EX-99.17B 7 dex9917b.txt A/R TO STOCKHOLDERS OF REGISTRANT Exhibit 17(b) 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 Name of Fund: Merrill Lynch Municipal Bond Fund, Inc. Fund 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 - 06/30/03 Item 1 - Attach shareholder report (BULL LOGO) Merrill Lynch Investment Managers Annual Report June 30, 2003 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. A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling toll-free 1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and (3) on the Securities and Exchange Commission's website at http://www.sec.gov. Merrill Lynch Municipal Bond Fund, Inc. Box 9011 Princeton, NJ 08543-9011 Printed on post-consumer recycled paper MERRILL LYNCH MUNICIPAL BOND FUND, INC. Important Tax Information (unaudited) All of the net investment income distributions paid monthly by Merrill Lynch Municipal Bond Fund, Inc. during the taxable year ended June 30, 2003 qualify as tax-exempt interest dividends for Federal income tax purposes. Please retain this information for your records. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 DEAR SHAREHOLDER Effective April 14, 2003, the share class names for the Merrill Lynch Family of mutual funds were changed to be consistent with the standard share classes of most other mutual fund families. As of that date, all Class A Shares were redesignated as Class I Shares. At the same time, Class D Shares were redesignated Class A Shares. There were no changes to the Class B or Class C share class labels. Trading symbols have not been changed nor have current eligibility rules or pricing structures. This redesignation of share classes does not impact your investment in any way. The Municipal Market Environment During the six-month period ended June 30, 2003, amid considerable volatility, long-term fixed income interest rates generally decreased, with the bulk of the decline occurring in May and early June. Bond yields initially rose in early 2003 as international political tensions moderated somewhat and U.S. equity markets rallied strongly in reaction to President Bush's proposed economic stimulus/tax-reduction legislation. By mid-January, U.S. Treasury bond yields rose to above 5% on expectations of stronger U.S. economic growth later in the year while the Standard & Poor's (S&P) 500 Index increased almost 6%. Reacting to disappointing 2002 holiday sales and corporate managements' attempts to scale back analysts' expectations of future earnings, however, equity markets were unable to maintain their earlier gains. By the end of February 2003, the S&P 500 Index declined by approximately 4.5% from year-end 2002 levels. Fearing an eventual U.S./Iraq military confrontation, investors again sought the safety of U.S. Treasury obligations and the prices of fixed income issues rose. By the end of February 2003, U.S. Treasury bond yields fell to 4.67%. Bond yields continued to fall into early March. Once direct U.S. military action against Iraq began, bond yields quickly rose. Prior uncertainty surrounding the Iraqi situation was obviously removed and early U.S. military successes fostered the hope that hostilities would be quickly and positively concluded. Concurrently, the S&P 400 Index rose over 6% as investors, in part, sold fixed income issues to purchase equities in anticipation of a strong U.S. economic recovery once the Iraqi conflict was resolved. By mid-March, U.S. Treasury bond yields had again risen to above 5%. However, as there was growing sentiment that hostilities may not be resolved in a matter of weeks, U.S. Treasury bond yields again declined to end the month at 4.81%. Long-term U.S. Treasury bond yields ratcheted back to near 5% by mid- April as U.S. equity markets continued to improve and the safe-haven premium U.S. Treasury issues had commanded prior to the beginning of the Iraqi conflict continued to be withdrawn. However, with the quick positive resolution of the Iraqi war, investors quickly resumed their focus on the fragile U.S. economic recovery. Business activity in the United States has remained sluggish, especially job creation. Investors were also concerned that the SARS outbreak would have a material, negative impact on world economic conditions, especially in China and Japan. First quarter 2003 U.S. gross domestic product growth was released in late April initially estimating U.S. economic activity to be growing at 1.60%, well below many analysts' assessments. These factors, as well as the possibility that the Federal Reserve Board could again lower short- term interest rates to encourage more robust U.S. economic growth, pushed bond prices higher. By April 30, 2003, long-term U.S. Treasury bond yields had declined to almost 4.75%. At its early May meeting, the Federal Reserve Board left the short- term interest rate target unchanged at 1.25%, its lowest level in more than 40 years. In its accompanying statement, the Federal Reserve Board noted that while the pace of U.S. economic growth was likely to expand going forward, the "probability of an unwelcome substantial fall in inflation" was a matter of greater concern. Many fixed income investors quickly concluded that since the Federal Reserve Board's focus was now centered on preventing future deflation, additional reduction in short-term interest rates could be expected. Given already low nominal interest rates, these investors also believed the Federal Reserve Board was likely to purchase longer-term U.S. Treasury issues to push bond yields lower to further stimulate U.S. economic activity, especially the already vibrant housing industry. These factors combined to trigger a major bond rally for the remainder of the month. At the end of May 2003, long-term U.S. Treasury bond yields fell to approximately 4.375%, a decline of approximately 40 basis points (.40%) during the month. Long-term U.S. Treasury bond yields further declined to approximately 4.20% by mid-June as U.S. economic growth, particularly employment trends and durable goods orders, remained sluggish. This led many investors to anticipate that the Federal Reserve Board would lower short-term interest rates an additional 50 basis points at its late June meeting to accelerate economic activity. However, the Federal Reserve Board lowered its target for the Federal Funds rate by only 25 basis points to 1%, the lowest level since 1958. In its accompanying statement, the Federal Reserve Board noted that an additional easing of monetary policy would "further supportan economy which it expects to improve over time." The prospect for stronger economic activity, as well as the absence of any potential purchases of U.S. Treasury issues, pushed bond prices sharply lower for the remainder of the period. By June 30, 2003, long-term U.S. Treasury bond yields rose to 4.55%, an increase of almost 20 basis points during the month. Over the last months, however, long-term U.S. Treasury bond yields have declined 20 basis points. During the six-month period ended June 30, 2003, long-term tax- exempt bond yields also fell. Yield volatility was reduced relative to that seen in U.S. Treasury issues, as municipal bond prices were much less sensitive to worldwide geopolitical pressures on a daily and weekly basis. Tax-exempt bond prices generally followed their taxable counterparts higher; responding to a more positive U.S. fixed income environment and continued slow economic growth. Municipal bond yields generally declined through February 2003. At February 28, 2003, long-term tax-exempt revenue bond yields, as measured by the Bond Buyer Revenue Bond Index, fell to approximately 5.05%. However, similar to U.S. Treasury bond yields, once military action began in Iraq, municipal bond yields rose sharply to nearly 5.20% before declining in response to the deflationary scare to approximately 4.80% by May 31, 2003. Municipal bond prices also fell during the latter half of June in response to higher economic growth expectations and disappointment about the recent Federal Reserve Board's actions. By the end of the month, long-term municipal revenue bond yields, as measured by the Bond Buyer Revenue Index, rose more than 15 basis points to almost 5%. Over the past six months, long-term municipal bond yields declined by approximately 20 basis points. Throughout the period, the municipal market continued to improve despite a dramatic increase in new bond issuance. Increased issuance, however, has not hindered the tax-exempt market's recent solid performance. There were a number of ongoing factors fostering the strong investor demand that supported the municipal bond market's improvement. Tax-exempt money market interest rates remained below 1% for much of 2003, forcing investors to invest in longer maturities to generate desired levels of coupon income. Investors will also receive approximately $60 billion in coupon income, bond maturities and the proceeds from early redemptions in July and August. Much of these proceeds are likely to be reinvested in the municipal market. Most importantly, as an asset class, municipal bonds have remained an extremely attractive investment alternative, especially relative to U.S. Treasury issues. At June 30, 2003, tax-exempt bond yields were 88% - 98% of comparable U.S. Treasury issues, well in excess of their historic average of 82% - 88%. Current yield ratios have made municipal securities attractive to both retail and institutional investors, as well as to nontraditional, arbitrage related accounts. As the tax-exempt market's favorable technical position is expected to remain stable in the near term, the expected increase in bond issuance during the remainder of 2003 is unlikely to significantly impact the municipal bond market's performance. Declining U.S. equity markets and escalating geopolitical pressures have resulted in reduced economic activity and consumer confidence. It is important to note that, despite all the recent negative factors impeding the growth of U.S. businesses, the U.S. economy still grew at an approximate 2.5% rate for all of 2002, twice that of 2001. Similar expansion is expected for early 2003 and above 3% for 2004. Lower oil prices, reduced geopolitical uncertainties, increased federal spending for defense, and a sizeable federal tax cut are factors which should promote stronger economic growth later this year. However, it is questionable to expect that business and investor confidence can be so quickly restored as to trigger dramatic, explosive U.S. economic growth and engender associated, large-scale interest rate increases. The resumption of solid economic growth is likely to be a gradual process accompanied by equally graduated increases in bond yields. Moderate economic growth, especially within a context of negligible inflationary pressures, should not greatly endanger the positive fixed income environments tax-exempt products currently enjoy. Fiscal Year in Review Insured Portfolio For the fiscal year ended June 30, 2003, Insured Portfolio's Class A, Class B, Class C and Class I Shares had total returns of +8.77%, +8.21%, +8.16% and +8.88%, respectively. (Fund results do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 6 - 11 of this report to shareholders. This compares to a total return of +8.74% for the unmanaged benchmark Lehman Brothers Municipal Bond Index for the same 12-month period. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 For most of the 12-month period, we maintained our overall strategy of providing an above-average yield, while seeking to mute any net asset value volatility. The Portfolio held minimal cash reserves, in many instances below 1%. While a neutral stance allowed the Portfolio to participate in much of the municipal bond market's recent improvement, we sacrificed some price appreciation. However, this neutral position allowed Portfolio asset valuations to escape much of the market volatility exhibited in early 2003. Volatile U.S. equity markets, the Iraqi war and the Federal tax reduction package all contributed to significant fluctuating changes in market valuations earlier in 2003. Over the past 12 months, our strategy of maintaining the Portfolio's fully invested stance and neutral market position contributed to the Portfolio's ability to provide a higher degree of tax-exempt income to shareholders. In recent months, we made few changes to the Portfolio's composition and strategy. The Portfolio's cash reserves remained below 1% as tax- exempt cash equivalent yields declined to less than 1%. Larger cash reserves would have had a material, negative impact on the Portfolio's yield. In early 2003, we focused on security transactions by purchasing insured California issues that became attractive as valuations fell in reaction to a significant increase in new-issue supply. These purchases were financed with the proceeds from bond calls and sales made into very strong retail demand for bonds in such high-tax states as Maryland and Oklahoma. We are maintaining the Portfolio in a neutral market position, waiting for additional signs of renewed U.S. economic activity before adopting a more defensive portfolio structure. National Portfolio During the fiscal year ended June 30, 2003, National Portfolio's Class A, Class B, Class C and Class I Shares had total returns of +7.98%, +7.43%, +7.48% and +8.34%, respectively. (Fund results do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 8 - 11 of this report to shareholders.) This compares to a total return of +8.74% for the unmanaged benchmark Lehman Brothers Municipal Bond Index for the same 12-month period. Our strategy for the fiscal year ended June 30, 2003 was consistent. We did not attempt to "ride the wave" of the year's fixed income rally. In the middle of 2002, our expectations for the municipal marketplace did not include a market rally, especially not one to the degree that was ultimately realized. Instead of positioning the Portfolio in aggressively structured discount securities or zero- coupon bonds, our emphasis focused on the current yield side of the total return equation. Initially, as interest rates declined, the Portfolio's performance lagged the market. However, over the 12- month period, the Portfolio's excellent current yield helped deliver a better-than-industry average total return. The most significant change during the fiscal year involved our approach to lower-rated credits. We have always maintained the Portfolio at an extremely high degree of credit quality, with most assets bearing a AA or higher rating by at least one of the major rating agencies comprising most of the Portfolio's positions. We were able to maintain a competitive relative performance during the fiscal year. However, in an environment that witnessed a substantial drop in interest rates, the Portfolio's performance was attained more by enhancing the income generated from its holdings rather than through an aggressive duration stance aimed at producing capital appreciation. The Portfolio was not positioned in long duration, discount securities. We directed our strategy toward delivering the highest level of tax-exempt income possible within the framework of the investment objectives and restrictions outlined in the Portfolio's prospectus. The Portfolio's high levels of coupon structure delivered the bulk of this year's performance, in addition to our security selection that steered the Portfolio away from some of this year's underperforming sectors. Taxable interest rates declined to levels not seen in four decades. We used this rally to cushion the Portfolio's net asset valuation from future price volatility during a time when the fixed income market exhibited negative price action in response to a better national economic environment. During the year, the Portfolio's exposure to inverse floater rate product decreased from 15% at the beginning of the fiscal year to 8% at June 30, 2003. These products generated a large additional benefit to the Portfolio in terms of current yield and price appreciation and allowed the Portfolio to generate an attractive return without compromising credit quality. This part of our strategy created a more defensive portfolio, and we raised cash equivalent reserves to 3% to provide the Portfolio with some additional liquidity. However, these limited reserves would still classify the Portfolio as a fully invested position. Limited Maturity Portfolio For the fiscal year ended June 30, 2003, Limited Maturity Portfolio's Class A, Class B, Class C and Class I Shares had total returns of +2.77%, +2.51%, +2.52% and +2.87%, respectively. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. Complete performance information can be found on pages 9 - 11 of this report to shareholders.) This compares to a total return of +8.74% for the unmanaged benchmark Lehman Brothers Municipal Bond Index and the total return of +4.96% for the unmanaged benchmark Lehman Brothers 3-Year General Obligation Bond Index for the same 12-month period. We kept the Portfolio in a fully invested stance at the outset of the fiscal year during the period of Federal Reserve Board monetary policy easing. However, by the second half of the period, we maintained the Portfolio in a more neutral position in an effort to limit net asset value volatility. Additionally, net assets of the Portfolio increased dramatically. In order to maintain our more neutral stance, investments were concentrated in the two-year - three-year sector of the municipal bond market curve in an effort to enhance the Portfolio's yield, while we sought to protect principal. We generally tend to maintain a higher quality portfolio than most of our peer group in order to protect against large swings in net asset value. As a result, this strategy helped the Portfolio perform approximately near the average of its peer group for the 12-month period ended June 30, 2003. The trend in short-term interest rates was lower throughout the recent six-month period. The two-year U.S. Treasury interest rate fell from 1.71% on December 31, 2002 to as low as 1.08% by early June 2003, before closing the period at 1.36%. A combination of factors including concerns about a double-dip recession, deflation and a flight to quality because of the Iraqi conflict all led to lower short-term interest rates. Additionally, interest rates on short-term municipal bonds also fell as demand for fixed income product remained strong and tax-exempt securities were inexpensive on a relative basis when compared to taxable investments. The Limited Maturity Portfolio was positioned at neutral or slightly below neutral for most of the period as the historically low interest rates seemed to offer little incentive for maturity extension. The average portfolio maturity ranged from 1.2 years to 1.5 years as we sought to limit net asset value fluctuations. The Portfolio continues to maintain an average credit quality rating of AA by at least one of the major rating agencies. However, since most of the funds in our peer group have longer average durations, the Portfolio underperformed, as it typically will in periods of falling interest rates. In Conclusion We appreciate your ongoing interest in Merrill Lynch Municipal Bond Fund, Inc., and we look forward to serving your investment needs in the months and years to come. Sincerely, (Terry K. Glenn) Terry K. Glenn President and Director (Kenneth A. Jacob) Kenneth A. Jacob Senior Vice President (John M. Loffredo) John M. Loffredo Senior Vice President (Robert A. DiMella) Robert A. DiMella Vice President and Portfolio Manager Insured Portfolio (Walter C. O'Connor) Walter C. O'Connor Vice President and Portfolio Manager National Portfolio (Peter Hayes) Peter Hayes Vice President and Portfolio Manager Limited Maturity Portfolio July 31, 2003 Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 PERFORMANCE DATA About Fund Performance Effective April 14, 2003, Class A Shares were redesignated Class I Shares and Class D Shares were redesignated Class A Shares. Investors are able to purchase shares of the Fund through multiple pricing alternatives: * Class A 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). * 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 A 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 I 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. 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's Class A and Class C Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class A and Insured Portfolio++--Class C Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class A Shares* Date Value --------- ------- 10/21/1994** $ 9,600 June 1995 $10,487 June 1996 $11,038 June 1997 $11,861 June 1998 $12,767 June 1999 $12,950 June 2000 $13,071 June 2001 $14,345 June 2002 $15,299 June 2003 $16,639 Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class C Shares* Date Value --------- ------- 10/21/1994** $10,000 June 1995 $10,883 June 1996 $11,390 June 1997 $12,171 June 1998 $13,029 June 1999 $13,125 June 2000 $13,190 June 2001 $14,378 June 2002 $15,268 June 2003 $16,514 Lehman Brothers Municipal Bond Index++++ Date Value --------- ------- 10/21/1994** $10,000 June 1995 $11,003 June 1996 $11,734 June 1997 $12,702 June 1998 $13,802 June 1999 $14,183 June 2000 $14,645 June 2001 $16,106 June 2002 $17,220 June 2003 $18,725 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. ++ The Insured Portfolio invests primarily in long-term, investment- grade municipal bonds (bonds rated Baa or better) covered by portfolio insurance guaranteeing the timely payment of principal at maturity and interest. