MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
Semi-Annual Report February 28, 1994
This report, including the financial
information herein, is transmitted
to the shareholders of Merrill Lynch
High Income Municipal Bond Fund,
Inc. for their information. It is not
a prospectus, circular or represen-
tation intended for use in the pur-
chase of shares of the Fund or any
securities mentioned in the report.
Past performance results shown
in this report should not be consi-
dered a representation of future
performance.
Merrill Lynch High Income
Municipal Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
DEAR SHAREHOLDER
For the six-month period ended February 28, 1994, Merrill Lynch
High Income Municipal Bond Fund, Inc. earned $0.322 per share
income dividends, representing a net annualized yield of 5.73%,
based on a per share net asset value of $11.32 as of February 28,
1994. Over the same period, the Fund's total investment return was
+2.38%, based on a change in per share net asset value from
$11.44 to $11.32, and assuming reinvestment of $0.367 per share
income dividends and $0.026 per share capital gains
distributions.
<PAGE>
The Environment
Inflationary expectations changed sharply during the February
quarter. Following better-than-expected economic results, Federal
Reserve Board Chairman Alan Greenspan indicated in Congres-
sional testimony in January that continued strong expansion of
the economy would lead the central bank to tighten monetary
policy in an effort to control inflation. On February 4, 1994,
the central bank broke with tradition and publicly announced
a modest increase in short-term interest rates.
Rather than view the Federal Reserve Board's action as a preemptive
strike against inflation, fixed-income investors focused on Chairman
Greenspan's implicit promise of further tightening should the rate of
inflation accelerate, and bond prices declined sharply. The
setback in the bond market was also reflected in greater stock
market volatility.
In the weeks ahead, investors will continue to gauge the pace of
the economic expansion and watch for signs of an overheating
economy that could prompt successive Federal Reserve Board
actions to raise short-term interest rates. At this time, there is
little evidence that the rate of inflation will increase rapidly.
Job growth is sluggish, and new claims for unemployment insurance
have trended higher since the beginning of the year. Commodity
prices have risen somewhat, but in many cases these increases are
occurring from very depressed levels. Therefore, although the
secular long-term trend toward lower interest rates may be over,
it is not yet certain whether the pace of economic activity will
accelerate to the point where extensive Federal Reserve Board
tightening will be necessary to contain inflation.
The Municipal Market
Yields on long-term tax-exempt securities exhibited considerable
volatility during the three months ended February 28, 1994.
Initially, municipal bond yields resumed their earlier decline
and in mid-December reached 5.53% as measured by the Bond Buyer
Revenue Bond Index. Tax-exempt yields rose slightly for the remainder
of 1993 before increasing more substantially in 1994. During the
February quarter, long-term municipal bond yields increased by
approximately 15 basis points (0.15%) to 5.88%. Over the same
period, however, US Treasury bond yields rose approximately 30
basis points to 6.70% at the end of February. This outperformance
by municipal bonds is likely to be the dominant theme of much of 1994.
<PAGE>
During recent months, taxable yields have become volatile in
reaction to the inherent conflicts between the strong economic
recovery seen in late 1993 and early 1994 and continued low
inflationary pressures. While tax-exempt yields have reacted to
these conflicts, the municipal bond market has also focused
on the very strong technical factors supporting lower municipal
bond yields. During the past 12 months, municipalities issued
over $284 billion in bonds, an increase of over 17% versus a year
ago. Much of this increase has been the result of municipalities
refinancing existing higher-couponed debt. At current yield levels,
few of these issues will remain to be refunded. This has led to
estimates of municipal bond issuance declining to approximately
$175 billion for all of 1994. Over $290 billion in long-term
tax-exempt bonds were issued during 1993. Thus far this year,
this expected decline in issuance has occurred. So far in 1994,
new-issue supply has fallen approximately 20% compared to the same
period last year.
In addition to this dramatic decline in issuance, investor demand
is expected to increase in the coming year. This demand should be
generated by a number of factors, with a recent increase in
marginal Federal income tax rates perhaps the dominant immediate
factor. Also, bond calls and early redemptions are expected to
increase significantly in the coming quarters and last at least
into early 1995. The combination of declining new-issue volume and
rising numbers of bonds being redeemed prior to their stated
maturities will eventually lead to a net decline in the number of
bonds outstanding. In such a scenario, investor demand rises as
bondholders are forced to continually purchase new municipal
bonds to replace their previous holdings.