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. The starting date for the Index is from 10/31/94. Past performance is not predictive of future performance. Insured Portfolio's Class A and Class C Shares Average Annual Total Return % Return Without % Return With Class A Shares* Sales Charge Sales Charge** ------------------------------------ --------------- --------------- One Year Ended 6/30/03 +8.77% +4.41% Five Years Ended 6/30/03 +5.44 +4.58 Inception (10/21/94) through 6/30/03 +6.53 +6.03 *Maximum sales charge is 4%. **Assuming maximum sales charge. % Return % Return Class C Shares* Without CDSC With CDSC** ------------------------------------ ------------ ----------- One Year Ended 6/30/03 +8.16% +7.16% Five Years Ended 6/30/03 +4.86 +4.86 Inception (10/21/94) through 6/30/03 +5.94 +5.94 * Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. ** Assuming payment of applicable contingent deferred sales charge. Insured Portfolio's Class B and Class I Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class B and Insured Portfolio++--Class I Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class B Shares* Date Value --------- ------- June 1993 $10,000 June 1994 $ 9,819 June 1995 $10,596 June 1996 $11,095 June 1997 $11,847 June 1998 $12,704 June 1999 $12,804 June 2000 $12,875 June 2001 $14,040 June 2002 $14,917 June 2003 $16,142 Merrill Lynch Municipal Bond Fund, Inc. Insured Portfolio++--Class I Shares* Date Value --------- ------- June 1993 $ 9,600 June 1994 $ 9,497 June 1995 $10,313 June 1996 $10,882 June 1997 $11,722 June 1998 $12,665 June 1999 $12,863 June 2000 $13,015 June 2001 $14,320 June 2002 $15,329 June 2003 $16,690 Lehman Brothers Municipal Bond Index++++ Date Value --------- ------- June 1993 $10,000 June 1994 $10,017 June 1995 $10,900 June 1996 $11,624 June 1997 $12,584 June 1998 $13,673 June 1999 $14,050 June 2000 $14,508 June 2001 $15,955 June 2002 $17,059 June 2003 $18,550 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ++ The Insured Portfolio invests primarily in long-term, investment- grade municipal bonds (bonds rated Baa or better) covered by portfolio insurance guaranteeing the timely payment of principal at maturity and interest. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. Past performance is not predictive of future performance. Insured Portfolio's Class B and Class I Shares Average Annual Total Return % Return % Return Class B Shares* Without CDSC With CDSC** ------------------------ ------------ ----------- One Year Ended 6/30/03 +8.21% +4.21% Five Years Ended 6/30/03 +4.91 +4.58 Ten Years Ended 6/30/03 +4.91 +4.91 * Maximum contingent deferred sales charge is 4% and is reduced to 0% after six years. ** Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Class I Shares* Sales Charge Sales Charge** ------------------------ ---------------- -------------- One Year Ended 6/30/03 +8.88% +4.53% Five Years Ended 6/30/03 +5.67 +4.81 Ten Years Ended 6/30/03 +5.69 +5.26 * Maximum sales charge is 4%. ** Assuming maximum sales charge. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 PERFORMANCE DATA (continued) National Portfolio's Class A and Class C Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class A and National Portfolio++--Class C Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class A Shares* Date Value ------------ ------- 10/21/1994** $ 9,600 June 1995 $10,404 June 1996 $11,102 June 1997 $12,053 June 1998 $13,016 June 1999 $13,150 June 2000 $13,202 June 2001 $14,530 June 2002 $15,508 June 2003 $16,746 Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class C Shares* Date Value ------------ ------- 10/21/1994** $10,000 June 1995 $10,797 June 1996 $11,446 June 1997 $12,358 June 1998 $13,284 June 1999 $13,346 June 2000 $13,325 June 2001 $14,570 June 2002 $15,465 June 2003 $16,622 Lehman Brothers Municipal Bond Index++++ Date Value ------------ ------- 10/21/1994** $10,000 June 1995 $11,003 June 1996 $11,734 June 1997 $12,702 June 1998 $13,802 June 1999 $14,183 June 2000 $14,645 June 2001 $16,106 June 2002 $17,220 June 2003 $18,725 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. ++ The National Portfolio invests primarily in long-term municipal bonds rated in any rating category. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. The starting date for the Index is from 10/31/94. Past performance is not predictive of future performance. National Portfolio's Class A and Class C Shares Average Annual Total Return % Return Without % Return With Class A Shares* Sales Charge Sales Charge** ------------------------------------ ---------------- -------------- One Year Ended 6/30/03 +7.98% +3.66% Five Years Ended 6/30/03 +5.17 +4.31 Inception (10/21/94) through 6/30/03 +6.61 +6.11 * Maximum sales charge is 4%. ** Assuming maximum sales charge. % Return % Return Class C Shares* Without CDSC With CDSC** ------------------------------------ ------------ ----------- One Year Ended 6/30/03 +7.48% +6.48% Five Years Ended 6/30/03 +4.58 +4.58 Inception (10/21/94) through 6/30/03 +6.02 +6.02 * Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. ** Assuming payment of applicable contingent deferred sales charge. National Portfolio's Class B and Class I Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class B and National Portfolio++--Class I Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class B Shares* Date Value --------- ------- June 1993 $10,000 June 1994 $ 9,861 June 1995 $10,579 June 1996 $11,232 June 1997 $12,121 June 1998 $13,036 June 1999 $13,102 June 2000 $13,087 June 2001 $14,332 June 2002 $15,219 June 2003 $16,350 Merrill Lynch Municipal Bond Fund, Inc. National Portfolio++--Class I Shares* Date Value --------- ------- June 1993 $ 9,600 June 1994 $ 9,555 June 1995 $10,309 June 1996 $11,029 June 1997 $12,004 June 1998 $13,007 June 1999 $13,174 June 2000 $13,246 June 2001 $14,615 June 2002 $15,638 June 2003 $16,941 Lehman Brothers Municipal Bond Index++++ Date Value --------- ------- June 1993 $10,000 June 1994 $10,017 June 1995 $10,900 June 1996 $11,624 June 1997 $12,584 June 1998 $13,673 June 1999 $14,050 June 2000 $14,508 June 2001 $15,955 June 2002 $17,059 June 2003 $18,550 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ++ The National Portfolio invests primarily in long-term municipal bonds rated in any rating category. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. Past performance is not predictive of future performance. National Portfolio's Class B and Class I Shares Average Annual Total Return % Return % Return Class B Shares* Without CDSC With CDSC** ------------------------ ------------ ----------- One Year Ended 6/30/03 +7.43% +3.43% Five Years Ended 6/30/03 +4.64 +4.30 Ten Years Ended 6/30/03 +5.04 +5.04 * Maximum contingent deferred sales charge is 4% and is reduced to 0% after six years. ** Assuming payments of applicable contingent deferred sales charge. % Return Without % Return With Class I Shares* Sales Charge Sales Charge** ------------------------ ---------------- -------------- One Year Ended 6/30/03 +8.34% +4.00% Five Years Ended 6/30/03 +5.43 +4.57 Ten Years Ended 6/30/03 +5.84 +5.41 * Maximum sales charge is 4%. ** Assuming maximum sales charge. Limited Maturity Portfolio's Class A and Class C Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++ --Class A and Limited Maturity Portfolio++--Class C Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++ and Lehman Brothers 3-Year General Obligation Bond Index++++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++--Class A Shares* Date Value ------------ ------- 10/21/1994** $ 9,900 June 1995 $10,269 June 1996 $10,633 June 1997 $11,101 June 1998 $11,562 June 1999 $11,941 June 2000 $12,321 June 2001 $13,057 June 2002 $13,579 June 2003 $13,956 Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++--Class C Shares* Date Value ------------ ------- 10/21/1994** $10,000 June 1995 $10,352 June 1996 $10,659 June 1997 $11,097 June 1998 $11,527 June 1999 $11,861 June 2000 $12,206 June 2001 $12,889 June 2002 $13,371 June 2003 $13,707 Lehman Brothers Municipal Bond Index++++ Date Value ------------ ------- 10/21/1994** $10,000 June 1995 $11,003 June 1996 $11,734 June 1997 $12,702 June 1998 $13,802 June 1999 $14,183 June 2000 $14,645 June 2001 $16,106 June 2002 $17,220 June 2003 $18,725 Lehman Brothers 3-Year General Obligation Bond Index++++++ Date Value ------------ ------- 10/21/1994** $10,000 June 1995 $10,525 June 1996 $11,069 June 1997 $11,656 June 1998 $12,281 June 1999 $12,733 June 2000 $13,199 June 2001 $14,210 June 2002 $15,074 June 2003 $15,821 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. ++ The Limited Maturity Portfolio invests primarily in investment- grade municipal bonds (bonds rated Baa or better) with a maximum maturity not to exceed 4 years. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. The starting date for the Index is from 10/31/94. ++++++ This unmanaged Index consists of state and local government obligation bonds that mature in 3 - 4 years, rated Baa or better. The starting date for the Index is from 10/31/94. Past performance is not predictive of future performance. Limited Maturity Portfolio's Class A and Class C Shares Average Annual Total Return % Return Without % Return With Class A Shares* Sales Charge Sales Charge** ------------------------------------ ---------------- -------------- One Year Ended 6/30/03 +2.77% +1.75% Five Years Ended 6/30/03 +3.83 +3.63 Inception (10/21/94) through 6/30/03 +4.03 +3.91 * Maximum sales charge is 1%. ** Assuming maximum sales charge. % Return % Return Class C Shares* Without CDSC With CDSC** ------------------------------------ ------------ ----------- One Year Ended 6/30/03 +2.52% +1.52% Five Years Ended 6/30/03 +3.52 +3.52 Inception (10/21/94) through 6/30/03 +3.70 +3.70 * Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. ** Assuming payment of applicable contingent deferred sales charge. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 PERFORMANCE DATA (concluded) Limited Maturity Portfolio's Class B and Class I Shares Total Return Based on a $10,000 Investment A line graph illustrating the growth of a $10,000 investment in Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++ --Class B and Limited Maturity Portfolio++--Class I Shares* compared to a similar investment in the Lehman Brothers Municipal Bond Index++++ and Lehman Brothers 3-Year General Obligation Bond Index++++++. Values illustrated are as follows: Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++--Class B Shares* Date Value --------- ------- June 1993 $10,000 June 1994 $10,198 June 1995 $10,620 June 1996 $10,979 June 1997 $11,432 June 1998 $11,877 June 1999 $12,234 June 2000 $12,590 June 2001 $13,309 June 2002 $13,792 June 2003 $14,139 Merrill Lynch Municipal Bond Fund, Inc. Limited Maturity Portfolio++--Class I Shares* Date Value --------- ------- June 1993 $ 9,900 June 1994 $10,127 June 1995 $10,586 June 1996 $10,983 June 1997 $11,466 June 1998 $11,954 June 1999 $12,358 June 2000 $12,764 June 2001 $13,540 June 2002 $14,096 June 2003 $14,501 Lehman Brothers Municipal Bond Index++++ Date Value --------- ------- June 1993 $10,000 June 1994 $10,017 June 1995 $10,900 June 1996 $11,624 June 1997 $12,584 June 1998 $13,673 June 1999 $14,050 June 2000 $14,508 June 2001 $15,955 June 2002 $17,059 June 2003 $18,550 Lehman Brothers 3-Year General Obligation Bond Index++++++ Date Value --------- ------- June 1993 $10,000 June 1994 $10,229 June 1995 $10,850 June 1996 $11,411 June 1997 $12,016 June 1998 $12,661 June 1999 $13,127 June 2000 $13,607 June 2001 $14,649 June 2002 $15,540 June 2003 $16,310 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ++ The Limited Maturity Portfolio invests primarily in investment- grade municipal bonds (bonds rated Baa or better) with a maximum maturity not to exceed 4 years. ++++ This unmanaged Index consists of revenue bonds, prerefunded bonds, general obligation bonds and insured bonds, all of which mature within 30 years. ++++++ This unmanaged Index consists of state and local government obligation bonds that mature in 3 - 4 years, rated Baa or better. Past performance is not predictive of future performance. Limited Maturity Portfolio's Class B and Class I Shares Average Annual Total Return % Return % Return Class B Shares* Without CDSC With CDSC** ------------------------ ------------ ----------- One Year Ended 6/30/03 +2.51% -0.49% Five Years Ended 6/30/03 +3.55 +3.55 Ten Years Ended 6/30/03 +3.52 +3.52 * Maximum contingent deferred sales charge is 1% and is reduced to 0% after three years. ** Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Class I Shares* Sales Charge Sales Charge** ------------------------ ---------------- -------------- One Year Ended 6/30/03 +2.87% +1.84% Five Years Ended 6/30/03 +3.94 +3.73 Ten Years Ended 6/30/03 +3.89 +3.79 * Maximum sales charge is 1%. ** Assuming maximum sales charge. RECENT PERFORMANCE RESULTS*
Ten Years/ Since 6-Month 12-Month Inception Standardized As of June 30, 2003 Total Return Total Return Total Return 30-Day Yield ------------------------------------------------------------------------ ------------ ------------ ------------- ------------ ML Municipal Bond Fund, Inc. Insured Portfolio Class A Shares** +3.43% +8.77% +73.33% 3.44% ML Municipal Bond Fund, Inc. Insured Portfolio Class B Shares** +3.17 +8.21 +61.42 3.07 ML Municipal Bond Fund, Inc. Insured Portfolio Class C Shares** +3.15 +8.16 +65.14 3.02 ML Municipal Bond Fund, Inc. Insured Portfolio Class I Shares** +3.54 +8.88 +73.86 3.68 ML Municipal Bond Fund, Inc. National Portfolio Class A Shares** +3.63 +7.98 +74.43 3.86
ML Municipal Bond Fund, Inc. National Portfolio Class B Shares** +3.37 +7.43 +63.50 3.51 ML Municipal Bond Fund, Inc. National Portfolio Class C Shares** +3.34 +7.48 +66.22 3.46 ML Municipal Bond Fund, Inc. National Portfolio Class I Shares** +3.74 +8.34 +76.47 4.11 ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class A Shares** +0.93 +2.77 +40.97 1.10 ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class B Shares** +0.81 +2.51 +41.39 0.86 ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class C Shares** +0.81 +2.52 +37.07 0.86 ML Municipal Bond Fund, Inc. Limited Maturity Portfolio Class I Shares** +0.98 +2.87 +46.47 1.20 Lehman Brothers 3-Year General Obligation Bond Index++ +1.87 +4.96 +63.10/+58.21 -- Lehman Brothers Municipal Bond Index++++ +3.81 +8.74 +85.50/+87.25 --
* 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 B & Class I Shares and from 10/21/94 for Class A & Class C 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. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (in Thousands) Insured Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value --------------- ---------- ---------- ------- --------------------------------------------------------------------- ------- Alabama--1.9% Alabama Water Pollution Control Authority Revenue Bonds (b): AAA Aaa $ 3,020 5.75% due 8/15/2018 $ 3,424
AAA Aaa 1,585 Revolving Fund Loan, Series A, 6.75% due 8/15/2017 1,753 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) 11,226 AAA Aaa 7,000 University of Alabama, University Revenue Bonds (Birmingham), 6% due 10/01/2020 (g) 8,085 Arizona--1.4% AAA Aaa 6,750 Arizona State Municipal Financing Program, COP, Series 34, 7.25% due 8/01/2009 (f) 8,481 Phoenix, Arizona, Civic Improvement Corporation, Excise Tax Revenue Bonds, Sub-Series A (e): AAA Aaa 4,280 5% due 7/01/2020 4,572 AAA Aaa 4,320 5% due 7/01/2022 4,560 Arkansas--0.5% NR* Aaa 6,060 University of Arkansas, University Revenue Bonds (Various Facilities--Fayetteville Campus), 5.50% due 12/01/2021 (g) 6,767 California-- AAA Aaa 19,000 California Pollution Control Financing Authority, PCR, Refunding 9.3% (Pacific Gas & Electric), AMT, Series A, 5.35% due 12/01/2016 (e) 20,927 AAA Aaa 2,075 California State Department of Veteran Affairs, Home Purpose Revenue Refunding Bonds, Series A, 5.35% due 12/01/2027 (b) 2,172 California State, Department of Water Resources, Power Supply Revenue Bonds, Series A: AAA Aaa 12,000 5.375% due 5/01/2017 (j) 13,330 AAA Aaa 12,000 5.375% due 5/01/2018 (b) 13,274 AAA Aaa 10,000 California State, GO, Refunding, 5% due 2/01/2033 (b) 10,401 AAA Aaa 26,085 Los Angeles, California, Community College District, GO, Series A, 5.50% due 8/01/2019 (e) Pasadena, California, Electric Revenue Bonds (e): 29,015
AAA Aaa 2,500 5.25% due 6/01/2020 2,729 AAA Aaa 2,630 5.25% due 6/01/2021 2,852 AAA Aaa 11,685 Rialto, California, Unified School District, GO, Series A, 6.24%** due 6/01/2025 (g) 3,865 AAA Aaa 8,390 San Joaquin Hills, California, Transportation Corridor Agency, Toll Road Revenue Refunding Bonds, Series A, 5.28%** due 1/15/2024 (e) 2,982 AAA Aaa 15,000 San Jose, California, Redevelopment Agency, Tax Allocation Refunding Bonds, DRIVERS, Series 158, 9.663% due 8/01/2014 (d)(e) 16,187 Colorado--7.3% AAA Aaa 19,250 Aurora, Colorado, COP, 6% due 12/01/2025 (b) 22,168 Denver, Colorado, City and County Airport Revenue Refunding Bonds: AAA Aaa 2,000 AMT, Series D, 5.50% due 11/15/2015 (i) 2,203 AAA Aaa 4,850 AMT, Series D, 5.50% due 11/15/2017 (i) 5,259 AAA Aaa 2,500 AMT, Series D, 5.50% due 11/15/2018 (i) 2,694 NR* Aaa 31,160 RIB, Series 153, 9.921% due 11/15/2025 (d)(e) 36,873 AAA Aaa 18,915 Series B, 5% due 11/15/2033 (j) 19,454 AAA Aaa 4,000 Logan County, Colorado, Justice Center Finance Corporation, COP, 5.50% due 12/01/2020 (e) 4,418 Connecticut-- AAA NR* 2,830 Connecticut State HFA, Housing Mortgage Finance Revenue Bonds, 0.2% AMT, Sub-Series B-2, 5.35% due 11/15/2032 (e) 2,932 Florida--4.0% AAA Aaa 5,500 Dade County, Florida, Water and Sewer System Revenue Bonds, 5.25% due 10/01/2026 (g) 5,781 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) 16,625
Miami-Dade County, Florida, Aviation Revenue Bonds, AMT, Series A: AAA Aaa 15,000 5.125% due 10/01/2035 (i) 15,255 AAA Aaa 10,000 (Miami International Airport), 5% due 10/01/2033 (g) 10,079 AAA Aaa 2,240 West Coast Regional Water Supply Authority, Florida, Capital Improvement Revenue Bonds, 10.40% due 10/01/2010 (a)(b) 3,164 Georgia--3.0% Georgia Municipal Electric Authority, Power Revenue Bonds, Series Y (b): AAA Aaa 490 6.40% due 1/01/2013 (c) 605 AAA Aaa 8,510 6.40% due 1/01/2013 10,430 AAA Aaa 20,000 Georgia Municipal Electric Authority, Power Revenue Refunding Bonds, Series EE, 7% due 1/01/2025 (b) 27,183 Hawaii--0.8% AAA Aaa 10,000 Hawaii State Airport System, Revenue Refunding Bonds, 6.45% due 7/01/2013 (e) 10,242 Illinois--4.3% AAA Aaa 2,000 Chicago, Illinois, O'Hare International Airport Revenue Bonds (Passenger Facility Charge), Series A, 5.625% due 1/01/2015 (b) 2,196 AAA NR* 14,450 Illinois Health Facilities Authority, Revenue Refunding Bonds, RIB, Series 166, 10.41% due 2/15/2024 (b)(d)(h) 17,389 AAA Aaa 26,000 Illinois Regional Transportation Authority Revenue Bonds, Series A, 6.25% due 6/01/2004 (a)(b) 27,775 AAA Aaa 6,800 Illinois State, GO, 5.75% due 5/01/2021 (e) 7,530 Indiana--0.5% AAA Aaa 5,555 Indiana State Office Building Commission, Facilities Revenue Bonds (Miami Correctional Facility--Phase 1), Series A, 5.50% due 7/01/2015 (b) 6,309 Kansas--1.4% AAA Aaa 11,000 Kansas City, Kansas, Utility System Revenue Refunding and
Improvement Bonds, 6.25% due 9/01/2014 (g) 11,819 AAA Aaa 5,145 Manhattan, Kansas, Hospital Revenue Bonds (Mercy Health Center), 5.50% due 8/15/2020 (i) 5,600 Maryland--0.5% AAA Aaa 4,400 Maryland State Health and Higher Educational Facilities Authority Revenue Bonds (University of Maryland Medical System), Series B, 7% due 7/01/2022 (g) 5,829 Massachusetts-- AAA Aaa 1,860 Massachusetts Educational Loan Authority, Education Loan Revenue 1.3% Bonds, AMT, Issue D, Series A, 7.25% due 1/01/2009 (e) 1,913 AAA Aaa 4,000 Massachusetts State HFA, Rental Housing Mortgage Revenue Bonds, AMT, Series C, 5.60% due 1/01/2045 (i) 4,147 AAA Aaa 10,000 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Beth Israel Deaconess Medical Center), INFLOS, Series G-4, 10.732% due 7/01/2025 (b)(d) 10,258 Michigan--1.3% AAA Aaa 5,540 Michigan State, HDA, Rental Housing Revenue Refunding Bonds, Series B, 6.15% due 10/01/2015 (e) 5,830 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) 11,123 Minnesota-- NR* Aaa 5,860 Delano, Minnesota, Independent School District Number 879, GO, 1.3% Series A, 5.875% due 2/01/2025 (i) 6,658 Sauk Rapids, Minnesota, Independent School District Number 047, GO, Series A (e): NR* Aaa 3,735 5.65% due 2/01/2020 4,194 NR* Aaa 4,440 5.70% due 2/01/2021 4,984 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) 1,855 NR* Aaa 10,000 Mississippi Hospital Equipment and Facilities Authority Revenue Bonds (Forrest County General Hospital Project), 6% due 1/01/2030 (i) 11,222
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 RAW Revenue Anticipation Warrants 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., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands) Insured Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- --------------------------------------------------------------------- ------- 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 $14,881 AAA Aaa 9,000 5.50% due 9/01/2014 10,146 Nevada--4.5% AAA Aaa 10,000 Clark County, Nevada, IDR (Power Company Project), AMT, Series A, 6.70% due 6/01/2022 (g) 10,303 AAA Aaa 45,000 Washoe County, Nevada, Water Facility Revenue Bonds (Sierra Pacific Power Company), AMT, 6.65% due 6/01/2017 (e) 46,985 New Jersey-- AAA Aaa 6,810 Cape May County, New Jersey, Industrial Pollution Control 6.7% Financing Authority, Revenue Refunding Bonds (Atlantic City Electric Company Project), Series A, 6.80% due 3/01/2021 (e) 9,019 Garden State Preservation Trust, New Jersey, Revenue Bonds, Series B (i): AAA Aaa 23,000 5.17%** due 11/01/2024 8,360 AAA Aaa 5,000 5.22%** due 11/01/2026 1,634 NR* Aaa 12,500 New Jersey EDA, Natural Gas Facilities Revenue Refunding Bonds (NUI Corporation), RIB, Series 371, 11.24% due 10/01/2022 (b)(d) 14,411 AAA Aaa 10,000 New Jersey EDA, Water Facilities Revenue Refunding Bonds (American Water), AMT, Series B, 5.125% due 4/01/2022 (b) 10,483 AAA Aaa 3,550 New Jersey State Housing and Mortgage Finance Agency, Home Buyer Revenue Bonds, AMT, Series M, 7% due 10/01/2026 (e) 3,588 AAA Aaa 10,070 New Jersey State Transportation Trust Fund Authority, Transportation System Revenue Refunding Bonds, Series B, 6% due 12/15/2011 (a)(e) 12,438 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, 11.24% due 6/01/2031 11,193 AAA Aaa 12,500 Series 381, 10.47% due 8/01/2030 14,145 New York-- AAA Aaa 20,000 Metropolitan Transportation Authority, New York, Revenue Refunding 13.2% Bonds, Series A, 5.50% due 11/15/2019 (b) 22,559 NR* Aaa 7,620 Metropolitan Transportation Authority, New York, Service Contract Revenue Bonds, RIB, Series 697X, 9.772% due 7/01/2024 (d)(e) 9,004 NR* Aaa 12,075 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds, RIB, Series 158, 10.277% due 6/15/2026 (d)(e) 14,928 New York City, New York, GO: AAA NR* 11,500 Series C, 5.625% due 3/15/2018 (j) 12,934 AAA Aaa 21,000 Series I, 6% due 4/15/2012 (i) 23,940 New York City, New York, GO, Refunding, Series G: AAA Aaa 7,655 5.75% due 2/01/2014 (e) 8,416 AAA Aaa 5,155 5.75% due 2/01/2017 (i) 5,655 AAA Aaa 7,210 New York State Dormitory Authority Revenue Bonds (School Districts Financing Program), Series D, 5.25% due 10/01/2023 (e) 7,734 AAA Aaa 10,000 New York State Dormitory Authority, Revenue Refunding Bonds (Mental Health Services), Series A, 5.75% due 8/15/2022 (e) 11,193 AAA Aaa 160 New York State Medical Care Facilities Finance Agency Revenue Bonds, Series E, 6.25% due 8/15/2019 (g) 170 Niagara Falls, New York, GO, Public Improvement (e): AAA Aaa 2,975 6.90% due 3/01/2023 3,134 AAA Aaa 3,190 6.90% due 3/01/2024 3,360 Tobacco Settlement Financing Corporation of New York Revenue Bonds, Series A-1 (b): AAA NR* 17,000 5.25% due 6/01/2021 18,464 AAA NR* 24,330 5.25% due 6/01/2022 26,253
North AAA Aaa 3,500 North Carolina HFA, Home Ownership Revenue Bonds, AMT, Series 14-A, Carolina--0.9% 5.35% due 1/01/2022 (b) 3,639 AAA Aaa 6,900 North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue Bonds, Series A, 5.25% due 1/01/2019 (e) 7,531 North Dakota-- AAA NR* 4,765 North Dakota State, HFA, Revenue Bonds (Housing Finance Program), 0.4% Series C, 5.30% due 7/01/2022 (b) 4,919 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) 6,775 Oklahoma--0.6% AAA Aaa 6,385 Oklahoma State, IDR, Refunding (Health System), Series A, 6.25% due 8/15/2016 (e) 7,442 Oregon--1.2% AAA Aaa 8,700 Oregon State Department, Administrative Services, COP, Series A, 6.25% due 5/01/2010 (a)(b) 10,682 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) 4,913 Pennsylvania-- AAA NR* 5,000 Pennsylvania HFA, S/F Revenue Bonds, AMT, Series 72A, 5.25% due 1.4% 4/01/2021 (e) 5,179 AAA Aaa 6,000 Philadelphia, Pennsylvania, Gas Works Revenue Bonds, 12th Series B, 7% due 5/15/2020 (c)(e) 7,791 AAA Aaa 4,420 Philadelphia, Pennsylvania, Redevelopment Authority Revenue Bonds (Neighborhood Transformation), Series A, 5.50% due 4/15/2020 (g) 4,890
Rhode Island-- AAA Aaa 6,815 Rhode Island State Economic Development Corporation, Airport 0.6% Revenue Bonds, Series B, 6% due 7/01/2028 (g) 7,771 South AAA Aaa 4,200 South Carolina State Public Service Authority, Revenue Refunding Carolina--0.4% Bonds, Series A, 6.25% due 1/01/2022 (b) 4,689 Texas--9.4% AAA Aaa 11,190 Austin, Texas, Utility System Revenue Bonds, Combined, 9.25% due 11/15/2008 (e) 11,992 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, AMT: AAA Aaa 30,000 Series A, 5.50% due 11/01/2033 (e) 31,693 AAA NR* 17,975 DRIVERS, Series 202, 10.64% due 11/01/2028 (d)(g) 21,512 El Paso, Texas, Water and Sewer Revenue Refunding and Improvement Bonds, Series A (i): AAA Aaa 4,375 6% due 3/01/2018 5,087 AAA Aaa 4,645 6% due 3/01/2019 5,368 AAA Aaa 14,500 Harris County, Houston, Texas, Sports Authority, Special Revenue Refunding Bonds, Junior Lien, Series B, 5.25% due 11/15/2040 (e) 15,273 AAA Aaa 3,500 Houston, Texas, Water Conveyance System Contract, COP, Series J, 6.25% due 12/15/2013 (b) 4,316 AAA Aaa 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) 11,965 AAA Aaa 6,000 San Antonio, Texas, Electric and Gas Revenue Bonds, 5.375% due 2/01/2018 (e) 6,523 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 2,265 AAA Aaa 2,800 5.50% due 3/01/2026 2,903
Utah--1.4% 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) 10,237 Utah Water Finance Agency Revenue Bonds (Pooled Loan Financing Program), Series A (b): NR* Aaa 2,515 5.75% due 10/01/2015 2,906 NR* Aaa 3,770 6% due 10/01/2020 4,398 Virginia--3.9% AAA Aaa 19,755 Fairfax County, Virginia, EDA, Resource Recovery Revenue Refunding Bonds, AMT, Series A, 6.10% due 2/01/2011 (b) 23,337 Virginia State HDA, Commonwealth Mortgage Revenue Bonds (e): AAA Aa1 2,285 AMT, Series A, Sub-Series A-4, 5.40% due 1/01/2011 2,477 AAA Aaa 2,270 AMT, Series A, Sub-Series A-4, 5.50% due 1/01/2012 2,450 AAA Aaa 19,965 Series J, Sub-Series J-1, 5.20% due 7/01/2019 20,983 Washington-- AAA Aaa 4,960 Chelan County, Washington, Public Utility District Number 001, 4.8% Consolidated Revenue Bonds (Chelan Hydro System), AMT, Series A, 5.45% due 7/01/2037 (b) 5,160 AAA Aaa 33,535 Seattle, Washington, Municipal Light and Power Revenue Bonds, 6.625% due 7/01/2004 (a)(g) 36,095 AAA Aaa 18,000 Tacoma, Washington, Electric System Revenue Refunding Bonds, Series A, 5.75% due 1/01/2019 (i) 20,319
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (concluded) (in Thousands) Insured Portfolio S&P Moody's Face SCHEDULE OF INVESTMENTS (concluded) (in Thousands) Insured Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- --------------------------------------------------------------------- ---------- West AAA Aaa $12,250 Pleasants County, West Virginia, PCR, Refunding (Potomac-- Virginia--1.1% Pleasants), Series C, 6.15% due 5/01/2015 (b) $ 13,459 Wisconsin-- AAA Aaa 9,000 Superior, Wisconsin, Limited Obligation Revenue Refunding Bonds 3.0% (Midwest Energy Resources), Series E, 6.90% due 8/01/2021 (g) 11,931 AAA Aaa 4,650 Wisconsin Public Power Inc., Power Supply System Revenue Bonds, Series A, 5.75% due 7/01/2006 (a)(e) 5,319 Wisconsin State, GO: AAA Aaa 5,365 AMT, Series B, 6.50% due 5/01/2025 (e) 5,724 AAA Aaa 13,570 Series F, 5.50% due 5/01/2019 (i) 15,136 Puerto Rico-- Puerto Rico Commonwealth, Highway and Transportation Authority, 2.3% Transportation Revenue Bonds (g): AAA Aaa 2,900 5.25% due 7/01/2017 3,273 AAA Aaa 3,100 5.25% due 7/01/2018 3,474 AAA Aaa 1,750 Series G, 5.25% due 7/01/2017 1,975 AAA Aaa 1,250 Series G, 5.25% due 7/01/2018 1,401 AAA Aaa 1,000 Series G, 5.25% due 7/01/2020 1,107 AAA Aaa 16,705 Puerto Rico Public Finance Corporation, Commonwealth Appropriation Revenue Bonds, Series A, 5.375% due 8/01/2023 (e) 18,274 Total Municipal Bonds (Cost--$1,147,255)--98.3% 1,248,481
Shares Held Short-Term Securities ------ --------------------------------------------------------------------- 1,017 Merrill Lynch Institutional Tax-Exempt Fund++ 1,017
Total Short-Term Securities (Cost--$1,017)--0.1% 1,017 Total Investments (Cost--$1,148,272)--98.4% 1,249,498 Other Assets Less Liabilities--1.6% 20,330 ---------- Net Assets--100.0% $1,269,828 ==========
(a) Prerefunded. (b) AMBAC Insured. (c) Escrowed to maturity. (d) The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at June 30, 2003. (e) MBIA Insured. (f) BIG Insured. (g) FGIC Insured. (h) FHA Insured. (i) FSA Insured. (j) XL Capital 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 Dividend Affiliate Activity Income --------------------------- -------- -------------- Merrill Lynch Institutional Tax-Exempt Fund 1,017 $191 +++Ratings of issues shown are unaudited. See Notes to Financial Statements. SCHEDULE OF INVESTMENTS (concluded) (in Thousands) National Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- --------------------------------------------------------------------- ------ Alabama--0.4% AAA Aaa $3,820 Alabama Incentives Financing Authority, Special Obligation Revenue Refunding Bonds, Series A, 6% due 10/01/2029 (c) $4,430 Alaska--0.6% AAA Aaa 3,000 Alaska State Housing Financial Corporation, General Mortgage Revenue Refunding, Series A, 6% due 6/01/2027 (f) 3,076 Anchorage, Alaska, School, GO, Series B (e): AAA Aaa 1,760 5.875% due 12/01/2016 2,053 AAA Aaa 2,100 5.875% due 12/01/2017 2,450 Arizona--3.6% NR* Aaa 875 Arizona Health Facilities Authority, Hospital System Revenue Refunding Bonds (Saint Luke's Health Systems), 7.25% due 11/01/2003 (j) 902 BBB Baa2 2,000 Arizona Health Facilities Authority Revenue Bonds (Catholic Healthcare West), Series A, 6.625% due 7/01/2020 2,145 NR* Aa1 2,000 Arizona Student Loan Acquisition Authority, Student Loan Revenue Refunding Bonds, AMT, Senior-Series B, 6.60% due 5/01/2010 2,127 AAA Aaa 2,000 Gilbert, Arizona, Water and Sewer Revenue Refunding Bonds, 6.50% due 7/01/2022 (e) 2,115 AAA NR* 1,000 Glendale, Arizona, Development Authority, Educational Facilities Revenue Refunding Bonds (American Graduate School International), 7.125% due 7/01/2005 (j)(p) 1,126 Maricopa County, Arizona, Alhambra Elementary School District 068, GO, Series A (c): AAA Aaa 1,000 6.75% due 7/01/2004 (j) 1,078 AAA Aaa 525 6.75% due 7/01/2014 563 BBB Baa1 1,000 Maricopa County, Arizona, Hospital Revenue Refunding Bonds (Sun Health Corporation), 6.125% due 4/01/2018 1,041
BBB Baa2 5,000 Maricopa County, Arizona, IDA, Health Facilities Revenue Bonds (Catholic Healthcare West Project), Series A, 5% due 7/01/2021 4,725 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) 1,061 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 1,235 BBB- Baa3 1,000 (Public Service Company of New Mexico Project), 6.30% due 12/01/2026 1,028 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 530 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) 2,692 NR* Ca 5,000 Phoenix, Arizona, IDA, Airport Facility Revenue Refunding Bonds (America West Airlines Inc. Project), AMT, 6.30% due 4/01/2023 2,650 NR* Aaa 2,720 Phoenix, Arizona, IDA Revenue Bonds (Camelback Crossing), 6.20% due 9/20/2020 (d) 3,009 B+ Ba3 1,000 Pima County, Arizona, IDA, Industrial Revenue Refunding Bonds (Tucson Electric Power Company Project), Series B, 6% due 9/01/2029 939 BBB- NR* 750 Prescott Valley, Arizona, Improvement District, Special Assessment Bonds (Sewer Collection System Roadway Repair), 7.90% due 1/01/2012 784 A NR* 1,600 Sedona, Arizona, Sewer Revenue Refunding Bonds, 7% due 7/01/2012 1,705 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 3,889
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands) National Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- -------------------------------------------------------------------- ------- Arizona AAA Aaa $ 3,180 University of Arizona, COP, Refunding, Series A, 5.50% due (concluded) 6/01/2018 (c) $ 3,568 AAA Aaa 1,000 University of Arizona, COP (University of Arizona Parking and Student Housing), 5.75% due 6/01/2019 (c) 1,131 NR* NR* 3,000 Vistancia, Arizona, Community Facilities District, GO, 6.75% due 7/15/2022 3,081 Arkansas--0.2% AAA NR* 160 Arkansas State Development Finance Authority, S/F Mortgage Revenue Bonds (Mortgage-Backed Securities Program), Series H, 6.15% due 7/01/2016 (d)(l) 171 NR* A2 250 Arkansas State Student Loan Authority Revenue Bonds, AMT, Sub-Series B, 7.25% due 6/01/2009 289 BBB Baa2 625 Camden, Arkansas, Environmental Improvement Revenue Bonds (International Paper Co. Project), AMT, Series A, 7.625% due 11/01/2018 674 AAA Aaa 250 Fort Smith, Arkansas, Water, Sewer and Construction Revenue Refunding Bonds, 6% due 4/01/2004 (f)(j) 262 AAA Aaa 200 Jonesboro, Arkansas, Residential Housing and Health Care Facilities Board, Hospital Revenue Refunding Bonds (Saint
Bernards Regional Medical Center), Series B, 5.90% due 7/01/2016 (c) 225 AAA Aaa 250 University of Central Arkansas, Housing System Revenue Bonds, 6.50% due 1/01/2031 (h) 299 California-- AAA Aaa 9,770 Alameda County, California, COP (Financing Project), 6% due 10.0% 9/01/2006 (f)(j) 11,357 A NR* 4,765 California Health Facilities Financing Authority, Health Facility Revenue Bonds (Adventist Health System), Series A, 5% due 3/01/2033 4,671 NR* A2 1,435 California Educational Facilities Authority Revenue Bonds (University of San Diego), Series A, 5.40% due 10/01/2032 1,548 BBB+ A3 7,500 California State, Department of Water Resources, Power Supply Revenue Bonds, Series A, 5.75% due 5/01/2017 8,239 A A2 9,000 California State, GO, Refunding: A A2 6,400 5% due 2/01/2023 9,013 A A2 10,000 5.25% due 2/01/2028 6,546 A- A3 6,010 5.125% due 6/01/2031 10,035 California Statewide Communities Development Authority, Health Facility Revenue Bonds (Memorial Health Services), Series A, 6% 6,503 due 10/01/2023 NR* NR* 2,880 Capistrano, California, Unified School District, Community Facility District, Special Tax Bonds (No. 90-2 Talega), 6% due 9/01/2032 2,970 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 1,114 NR* NR* 2,000 6.15% due 9/01/2026 2,063 Contra Costa County, California, Special Tax Bonds (Community Facilities District Number 2001-01): NR* NR* 1,585 6% due 9/01/2026 1,651
NR* NR* 1,200 6.10% due 9/01/2031 1,258 Golden State Tobacco Securitization Corporation of California, Tobacco Settlement Revenue Bonds: A- Baa2 5,250 Series 2003-A-1, 6.75% due 6/01/2039 4,740 A- Baa2 1,000 Series A-3, 7.875% due 6/01/2042 1,003 A- Baa2 4,200 Series A-4, 7.80% due 6/01/2042 4,191 A- Baa2 2,785 Series A-5, 7.875% due 6/01/2042 2,796 NR* NR* 4,000 Long Beach, California, Special Tax Bonds (Community Facilities District No. 3-Pine Ave.), 6.375% due 9/01/2023 4,265 Los Angeles, California, Department of Water and Power, Electric Plant Revenue Refunding Bonds: AA- Aaa 7,000 6% due 2/15/2005 (j) 7,619 NR* Aa3 5,160 RIB, Series 370, 10.74% due 2/15/2024 (g) 6,033 NR* NR* 1,100 Poway, California, Unified School District, Special Tax Bonds (Community District No. 6), Series A, 6.05% due 9/01/2025 1,129 NR* NR* 2,695 Riverside, California, Improvement Bond Act of 1915, Special Assessment (Riverwalk Assessment District), 6.375% due 9/02/2026 2,842 Roseville, California, Special Tax (Stoneridge Community Facilities Number 1): NR* NR* 1,250 6.20% due 9/01/2021 1,314 NR* NR* 1,125 6% due 9/01/2025 1,174 NR* NR* 2,500 6.30% due 9/01/2031 2,626 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 5,138 NR* NR* 2,500 GO, Series A, 6% due 8/01/2025 2,506 NR* Aaa 1,075 San Francisco, California, Uptown Parking Corporation, Parking Revenue Bonds (Union Square), 6% due 7/01/2020 (f) 1,223 Santa Margarita, California, Water District, Special Tax Refunding Bonds:
NR* NR* 3,000 (Community Facilities District No. 99), Series 1, 6.25% due 9/01/2029 3,122 NR* NR* 3,680 (Community Facilities District Number 99-1), 6.20% due 9/01/2020 3,845 Colorado--2.1% AA NR* 500 Boulder County, Colorado, Hospital Development Revenue Bonds (Longmont United Hospital Project), 6% due 12/01/2030 551 AAA NR* 555 Boulder County, Colorado, M/F Mortgage Revenue Bonds (Sinton Apartments Project), AMT, 6.625% due 7/01/2034 (b) 567 Colorado HFA Revenue Refunding Bonds (S/F Program), AMT: AA Aa2 260 Senior Series B-2, 7.25% due 10/01/2031 274 NR* Aa2 265 Senior Series B-3, 6.80% due 11/01/2028 269 AA Aa2 245 Senior Series C-2, 7.25% due 10/01/2031 258 AAA Aaa 550 Colorado Water Resource and Power Development Authority, Small Water Resource Revenue Bonds, Series A, 5.80% due 11/01/2020 (e) 628 A A2 2,575 Denver, Colorado, City and County Airport Revenue Bonds, AMT, Series A, 7.50% due 11/15/2023 2,787 Elk Valley, Colorado, Public Improvement Revenue Bonds (Public Improvement Fee): NR* NR* 7,560 Series A, 7.35% due 9/01/2031 7,805 NR* NR* 1,400 Series B, 7% due 9/01/2031 1,436 AAA Aaa 3,685 Larimer County, Colorado, Poudre School District Number R-1, GO, 6% due 12/15/2016 (e) 4,333 BB+ Ba1 6,170 Northwest Parkway, Colorado, Public Highway Authority Revenue Bonds, First Tier, Sub-Series D, 7.125% due 6/15/2041 6,468 NR* A1 750 Pitkin County, Colorado, GO, Refunding and Improvement Bonds, 6.875% due 12/01/2024 817 Connecticut-- AAA Aaa 1,000 Connecticut State Development Authority, Governmental Lease Revenue 2.0% Bonds, 6.60% due 6/15/2014 (f) 1,069
AA A1 2,000 Connecticut State Development Authority Revenue Bonds (General Fund), Series A, 6.375% due 10/15/2024 2,155 AAA Aaa 1,500 Connecticut State Development Authority, Solid Waste Disposal Facilities Revenue Bonds (Pfizer Inc. Project), AMT, 7% due 7/01/2025 1,653 AAA NR* 1,250 Connecticut State Development Authority, Water Facility Revenue Bonds (Bridgeport Hydraulic Company), AMT, 6.15% due 4/01/2035 (c) 1,414 AA Aa3 1,000 Connecticut State, GO, Series B, 5.50% due 11/01/2018 1,118 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 1,063 AAA Aaa 955 Series A-1, 6% due 11/15/2028 1,024 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) 1,014 AAA Aaa 1,400 (Newington Children's Hospital), Series A, 6.30% due 7/01/2021 (f) 1,489 AA NR* 1,500 (Waterbury Hospital Issue), Series C, 5.75% due 7/01/2020 1,631 AA NR* 1,000 (Westover School), Series A, 5.70% due 7/01/2030 1,083 A1+ VMIG1++ 200 (Yale University), VRDN, Series U, 1% 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 2,323 AA NR* 640 (Sacred Heart University), 6.625% due 7/01/2026 722 AAA Aaa 1,000 (Yale--New Haven Hospital Issue), Series H, 5.70% due 7/01/2025 (f) 1,095 Connecticut State Higher Education, Supplemental Loan Authority Revenue Bonds (Family Education Loan Program), AMT, Series A: NR* Aa3 405 6.40% due 11/15/2014 416 NR* Aaa 1,175 5.50% due 11/15/2020 1,211
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003
SCHEDULE OF INVESTMENTS (continued) (in Thousands) National Portfolio S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------ --------------------------------------------------------------------- ------- Connecticut NR* NR* $1,000 Connecticut State Regional Learning Educational Service Center (concluded) Revenue Bonds (Office/Education Center Facility), 7.75% due 2/01/2015 $ 1,035 AA Baa2 860 Waterbury, Connecticut, GO, 6% due 2/01/2017 (m) 954 Florida--6.0% NR* NR* 2,200 Bonnet Creek Resort, Florida, Community Development District, Special Assessment Revenue Bonds, 7.50% due 5/01/2034 2,309 NR* NR* 465 Brooks of Bonita Springs II, Florida, Community Development District, Capital Improvement Revenue Bonds, Series B, 6.60% due 5/01/2007 471 NR* Aaa 2,725 Duval County, Florida, School Board, COP, 5.75% due 7/01/2017 (h) 3,128 NR* NR* 5,000 Fiddlers Creek, Florida, Community Development District Number 2, Special Assessment Revenue Bonds, Series A, 6.375% due 5/01/2035 4,956 AAA Aaa 6,330 Florida HFA, Revenue Bonds (Antigua Club Apartments), AMT, Series A-1, 7% due 2/01/2035 (c) 6,617 NR* NR* 2,100 Heritage Isles Community Development District, Florida, Special Assessment Revenue Refunding Bonds, 5.90% due 11/01/2006 2,106 BBB- Baa1 4,415 Hillsborough County, Florida, IDA, PCR, Refunding (Tampa Electric Company Project), 5.10% due 10/01/2013 4,402 A+ Aa3 9,500 Jacksonville, Florida, Electric Authority, Water and Sewer Revenue Bonds, Series A, 6% due 10/01/2024 10,300
NR* NR* 995 Lakewood Ranch Community, Florida, Development District Number 5, Special Assessment Revenue Refunding Bonds, Series B, 6% due 5/01/2011 1,002 AAA NR* 7,000 Lee County, Florida, Airport Revenue Bonds, RIB, AMT, Series 580X, 10.64% due 10/01/2029 (g)(h) 8,507 AAA Aaa 4,500 Lee County, Florida, Transportation Facilities Revenue Bonds, 5.75% due 10/01/2022 (f) 4,940 Mediterra, Florida, South Community Development District, Capital Improvement Revenue Bonds: NR* NR* 1,075 6.85% due 5/01/2031 1,123 NR* NR* 1,000 Series A, 6.375% due 5/01/2034 1,001 NR* NR* 20 Series B, 6.25% due 5/01/2004 20 NR* NR* 2,000 Series B, 5.50% due 5/01/2010 1,990 AAA NR* 785 Orange County, Florida, HFA, Mortgage Revenue Bonds, AMT, Series A, 8.375% due 3/01/2021 (b)(d) 787 AAA Aaa 5,000 Orange County, Florida, Tourist Development, Tax Revenue Bonds, 5.50% due 10/01/2020 (c) 5,525 NR* NR* 800 Panther Trace, Florida, Community Development District, Special Assessment Revenue Bonds, Series B, 6.50% due 5/01/2009 807 NR* NR* 1,000 Park Place Community Development District, Florida, Special Assessment Revenue Bonds, 6.75% due 5/01/2032 1,016 NR* NR* 1,135 Preserve at Wilderness Lake, Florida, Community Development District, Capital Improvement Revenue Bonds, Series B-1, 5.90% due 11/01/2006 1,136 AAA Aaa 2,000 Saint Lucie, Florida, West Services District, Utility Revenue Refunding Bonds, Senior Lien, 6% due 10/01/2022 (f) 2,288 NR* NR* 2,735 Stoneybrook West, Florida, Community Development District, Special Assessment Revenue Bonds, Series B, 6.45% due 5/01/2010 2,786 NR* NR* 1,045 Verandah West, Florida, Community Development District, Capital Improvement Revenue Bonds, Series B, 5.25% due 5/01/2008 1,042 NR* NR* 4,905 Vista Lakes Community, Florida, Development District, Capital