The outlook for the municipal market is positive. While the
historic declines in yields seen last year are unlikely to be
repeated, the strong technical structure within the tax-exempt
market would easily support the retracing of much of the recent
increase in bond yields. At the very least, should interest rates
continue to rise in response to continued strong economic growth
and a resurgence in inflationary pressures, municipal bond price
deterioration should continue to be minimal in comparison to
taxable investment alternatives.
Portfolio Strategy
During the quarter ended February 28, 1994, the Fund's portfolio
strategy and composition remained consistent as we continued to
focus on generating an attractive yield. We purchased approximately
$13 million in high-yielding tax-exempt securities bearing an
average yield of 7%. We took profits on those holdings deemed to
have attained full valuation and subsequently invested these
proceeds primarily in similarly rated securities that offered a
better yield and which were considered to be of higher credit
quality by our own credit analysts.
<PAGE>
We intend to maintain the Fund's cash reserve position below 5%
of net assets. The Fund continues to grow at a moderate and
sustainable pace since new subscriptions have more than kept pace
with the results of recent quarterly tender offers. Looking
forward, we will continue to search the marketplace for
attractive high-yield products as a means to further seek to
enhance the Fund's performance.
We appreciate your ongoing interest in Merrill Lynch High Income
Municipal Bond Fund, Inc., and we look forward to serving your
investment needs and objectives in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 29, 1994
PORTFOLIO ABBREVIATIONS
To simplify the listings of Merrill Lynch High Income Muni-
cipal Bond Fund, Inc.'s portfolio holdings in the Schedule
of Investments, we have abbreviated the names of many of
the securites according to the list below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
CPCR Collateralized Pollution Control Revenue Bonds
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Authority
IDA Industrial Development Authority
IDR Industrial Development Revenue Bonds
INFLOS Inverse Floating Rate Municipal Bonds
M/F Multi-Family
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Alabama--0.4% B+ NR $1,000 Brewton, Alabama, Industrial Development Board, PCR,
Refunding (Container Corporation American Project),
8% due 4/01/2009 $ 1,004
Arizona--1.9% NR Ba 3,000 Arizona Health Facilities Authority, Hospital Systems
Revenue Refunding Bonds (Saint Luke's Health Systems),
7.25% due 11/01/2014 3,137
NR NR 1,280 Pima County, Arizona, IDA, Revenue Bonds (La Hacienda
Project), 9.50% due 12/01/2016 1,152
California--2.1% NR NR 1,500 Long Beach, California, Redevelopment Agency, M/F Housing
Revenue Refunding Bonds (Pacific Court Apartments), AMT,
Issue B, 6.80% due 9/01/2013 1,476
NR NR 3,000 Orange County, California, Community Facilities Special Tax
Bonds (Aliso Viejo No 88-1), Series A, 7.35% due 8/15/2018 3,227
Colorado--6.0% BBB+ Baa1 2,000 Colorado Health Facilities Authority, Hospital Revenue Bonds
(P/SL Healthcare System Project), Series A, 6.875% due
2/15/2023 2,108
BBB- NR 1,000 Colorado Health Facilities Financial Authority, Revenue
Refunding Bonds (National Jewish Center Immunization
Project), 6.875% due 2/15/2012 1,038
Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa1 900 AMT, Series A, 8% due 11/15/2025 997
BBB Baa1 2,000 AMT, Series B, 7.50% due 11/15/2025 2,125
BBB Baa1 2,000 AMT, Series D, 7.75% due 11/15/2013 2,368
BBB Baa1 2,000 Series A, 7.25% due 11/15/2025 2,183
NR NR 2,000 Mountain Village Metropolitan District, Colorado, Refunding
Bonds (San Miguel County), UT, 8.10% due 12/01/2011 2,242
A-1 NR 300 Pitkin County, Colorado, IDR, Refunding (Aspen Skiing
Company Project), Series A, VRDN, 2.25% due 4/01/2014 (a) 300