Improvement Revenue Bonds, Series B, 5.80% due 5/01/2008 4,952 Georgia--1.3% NR* NR* 5,000 Atlanta, Georgia, Tax Allocation Revenue Bonds (Atlantic Station Project), 7.90% due 12/01/2024 5,201 AAA Aaa 5,210 College Park, Georgia, Business and IDA Revenue Bonds (Civic Center Project), 5.75% due 9/01/2026 (c) 5,819 AAA Aaa 3,450 Fulton County, Georgia, Development Authority Revenue Bonds (Morehouse College Project), 5.875% due 12/01/2030 (c) 3,926 NR* Aaa 1,250 Tift County, Georgia, Development Authority Revenue Bonds (First ABAC LLC Project), Series A, 5% due 9/01/2019 (c) 1,344 Hawaii--0.1% BBB Baa1 1,410 Kuakini, Hawaii, Health System, Special Purpose Revenue Bonds, Series A, 6.30% due 7/01/2022 1,459 Idaho--0.3% BB+ Ba3 5,000 Power County, Idaho, Industrial Development Corporation, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, 6.45% due 8/01/2032 4,159 Illinois--6.1% AAA NR* 10,620 Chicago, Illinois, Board of Education, GO, DRIVERS, Series 199, 10.17% due 12/01/2020 (c)(g) 13,252 AAA Aaa 1,400 Chicago, Illinois, GO (Neighborhoods Alive 21 Program), 5.875% due 1/01/2019 (e) 1,598 CCC Caa2 3,000 Chicago, Illinois, O'Hare International Airport, Special Facility Revenue Refunding Bonds (American Airlines Inc. Project), 8.20% due 12/01/2024 1,650 AAA Aaa 2,265 Chicago, Illinois, Park District, GO, Refunding, Series B, 5.75% due 1/01/2015 (e) 2,616 AAA Aaa 1,500 Chicago, Illinois, Park District, GO, Series A, 5.75% due
1/01/2016 (e) 1,718 NR* NR* 2,000 Chicago, Illinois, Special Assessment Bonds (Lake Shore East), 6.75% due 12/01/2032 2,009 AAA Aaa 3,210 Cicero, Illinois, GO, Refunding (Corporate Purpose), 6% due 12/01/2028 (f) 3,664 NR* Aaa 7,000 Decatur, Illinois, GO, Refunding, 6% due 3/01/2025 (e) 7,899 BBB A3 10,000 Hodgkins, Illinois, Environmental Improvement Revenue Bonds (Metro Biosolids Management LLC Project), AMT, 6% due 11/01/2023 10,382 Illinois State, GO, 1st Series (f): AAA Aaa 8,890 5.75% due 12/01/2015 10,275 AAA Aaa 3,745 5.75% due 12/01/2016 4,319 AAA Aaa 4,000 5.75% due 12/01/2017 4,590 NR* Aa3 3,000 Illinois State, Sales Tax Revenue Bonds, 6% due 6/15/2020 3,464 AAA Aa1 2,000 Lake County, Illinois, Forest Preservation District, GO (Land Acquisition and Development), 5.75% due 12/15/2016 2,348 NR* A1 4,400 Southwestern Illinois Development Authority, Sewer Facilities Revenue Bonds (Monsanto Company Project), AMT, 7.30% due 7/15/2015 4,625 Indiana--0.2% NR* NR* 2,595 Indiana State Educational Facilities Authority, Revenue Refunding Bonds (Saint Joseph's College Project), 7% due 10/01/2029 2,787 Iowa--0.8% AAA Aaa 1,000 Iowa City, Iowa, Sewer Revenue Bonds, 5.75% due 7/01/2021 (f) 1,096 NR* NR* 6,930 Iowa Finance Authority, Health Care Facilities Revenue Refunding Bonds (Care Initiatives Project), 9.25% due 7/01/2025 8,189 Kansas--1.4% AAA Aaa 12,000 Wichita, Kansas, Hospital Revenue Refunding Bonds, RIB, Series III-A, 11.55% due 10/01/2017 (f)(g) 12,520 BBB Baa1 4,500 Wyandotte County, Kansas, Kansas City Unified Government Revenue Refunding Bonds (General Motors Corporation Project), 6% due 6/01/2025 4,827
Kentucky--1.4% Kenton County, Kentucky, Airport Board, Special Facilities Airport Revenue Bonds (Delta Airlines Project), AMT, Series A: B B3 500 7.50% due 2/01/2012 450 B B3 4,950 7.50% due 2/01/2020 4,453 B B3 4,635 7.125% due 2/01/2021 4,002 BBB Baa2 8,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds (TJ International Project), AMT, 7% due 6/01/2024 8,441 Louisiana-- NR* Baa3 34,000 Lake Charles, Louisiana, Harbor and Terminal District, Port 4.0% Facilities Revenue Refunding Bonds (Trunkline Long Company Project), 7.75% due 8/15/2022 35,367 BB- NR* 13,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain Company Project), 7.50% due 7/01/2013 13,188 Maine--1.2% BB+ Ba1 8,635 Maine Finance Authority, Solid Waste Recycling Facilities Revenue Bonds (Great Northern Paper Project--Bowater), AMT, 7.75% due 10/01/2022 8,644 AA+ Aa1 6,045 Maine State Housing Authority, Mortgage Purpose Revenue Bonds, DRIVERS, AMT, Series 170, 10.62% due 11/15/2028 (g) 6,659 Maryland--1.1% NR* NR* 500 Anne Arundel County, Maryland, Special Obligation Revenue Bonds (Arundel Mills Project), 7.10% due 7/01/2029 546 NR* VMIG1++ 200 Baltimore County, Maryland, EDR, Refunding (Garrison Forest School Project), VRDN, 1% due 6/01/2026 (a) 200 AA Aa2 600 Carroll County, Maryland, Consolidated Public Improvement, GO, 6.50% due 10/01/2004 (j) 653 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 1,077 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) 1,254
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands) National Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- -------------------------------------------------------------------- ----- Maryland NR* Aaa $1,000 Maryland State Community Development Administration, Department (concluded) of Housing and Community Development Revenue Bonds (Waters Landing II Apartments), AMT, Series A, 5.875% due 8/01/2033 $1,067 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 517 NR* Aa2 30 6th Series, 7.05% due 4/01/2017 31 NR* NR* 345 Maryland State Economic Development Corporation Revenue Bonds (Health and Mental Hygiene Program), Series A, 7.125% due 3/01/2006 366 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 1,077 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) 828 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) 1,559 NR* NR* 900 (Memorial Hospital of Cumberland), 6.50% due 7/01/2004 (j) 947 Maryland Water Quality Financing Administration, Revolving Loan Fund Revenue Bonds, Series A: AA Aa2 300 6.375% due 9/01/2010 318 AA Aa2 500 6.55% due 9/01/2014 507 NR* Aa2 375 Montgomery County, Maryland, Housing Opportunities Commission, S/F Mortgage Revenue Refunding Bonds, Series A, 5.75% due 7/01/2013 404 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 1,150 Massachusetts AA Aa2 1,000 Massachusetts Bay Transportation Authority Revenue Bonds --1.5% (General Transportation System), Series A, 7% due 3/01/2021 1,318 AAA Aaa 460 Massachusetts Education Loan Authority, Education Loan Revenue Bonds, AMT, Issue E, Series A, 7.375% due 1/01/2012 (c) 479 AAA Aaa 610 Massachusetts Educational Financing Authority, Education Loan Revenue Refunding Bonds, AMT, Issue E, 5.85% due 7/01/2014 (c) 680 BB+ NR* 1,000 Massachusetts State Development Finance Agency, Revenue Refunding Bonds (Eastern Nazarine College), 5.625% due 4/01/2029 771 AAA Aaa 2,500 Massachusetts State, HFA, Housing Revenue Refunding Bonds, Series B, 6.05% due 12/01/2009 (f) 2,647 AAA Aaa 915 Massachusetts State, HFA, S/F Housing Revenue Bonds, AMT, Series 48, 6.35% due 6/01/2026 (f) 961
AA Aa2 1,065 Massachusetts State, HFA, S/F Housing Revenue Refunding Bonds, AMT, Series 40, 6.65% due 12/01/2027 1,112 AAA Aaa 2,575 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Medical Center of Central Massachusetts), CARS, Series B, 11.67% due 6/23/2022 (c)(g) 3,353 Massachusetts State Health and Educational Facilities Authority, Revenue Refunding Bonds: NR* Ba2 180 (Bay Cove Human Services Issue), Series A, 5.85% due 4/01/2004 184 AAA Aaa 85 (Boston College), Series J, 6.625% due 7/01/2021 (e) 85 AAA Aaa 1,900 (Massachusetts General Hospital), Series F, 6.25% due 7/01/2012 (c) 2,270 NR* Ca 723 (New England Memorial Hospital), Series B, 6.125% due 7/01/2013 (k) 43 NR* Ca 8,924 (New England Memorial Hospital), Series B, 6.25% due 7/01/2023 (k) 535 AAA Aaa 550 (Stonehill College), Series E, 6.60% due 7/01/2020 (f) 558 Massachusetts State Water Pollution Abatement Trust, Water Abatement Revenue Bonds, Series A: AA+ Aaa 1,550 6.375% due 2/01/2004 (j) 1,631 AA+ Aaa 130 6.375% due 2/01/2015 136 NR* Aaa 1,600 Montachusett, Massachusetts, Regional Vocational Technical School District, GO, 5.95% due 1/15/2020 (f) 1,869 Michigan--1.4% 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 5,188 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 537 AAA Aaa 1,000 Eastern Michigan University Revenue Refunding Bonds, 6% due 6/01/2024 (c) 1,154 BBB- Baa3 3,000 Flint, Michigan, Hospital Building Authority, Revenue Refunding
Bonds (Hurley Medical Center), 6% due 7/01/2020 2,828 AAA Aaa 615 Kalamazoo, Michigan, Hospital Finance Authority, Hospital Facility Revenue Refunding and Improvement Bonds (Bronson Methodist Hospital), Series A, 6.375% due 5/15/2017 (f) 630 AAA Aaa 1,500 Michigan State Hospital Finance Authority Revenue Refunding Bonds (Mercy Mount Clemens), Series A, 6% due 5/15/2014 (f) 1,718 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) 1,179 A- A3 3,500 (Detroit Edison Pollution Control), Series C, 5.45% due 9/01/2029 3,635 Minnesota-- A A1 1,400 Anoka County, Minnesota, Solid Waste Disposal Revenue Bonds 1.1% (Natural Rural Utilities), AMT, Series A, 6.95% due 12/01/2008 1,436 NR* A1 1,000 Eden Prairie, Minnesota, M/F Housing Revenue Bonds (Rolling Hills Project), Series A, 6.15% due 8/20/2031 (d) 1,111 AAA NR* 1,500 Minneapolis and St. Paul, Minnesota, Metropolitan Airports Commission, Airport Revenue Bonds, DRIVERS, AMT, Series 203, 10.15% due 1/01/2012 (e)(g) 1,887 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 797 NR* A3 1,500 Minneapolis, Minnesota, Health Care System Revenue Bonds (Allina Health System), Series A, 5.70% due 11/15/2022 1,579 AA+ Aa1 480 Minnesota State, HFA, S/F Mortgage Revenue Bonds, AMT, Series L, 6.70% due 7/01/2020 494 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 1,154 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) 1,155 AAA Aaa 1,000 Saint Francis, Minnesota, Independent School District No. 015, GO, Series A, 6.35% due 2/01/2013 (h) 1,119 BBB NR* 990 Sartell, Minnesota, IDR, Refunding (Champion International Corporation), 6.95% due 7/01/2012 1,008 AA NR* 1,500 Waconia, Minnesota, Health Care Facilities Revenue Bonds (Ridgeview Medical Center Project), Series A, 6.125% due 1/01/2029 (m) 1,661 Mississippi-- NR* Aaa 1,760 Mississippi Home Corporation, S/F Mortgage Revenue Bonds (Access 0.1% Program), AMT, Series A, 6.90% due 6/01/2024 (d) 1,823 Missouri--0.5% Fenton, Missouri, Tax Increment Revenue Refunding and Improvement Bonds (Gravois Bluffs): NR* NR* 1,640 6.75% due 10/01/2015 1,706 NR* NR* 4,000 7% due 10/01/2021 4,360 Nevada--1.8% NR* NR* 3,000 Henderson, Nevada, Local Improvement Districts, Special Assessment, Series No. T-14, 5.80% due 3/01/2023 3,004 Las Vegas, Nevada, Local Improvement Bonds, Special Assessment, Special Improvement District Number 808, Summerlin: NR* NR* 1,775 5.875% due 6/01/2009 1,842 NR* NR* 2,045 6.125% due 6/01/2012 2,121 NR* NR* 2,285 6.25% due 6/01/2013 2,370 NR* NR* 2,000 Reno, Nevada, Special Assessment District Number 4 (Somerset Parkway), 6.625% due 12/01/2022 2,038 Sparks, Nevada, Redevelopment Agency, Tax Allocation Revenue
Refunding Bonds, Series A: AA NR* 3,110 6% due 1/15/2015 3,464 AA NR* 6,315 6% due 1/15/2023 6,825 New Jersey-- CCC B2 825 Camden County, New Jersey, Pollution Control Financing Authority, 2.9% Solid Waste Resource Recovery Revenue Refunding Bonds, AMT, Series B, 7.50% due 12/01/2009 789 NR* NR* 3,300 New Jersey EDA, Retirement Community Revenue Bonds (Cedar Crest Village Inc. Facility), Series A, 7.25% due 11/15/2031 3,413 BB+ NR* 3,000 New Jersey Health Care Facilities Financing Authority Revenue Bonds (Pascack Valley Hospital Association), 6% due 7/01/2013 2,989
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands) National Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- -------------------------------------------------------------------- ------- New Jersey New Jersey State Turnpike Authority, Turnpike Revenue Refunding (concluded) Bonds (f)(g): NR* Aaa $10,000 DRIVERS, Series 155, 10.277% due 1/01/2018 $12,822 NR* Aaa 5,000 RIB, Series 315, 10.24% due 1/01/2018 6,411 A- Baa2 10,000 Tobacco Settlement Financing Corporation of New Jersey Revenue Bonds, 7% due 6/01/2041 9,378 New Mexico-- BBB- Baa3 8,000 Farmington, New Mexico, PCR, Refunding (Public Service Company of 0.8% San Juan), Series B, 6.30% due 12/01/2016 8,277
AAA Aaa 300 Las Cruces, New Mexico, Health Facilities Revenue Refunding Bonds (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)(e)(l) 286 AAA Aaa 250 Santa Fe County, New Mexico, Correctional System Revenue Bonds, 6% due 2/01/2027 (h) 309 New York-- AAA Aaa 9,500 Metropolitan Transportation Authority, New York, Commuter 12.8% Facilities, Service Contract Revenue Refunding Bonds, Series 8, 5.50% due 7/01/2013 (h)(j) 11,322 AAA Aaa 10,000 Metropolitan Transportation Authority, New York, Transit Facilities Revenue Bonds, Series A, 5.625% due 7/01/2007 (f)(j) 11,606 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 3,252 BB+ 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 3,564 NR* Aaa 10,000 New York City, New York, City Municipal Water Finance Authority, Water and Sewer System Revenue Bonds, RIB, Series 158, 10.277% due 6/15/2026 (f)(g) 12,362 AAA Aaa 3,000 New York City, New York, City Transit Authority, Triborough Metropolitan Transportation Authority, COP, 5.75% due 1/01/2020 (c) 3,400 New York City, New York, City Transitional Finance Authority, Revenue Refunding Bonds, Series C: AA+ Aa2 8,000 Future Tax Secured, 5.875% due 11/01/2017 9,263 AA+ Aa2 12,015 5.875% due 11/01/2015 New York City, New York City, New York, GO, Refunding: 13,974 AAA Aaa 6,600 Series A, 6% due 5/15/2021 (n) 7,569 AAA Aaa 10,000 Series A, 6.25% due 5/15/2026 (n) 11,752
AAA Aaa 4,000 Series B, 8.25% due 6/01/2006 (n) 4,722 AAA Aaa 4,000 Series C, 5.875% due 2/01/2016 (e) 4,464 AAA Aaa 15,000 Series G, 5.75% due 2/01/2014 (f) 16,492 AAA Aaa 1,000 Series H, 6% due 8/01/2017 (n) 1,141 AAA Aaa 10,000 New York City, New York, GO, Series B, 5.875% due 8/01/2015 (f) 11,667 AA- A3 5,000 New York State Dormitory Authority, Revenue Refunding Bonds (State University Educational Facilities), Series A, 7.50% due 5/15/2013 6,667 AAA Aaa 3,350 New York State Environmental Facilities Corporation, State Clean Water and Drinking Revenue Bonds, Series B, 5.875% due 1/15/2019 3,857 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 96 Tobacco Settlement Financing Corporation of New York Revenue Bonds, Series A-1 (c): AAA NR* 6,800 5.25% due 6/01/2021 7,386 AAA NR* 3,000 5.25% due 6/01/2022 3,237 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 710 NR* NR* 8,095 Westchester County, New York, IDA, Continuing Care Retirement, Mortgage Revenue Bonds (Kendal on Hudson Project), Series A, 6.50% due 1/01/2034 8,190 North AAA Aaa 1,195 Bladen County, North Carolina, GO, 5.60% due 5/01/2018 (h) 1,362 Carolina--2.2% AAA Aaa 920 Brunswick County, North Carolina, COP, 6% due 6/01/2016 (h) 1,077 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 509 AAA Aaa 1,000 Cumberland County, North Carolina, COP (Civic Center Project),
Series A, 6.40% due 12/01/2004 (c)(j) 1,095 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 1,564 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 2,101 AA Aa2 500 New Hanover County, North Carolina, Public Improvement, GO, 5.75% due 11/01/2015 North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds: 585 AAA Aaa 1,500 Series B, 5.875% due 1/01/2021 (f) 1,683 BBB Baa3 4,000 Series D, 6.75% due 1/01/2026 4,383 North Carolina HFA, S/F Revenue Bonds: AA Aa2 200 AMT, Series X, 6.70% due 9/01/2026 206 AA Aa2 1,005 Series W, 6.50% due 3/01/2018 1,033 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 2,715 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 1,656 North Carolina Municipal Power Agency Number 1, Catawba Electric Revenue Refunding Bonds, Series B: BBB+ Baa1 500 6.375% due 1/01/2013 573 A NR* 1,080 6.375% due 1/01/2013 1,237 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 1,242
Piedmont, North Carolina, Triad Airport Authority, Airport Revenue Refunding Bonds, Series A (h): AAA Aaa 1,000 6.375% due 7/01/2016 1,194 AAA Aaa 1,000 6% due 7/01/2024 1,140 AAA Aaa 1,000 Randolph County, North Carolina, COP, 5.75% due 6/01/2022 (h) 1,117 Ohio--2.9% NR* NR* 1,000 Cuyahoga County, Ohio, Health Care Facilities Revenue Refunding Bonds (Benjamin Rose Institute Project), 5.50% due 12/01/2028 864 AAA Aaa 1,200 Huron County, Ohio, GO, Human Services Building, 7.25% due 12/01/2005 (f)(j) 1,385 NR* NR* 2,000 Lucas County, Ohio, Hospital Revenue Bonds (Flower Hospital), 6.125% due 12/01/2004 (j) 2,151 BBB Baa1 2,000 Moraine, Ohio, Solid Waste Disposal Revenue Bonds (General Motors Corp. Project), AMT, 6.75% due 7/01/2014 2,232 AAA Aaa 3,000 North Canton, Ohio, City School District GO, 6.70% due 12/01/2004 (c)(j) 3,299 Ohio HFA, Mortgage Revenue Bonds, AMT (d): NR* Aaa 950 Series A-1, 6.15% due 3/01/2029 1,006 AAA Aaa 300 Series B-2, 6.70% due 3/01/2025 311 NR* Aaa 7,510 Ohio HFA, Residential Mortgage Revenue Bonds, Series A-1, 6.35% due 9/01/2031 (d) 8,022 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) 8,190 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) 1,065 AAA Aaa 3,005 Toledo-Lucas County, Ohio, Lodging Tax Revenue Refunding Bonds (Convention Center Project), 5.70% due 10/01/2015 (f) 3,393
NR* Aa3 1,000 Toledo-Lucas County, Ohio, Port Authority Revenue Refunding Bonds (Cargill Inc. Project), 5.90% due 12/01/2015 1,023 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)(j) 2,025 Oregon--0.8% Forest Grove, Oregon, Campus Improvement Revenue Refunding Bonds (Pacific University) (m): AA NR* 250 6% due 5/01/2015 280 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) 2,857 Oregon State Housing and Community Services Department, Mortgage Revenue Refunding Bonds (S/F Mortgage Program), Series A: NR* Aa2 250 6.40% due 7/01/2018 259 NR* Aa2 105 AMT, 6.20% due 7/01/2027 111
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands)
National Portfolio S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value ----- ---------- ---------- ------- -------------------------------------------------------------------- ------- Oregon NR* Aaa $ 500 Portland, Oregon, M/F Housing Authority Revenue Bonds (Lovejoy (concluded) Station Apartments Project), AMT, 5.90% due 7/01/2023 (f) $ 530 NR* Aaa 500 Portland, Oregon, Sewer System Revenue Bonds, RIB, Series 386, 10.16% due 8/01/2020 (e)(g) 708
NR* Aaa 3,190 Portland, Oregon, Urban Renewal and Redevelopment Revenue Bonds (South Park Blocks), Series A, 5.75% due 6/15/2018 (c) 3,651 NR* Aaa 1,000 Portland, Oregon, Urban Renewal and Redevelopment Revenue Refunding Bonds (Downtown Waterfront), Series A, 5.75% due 6/15/2018 (c) 1,144 Pennsylvania-- AAA Aaa 2,220 Allegheny County, Pennsylvania, Sanitation Authority, Sewer 1.2% Revenue Bonds, 5.75% due 12/01/2017 (f) 2,561 A NR* 4,000 Pennsylvania State Higher Educational Facilities Authority Revenue Bonds (University of Pennsylvania Medical Center Health System), Series A, 6% due 1/15/2031 4,230 NR* NR* 1,265 Philadelphia, Pennsylvania, Authority for IDR, Commercial Development, AMT, 7.75% due 12/01/2017 1,294 A- NR* 5,750 Sayre, Pennsylvania, Health Care Facilities Authority Revenue Bonds (Guthrie Health), Series A, 5.875% due 12/01/2031 5,995 Rhode Island-- AA+ Aa2 8,075 Rhode Island Housing and Mortgage Finance Corporation Revenue Bonds, 1.4% DRIVERS, AMT, Series 156, 10.539% due 4/01/2029 (g) 8,794 AAA Aaa 6,815 Rhode Island State Economic Development Corporation, Airport Revenue Bonds, Series B, 6% due 7/01/2028 (e) 7,771 AA NR* 1,000 Rhode Island State Economic Development Corporation Revenue Bonds (Providence Place Mall), 6.125% due 7/01/2020 (m) 1,127 South BBB+ Baa2 5,400 Medical University, South Carolina, Hospital Authority, Hospital Carolina--0.5% Facilities Revenue Refunding Bonds, Series A, 6.375% due 8/15/2027 5,695 South Dakota-- NR* Aaa 3,750 Pierre, South Dakota, School District Number 32-2, GO, 5.75% due 0.3% 8/01/2020 (h) 4,256
Tennessee-- Chattanooga, Tennessee, IDB, Lease Rent Revenue Bonds (Southside 2.1% Redevelopment Corporation) (c): AAA Aaa 4,485 5.75% due 10/01/2017 5,167 AAA Aaa 3,740 5.75% due 10/01/2018 4,287 BB+ Ba1 4,950 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds (Recycling Facility--Calhoun Newsprint), AMT, 7.40% due 12/01/2022 4,903 AA Aa2 5,000 Metropolitan Government of Nashville and Davidson County, Tennessee, GO, 5.875% due 5/15/2026 5,518 NR* NR* 2,000 Metropolitan Knoxville, Tennessee, Airport Authority, Special Purpose Revenue Bonds (Northwest Airlines Inc. Project), AMT, 8% due 4/01/2032 1,530 A- Baa1 3,800 Shelby County, Tennessee, Health, Educational and Housing Facility Board, Hospital Revenue Refunding Bonds (Methodist Healthcare), 6.50% due 9/01/2026 4,185 Texas--10.5% Austin, Texas, Convention Center Revenue Bonds (Convention Enterprises Inc.), First Tier, Series A: BBB- Baa3 4,300 6.60% due 1/01/2021 4,587 BBB- Baa3 2,300 6.70% due 1/01/2028 2,453 AAA Aaa 5,300 Austin, Texas, Revenue Bonds (Town Lake Community Events Center Venue), 6.20% due 11/15/2029 (e) 6,200 Bexar County, Texas, Health Facilities Development Corporation, Revenue Refunding Bonds (Army Retirement Residence Project): BBB- NR* 600 6.125% due 7/01/2022 622 BBB- NR* 1,750 6.30% due 7/01/2032 1,823 BBB- Ba1 4,250 Brazos River Authority, Texas, Revenue Refunding Bonds (Reliant Energy Inc. Project), Series B, 7.75% due 12/01/2018 4,594 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) 1,475
AAA NR* 10,125 Dallas-Fort Worth, Texas, International Airport Revenue Bonds, DRIVERS, AMT, Series 201, 10.64% due 11/01/2024 (e)(g) 12,114 AA NR* 1,260 Fort Bend County, Texas, Municipal Utility District Number 23, GO, 6.625% due 9/01/2024 1,444 AA+ Aa1 1,400 Fort Worth, Texas, Certificates of Obligation, GO, 6.25% due 3/01/2021 1,499 AA NR* 1,000 Gregg County, Texas, Health Facilities Development Corporation, Hospital Revenue Bonds (Good Shepherd Medical Center Project), 6.875% due 10/01/2020 (m) 1,196 NR* Aa3 1,000 Harris County, Texas, Health Facilities Development Corporation, Revenue Refunding Bonds, RITR, Series 6, 9.795% due 12/01/2027 (g)(i) 1,355 A- A3 1,000 Lower Colorado River Authority, Texas, PCR (Samsung Austin Semiconductor), AMT, 6.95% due 4/01/2030 1,123 BBB- Ba1 8,080 Matagorda County, Texas, Navigation District Number 1 Revenue Refunding Bonds (Reliant Energy Inc.), Series C, 8% due 5/01/2029 8,764 AAA Aaa 1,000 Pflugerville, Texas, Independent Industrial School District, GO, 5.75% due 8/15/2020 1,130 BB- Ba3 4,825 Port Corpus Christi, Texas, Individual Development Corporation, Environmental Facilities Revenue Bonds (Citgo Petroleum Corporation Project), AMT, 8.25% due 11/01/2031 4,963 BBB Baa2 2,495 Red River Authority, Texas, PCR, Refunding (Celanese Project), Series A, 6.45% due 11/01/2030 2,644 AA NR* 1,000 Red River, Texas, Education Finance Revenue Bonds (Saint Mark's School--Texas Project), 6% due 8/15/2019 1,100 NR* Aaa 730 South Plains, Texas, Housing Finance Corporation, S/F Mortgage Revenue Bonds, AMT, Series A, 7.30% due 9/01/2031 831 Southeast Texas, Housing Finance Corporation Revenue Bonds, AMT (d)(o): NR* Aaa 1,100 Series A, 8% due 11/01/2025 1,197
NR* Aaa 475 Series B, 8.50% due 11/01/2025 498 AA Aa1 800 Texas State, GO, Veterans' Housing Assistance Fund II, AMT, Series A, 7% due 8/01/2004 832 AA NR* 805 Texas State, GO, Water Development Board, 7% due 8/01/2004 (j) 857 Texas State Public Finance Authority, Building Revenue Bonds (h): AAA Aaa 2,100 (General Services Commission Project), Series A, 6% due 2/01/2020 2,425 AAA Aaa 1,000 (State Preservation Project), Series B, 6% due 8/01/2015 1,171 NR* Baa3 1,750 Texas State Student Housing Corporation, Student Housing Revenue Bonds (Midwestern State University Project), 6.50% due 9/01/2034 1,709 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) 54,048 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) 5,721 Utah--1.1% AAA Aaa 12,000 Weber County, Utah, Municipal Building Authority, Lease Revenue Bonds, 7.50% due 12/15/2004 (j) 13,356 Virginia--0.6% BBB+ A3 2,425 Chesterfield County, Virginia, IDA, PCR (Virginia Electric and Power Company), Series B, 5.875% due 6/01/2017 2,586 BBB- Baa3 4,900 Mecklenburg County, Virginia, IDA, Exempt Facility Revenue Refunding Bonds (UAE LP Project), 6.50% due 10/15/2017 5,072 Washington-- AAA Aaa 2,065 Kitsap County, Washington, GO, 5.875% due 7/01/2020 (c) 2,365 1.1% AAA Aaa 3,000 Port Seattle, Washington, Special Facilities Revenue Bonds, Series A, 6% due 9/01/2029 (f) 3,469 AAA Aaa 3,010 Seattle, Washington, Drain and Wastewater Utility Revenue Bonds, 5.75% due 11/01/2022 (f) 3,371 NR* NR* 2,500 Seattle, Washington, Housing Authority, Housing Revenue Bonds
(Replacement Housing Project), 6.125% due 12/01/2032 2,526 AAA Aaa 1,625 University of Washington, University Revenue Bonds (Student Facilities Fee), 5.875% due 6/01/2017 (h) 1,880 West BBB Baa2 7,500 Upshur County, West Virginia, Solid Waste Disposal Revenue Bonds Virginia--0.7% (TJ International Project), AMT, 7% due 7/15/2025 8,148 Wisconsin-- NR* Aaa 2,050 Waterford, Wisconsin, Graded Joint School District Number 1, GO, 1.7% Refunding, 5.75% due 4/01/2018 (e)(h) 2,343 AA Aa2 6,585 Wisconsin Housing and EDA, Home Ownership Revenue Refunding Bonds, RITR, AMT, Series 18, 10.562% due 9/01/2028 (g) 7,060 AAA Aaa 7,265 Wisconsin State, GO, AMT, Series B, 6.20% due 11/01/2026 (f) 8,071 BBB+ NR* 3,250 Wisconsin State Health and Educational Facilities Authority Revenue Bonds (Synergyhealth Inc.), 6% due 11/15/2023 3,339 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) 9,474 BB+ Ba3 4,000 Sweetwater County, Wyoming, Solid Waste Disposal Revenue Bonds (FMC Corporation Project), AMT, Series A, 7% due 6/01/2024 3,715
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (concluded) (in Thousands) National Portfolio
S&P Moody's Face Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- --------------------------------------------------------------------- ---------
Guam--0.0% AAA NR* $ 115 Guam Housing Corporation, S/F Mortgage Revenue Bonds, AMT, Series A, 5.75% due 9/01/2031 (o) $ 126 Puerto Puerto Rico Commonwealth Highway and Transportation Authority, Rico--2.4% Transportation Revenue Bonds: A- Baa2 8,045 5.75% due 7/01/2022 8,841 AAA Aaa 2,000 Series B, 5.875% due 7/01/2021 (f) 2,318 A Baa1 1,000 Series B, 6% due 7/01/2026 1,079 Puerto Rico Commonwealth, Public Improvement, GO (f): AAA Aaa 4,145 5.75% due 7/01/2010 4,963 AAA Aaa 785 Refunding, 5.70% due 7/01/2020 897 AAA Aaa 800 Puerto Rico Electric Power Authority, Power Revenue Bonds, STRIPES, Series T, 10.29% due 7/01/2004 (g)(h)(j) 909 NR* Aa2 2,000 Puerto Rico Industrial Tourist Educational, Medical and Environmental Control Facilities Revenue Bonds (Ascension Health), RIB, Series 377, 10.99% due 11/15/2030 (g) 2,467 Puerto Rico Public Finance Corporation, Commonwealth Appropriation Revenue Bonds, Series E: BBB+ Baa3 2,750 5.70% due 8/01/2025 2,939 BBB+ Baa3 3,995 5.50% due 8/01/2029 4,242 BBB+ Baa3 1,000 5.75% due 8/01/2030 1,089 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 8,168 Total Municipal Bonds (Cost--$1,115,452)--97.0% 1,186,321
Shares Held Short-Term Securities ------ ---------------------------------------------------------------------
23,423 Merrill Lynch Institutional Tax-Exempt Fund** 23,423 Total Short-Term Securities (Cost--$23,423)--1.9% 23,423 Total Investments (Cost--$1,138,875)--98.9% 1,209,744 Other Assets Less Liabilities--1.1% 13,939 ---------- Net Assets--100.0% $1,223,683 ==========
(a) The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at June 30, 2003. (b) FHA Insured. (c) AMBAC Insured. (d) GNMA Collateralized. (e) FGIC Insured. (f) MBIA Insured. (g) The interest rate is subject to change periodically and inversely based upon prevailing market rates. The interest rate shown is the rate in effect at June 30, 2003. (h) FSA Insured. (i) Escrowed to maturity. (j) Prerefunded. (k) Non-income producing security. (l) FNMA Collateralized. (m) Radian Insured. (n) XL Capital Insured. (o) FHLMC Collateralized. (p) Connie Lee 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 Dividend Affiliate Activity Income --------------------------- -------- -------------- Merrill Lynch Institutional Tax-Exempt Fund 23,423 $288 ++ Highest short-term rating issued by Moody's Investors Service, Inc. +++ Ratings of issues shown are unaudited. See Notes to Financial Statements. SCHEDULE OF INVESTMENTS (in Thousands) Limited Maturity Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- ----------------------------------------------------------------- ------- Alabama--1.4% AA Aa3 $ 7,675 Alabama State Public School and College Authority, Capital Improvement Revenue Bonds, Series D, 5% due 8/01/2003 $ 7,702 AAA Aaa 2,400 Birmingham, Alabama, GO, Refunding and Improvement, Series B, 4% due 12/01/2004 (c) 2,500 Alaska--0.4% A- A3 3,000 Valdez, Alaska, Marine Terminal Revenue Refunding Bonds (Phillips Petroleum Company Project), Series A, VRDN, 2% due 1/01/2004 (b) 3,009 Arizona--3.4% AA- A1 4,000 Central Arizona, Water Conservation District, Contract Revenue Refunding Bonds (Central Arizona Project), Series A, 5.40% due 11/01/2005 4,371 Maricopa County, Arizona, Pollution Control Corporation, PCR, Refunding (Arizona Public Service Company): A- A3 5,000 Series D, 1.75% due 5/01/2029 5,004 A- A3 5,000 Series E, 1.75% due 5/04/2029 5,004 Salt River Project, Arizona, Agriculture Improvement and Power District, Electric System Revenue Refunding Bonds (Salt River Project): AA Aa2 7,000 Series A, 5.25% due 1/01/2006 7,642 AAA Aa2 1,455 Series B, 7% due 1/01/2005 (g) 1,581 AA Aa2 890 Series B, 7% due 1/01/2005 965
California-- SP1 MIG1++ 1,900 California State, RAW, Series A, 2% due 6/16/2004 1,914 3.5% A A3 10,000 California Statewide Communities Development Authority Revenue Bonds (Kaiser Permanente), Series C, 3.70% due 5/31/2005 10,311 A A2 4,000 Chula Vista, California, IDR, Refunding (San Diego Gas & Electric Co.), AMT, Series A, 6.75% due 3/01/2004 4,055 AAA Aaa 5,000 Long Beach, California, Harbor Revenue Bonds, AMT, Series A, 4% due 5/15/2027 5,125 AAA Aaa 3,750 Natomas, California, Unified School District, COP (Natomas High School Project), VRDN, 2.50% due 9/01/2004 (b)(c) 3,796 Colorado--0.5% AAA Aaa 3,175 Denver, Colorado, City and County Airport Revenue Refunding Bonds, AMT, Series A, 5.50% due 11/15/2004 (c) 3,351 Connecticut-- AA Aa3 2,700 Connecticut State, GO, Refunding, Series C, 4% due 12/15/2005 2,872 0.8% AAA Aaa 2,630 Waterbury, Connecticut, GO, Refunding, 4% due 2/01/2005 (i) 2,735 Delaware--0.6% AAA Aaa 4,125 Delaware State, GO, Series A, 5% due 1/01/2006 4,486 Florida--2.8% AA+ Aa1 3,000 Broward County, Florida, GO, Refunding, 4.625% due 1/01/2005 3,080 AAA Aaa 500 Charlotte County, Florida, Utility Revenue Bonds, 6.75% due 10/01/2003 (a)(f) 517 AAA Aaa 1,000 Dade County, Florida, GO, Series I, 6.90% due 7/01/2003 (c) 1,000 AA+ Aa2 1,000 Florida State Board of Education, Capital Outlay, GO (Public Education), Series B, 5.625% due 6/01/2005 1,081 AAA Aaa 2,500 Florida State Board of Education, Lottery Revenue Bonds, Series B, 5.25% due 7/01/2005 (f) 2,694 AAA Aaa 400 Hillsborough County, Florida, Aviation Authority Revenue Refunding
Bonds (Tampa International Airport), AMT, Series A, 5% due 10/01/2005 (c) 428 AAA Aaa 9,685 Orlando, Florida, Greater Orlando Aviation Authority, Airport Facilities Revenue Refunding Bonds, Series C, 5% due 10/01/2004 10,163 AAA Aaa 300 Port Orange, Florida, Water and Sewer Revenue Refunding Bonds, 5% due 10/01/2003 (c) 303 AAA Aaa 500 Tallahassee, Florida, Energy System Revenue Bonds, Series B, 4% due 10/01/2004 (e) 518 Georgia--4.0% AA- Aa2 3,500 Cherokee County, Georgia, GO, 4.25% due 8/01/2003 3,510 A1+ VMIG1++ 10,000 Clayton County, Georgia, Development Authority, Special Facilities Revenue Bonds (Delta Airlines), VRDN, AMT, Series C, 1.05% 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 5,327 A+ Aa3 2,050 Dalton, Georgia, Building Authority Revenue Bonds, 5% due 7/01/2004 2,132 AAA Aaa 2,550 Georgia State, GO, Refunding, Series A, 6.25% due 3/01/2006 2,866
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (continued) (in Thousands) Limited Maturity Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- -------------------------------------------------------------------- ------- Georgia Gwinnett County, Georgia, School District, GO, Refunding: (concluded) AA+ Aaa $ 4,000 4% due 2/01/2005 $ 4,174
AA+ Aaa 1,000 4.50% due 2/01/2006 1,077 Hawaii--1.0% AAA Aaa 3,585 Hawaii State, GO, Series CT, 5.25% due 9/01/2003 (e)(g) 3,611 AAA Aaa 3,505 Hawaii State Highway Revenue Refunding Bonds, 3% due 7/01/2005 (e) 3,622 Illinois--2.7% AAA Aaa 5,000 Chicago, Illinois, Public Building Commission, Building Revenue Bonds, Series C, 5.125% due 2/01/2004 (f) 5,120 AAA NR* 5,000 Chicago, Illinois, Skyway Toll Bridge Revenue Refunding Bonds, 6.75% due 1/01/2004 (a) 5,246 A1 VMIG1++ 6,000 Illinois Health Facilities Authority, Revenue Refunding Bonds (Resurrection Health Care), VRDN, Series A, 0.95% due 5/15/2029 (b) 6,000 AAA Aaa 3,000 Illinois Regional Transportation Authority Revenue Bonds, Series A, 6.25% due 6/01/2004 (a)(c) 3,205 Indiana--0.6% BBB+ Baa1 4,300 Indiana State Development Finance Authority, PCR, Refunding (Southern Indiana Gas & Electric), AMT, Series C, 5% due 3/01/2030 4,463 Iowa--1.0% NR* MIG1++ 6,920 Ankeny, Iowa, GO, BAN, Series C, 1.50% due 6/01/2005 6,943 Kentucky--1.5% NR* MIG1++ 5,000 Logan/Todd, Kentucky, Regional Water Commission Revenue Refunding Bonds, 4% due 2/01/2007 5,340 NR* A2 5,500 Newport, Kentucky, GO, BAN, 2.41% due 12/01/2004 5,541 Louisiana-- AAA Aaa 4,000 Orleans Parish, Louisiana, School Board, GO, 7.50% due 0.6% 9/01/2005 (a)(f) 4,532 Maryland--0.6% AAA Aaa 4,050 Washington Suburban Sanitation District, Maryland, Water Supply, GO, Refunding, 4.125% due 6/01/2004 4,169
Massachusetts SP1+ MIG1++ 6,425 Boston, Massachusetts, BAN, Series B, 2.125% due 2/01/2006 6,523 --5.2% NR* NR* 3,000 Massachusetts State Development Finance Agency, Environmental Improvement Revenue Bonds (The Mead Corporation Project), VRDN, AMT, Series A, 2.25% due 11/01/2033 (b)(d) 3,000 A1+ MIG1++ 10,000 Massachusetts State, HFA, Housing Revenue Refunding Bonds (S/F Housing), AMT, Series I, 3.25% due 6/01/2004 10,193 AA- Aa3 1,500 Massachusetts State Health and Educational Facilities Authority Revenue Bonds (Partners Healthcare), Series E, 4% due 7/01/2006 1,587 AA Aa2 15,070 New England Education Loan Marketing Corporation, Massachusetts, Student Loan Revenue Refunding Bonds, AMT, Series A, 5.70% due 7/01/2005 16,230 Michigan--1.5% AAA Aaa 6,890 Michigan Municipal Bond Authority Revenue Bonds (Pooled Project), Series B, 5.625% due 4/01/2006 (a) 7,796 AA+ Aa1 3,000 Michigan State Building Authority, Revenue Refunding Bonds (Facilities Program), Series III, 5% due 10/15/2004 3,153 Missouri--0.8% NR* Aaa 4,000 Kansas City, Missouri, School District, Building Revenue Refunding Bonds, Series A, 5% due 2/01/2006 (f) 4,352 AA+ NR* 1,175 Saint Louis County, Missouri, Rockwood School District Number R-6, GO, Refunding, 3.50% due 2/01/2004 1,192 Nebraska--1.2% Nebraska Public Power District, Revenue Refunding Bonds: AAA Aaa 2,000 (Power Supply System), Series C, 4.50% due 1/01/2004 (g) 2,036 AAA Aaa 6,750 Series A, 5.25% due 1/01/2004 (d) 6,895 Nevada--1.7% BBB- Baa2 12,000 Clark County, Nevada, IDR (Southwest Gas Corporation Project), AMT, Series D, 3.35% due 9/01/2004 12,095
New Hampshire-- NR* NR* 8,000 New Hampshire State Business Finance Authority, PCR, Refunding 1.1% (United Illuminating Company), AMT, Series A, 3.75% due 7/01/2007 8,046 New Jersey-- SP1 MIG2 5,405 Jersey City, New Jersey, GO, Refunding, 2% due 1/09/2004 5,424 0.8% New Mexico-- AA Aa3 2,000 Albuquerque, New Mexico, Joint Water and Sewer System Revenue 1.5% Refunding Bonds, Series A, 4.40% due 7/01/2003 2,000 BBB- Baa3 6,000 Farmington, New Mexico, Public Service, PCR, Refunding (San Juan Project), Series B, 2.75% due 4/01/2004 6,008 AA+ Aa1 3,100 New Mexico State, GO, Refunding, Series A, 5% due 9/01/2003 3,121 New York-- NR* NR* 13,000 Little Falls, New York, City School District, GO, BAN, 2.50% 8.3% due 8/28/2003 13,023 AA+ Aa1 2,400 Municipal Assistance Corporation for the City of New York, New York, Revenue Refunding Bonds, Series E, 6% due 7/01/2005 2,624 A1+ NR* 5,800 New York City, New York, City Transitional Finance Authority Revenue Bonds, VRDN, Sub-Series 2D, 0.95% due 11/01/2022 (b) 5,800 A A2 7,000 New York City, New York, GO, Refunding, Series G, 5% due 8/01/2005 7,447 A A2 5,135 New York City, New York, GO, Series H, 4.50% due 8/01/2004 5,306 A A3 6,530 New York State Dormitory Authority, Lease Revenue Bonds (Court Facilities), Series A, 4% due 5/15/2006 6,871 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 4,551 AA A2 8,250 New York State, GO, Refunding, Series C, 4% due 4/15/2006 8,781 Schenectady, New York, GO, BAN: NR* NR* 2,000 Series A, 3.75% due 5/28/2004 2,009
NR* NR* 3,000 Series B, 3.75% due 5/28/2004 3,017 North Carolina-- North Carolina State, Public School Building, GO: 1.4% AAA Aa1 4,500 4.60% due 4/01/2004 4,624 AAA Aa1 5,000 4.60% due 4/01/2006 5,423 Ohio--6.1% AAA Aaa 1,580 Cincinnati, Ohio, City School District, GO, TAN, 5.50% due 12/01/2003 (c) 1,607 NR* Aaa 740 Mason, Ohio, COP (Municipal Facilities Project), 3.50% due 12/01/2004 (d) 766 BBB NR* 4,000 Ohio State Air Quality, Development Authority, Revenue Refunding Bonds (Ohio Edison Project), Series B, 2.25% due 6/01/2005 4,004 AAA Aaa 5,000 Ohio State Building Authority, Adult Correctional Facilities Revenue Bonds, 6% due 10/01/2004 (a)(d) 5,408 Ohio State, Highway Capital Improvement, GO: AAA Aa1 5,375 Series C, 4.75% due 5/01/2005 5,716 AAA Aa1 4,850 Series F, 5% due 5/01/2005 5,180 NR* NR* 6,000 Ohio State Water Development Authority, 3% due 7/18/2003 6,000 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 2,015 NR* Aa3 13,000 Rickenbacker, Ohio, Port Authority, Capital Funding Revenue Bonds (Oasbo Expanded Asset Pooled), Series A, 3.90% due 5/01/2004 13,291 Oklahoma--1.1% NR* Aaa 1,235 Midwest City, Oklahoma, Municipal Authority, Capital Improvement Revenue Bonds, 4.55% due 6/01/2005 (e) 1,311 Oklahoma City, Oklahoma, Airport Trust Revenue Bonds, Junior Lien, AMT, 28th Series (d): AAA Aaa 1,000 4% due 7/01/2004 1,027
AAA Aaa 3,040 4% due 7/01/2005 3,170 A2 VMIG2 2,500 Oklahoma Development Finance Authority Revenue Bonds (Conoco Project), VRDN, AMT, Series B, 1.47% due 8/01/2037 (b) 2,500 Oregon--2.6% NR* NR* 10,770 Portland, Oregon, Limited Tax, GO, Refunding, Series B, 3% due 12/15/2004 11,073 AA+ Aa1 4,815 Tri-County, Oregon, Metropolitan Transportation District, GO, Refunding (Light Rail Extension), Series A, 4% due 7/01/2003 4,815 AA+ Aa3 2,385 Tri-County, Oregon, Metropolitan Transportation District Revenue Bonds, Series A, 5.25% due 8/01/2005 2,578 Pennsylvania-- AAA Aaa 1,500 Pennsylvania Inter-Governmental Cooperative Authority, Special 1.9% Tax Revenue Bonds (Philadelphia Funding Program), 6.75% due 6/15/2005 (a)(f) 1,660 AA Aa2 11,000 Pennsylvania State, GO, Refunding, Second Series, 5% due 7/01/2005 11,802
Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 SCHEDULE OF INVESTMENTS (concluded) (in Thousands) Limited Maturity Portfolio
S&P Moody's Face STATE Ratings+++ Ratings+++ Amount Municipal Bonds Value -------------- ---------- ---------- ------- -------------------------------------------------------------------- ------- Rhode Island-- AA+ Aa2 $ 2,500 Rhode Island Housing and Mortgage Finance Corporation, Homeowner 0.4% Opportunity Revenue Bonds, AMT, Series 41-C, 3.375% due 11/01/2005 $ 2,586 South AAA Aaa 500 South Carolina State Highway, GO, Series B, 5.25% due 4/01/2005 535 Carolina--0.1%
Tennessee-- NR* Aaa 3,815 Hamilton County, Tennessee, GO, Refunding, 4% due 10/01/2005 (f) 4,039 1.4% AA Aa2 5,605 Tennessee State, GO, Refunding, Series B, 5.50% due 5/01/2004 5,816 Texas--14.8% AAA Aaa 2,560 Arlington, Texas, GO, Refunding and Improvement, 2.50% due 8/15/2006 (f) 2,630 BBB Baa2 15,000 Brazos River Authority, Texas, PCR, Refunding (Texas Utilities Electric Company Project), AMT, Series D, 4.25% due 11/01/2003 15,075 AAA Aaa 2,000 Dallas, Texas, Independent School District, GO, Refunding, 5% due 8/15/2005 2,154 AA+ Aa1 2,000 Forth Worth, Texas, GO, Refunding, Series A, 4% due 3/01/2004 2,041 AA Aa2 6,075 Fort Worth, Texas, Water and Sewer Revenue Refunding and Improvement Bonds, 5.50% due 2/15/2004 6,246 BBB NR* 4,000 Gulf Coast, Texas, Waste Disposal Authority (Waste Management of Texas), AMT, Series C, 2.85% due 5/01/2004 4,014 A1+ NR* 4,400 Harris County, Texas, Health Facilities Development Corporation Revenue Refunding Bonds (Methodist Hospital), VRDN, 0.95% due 12/01/2032 (b) 4,400 AAA Aaa 3,870 Harris County, Texas, Toll Road Revenue Bonds, Senior Lien, Series A, 6.25% due 8/15/2004 (a)(d) 4,174 AAA Aaa 16,000 Northside, Texas, Independent School District, GO, Series A, 2.25% due 8/01/2004 16,016 BBB Baa2 2,580 Sabine River Authority, Texas, PCR, Refunding (TXU Electric Company Project), Series C, 4% due 11/01/2003 2,594 AA Aa1 3,000 Texas State, Public Finance Authority, GO, Refunding: Series A, 5% due 10/01/2006 3,323 AA Aa1 5,750 Series B, 6% due 10/01/2004 (c) 6,103 AAA Aaa 5,000 Texas State Turnpike Authority, Dallas North Thruway Revenue