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Connecticut--3.1% BBB- NR $4,000 Connecticut State Health and Educational Facilities
Authority Revenue Bonds (New Britain Memorial Hospital),
Series A, 7.75% due 7/01/2022 $ 4,348
NR NR 580 Eastern Connecticut State Regional Education Service
Center, GO, 5.75% due 5/15/1998 588
NR NR 1,975 New Haven, Connecticut, Facilities Revenue Bonds (Hill
Health Corporation Project), 9.25% due 5/01/2017 2,188
<PAGE>
District of BBB NR 3,000 District of Columbia, COP, 7.30% due 1/01/2013 3,276
Columbia--1.4%
Florida--0.4% B+ NR 960 Jacksonville, Florida, Port Authority, IDA, Refunding Bonds
(United States Gypsum Corporate Project), 7.25% due
10/01/2014 955
Georgia--3.1% NR NR 2,550 Atlanta, Georgia, Urban Residential Finance Authority,
College Facilities Revenue Bonds (Morris Brown College
Project), 9.50% due 6/01/2011 2,435
NR NR 2,000 Atlanta, Georgia, Urban Residential Finance Authority, M/F
Mortgage Revenue Bonds (Northside Plaza Apartments Project),
9.75% due 11/01/2020 2,120
BBB+ NR 2,500 Tri-City Hospital Authority, Georgia, Hospital Revenue Bonds
(South Fulton Medical Centers), COP, 6.375% due 7/01/2016 2,478
Hawaii--0.9% AAA NR 1,750 Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Citizens Utility Company),
RIB, Series 91-B, 10.603% due 11/01/2021 (g) 2,017
Illinois--1.7% BB Baa2 490 Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines), AMT, Series B,
8.95% due 5/01/2018 572
BBB+ NR 2,000 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health System), 7.25% due 5/15/2022 2,110
BBB NR 1,000 Lansing, Illinois, Tax Increment Revenue Refunding Bonds,
7% due 12/01/2008 1,074
Indiana--0.7% A NR 1,500 Indiana Bond Bank, Special Hospital Program Revenue Bonds
(Hendricks Community Hospital), Series A, 7.125%
due 4/01/2013 1,664
Iowa--1.0% NR NR 1,500 Iowa Finance Authority, Health Care Facilities Revenue Bonds
(Mercy Health Initiatives Project), 9.95% due 7/01/2019 1,587
A1+ NR 800 Iowa Financial Authority, Solid Waste Disposal Revenue Bonds
(Cedar River Paper Company Project), Series A, VRDN, 2.40%
due 7/01/2023 (a) 800
Kentucky--2.8% Jefferson County, Kentucky, First Mortgage Revenue Bonds
(Christian Church Homes):
BBB NR 715 6.125% due 11/15/2013 693
BBB NR 1,165 6.125% due 11/15/2018 1,118
AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds, INFLOS, 10.606%
due 10/01/2014 (b)(g) 4,645
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Louisiana--5.0% NR Ba1 $3,500 Lake Charles, Louisiana, Harbor and Terminal District
Refunding Bonds (Truckline LNG Company Project), 7.75%
due 8/15/2022 $ 3,908
BBB+ Baa1 1,000 Louisiana Public Facilities Authority, Hospital Revenue
Bonds (Woman's Hospital Foundation Project), 7.25% due
10/01/2022 1,080
NR A 1,000 Louisiana Public Facilities Authority, Student Loan Revenue
Bonds, AMT, Series A-3, 7% due 9/01/2006 1,068
BB- NR 3,000 Port New Orleans, Louisiana, IDA, Revenue Refunding Bonds
(Continental Grain Company Project), 7.50% due 7/01/2013 3,132
BBB- NR 2,000 West Feliciana Parish, Louisiana, PCR (Gulf States
Utilities), Series II, 7.70% due 12/01/2014 2,273
Maryland--1.0% NR A 2,000 Prince George's County, Maryland, Hospital Revenue Bonds
(Dimensions Health Corporation), 7% due 7/01/2002 (d) 2,308
Massachusetts--5.8% NR NR 1,200 Boston, Massachusetts, Industrial Development Financing
Authority, Solid Waste Disposal Facility Revenue Bonds
(Jet-A-Way Project), AMT, 10.50% due 1/01/2011 1,344
NR Ba 1,325 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 1,603
AAA Aaa 3,500 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (Beth Israel Hospital), INFLOS, 9.384% due
7/01/2025 (e)(g) 3,658
NR NR 1,505 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (North Adams Regional Hospital), Series B,
8% due 7/01/1998 1,594
BB+ Ba1 1,600 Massachusetts Industrial Finance Authority, Revenue Bonds
(Vinfen Corporate Issue), 7.10% due 11/15/2018 1,578