Refunding Bonds, 4.80% due 1/01/2006 5,188 AA Aa1 6,425 Texas State, Water Financial Assistance, GO, Refunding, Series C, 5% due 8/01/2006 7,088 Trinity River Authority, Texas, Regional Wastewater System Revenue Refunding Bonds (d): AAA Aaa 1,845 5% due 8/01/2003 1,851 AAA Aaa 3,000 5% due 8/01/2004 3,129 AAA Aaa 4,515 5% due 8/01/2006 4,976 AAA Aaa 4,950 University of Houston, Texas, University Revenue Refunding Bonds, Series B, 5% due 2/15/2005 (e) 5,246 AAA Aaa 10,000 Weatherford, Texas, Independent School District, GO, Series A, 2.50% due 2/01/2005 10,105 Utah--0.8% A+ A1 2,725 Intermountain Power Agency, Utah, Power Supply, Revenue Refunding Bonds, Series C, 4.80% due 7/01/2003 2,725 AAA Aaa 3,200 Utah State, GO, Refunding, Series A, 5% due 7/01/2004 3,329 Virginia--3.1% BBB NR* 7,000 Amelia County, Virginia, IDA, Solid Waste Disposal Revenue Refunding Bonds (Waste Management Project), AMT, 4.90% due 4/01/2027 7,255 Louisa, Virginia, IDA, Solid Waste and Sewer Disposal Revenue Bonds (Virginia Electric & Power Company Project), AMT, Series A: BBB+ A3 2,000 1.85% due 4/01/2022 2,011 BBB+ A3 2,500 1.85% due 9/01/2030 2,514 AA+ Aa1 5,890 Virginia State Public School Authority Revenue Bonds (School Technology Notes), 5% due 4/15/2007 6,554 AA+ Aa1 3,900 Virginia State Public School Authority, School Financing, GO, Series B, 4% due 8/01/2005 4,116 Washington-- AA+ Aa1 3,345 King County, Washington, GO, Refunding, 5% due 12/01/2005 3,632
5.1% AAA Aa1 5,000 Seattle, Washington, GO, Refunding and Improvement, 4% due 8/01/2005 5,274 AAA Aaa 2,180 Seattle, Washington, GO, Refunding, Series A, 5.25% due 3/01/2005 2,323 AAA Aaa 4,200 Snohomish County, Washington, Everett School District Number 002, GO, Refunding, 6.20% due 12/01/2003 (a)(d) 4,376 AAA Aaa 1,650 Snohomish County, Washington, Public Utility District Number 001, Electric Revenue Refunding Bonds, 5% due 12/01/2003 (e) 1,678 AA+ Aa1 7,195 Washington State, GO, Series B and AT-7, 6.10% due 6/01/2006 8,105 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) 5,454 AA- Aa1 4,000 (Nuclear Project Number 2), 5% due 7/01/2003 4,000 AA- Aa1 2,275 (Nuclear Project Number 3), 5% due 7/01/2003 2,275 Wisconsin-- NR* MIG1++ 7,105 Menomonee Falls, Wisconsin, BAN, Refunding, 3.20% due 6/01/2004 7,166 1.8% AA- Aa3 5,605 Wisconsin State, GO, Series A, 5.50% due 5/01/2004 5,816 Puerto Rico-- Puerto Rico Commonwealth, GO, Refunding: 2.9% A- Baa1 50 5.30% due 7/01/2004 (c) 52 A- Baa1 850 5.30% due 7/01/2004 884 Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue Refunding Bonds, Series AA: A Baa1 13,505 5% due 7/01/2005 14,387 A Baa1 5,000 5% due 7/01/2006 5,435 Total Municipal Bonds (Cost--$647,625)--91.0% 654,825
Shares Held Short-Term Securities ------ -----------------------------------------------------------------
61,414 Merrill Lynch Institutional Tax-Exempt Fund (h) 61,414 Total Short-Term Securities (Cost--$61,414)--8.6% 61,414 Total Investments (Cost--$709,039)--99.6% 716,239 Other Assets Less Liabilities--0.4% 3,020 -------- Net Assets--100.0% $719,259 ========
(a)Prerefunded. (b)The interest rate is subject to change periodically based upon prevailing market rates. The interest rate shown is the rate in effect at June 30, 2003. (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 Dividend Affiliate Activity Income --------------------------- -------- -------------- Merrill Lynch Institutional Tax-Exempt Fund 61,414 $340 (i)XL Capital Insured. *Not Rated. ++Highest short-term rating issued by Moody's Investors Service, Inc. +++Ratings of issues shown are unaudited. See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 STATEMENTS OF ASSETS AND LIABILITIES
Limited Insured National Maturity As of June 30, 2003 Portfolio Portfolio Portfolio -------------------------------------------------- -------------- -------------- ------------ Assets: Investments, at value* $1,249,497,828 $1,209,743,580 $716,239,158 Cash 853,166 61,836 144,950 Receivables: Interest 18,763,993 20,120,045 7,499,281 Securities sold 2,458,579 11,923,574 9,142,250 Capital shares sold 1,049,890 509,597 4,679,513 Dividends 24 558 1,464 Prepaid registration fees and other assets 772,266 173,192 101,147 -------------- -------------- ------------ Total assets 1,273,395,746 1,242,532,382 737,807,763 -------------- -------------- ------------ Liabilities: Payables: Securities purchased -- 14,153,114 17,120,788 Capital shares redeemed 1,524,160 2,396,361 803,310 Dividends to shareholders 1,345,416 1,374,901 305,614 Distributor 176,554 284,208 78,797 Investment adviser 369,713 463,805 178,106 Other affiliates 87,702 107,876 28,439 Accrued expenses and other liabilities 64,299 68,971 33,217 -------------- -------------- ------------ Total liabilities 3,567,844 18,849,236 18,548,271 -------------- -------------- ------------ Net Assets: Net assets $1,269,827,902 $1,223,683,146 $719,259,492 ============== ============== ============
Net Assets Class A Common Stock, $.10 par value++ $ 2,327,024 $ 1,898,452 $ 2,440,961 Consist of: Class B Common Stock, $.10 par value++++ 1,985,421 3,052,386 824,735 Class C Common Stock, $.10 par value++++++ 818,983 739,319 1,340,768 Class I Common Stock, $.10 par value++++++++ 10,599,716 5,924,408 2,469,301 Paid-in capital in excess of par 1,172,804,369 1,181,699,725 705,087,117 -------------- -------------- ------------ Undistributed investment income--net 1,129,449 733,857 474,511 Accumulated realized capital losses on investments--net (21,062,895) (41,233,964) (578,357) Unrealized appreciation on investments--net 101,225,835 70,868,963 7,200,456 -------------- -------------- ------------ Total accumulated earnings--net 81,292,389 30,368,856 7,096,610 -------------- -------------- ------------ Net assets $1,269,827,902 $1,223,683,146 $719,259,492 ============== ============== ============ Net Asset Class A: Value: Net assets $ 187,804,892 $ 200,108,040 $248,454,571 ============== ============== ============ Shares outstanding 23,270,243 18,984,524 24,409,606 ============== ============== ============ Net asset value and redemption price per share $ 8.07 $ 10.54 $ 10.18 ============== ============== ============ Class B: Net assets $ 160,176,942 $ 321,477,018 $ 83,885,597 ============== ============== ============ Shares outstanding 19,854,213 30,523,856 8,247,346 ============== ============== ============ Net asset value and redemption price per share $ 8.07 $ 10.53 $ 10.17 ============== ============== ============
Class C: Net assets $ 66,088,984 $ 77,906,185 $135,782,576 ============== ============== ============ Shares outstanding 8,189,828 7,393,187 13,407,675 ============== ============== ============ Net asset value and redemption price per share $ 8.07 $ 10.54 $ 10.13 ============== ============== ============ Class I: Net assets $ 855,757,084 $ 624,191,903 $251,136,748 ============== ============== ============ Shares outstanding 105,997,160 59,244,079 24,693,007 ============== ============== ============ Net asset value and redemption price per share $ 8.07 $ 10.54 $ 10.17 ============== ============== ============ *Identified cost $1,148,271,993 $1,138,874,617 $709,038,702 ============== ============== ============ ++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 I 500,000,000 375,000,000 150,000,000 ============== ============== ============ See Notes to Financial Statements.
STATEMENTS OF OPERATIONS
Limited Insured National Maturity For the Year Ended June 30, 2003 Portfolio Portfolio Portfolio -------------------------------------------------- ------------ ----------- ----------- Investment Interest $ 70,882,910 $73,126,777 $16,296,189 Income: Dividends 190,828 287,961 339,674 ------------ ----------- ----------- Total income 71,073,738 73,414,738 16,635,863 ------------ ----------- ----------- Expenses: Investment advisory fees 4,630,741 5,902,334 1,962,052 Account maintenance and distribution fees--Class B 1,274,785 2,624,333 318,898 Account maintenance and distribution fees--Class C 425,392 559,858 236,188 Account maintenance fees--Class A 440,803 452,203 199,341 Accounting services 377,747 378,514 171,575 Transfer agent fees--Class I 316,434 293,684 49,918 Registration fees 85,964 77,996 130,480 Transfer agent fees--Class B 75,840 191,135 24,741 Transfer agent fees--Class A 64,054 83,196 43,580 Professional fees 66,276 96,660 24,395 Custodian fees 67,835 75,441 41,892 Printing and shareholder reports 54,172 71,893 37,955 Pricing services 36,359 55,763 20,033 Transfer agent fees--Class C 23,753 37,907 18,258 Directors' fees and expenses 25,318 20,920 8,973 Other 50,962 44,092 18,650 ------------ ----------- ----------- Total expenses before waiver 8,016,435 10,965,929 3,306,929 Waiver of expenses (34,961) (51,630) (61,490)
------------ ----------- ----------- Total expenses after waiver 7,981,474 10,914,299 3,245,439 ------------ ----------- ----------- Investment income--net 63,092,264 62,500,439 13,390,424 ------------ ----------- ----------- Realized & Realized gain on investments--net 18,978,718 23,064,897 474,301 Unrealized Change in unrealized appreciation on Gain on investments--net 25,252,894 8,215,548 1,115,437 Investments-- ------------ ----------- ----------- Net: Total realized and unrealized gain on investments--net 44,231,612 31,280,445 1,589,738 ------------ ----------- ----------- Net Increase in Net Assets Resulting from Operations $107,323,876 $93,780,884 $14,980,162 ============ =========== ===========
See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 STATEMENTS OF CHANGES IN NET ASSETS
Insured Portfolio National Portfolio For the Year For the Year Ended June 30, Ended June 30, ------------------------------- ------------------------------- Increase (Decrease) in Net Assets: 2003 2002 2003 2002 --------------------------------------- -------------- -------------- -------------- -------------- Operations: Investment income--net $ 63,092,264 $ 66,349,214 $ 62,500,439 $ 54,128,954 Realized gain on investments--net 18,978,718 10,407,929 23,064,897 3,056,161 Change in unrealized appreciation on investments--net 25,252,894 8,385,315 8,215,548 9,583,130
--------------------------------------- -------------- -------------- -------------- -------------- Net increase in net assets resulting from operations 107,323,876 85,142,458 93,780,884 66,768,245 -------------- -------------- -------------- -------------- Dividends & Investment income--net: Distributions to Class A (8,594,352) (7,841,632) (9,204,187) (6,106,400) Shareholders: Class B (7,434,794) (9,358,143) (16,020,155) (11,045,083) Class C (2,290,564) (999,113) (3,170,397) (1,756,295) Class I (44,741,184) (48,114,588) (33,985,291) (35,234,862) Realized gain on investments--net: Class A -- (77,773) -- (38,236) Class B -- (106,680) -- (82,921) Class C -- (10,641) -- (12,681) Class I -- (467,684) -- (227,631) -------------- -------------- -------------- -------------- Net decrease in net assets resulting from dividends and distributions to shareholders (63,060,894) (66,976,254) (62,380,030) (54,504,109) -------------- -------------- -------------- -------------- Capital Share Net increase (decrease) in net assets Transactions: derived from capitalshare transactions (30,345,541) (66,642,942) 79,473,855 63,305,521 -------------- -------------- -------------- -------------- Net Assets: Total increase (decrease) in net assets 13,917,441 (48,476,738) 110,874,709 75,569,657 Beginning of year 1,255,910,461 1,304,387,199 1,112,808,437 1,037,238,780 -------------- -------------- -------------- -------------- End of year* $1,269,827,902 $1,255,910,461 $1,223,683,146 $1,112,808,437 ============== ============== ============== ============== *Undistributed investment income--net $ 1,129,449 $ 1,098,079 $ 733,857 $ 622,013 ============== ============== ============== ==============
STATEMENTS OF CHANGES IN NET ASSETS (concluded) Limited Maturity Portfolio
For the Year Ended June 30, --------------------------- 2003 2002 ------------ ------------ Increase (Decrease) in Net Assets: Operations: Investment income--net $ 13,390,424 $ 10,600,072 Realized gain on investments--net 474,301 333,062 Change in unrealized appreciation on investments--net 1,115,437 2,009,531 ------------ ------------ Net increase in net assets resulting from operations 14,980,162 12,942,665 ------------ ------------ Dividends & Investment income--net: Distributions to Class A (4,590,844) (2,724,180) Shareholders: Class B (1,899,081) (1,406,735) Class C (1,287,536) (34,601) Class I (5,543,293) (6,189,098) Realized gain on investments--net: Class A -- -- Class B -- -- Class C -- -- Class I -- -- ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (13,320,754) (10,354,614) ------------ ------------ Capital Share Net increase (decrease) in net assets derived from capital
Transactions: share transactions 288,357,426 160,472,985 ------------ ------------ Net Assets: Total increase (decrease) in net assets 290,016,834 163,061,036 Beginning of year 429,242,658 266,181,622 ------------ ------------ End of year* $719,259,492 $429,242,658 ============ ============ *Undistributed investment income--net $ 474,511 $ 398,052 ============ ============
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS Insured Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class A+++ For the Year Ended June 30, ------------------------------------------------------ Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999 -------- -------- -------- ------- ------- Per Share Net asset value, beginning of year $ 7.79 $ 7.69 $ 7.36 $ 7.79 $ 8.24 Operating -------- -------- -------- ------- ------- Performance: Investment income--net .39++++ .39 .37 .38 .39 Realized and unrealized gain (loss) on investments--net .28 .10 .33 (.32) (.26) -------- -------- -------- ------- ------- Total from investment operations .67 .49 .70 .06 .13 -------- -------- -------- ------- ------- Less dividends and distributions:
Investment income--net (.39) (.39) (.37) (.38) (.39) Realized gain on investments--net -- --++ -- -- (.19) In excess of realized gain on investments--net -- -- -- (.11) -- -------- -------- -------- ------- ------- Total dividends and distributions (.39) (.39) (.37) (.49) (.58) -------- -------- -------- ------- ------- Net asset value, end of year $ 8.07 $ 7.79 $ 7.69 $ 7.36 $ 7.79 ======== ======== ======== ======= ======= Total Investment Based on net asset value per share Return:* 8.77% 6.63% 9.74% .96% 1.43% ======== ======== ======== ======= ======= Ratios to Expenses, net of waiver .71% .72% .70% .68% .67% Average ======== ======== ======== ======= ======= Net Assets: Expenses .71% .72% .70% .68% .67% ======== ======== ======== ======= ======= Investment income--net 4.88% 5.10% 4.94% 5.10% 4.77% ======== ======== ======== ======= ======= Supplemental Net assets, end of year (in thousands) $187,805 $161,110 $145,688 $99,326 $81,238 Data: ======== ======== ======== ======= ======= Portfolio turnover 38.17% 32.78% 64.39% 94.08% 86.35% ======== ======== ======== ======= =======
Insured Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class B For the Year Ended June 30, --------------------------------------------------------- Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999 -------- -------- -------- -------- --------
Per Share Net asset value, beginning of year $ 7.79 $ 7.68 $ 7.36 $ 7.78 $ 8.24 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .35++++ .36 .34 .34 .35 Realized and unrealized gain (loss) on investments--net .28 .11 .32 (.31) (.27) -------- -------- -------- -------- -------- Total from investment operations .63 .47 .66 .03 .08 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.35) (.36) (.34) (.34) (.35) Realized gain on investments--net -- --++ -- -- (.19) In excess of realized gain on investments--net -- -- -- (.11) -- -------- -------- -------- -------- -------- Total dividends and distributions (.35) (.36) (.34) (.45) (.54) -------- -------- -------- -------- -------- Net asset value, end of year $ 8.07 $ 7.79 $ 7.68 $ 7.36 $ 7.78 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 8.21% 6.23% 9.04% .57% .79% Return:* ======== ======== ======== ======== ======== Ratios to Expenses, net of waiver 1.22% 1.23% 1.21% 1.19% 1.18% Average ======== ======== ======== ======== ======== Net Assets: Expenses 1.22% 1.23% 1.21% 1.19% 1.18% ======== ======== ======== ======== ======== Investment income--net 4.38% 4.58% 4.43% 4.56% 4.26% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $160,177 $182,241 $223,710 $276,154 $414,135
Data: ======== ======== ======== ======== ======== Portfolio turnover 38.17% 32.78% 64.39% 94.08% 86.35% ======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges. ++Amount is less than ($.01) per share. ++++Based on average shares outstanding. +++Effective April 14, 2003, Class D Shares were redesignated Class A Shares. See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 FINANCIAL HIGHLIGHTS (continued) Insured Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class C For the Year Ended June 30, ----------------------------------------------------- Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999 --------------------------------------- -------- ------- ------- ------- ------- Per Share Net asset value, beginning of year $ 7.79 $ 7.68 $ 7.36 $ 7.78 $ 8.24 Operating -------- ------- ------- ------- ------- Performance: Investment income--net .34++++ .35 .33 .34 .34 Realized and unrealized gain (loss) on investments--net .28 .11 .32 (.31) (.27) -------- ------- ------- ------- ------- Total from investment operations .62 .46 .65 .03 .07 -------- ------- ------- ------- ------- Less dividends and distributions: Investment income--net (.34) (.35) (.33) (.34) (.34) Realized gain on investments--net -- --++ -- -- (.19) In excess of realized gain on
investments--net -- -- -- (.11) -- -------- ------- ------- ------- ------- Total dividends and distributions (.34) (.35) (.33) (.45) (.53) -------- ------- ------- ------- ------- Net asset value, end of year $ 8.07 $ 7.79 $ 7.68 $ 7.36 $ 7.78 ======== ======= ======= ======= ======= Total Investment Based on net asset value per share 8.16% 6.18% 8.99% .52% .74% Return:* ======== ======= ======= ======= ======= Ratios to Expenses, net of waiver 1.27% 1.28% 1.26% 1.24% 1.23% Average ======== ======= ======= ======= ======= Net Assets: Expenses 1.27% 1.28% 1.26% 1.24% 1.23% ======== ======= ======= ======= ======= Investment income--net 4.31% 4.56% 4.38% 4.52% 4.21% ======== ======= ======= ======= ======= Supplemental Net assets, end of year (in thousands) $ 66,089 $34,541 $14,392 $12,856 $16,850 Data: ======== ======= ======= ======= ======= Portfolio turnover 38.17% 32.78% 64.39% 94.08% 86.35% ======== ======= ======= ======= =======
Insured Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class I+++ For the Year Ended June 30, --------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- ---------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 7.80 $ 7.69 $ 7.36 $ 7.79 $ 8.25 Operating -------- -------- -------- -------- ----------
Performance: Investment income--net .41++++ .41 .39 .40 .41 Realized and unrealized gain (loss) on investments--net .27 .11 .33 (.32) (.27) -------- -------- -------- -------- ---------- Total from investment operations .68 .52 .72 .08 .14 -------- -------- -------- -------- ---------- Less dividends and distributions: Investment income--net (.41) (.41) (.39) (.40) (.41) Realized gain on investments--net -- --++ -- -- (.19) In excess of realized gain on investments--net -- -- -- (.11) -- -------- -------- -------- -------- ---------- Total dividends and distributions (.41) (.41) (.39) (.51) (.60) -------- -------- -------- -------- ---------- Net asset value, end of year $ 8.07 $ 7.80 $ 7.69 $ 7.36 $ 7.79 ======== ======== ======== ======== ========== Total Investment Based on net asset value per share 8.88% 7.03% 10.01% 1.21% 1.56% Return:* ======== ======== ======== ======== ========== Ratios to Expenses, net of waiver .46% .47% .45% .43% .42% Average ======== ======== ======== ======== ========== Net Assets: Expenses .46% .47% .45% .43% .42% ======== ======== ======== ======== ========== Investment income--net 5.13% 5.35% 5.19% 5.33% 5.02% ======== ======== ======== ======== ========== Supplemental Net assets, end of year (in thousands) $855,757 $878,018 $920,597 $972,420 $1,216,346 Data: ======== ======== ======== ======== ========== Portfolio turnover 38.17% 32.78% 64.39% 94.08% 86.35% ======== ======== ======== ======== ==========
National Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class A+++++ For the Year Ended June 30, -------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- ------- ------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.27 $ 10.15 $ 9.71 $ 10.22 $ 10.64 Operating -------- -------- -------- ------- ------- Performance: Investment income--net .53++++ .53 .52 .54 .53 Realized and unrealized gain (loss) on investments--net .27 .12 .44 (.51) (.42) -------- -------- -------- ------- ------- Total from investment operations .80 .65 .96 .03 .11 -------- -------- -------- ------- ------- Less dividends and distributions: Investment income--net (.53) (.53) (.52) (.54) (.53) Realized gain on investments--net -- --++ -- -- -- In excess of realized gain on investments--net -- -- -- -- --++ -------- -------- -------- ------- ------- Total dividends and distributions (.53) (.53) (.52) (.54) (.53) -------- -------- -------- ------- ------- Net asset value, end of year $ 10.54 $ 10.27 $ 10.15 $ 9.71 $ 10.22 ======== ======== ======== ======= ======= Total Investment Based on net asset value per share Return:* 7.98% 6.72% 10.04% .43% 1.03% ======== ======== ======== ======= ======= Ratios to Expenses, net of waiver .84% .87% .83% .81% .81% Average ======== ======== ======== ======= =======