NR NR 3,000 Massachusetts Port Authority Revenue Bonds (Harborside Hyatt
Project), AMT, 10% due 3/01/2026 3,343
Michigan--1.5% BBB Ba1 2,900 Detroit, Michigan, GO, Series A, 8.70% due 4/01/2010 3,416
Minnesota--3.4% Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 2,000 Series A, 6.625% due 11/01/2017 2,035
BBB- Baa 4,820 Series D, 9.75% due 11/01/2017 5,725
Mississippi--0.5% NR Baa 1,000 Mississippi Hospital Equipment and Authority Revenue Bonds
(Riley Memorial Hospital), Series B, 7.125% due 5/01/2022 1,076
<PAGE>
Missouri--5.0% BBB- NR 3,000 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic Project), 8.25%
due 12/15/2014 3,410
Missouri Health and Educational Facilities Authority Revenue
Bonds (Southwest Baptist University Project):
BB NR 905 9.50% due 10/01/2001 1,066
BB NR 3,690 9.50% due 10/01/2011 4,533
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds (Phelps County
Regional Medical Center), 8.30% due 3/01/2000 (d) 2,411
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Montana--0.9% NR NR $2,000 Montana State Investment Board, Resource Recovery Revenue
Bonds (Yellowstone Energy Light & Power Project), AMT, 7%
due 12/31/2019 $ 2,037
Nevada--0.9% BBB+ NR 2,000 Las Vegas, Nevada, Downtown Redevelopment Agency, Tax
Increment Revenue Bonds (Fremont Street Project), Series A,
6.10% due 6/15/2014 1,961
New BBB+ Baa1 1,845 New Hampshire Higher Educational and Health Facilities
Hampshire--2.6% Authority Revenue Bonds (Saint Joseph Hospital), 7.50% due
1/01/2016 2,011
BB+ Baa3 3,450 New Hampshire, IDA, PCR (Public Service Company New
Hampshire Project), Series B, 7.50% due 5/01/2021 3,799
New Jersey--5.7% BBB+ Baa1 2,000 Camden County, New Jersey, Pollution Control Financing
Authority, Solid Waste Resource Recovery Revenue Bonds,
Series D, 7.25% due 12/01/2010 2,149
New Jersey Health Care Facilities, Financing Authority
Revenue Bonds:
NR NR 4,900 (Riverwood Center), Series A, 9.90% due 7/01/2021 5,475
BBB- Baa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 5,328
New Mexico--1.7% BB Ba2 2,000 Farmington, New Mexico, PCR, Refunding (Public Service
Company--San Juan Project), Series A, 6.40% due 8/15/2023 2,004
A A3 1,750 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
Corporate Project), 6.50% due 4/01/2013 1,862
New York--5.2% New York City, New York, GO:
A- Aaa 4,000 Series B, 8.25% due 6/01/2001 (d) 4,922
A- Baa1 5,260 Series C, 7.50% due 8/01/2021 6,019
A1+ NR 500 New York State Energy, Research and Development Authority,
PCR (Niagara Power Corporate Project), Series B, AMT, VRDN,
2.30% due 7/01/2027 (a) 500
A1+ NR 400 New York State Environmental Facilities, Corporate Resource
Recovery Revenue Bonds (Offshore Equity Huntington Project),
AMT, VRDN, 2.25% due 11/01/2014 (a) 400
<PAGE>
Ohio--4.1% NR NR 1,820 Cincinnati, Ohio, Student Loan Funding Corporation, Revenue
Refunding Bonds, AMT, Series B, 6.75% due 1/01/2007 1,886
AAA Aaa 2,000 Ohio, HFA, S/F Mortgage Revenue Bonds, Series A-2, AMT, RIB,
10.906% due 3/24/2031 (c)(g) 2,208
BB Baa3 2,500 Ohio State Air Quality Development Authority, CPCR, Refunding
(Cleveland Electric Company), AMT, 6.85% due 7/01/2023 2,548
BB Ba2 2,500 Ohio State Water Development Authority, Pollution Control
Facilities Revenue Bonds (Toledo Edison Company Project),
Series A, AMT, 7.40% due 11/01/2022 2,641
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Oklahoma--0.4% B+ NR $ 985 Blaine County, Oklahoma, Industrial Authority, IDA, Revenue
Bonds (United States Gypsum Corporate Project), 7.25% due
10/01/2010 $ 975
Oregon--1.0% A1 VMIG1 300 Medford, Oregon, Hospital Facilities Authority Revenue Bonds
(Gross Rogue Valley Health Service), DATES, 2.45% due
10/01/2016 (a) 300
B+ NR 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporate Project), 8% due 12/01/2003 1,961
Pennsylvania--8.5% BBB- NR 5,000 McKean County, Pennsylvania, Hospital Authority Revenue Bonds
(Bradford Hospital Project), 8.875% due 10/01/2020 6,012