Net Assets: Expenses .84% .87% .83% .81% .81% ======== ======== ======== ======= ======= Investment income--net 5.10% 5.30% 5.16% 5.50% 5.01% ======== ======== ======== ======= ======= Supplemental Net assets, end of year (in thousands) $200,108 $137,225 $124,082 $86,701 $93,201 Data: ======== ======== ======== ======= ======= Portfolio turnover 37.75% 35.75% 80.88% 108.43% 125.75% ======== ======== ======== ======= =======
*Total investment returns exclude the effects of sales charges. ++Amount is less than ($.01) per share. ++++Based on average shares outstanding. +++Effective April 14, 2003, Class A Shares were redesignated Class I Shares. +++++Effective April 14, 2003, Class D Shares were redesignated Class A Shares. See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 FINANCIAL HIGHLIGHTS (continued) National Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class B For the Year Ended June 30, --------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.26 $ 10.14 $ 9.70 $ 10.21 $ 10.63 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .48++++ .53 .46 .49 .48 Realized and unrealized gain (loss) on investments--net .27 .12 .44 (.51) (.42)
-------- -------- -------- -------- -------- Total from investment operations .75 .65 .90 (.02) .06 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.48) (.53) (.46) (.49) (.48) Realized gain on investments--net -- --++ -- -- -- In excess of realized gain on investments--net -- -- -- -- --++ -------- -------- -------- -------- -------- Total dividends and distributions (.48) (.53) (.46) (.49) (.48) -------- -------- -------- -------- -------- Net asset value, end of year $ 10.53 $ 10.26 $ 10.14 $ 9.70 $ 10.21 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share Return:* 7.43% 6.18% 9.49% (.09%) .51% ======== ======== ======== ======== ======== Ratios to Expenses, net of waiver 1.34% 1.38% 1.34% 1.32% 1.31% Average ======== ======== ======== ======== ======== Net Assets: Expenses 1.35% 1.38% 1.34% 1.32% 1.31% ======== ======== ======== ======== ======== Investment income--net 4.59% 4.80% 4.67% 4.98% 4.50% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $321,477 $295,827 $227,592 $254,860 $374,642 Data: ======== ======== ======== ======== ======== Portfolio turnover 37.75% 35.75% 80.88% 108.43% 125.75% ======== ======== ======== ======== ========
National Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class C For the Year Ended June 30, ---------------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.26 $ 10.14 $ 9.71 $ 10.22 $ 10.64 Operating ------- ------- ------- ------- ------- Performance: Investment income--net .47++++ .53 .46 .48 .47 Realized and unrealized gain (loss) on investments--net .28 .12 .43 (.51) (.42) ------- ------- ------- ------- ------- Total from investment operations .75 .65 .89 (.03) .05 ------- ------- ------- ------- ------- Less dividends and distributions: Investment income--net (.47) (.53) (.46) (.48) (.47) Realized gain on investments--net -- --++ -- -- -- In excess of realized gain on investments--net -- -- -- -- --++ ------- ------- ------- ------- ------- Total dividends and distributions (.47) (.53) (.46) (.48) (.47) ------- ------- ------- ------- ------- Net asset value, end of year $ 10.54 $ 10.26 $ 10.14 $ 9.71 $ 10.22 ======= ======= ======= ======= ======= Total Investment Based on net asset value per share Return:* 7.48% 6.13% 9.33% (.13%) .47% ======= ======= ======= ======= ======= Ratios to Expenses, net of waiver 1.39% 1.43% 1.39% 1.37% 1.36% Average ======= ======= ======= ======= ======= Net Assets: Expenses 1.40% 1.43% 1.39% 1.37% 1.36% ======= ======= ======= ======= ======= Investment income--net 4.54% 4.76% 4.61% 4.92% 4.45%
======= ======= ======= ======= ======= Supplemental Net assets, end of year (in thousands) $77,906 $52,822 $31,880 $30,303 $47,901 Data: ======= ======= ======= ======= ======= Portfolio turnover 37.75% 35.75% 80.88% 108.43% 125.75% ======= ======= ======= ======= =======
National Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class I+++ For the Year Ended June 30, ---------------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- -------- -------- -------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.26 $ 10.14 $ 9.70 $ 10.22 $ 10.64 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .56++++ .62 .54 .56 .56 Realized and unrealized gain (loss) on investments--net .28 .12 .44 (.52) (.42) -------- -------- -------- -------- -------- Total from investment operations .84 .74 .98 .04 .14 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.56) (.62) (.54) (.56) (.56) Realized gain on investments--net -- --++ -- -- -- In excess of realized gain on investments--net -- -- -- -- --++ -------- -------- -------- -------- -------- Total dividends and distributions (.56) (.62) (.54) (.56) (.56) -------- -------- -------- -------- -------- Net asset value, end of year $ 10.54 $ 10.26 $ 10.14 $ 9.70 $ 10.22
======== ======== ======== ======== ======== Total Investment Based on net asset value per share 8.34% 6.98% 10.32% .58% 1.28% Return:* ======== ======== ======== ======== ======== Ratios to Expenses, net of waiver .59% .62% .58% .56% .55% Average ======== ======== ======== ======== ======== Net Assets: Expenses .59% .62% .58% .56% .55% ======== ======== ======== ======== ======== Investment income--net 5.35% 5.55% 5.42% 5.74% 5.26% ======== ======== ======== ======== ======== Supplemental Net assets, end of year (in thousands) $624,192 $626,935 $653,685 $682,553 $877,841 Data: ======== ======== ======== ======== ======== Portfolio turnover 37.75% 35.75% 80.88% 108.43% 125.75% ======== ======== ======== ======== ========
* Total investment returns exclude the effects of sales charges. ++ Amount is less than ($.01) per share. ++++ Based on average shares outstanding. +++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares. See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 FINANCIAL HIGHLIGHTS (continued) Limited Maturity Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class A+++ For the Year Ended June 30, ----------------------------------------------------- 2003 2002 2001 2000 1999 -------- -------- ------- ------- ------- Increase (Decrease) in Net Asset Value:
Per Share Net asset value, beginning of year $ 10.14 $ 10.06 $ 9.86 $ 9.92 $ 9.97 Operating -------- -------- ------- ------- ------- Performance: Investment income--net .24++ .32 .38 .37 .37 Realized and unrealized gain (loss) on investments--net .04 .08 .20 (.06) (.04) -------- -------- ------- ------- ------- Total from investment operations .28 .40 .58 .31 .33 -------- -------- ------- ------- ------- Less dividends and distributions: Investment income--net (.24) (.32) (.38) (.37) (.37) In excess of realized gain on investments--net -- -- -- -- (.01) -------- -------- ------- ------- ------- Total dividends and distributions (.24) (.32) (.38) (.37) (.38) -------- -------- ------- ------- ------- Net asset value, end of year $ 10.18 $ 10.14 $ 10.06 $ 9.86 $ 9.92 ======== ======== ======= ======= ======= Total Investment Based on net asset value per share 2.77% 3.99% 5.96% 3.20% 3.27% Return:* ======== ======== ======= ======= ======= Ratios to Expenses, net of waiver .52% .56% .54% .50% .53% Average ======== ======== ======= ======= ======= Net Assets: Expenses .53% .56% .54% .50% .53% ======== ======== ======= ======= ======= Investment income--net 2.31% 3.13% 3.80% 3.72% 3.65% ======== ======== ======= ======= ======= Supplemental Net assets, end of year (in thousands) $248,454 $140,744 $42,619 $39,090 $83,177 Data: ======== ======== ======= ======= =======
Portfolio turnover 44.61% 74.74% 51.94% 51.42% 40.28% ======== ======== ======= ======= =======
Limited Maturity Portfolio The following per share data and ratios have been derived from information provided in the financial statements.
Class B For the Year Ended June 30, ----------------------------------------------- 2003 2002 2001 2000 1999 ------- ------- ------- ------- ------- Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.13 $ 10.06 $ 9.86 $ 9.92 $ 9.97 Operating ------- ------- ------- ------- ------- Performance: Investment income--net .21++ .29 .35 .35 .34 Realized and unrealized gain (loss) on investments--net .04 .07 .20 (.06) (.04) ------- ------- ------- ------- ------- Total from investment operations .25 .36 .55 .29 .30 ------- ------- ------- ------- ------- Less dividends and distributions: Investment income--net (.21) (.29) (.35) (.35) (.34) In excess of realized gain on investments--net -- -- -- -- (.01) ------- ------- ------- ------- ------- Total dividends and distributions (.21) (.29) (.35) (.35) (.35) ------- ------- ------- ------- ------- Net asset value, end of year $ 10.17 $ 10.13 $ 10.06 $ 9.86 $ 9.92 ======= ======= ======= ======= ======= Total Investment Based on net asset value per share 2.51% 3.62% 5.69% 2.94% 3.01% Return:* ======= ======= ======= ======= ======= Ratios to Expenses, net of waiver .78% .82% .80% .76% .78%
Average ======= ======= ======= ======= ======= Net Assets: Expenses .79% .82% .80% .76% .78% ======= ======= ======= ======= ======= Investment income--net 2.10% 2.87% 3.55% 3.47% 3.39% ======= ======= ======= ======= ======= Supplemental Net assets, end of year (in thousands) $83,886 $81,967 $31,480 $32,742 $42,930 Data: ======= ======= ======= ======= ======= Portfolio turnover 44.61% 74.74% 51.94% 51.42% 40.28% ======= ======= ======= ======= =======
Limited Maturity Portfolio The following per share data and ratios have been derived from information provided in the financial statements. Class C
For the Year Ended June 30, --------------------------------------------- 2003 2002 2001 2000 1999 -------- ------ ------ ------ ------ Increase (Decrease) in Net Asset Value: Per Share Net asset value, beginning of year $ 10.09 $10.01 $ 9.82 $ 9.88 $ 9.94 Operating -------- ------ ------ ------ ------ Performance: Investment income--net .19++ .29 .35 .34 .34 Realized and unrealized gain (loss) on investments--net .06 .08 .19 (.06) (.05) -------- ------ ------ ------ ------ Total from investment operations .25 .37 .54 .28 .29 -------- ------ ------ ------ ------ Less dividends and distributions: Investment income--net (.21) (.29) (.35) (.34) (.34) In excess of realized gain on investments--net -- -- -- -- (.01) -------- ------ ------ ------ ------
Total dividends and distributions (.21) (.29) (.35) (.34) (.35) -------- ------ ------ ------ ------ Net asset value, end of year $ 10.13 $10.09 $10.01 $ 9.82 $ 9.88 ======== ====== ====== ====== ====== Total Investment Based on net asset value per share 2.52% 3.72% 5.59% 2.93% 2.89% Return:* ======== ====== ====== ====== ====== Ratios to Expenses, net of waiver .78% .82% .81% .76% .79% Average ======== ====== ====== ====== ====== Net Assets: Expenses .79% .82% .81% .76% .79% ======== ====== ====== ====== ====== Investment income--net 1.92% 2.91% 3.53% 3.46% 3.37% ======== ====== ====== ====== ====== Supplemental Net assets, end of year (in thousands) $135,782 $1,596 $ 602 $ 308 $ 437 Data: ======== ====== ====== ====== ====== Portfolio turnover 44.61% 74.74% 51.94% 51.42% 40.28% ======== ====== ====== ====== ======
* Total investment returns exclude the effects of sales charges. ++ Based on average shares outstanding. +++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares. See Notes to Financial Statements. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 FINANCIAL HIGHLIGHTS (concluded) Limited Maturity Portfolio The following per share data and ratios have been derived from information provided in the financial statements. Class I+++
For the Year Ended June 30, ---------------------------------------------------- Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999 ----------------------------------------------------- -------- -------- -------- -------- -------- Per Share Net asset value, beginning of year $ 10.13 $ 10.05 $ 9.85 $ 9.91 $ 9.96 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .27++ .34 .39 .38 .37 Realized and unrealized gain (loss) on investments--net .02 .08 .20 (.06) (.04) -------- -------- -------- -------- -------- Total from investment operations .29 .42 .59 .32 .33 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.25) (.34) (.39) (.38) (.37) In excess of realized gain on investments--net -- -- -- -- (.01) -------- -------- -------- -------- -------- Total dividends and distributions (.25) (.34) (.39) (.38) (.38) -------- -------- -------- -------- -------- Net asset value, end of year $ 10.17 $ 10.13 $ 10.05 $ 9.85 $ 9.91 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 2.87% 4.10% 6.07% 3.31% 3.37% Return:* ======== ======== ======== ======== ======== Ratios to Expenses, net of waiver .42% .46% .44% .40% .43% Average ======== ======== ======== ======== ======== Net Assets: Expenses .43% .46% .44% .40% .43% ======== ======== ======== ======== ======== Investment income--net 2.44% 3.30% 3.91% 3.83% 3.75% ======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $251,137 $204,936 $191,481 $215,421 $261,970 Data: ======== ======== ======== ======== ======== Portfolio turnover 44.61% 74.74% 51.94% 51.42% 40.28% ======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges. ++Based on average shares outstanding. +++Effective April 14, 2003, Class A Shares were redesignated Class I Shares. 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 amended, 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. The Fund's Portfolios offer multiple classes of shares. Effective April 14, 2003, Class A Shares were redesignated Class I Shares and Class D Shares were redesignated Class A Shares. The Fund's financial statements and financial highlights contained within this report reflect elsewhere the class redesignation. Shares of Class A and Class I 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 A, Class B and Class C 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 determined in good faith by the Fund's Board of Directors, including valuations furnished by a pricing service retained by the Fund, which may utilize a matrix system for valuations. The procedures of the pricing service and its valuations are reviewed by the officers of the Fund under the general supervision of the Board of Directors. (b) Derivative financial instruments--The Fund may engage in various portfolio investment strategies both to increase the return of the Fund and to hedge, or protect, its exposure to interest rate movement and movements in the securities markets. * Financial futures contracts--The Fund's Portfolios may purchase or sell financial futures contracts and options on such futures contracts. Futures contracts are contracts for delayed delivery of securities at a specific future date and at a specific price or yield. Upon entering into a contract, the Portfolios deposit and maintain as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Portfolios agree to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Portfolios as unrealized gains or losses. When the contract is closed, the Portfolios record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. (c) Income taxes--It is the Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Therefore, no Federal income tax provision is required. (d) Security transactions and investment income--Security transactions are recorded on the dates the transactions are entered into (the trade dates). 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. The Portfolios amortize all premiums and discounts on debt securities. (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. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 NOTES TO FINANCIAL STATEMENTS (continued) (h) Reclassification--Accounting principles generally accepted in the United States of America require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, the current year's permanent book/tax differences on the National Portfolio of $8,565 has been reclassified between undistributed net investment income and accumulated net realized capital losses. In addition, the current year's permanent book/tax differences on the Limited Maturity Portfolio of $1,426,455 has been reclassified between paid-in capital in excess of par and accumulated net realized capital losses and $6,789 has been reclassified between paid-in capital in excess of par and undistributed net investment income. These reclassifications have no effect on net assets or net asset values per share. 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 For the year ended June 30, 2003, FAM earned fees of $4,630,741, $5,902,334 and $1,962,052 of which $34,961, $51,630 and $61,490 were waived for the Insured Portfolio, National Portfolio and Limited Maturity Portfolio, respectively. 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 A .25% .25% .10% -- -- -- Class B .25 .25 .15 .50% .50% .20% Class C .25 .25 .15 .55 .55 .20 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 A, Class B and Class C shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B and Class C shareholders. For the year ended June 30, 2003, FAMD earned underwriting discounts and direct commissions and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class I Shares follows: Limited Insured National Maturity Portfolio Portfolio Portfolio --------- --------- --------- Class A Shares: FAMD $ 15,459 $ 15,390 $ 8,951 MLPF&S $139,722 $125,755 $111,558 Class I Shares: FAMD $ 19,230 $ 9,537 $ 586 MLPF&S $139,655 $ 81,840 $ 5,680 For the year ended June 30, 2003, MLPF&S received contingent deferred sales charges of $578,907 relating to transactions in Class B Shares, amounting to $149,848, $355,259 and $73,800 in the Insured, National and Limited Maturity Portfolios, respectively, and $103,912 relating to transactions in Class C Shares, amounting to $26,374, $25,394 and $52,144 in the Insured, National and Limited Maturity Portfolios, respectively. Furthermore, MLPF&S received contingent deferred sales charges of $3,001 relating to transactions subject to front-end sales charge waivers in Class A Shares amounting to $795 and $2,206 in the Insured and National Portfolios and $5,348 relating to transactions subject to front-end sales charge waivers in Class I Shares in the National Portfolio. Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. For the year ended June 30, 2003, the Fund reimbursed FAM $26,952, $37,000 and $14,062 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 year ended June 30, 2003 were as follows: Purchases Sales ------------ ------------ Insured Portfolio $470,844,776 $483,848,288 National Portfolio 448,587,863 506,190,304 Limited Maturity Portfolio 412,092,655 200,513,242 Net realized gains for the year ended June 30, 2003 and net unrealized gains as of June 30, 2003 were as follows: Realized Unrealized Insured Portfolio Gains Gains ------------------------------------------- ----------- ------------ Long-term investments $18,978,718 $101,225,835 ----------- ------------ Total $18,978,718 $101,225,835 =========== ============ Realized Unrealized National Portfolio Gains Gains ------------------------------------------- ----------- ----------- Long-term investments $23,064,897 $70,868,963 ----------- ----------- Total $23,064,897 $70,868,963 =========== =========== Realized Unrealized Limited Maturity Portfolio Gains Gains ------------------------------------------- -------- ---------- Long-term investments $472,301 $7,016,943 Short-term investments 2,000 183,513 -------- ---------- Total $474,301 $7,200,456 ======== ========== As of June 30, 2003 net unrealized appreciation for Federal income tax purposes were as follows: Gross Gross Net Unrealized Unrealized Unrealized Appreciation Depreciation Appreciation ------------- ------------ ------------ Insured Portfolio $102,068,985 $ 785,613 $101,283,372 National Portfolio 86,109,333 15,103,135 71,006,198 Limited Maturity Portfolio 7,601,872 151,905 7,449,967 The aggregate cost of investments at June 30, 2003 for Federal income tax purposes was $1,148,214,456 for the Insured Portfolio, $1,138,737,382 for the National Portfolio, and $708,789,191 for the Limited Maturity Portfolio. 