BBB NR 1,710 Montgomery County, Pennsylvania, Higher Education and Health
Authority, Hospital Revenue Bonds (Jeanes Health System
Project), 8.625% due 7/01/2000 (d) 2,108
Montgomery County, Pennsylvania, IDA, Revenue Refunding Bonds:
NR NR 1,500 (1st Mortgage--Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,652
NR NR 3,500 (Pennsburg Nursing and Rehabilitation Center), 7.625% due
7/01/2018 3,494
NR NR 2,000 Pennsylvania Economic Development Financing Authority, IDR
(GEHL Company Inc. Project), AMT, Series F, 9% due 9/01/2010 2,000
NR NR 1,000 Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Northampton Generating),
Series A, 6.60% due 1/01/2019 982
NR NR 3,000 Washington County, Pennsylvania, Hospital Authority Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 3,076
Rhode Island--1.6% BBB+ NR 1,500 Rhode Island Health and Educational Building Corporation,
Hospital Revenue Bonds (South County Hospital), 7.25% due
11/01/2011 1,622
NR Ba 2,000 West Warwick, Rhode Island, GO, UT, Series A, 6.80%
due 7/15/1998 2,051
<PAGE>
South NR Baa1 1,500 Horry County, South Carolina, Hospital Facilities Revenue
Carolina--0.7% Refunding Bonds (Conway Hospital), 6.75% due 7/01/2012 1,573
South Dakota--0.5% BBB Baa 1,000 South Dakota Health and Educational Facilities Authority,
Revenue Refunding Bonds (Prairie Lakes Health Care), 7.25%
due 4/01/2022 1,109
Tennessee--3.2% NR NR 4,265 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health System of East Tennessee), 8.60% due 4/15/2016 4,628
BBB- Baa1 2,500 McMinn County, Tennessee, Industrial Development Board, Solid
Waste Disposal Revenue Bonds (Calhoun Newsprint), AMT,
7.40% due 12/01/2022 2,756
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <S> <S> <C> <S> <C>
Texas--11.4% BBB Baa2 $5,750 Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company), AMT, Series A, 8.125% due 2/01/2020 $ 6,562
Dallas--Fort Worth, Texas, International Airport Facilities
Improvement Corporation Revenue Bonds:
BB+ Baa2 3,000 (American Airlines), AMT, 7.25% due 11/01/2030 3,173
BB Ba1 3,375 (Delta Airlines Incorporated), 6.25% due 11/01/2013 3,318
BBB Baa1 1,500 Ector County, Texas, Hospital Revenue Bonds (Ector County
Hospital), 7.30% due 4/15/2012 1,617
NR NR 1,000 Gulf Coast, Texas, Waste Disposal Authority, Revenue Bonds,
PCR and Solid Waste Disposal (Diamond Shamrock Corporation
Project), 6.75% due 6/01/2009 1,012
A- Baa1 1,500 Harris County, Texas, Industrial Development Corporation,
Marine Terminal Revenue Refunding Bonds (GATX Terminals
Corporation Project), 6.95% due 2/01/2022 1,629
BBB- Baa 4,960 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
Systems Project), 8.875% due 6/01/2021 5,728
BBB NR 1,500 Midland County, Texas, Hospital District Revenue Bonds
(Midland Memorial Hospital), 7.50% due 6/01/2016 1,651
NR NR 1,845 Swisher County, Texas, Jail Facilities Financing Corporation
Revenue Bonds (Criminal Detention Center), 9.75% due
8/01/2009 (f) 0
BBB Baa2 1,000 West Side Calhoun County, Texas, Navigation District, Solid
Waste Revenue Bonds (Union Carbide Chemical and Plastics),
AMT, 8.20% due 3/15/2021 1,142
Utah--1.5% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 10.681% due 5/15/2020 (e)(g) 3,499
Wisconsin--1.0% NR B2 2,350 Walworth, Wisconsin, IDA, Refunding (US Gypsum Corporation
Project), 7.25% due 5/01/2010 2,347
<PAGE>
Total Investments (Cost--$206,277)--98.6% 224,313
Variation Margin on Stock Index Futures Contracts*--0.0% (63)
Other Assets Less Liabilities--1.4% 3,252
--------
Net Assets--100.0% $227,502
========
<FN>
(a) The interest rate is subject to change periodically based upon
the prevailing market rate. The interest rate shown is the rate
in effect at February 28, 1994.
(b) MBIA Insured.
(c) GNMA Collateralized.
(d) Prerefunded.
(e) AMBAC Insured.
(f) Non-income producing security.
(g) The interest rate is subject to change periodically and inversely to
the prevailing market rate. The interest rate shown is the rate in
effect at February 28, 1994.
* Futures contracts sold as of February 28, 1994 were as follows:
Number of Expiration Value
Contracts Issue Date (Note 1a)
225 US Treasury Note (5 year) June 1994 $(24,542,578)
Total Futures Contracts
(Total Contract Price -- $24,778,125) $(24,542,578)
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of February 28, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$206,276,857) (Note 1a) $224,313,119
Cash 71,617
Receivables:
Interest $ 3,998,654
Capital shares sold 850,393
Securities sold 800,164 5,649,211
------------
Deferred organization expenses (Note 1e) 94,739
Prepaid registration fees and other assets (Note 1e) 30,342
------------
Total assets 230,159,028
------------
<PAGE>
Liabilities: Payables:
Securities purchased 1,855,796
Dividends to shareholders (Note 1g) 392,486
Investment adviser (Note 2) 212,739
Variation margin 63,281 2,524,302
------------
Accrued expenses and other liabilities 133,088
------------
Total liabilities 2,657,390
------------
Net Assets: Net assets $227,501,638
============
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $ 2,010,382
Consist of: Paid-in capital in excess of par 206,580,473
Undistributed realized capital gains--net 638,974
Unrealized appreciation on investments--net 18,271,809
------------
Net assets--Equivalent to $11.32 per share based on 20,103,821 shares
of capital outstanding $227,501,638
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
February 28, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 7,963,057
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 1,065,038
Administrative fees (Note 2) 280,273
Professional fees 55,815
Transfer agent fees (Note 2) 44,799
Listing fees 41,029
Printing and shareholder reports 35,786
Advertising 25,919
Registration fees (Note 1e) 23,976
Amortization of organization expenses (Note 1e) 20,264
Accounting services (Note 2) 15,110
Directors' fees and expenses 12,547
Custodian fees 10,898
Pricing fees 5,302
Other 3,094
<PAGE> ------------
Total expenses before reimbursement 1,639,850
Reimbursement of expenses (Note 2) (3,564)
------------
Total expenses after reimbursement 1,636,286
------------
Investment income--net 6,326,771
------------
Realized & Realized gain on investments--net 1,413,371
Unrealized Change in unrealized appreciation on investments--net (2,579,616)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,160,526
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the
Six Months For the
Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 6,326,771 $ 11,632,598
Realized gain on investments--net 1,413,371 1,137,534
Change in unrealized appreciation on investments--net (2,579,616) 12,041,409
------------ ------------
Net increase in net assets resulting from operations 5,160,526 24,811,541
------------ ------------
Dividends & Investment income--net (6,326,771) (11,632,598)
Distributions Realized gain on investments--net (1,365,805) (851,810)
To Shareholders ------------ ------------
(Note 1g): Net decrease in net assets resulting from dividends and distributions to
shareholders (7,692,576) (12,484,408)
------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 13,111,270 33,860,084
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase in net assets 10,579,220 46,187,217
Beginning of period 216,922,418 170,735,201
------------ ------------
End of period $227,501,638 $216,922,418
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the For the
Six Period
The following per share data and ratios have been derived Months Nov. 2,
from information provided in the financial statements. Ended For the Year 1990++ to
Feb. 28, Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.44 $ 10.74 $ 10.29 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income--net .32 .68 .71 .63
Realized and unrealized gain (loss) on investments--net (.05) .75 .50 .29
-------- -------- -------- --------