4. Capital Share Transactions: Net increase (decrease) in net assets derived from capital share transactions for the years ended June 30, 2003 and June 30, 2002 were $(30,345,541) and $(66,642,942), respectively, for the Insured Portfolio; $79,473,855 and $63,305,521, respectively, for the National Portfolio, $288,357,426 and $160,472,985, respectively, for the Limited Maturity Portfolio. Transactions in capital shares for each class were as follows: Insured Portfolio Dollar Class A Shares for the Year Ended June 30, 2003++ Shares Amount --------------------------------------------------- ---------- ------------ Shares sold 1,950,736 $ 15,635,023 Automatic conversion of shares 4,209,407 33,525,703 Shares issued to shareholders in reinvestment of dividends 494,242 3,937,026 ---------- ------------ Total issued 6,654,385 53,097,752 Shares redeemed (4,057,088) (32,406,400) ---------- ------------ Net increase 2,597,297 $ 20,691,352 ========== ============ ++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares. Insured Portfolio Dollar Class A Shares for the Year Ended 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 reinvest- ment 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 ========== ============ ++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 NOTES TO FINANCIAL STATEMENTS (continued) Insured Portfolio Dollar Class B Shares for the Year Ended June 30, 2003 Shares Amount --------------------------------------------------- ---------- ------------ Shares sold 4,003,377 $ 31,944,128 Shares issued to shareholders in reinvestment of dividends 426,816 3,396,402 ---------- ------------ Total issued 4,430,193 35,340,530 Automatic conversion of shares (4,210,678) (33,525,703) Shares redeemed (3,757,787) (29,873,911) ---------- ------------ Net decrease (3,538,272) $(28,059,084) ========== ============ Insured Portfolio Dollar Class B Shares for the Year Ended June 30, 2002 Shares Amount --------------------------------------------------- ---------- ------------ Shares sold 3,649,035 $ 28,346,728 Shares issued to shareholders in reinvest- ment 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 Dollar Class C Shares for the Year Ended June 30, 2003 Shares Amount ---------------------------------------------------- --------- ----------- Shares sold 4,603,403 $36,689,714 Shares issued to shareholders in reinvestment of dividends 153,209 1,221,255 --------- ----------- Total issued 4,756,612 37,910,969 Shares redeemed (999,396) (7,980,994) --------- ----------- Net increase 3,757,216 $29,929,975 ========= =========== Insured Portfolio Dollar Class C Shares for the Year Ended June 30, 2002 Shares Amount ---------------------------------------------------- --------- ----------- Shares sold 2,976,028 $23,077,017 Shares issued to shareholders in reinvest- ment 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 Dollar Class I Shares for the Year Ended June 30, 2003++ Shares Amount ---------------------------------------------------- --------- ----------- Shares sold 2,669,821 $21,281,651 Shares issued to shareholders in reinvestment of dividends 2,353,883 18,745,764 --------- ----------- Total issued 5,023,704 40,027,415 Shares redeemed (11,649,682) (92,935,199) ----------- ------------ Net decrease (6,625,978) $(52,907,784) =========== ============ ++Effective April 14, 2003, Class A Shares were redesignated Class I Shares. Insured Portfolio Dollar Class I Shares for the Year Ended 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) =========== ============ ++Effective April 14, 2003, Class A Shares were redesignated Class I Shares. National Portfolio Dollar Class A Shares for the Year Ended June 30, 2003++ Shares Amount ------------------------------------------------- ---------- ------------ Shares sold 1,817,741 $ 18,919,074 Automatic conversion of shares 4,211,990 43,907,704 Shares issued resulting from reorganization 2,781,396 28,790,872 Shares issued to shareholders in reinvestment of dividends 419,512 4,367,054 ---------- ------------ Total issued 9,230,639 95,984,704 Shares redeemed (3,612,689) (37,612,997) ---------- ------------ Net increase 5,617,950 $ 58,371,707 ========== ============ ++Effective April 14, 2003, Class D Shares were redesignated Class A Shares. National Portfolio Dollar Class A Shares for the Year Ended 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 ========== ============ ++Effective April 14, 2003, Class D Shares were redesignated Class A Shares. National Portfolio Dollar Class B Shares for the Year Ended June 30, 2003 Shares Amount ----------------------------------------------- ---------- ------------ Shares sold 3,808,847 $ 39,620,050 Shares issued resulting from reorganization 9,719,653 100,571,771 Shares issued to shareholders in reinvestment of dividends 661,896 6,880,683 ---------- ------------ Total issued 14,190,396 147,072,504 Automatic conversion of shares (4,215,216) (43,907,704) Shares redeemed (8,289,076) (86,180,280) ---------- ------------ Net increase 1,686,104 $ 16,984,520 ========== ============ National Portfolio Dollar Class B Shares for the Year Ended 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 Dollar Class C Shares for the Year Ended June 30, 2003 Shares Amount ----------------------------------------------- ---------- ------------ Shares sold 2,368,509 $ 24,696,245 Shares issued resulting from reorganization 1,042,309 10,790,909 Shares issued to shareholders in reinvestment of dividends 172,937 1,799,753 ---------- ------------ Total issued 3,583,755 37,286,907 Shares redeemed (1,337,070) (13,921,043) ---------- ------------ Net increase 2,246,685 $ 23,365,864 ========== ============ National Portfolio Dollar Class C Shares for the Year Ended 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 ========== ============ National Portfolio Dollar Class I Shares for the Year Ended June 30, 2003++ Shares Amount ------------------------------------------------- ---------- ------------ Shares sold 1,981,190 $ 20,668,840 Shares issued resulting from reorganization 2,488,551 25,766,020 Shares issued to shareholders in reinvestment of dividends 1,624,924 16,902,499 ---------- ------------ Total issued 6,094,665 63,337,359 Shares redeemed (7,943,755) (82,585,595) ---------- ------------ Net decrease (1,849,090) $(19,248,236) ========== ============ ++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares. National Portfolio Dollar Class I Shares for the Year Ended 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) ========== ============ ++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 NOTES TO FINANCIAL STATEMENTS (continued) Limited Maturity Portfolio Dollar Class A Shares for the Year Ended June 30, 2003++ Shares Amount ------------------------------------------------- ---------- ------------ Shares sold 19,163,398 $195,049,800 Automatic conversion of shares 599,540 6,100,091 Shares issued to shareholders in reinvestment of dividends 306,969 3,122,566 ---------- ------------ Total issued 20,069,907 204,272,457 Shares redeemed (9,539,525) (97,085,514) ---------- ------------ Net increase 10,530,382 $107,186,943 ========== ============ ++Effective April 14, 2003, Class D Shares were redesignated Class A Shares. Limited Maturity Portfolio Dollar Class A Shares for the Year Ended 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 ========== ============ ++ Effective April 14, 2003, Class D Shares were redesignated Class A Shares. Limited Maturity Portfolio Dollar Class B Shares for the Year Ended June 30, 2003 Shares Amount ------------------------------------------------ ---------- ------------ Shares sold 3,419,780 $ 34,748,313 Shares issued to shareholders in reinvestment of dividends 120,074 1,220,502 ---------- ------------ Total issued 3,539,854 35,968,815 Automatic conversion of shares (599,877) (6,100,091) Shares redeemed (2,781,128) (28,284,229) ---------- ------------ Net increase 158,849 $ 1,584,495 ========== ============ Limited Maturity Portfolio Dollar Class B Shares for the Year Ended 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 Dollar Class C Shares for the Year Ended June 30, 2003 Shares Amount ------------------------------------------------ ---------- ------------ Shares sold 14,075,218 $142,489,128 Shares issued to shareholders in reinvestment of dividends 81,130 821,390 ---------- ------------ Total issued 14,156,348 143,310,518 Shares redeemed (906,813) (9,187,709) ---------- ------------ Net increase 13,249,535 $134,122,809 ========== ============ Limited Maturity Portfolio Dollar Class C Shares for the Year Ended 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 Dollar Class I Shares for the Year Ended June 30, 2003++ Shares Amount ------------------------------------------------- ---------- ------------ Shares sold 9,361,219 $ 95,197,425 Shares issued to shareholders in reinvestment of dividends 334,427 3,399,346 ---------- ------------ Total issued 9,695,646 98,596,771 Shares redeemed (5,228,193) (53,133,592) ---------- ------------ Net increase 4,467,453 $ 45,463,179 ========== ============ ++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares. Limited Maturity Portfolio Dollar Class I Shares for the Year Ended 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 ========== ============ ++ Effective April 14, 2003, Class A Shares were redesignated Class I Shares. 5. Short-Term Borrowings: The Fund, along with certain other funds managed by MLIM and its affiliates, is a party to a $500,000,000 credit agreement with Bank One, N.A. and certain other lenders. 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. On November 29, 2002, the credit agreement was renewed for one year under the same terms, except that the commitment was reduced from $1,000,000,000 to $500,000,000. The Fund did not borrow under the credit agreement during the year ended June 30, 2003. 6. Distributions to Shareholders: The tax character of distributions paid by the Insured Portfolio during the fiscal years ended June 30, 2003 and June 30, 2002 was as follows: 6/30/2003 6/30/2002 ----------- ----------- Distributions paid from: Tax-exempt income $63,060,894 $66,313,476 Net long-term capital gains -- 662,778 ----------- ----------- Total distributions $63,060,894 $66,976,254 =========== =========== The tax character of distributions paid by the National Portfolio during the fiscal years ended June 30, 2003 and June 30, 2002 was as follows: 6/30/2003 6/30/2002 ----------- ----------- Distributions paid from: Tax-exempt income $62,380,030 $54,142,640 Net long-term capital gains -- 361,469 ----------- ----------- Total distributions $62,380,030 $54,504,109 =========== =========== The tax character of distributions paid by the Limited Maturity Portfolio during the fiscal years ended June 30, 2003 and June 30, 2002 was as follows: 6/30/2003 6/30/2002 ----------- ----------- Distributions paid from: Tax-exempt income $13,320,754 $10,354,614 ----------- ----------- Total distributions $13,320,754 $10,354,614 =========== =========== As of June 30, 2003, the components of accumulated earnings on a tax basis were as follows: Limited Insured National Maturity Portfolio Portfolio Portfolio ------------ ------------ ---------- Undistributed tax-exempt income-- net $ 1,025,921 $ 596,622 $ 224,999 Undistributed long-term capital gains--net -- -- -- ------------ ------------ ---------- Total undistributed earnings--net 1,025,921 596,622 224,999 Capital loss carryforward (19,667,073)* (37,277,880)* (545,507)* Unrealized gains--net 99,933,541** 67,050,114** 7,417,118** ------------ ------------ ---------- Total accumulated earnings--net $ 81,292,389 $ 30,368,856 $7,096,610 ============ ============ ========== * At June 30, 2003, the Insured Portfolio had a net capital loss carryforward of $19,667,073, all of which expires in 2009; the National Portfolio had a net capital loss carryforward of $37,277,880, of which $23,598 expires in 2004, $2,310,368 expires in 2007, $15,425,491 expires in 2008 and $19,518,423 expires in 2009; and the Limited Maturity Portfolio had a net capital loss carryforward of approximately $545,507, of which $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. **The difference between book-basis and tax-basis net unrealized gains is attributable primarily to the tax deferral of losses on wash sales, the tax deferral of losses on straddles, the difference between book and tax amortization methods for premiums and discounts on fixed income securities, and the deferral of post-October capital losses for tax purposes. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2001 NOTES TO FINANCIAL STATEMENTS (concluded) 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 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 $ (418,705) Merrill Lynch Massachusetts
Municipal Bond Fund $28,939,506 $1,499,190 $(1,815,147) Merrill Lynch Michigan Municipal Bond Fund $37,458,772 $1,809,968 $(4,463,668) Merrill Lynch North Carolina Municipal Bond Fund $25,709,770 $1,764,087 $(1,128,530) Merrill Lynch Ohio Municipal Bond Fund $29,111,290 $2,254,522 $(3,827,607)
The aggregate net assets of the National Portfolio immediately after the acquisition amounted to $1,284,207,941. INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of Merrill Lynch Municipal Bond Fund, Inc.: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Merrill Lynch Municipal Bond Fund, Inc. comprising the Insured, National and Limited Maturity Portfolios as of June 30, 2003, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2003, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the respective portfolios constituting the Merrill Lynch Municipal Bond Fund, Inc. as of June 30, 2003, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and their financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. Deloitte & Touche LLP Princeton, New Jersey August 8, 2003 OFFICERS AND DIRECTORS (unaudited)
Number of Other Public Portfolios in Director- Position(s) Length Fund Complex ships Held of Time Overseen by Held by Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director Interested Director Terry K. Glenn* President 2000 to President and Chairman of Merrill Lynch Investment 114 Funds None P.O. Box 9011 and present Managers, L.P. ("MLIM")/Fund Asset Management, L.P. 159 Portfolios Princeton, Director ("FAM")--Advised Funds since 1999; Chairman NJ 08543-9011 (Americas Region) of MLIM from 2000 to 2002; Age: 62 Executive Vice President of MLIM and FAM (which terms as used herein include their corporate predecessors) from 1983 to 2002; President of FAM Distributors, Inc. ("FAMD") from 1986 to 2002 and Director thereof from 1991 to 2002; Executive Vice President and Director of Princeton Services, Inc. ("Princeton Services") from 1993 to 2002; President of Princeton Administrators, L.P. from
1989 to 2002; Director of Financial Data Services, Inc. from 1985 to 2002.
* Mr. Glenn is a director, trustee or member of an advisory board of certain other investment companies for which MLIM or FAM acts as investment adviser. Mr. Glenn is an "interested person," as described in the Investment Company Act, of the Fund based on his former positions with MLIM, FAM, FAMD, Princeton Services and Princeton Administrators, L.P. The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72. As Fund President, Mr. Glenn serves at the pleasure of the Board of Directors. Merrill Lynch Municipal Bond Fund, Inc., June 30, 2003 OFFICERS AND DIRECTORS (unaudited)(concluded) Number of Other Public
Number of Other Public Portfolios in Director- Position(s) Length Fund Complex ships Held of Time Overseen by Held by Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Director Director --------------------- ----------- ------- --------------------------------------------------- ------------- ------------ Independent Directors Ronald W. Forbes Director 1977 to Professor Emeritus of Finance, School of Business, 45 Funds None P.O. Box 9095 present State University of New York at Albany since 2000 50 Portfolios Princeton, and Professor thereof from 1989 to 2000; NJ 08543-9095 International Consultant at the Urban Institute Age: 62 from 1995 to 1999. Cynthia A. Montgomery Director 1994 to Professor, Harvard Business School since 1989; 45 Funds Unum P.O. Box 9095 present Director, Unum Provident Corporation since 1990; 50 Portfolios Provident Princeton, Director, Newell Rubbermaid, Corpora-
NJ 08543-9095 Inc. since 1995. tion; Newell Age: 50 Rubbermaid, Inc. Charles C. Reilly Director 1990 to Self-employed financial consultant since 1990; 45 Funds None P.O. Box 9095 present Partner of Small Cities Cable Television from 1986 50 Portfolios Princeton, to 1997. NJ 08543-9095 Age: 72 Kevin A. Ryan Director 1992 to Founder and Director Emeritus of The Boston 45 Funds None P.O. Box 9095 present University Center for the Advancement of Ethics and 50 Portfolios Princeton, Character; Professor of Education at Boston NJ 08543-9095 University from 1982 to 1999 and Professor Emeritus Age: 70 thereof since 1999. Roscoe S. Suddarth Director 2000 to President, Middle East Institute from 1995 to 2001; 45 Funds None P.O. Box 9095 present Foreign Service Officer, United States Foreign 50 Portfolios Princeton, Service from 1961 to 1995; Career Minister from NJ 08543-9095 1989 to 1995; Deputy Inspector General, U.S. Age: 67 Department of State from 1991 to 1994; U.S. Ambassador to the Hashemite Kingdom of Jordan from 1987 to 1990. Richard R. West Director 1981 to Dean Emeritus of New York University, Leonard 45 Funds Bowne & Co. P.O. Box 9095 present N. Stern School of Business Administration since 50 Portfolios Inc.; Vornado Princeton, 1994. Realty Trust; NJ 08543-9095 Vornado Age: 65
Operating Company; Alexander's, Inc. Edward D. Zinbarg Director 2000 to Self-employed financial consultant since 1994. 45 Funds None P.O. Box 9095 present 50 Portfolios Princeton, NJ 08543-9095 Age: 68
*The Director's term is unlimited. Directors serve until their resignation, removal or death, or until December 31 of the year in which they turn 72.
Position(s) Length Held of Time Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years --------------------- ----------- ------- --------------------------------------------------- Fund Officers Donald C. Burke Vice 1993 to First Vice President of MLIM and FAM since 1997 and P.O. Box 9011 President present Treasurer thereof since 1999; Senior Vice President Princeton, and and and Treasurer of Princeton Services since 1999; NJ 08543-9011 Treasurer 1999 to Vice President of FAMD since 1999; Director of MLIM Age: 43 present Taxation since 1990. Kenneth A. Jacob Senior Vice 2002 to Managing Director of MLIM since 2000; Director P.O. Box 9011 President present (Municipal Tax-Exempt Fund Management) of MLIM from Princeton, 1997 to 2000. NJ 08543-9011 Age: 52 John M. Loffredo Senior Vice 2002 to Managing Director of MLIM since 2000; Director P.O. Box 9011 President present (Municipal Tax-Exempt Fund Management) of MLIM from Princeton, 1998 to 2000.
NJ 08543-9011 Age: 39 Peter J. Hayes Vice 1996 to Managing Director of MLIM since 2000; Director P.O. Box 9011 President present (Municipal Tax-Exempt Fund Management) of MLIM from Princeton, 1997 to 2000. NJ 08543-9011 Age: 44 Walter C. O'Connor Vice 1996 to Managing Director of MLIM since 2003; Director P.O. Box 9011 President present (Municipal Tax-Exempt Fund Management) of MLIM from Princeton, 2000 to 2003; Vice President of MLIM from 1994 to NJ 08543-9011 2000. Age: 41 Robert A. DiMella Vice 1999 to Director (Municipal Tax-Exempt Fund Management) of P.O. Box 9011 President present MLIM since 2002; Vice President of MLIM from 1996 Princeton, to 2002. NJ 08543-9011 Age: 36 Brian D. Stewart Secretary 2002 to Vice President of MLIM since 2002; Attorney with P.O. Box 9011 present Reed Smith from 2001 to 2002; Attorney with Saul Princeton, Ewing from 1999 to 2001. NJ 08543-9011 Age: 34
* Officers of the Fund serve at the pleasure of the Board of Directors. Further information about the Fund's Officers and Trustees is available in the Fund's Statement of Additional Information, which can be obtained without charge by calling 1-800-MER-FUND. Custodian The Bank of New York 100 Church St. New York, NY 10286 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 800-637-3863 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 (annual requirement only and not required to be answered until the registrant's fiscal year-end on or after July 15, 2003) 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 (annual requirement only and not required to be answered until the registrant's fiscal year-end on or after July 15, 2003) 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. Item 5 - If the registrant is a listed issuer as defined in Rule 10A- 3 under the Exchange Act, state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee in Section 3(a)(58)(B) of the Exchange Act, so state. If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act regarding an exemption from the listing standards for audit committees. N/A (Listed issuers must be in compliance with the new listing rules by the earlier of their first annual shareholders meeting after January 2004, or October 31, 2004 (annual requirement)) Item 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) - The registrant's certifying officers have reasonably designed such disclosure controls and procedures to ensure material information relating to the registrant is made known to us by others particularly during the period in which this report is being prepared. The registrant's certifying officers have determined that the registrant's disclosure controls and procedures are effective based on our evaluation of these controls and procedures as of a date within 90 days prior to the filing date of this report. 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 pursuant to Section 302 of the Sarbanes-Oxley Act. 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: August 21, 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: August 21, 2003 By: /s/ Donald C. Burke ----------------------------------------- Donald C. Burke, Chief Financial Officer of Merrill Lynch Municipal Bond Fund, Inc. Date: August 21, 2003 Attached hereto as a furnished exhibit are the certifications pursuant to Section 906 of the Sarbanes-Oxley Act.