Total from investment operations .27 1.43 1.21 .92
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.32) (.68) (.71) (.63)
Realized gain on investments--net (.07) (.05) (.05) --
-------- -------- -------- --------
Total dividends and distributions (.39) (.73) (.76) (.63)
-------- -------- -------- --------
Net asset value, end of period $ 11.32 $ 11.44 $ 10.74 $ 10.29
======== ======== ======== ========
Total Investment Based on net asset value per share 2.38%+++ 13.83% 12.29% 9.43%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.46%* 1.37% 1.30% .84%*
New Assets: ======== ======== ======== ========
Expenses 1.46%* 1.47% 1.55% 1.76%*
======== ======== ======== ========
Investment income--net 5.64%* 6.17% 6.85% 7.43%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $227,502 $216,922 $170,735 $114,628
Data: ======== ======== ======== ========
Portfolio turnover 11.59% 28.74% 31.74% 75.92%
======== ======== ======== ========
<FN>
+Commencement of Operations.
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
The Fund is a continuously offered closed-end fund, the shares of which are
offered at net asset value. Therefore, no separate market exists.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch High Income Municipal Bond Fund,
Inc. (the "Fund") is registered under the Investment Company Act of
1940 as a continuously offered, non-diversified, closed-end management
investment company. The following is a summary of significant account-
ing policies followed by the Fund.
(a) Valuation of investments--Municipal bonds
are traded primarily in the over-the-counter markets and are valued at
the most recent bid price or yield equivalent as obtained by the Fund's
pricing service from dealers that make markets in such securities.
Financial futures contracts, which are traded on exchanges, are valued
at their closing prices as of the close of such exchanges. Options,
which are traded on exchanges, are valued at their last sale price as
of the close of such exchanges or, lacking any sales, at the last
available bid price. Securities with remaining maturities of sixty days
or less are valued at amortized cost which approximates market. Securities
for which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the Board
of Directors of the Fund.
(b) Financial futures contracts--The Fund may purchase or sell certain
financial futures contracts and options thereon for the purpose of hedging
the market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon entering into
a contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay to the
broker an amount of cash equal to the daily fluctuation in value of the
contract. Such receipts or payments are known as variation margin and are
recorded by the Fund as unrealized gains or losses. When the contract is
closed, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required.
(d) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Interest income is recognized on the accrual basis. Original issue discounts
and market premiums are amortized into interest income. Realized gains and
losses on security transactions are determined on the identified cost basis.
<PAGE>
(e) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are amortized on a straight-line basis over a five-
year period. Prepaid registration fees are charged to expense as the related
shares are issued.
(f) Non-income producing investments--Written and purchased options are
nonincome producing investments.
(g) 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.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). Effective January 1, 1994, the investment
advisory business of MLAM was reorganized from a corporation to a limited
partnership. Both prior to and after the reorganization, ultimate control of
MLAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general
partner of MLAM is Princeton Services, Inc., an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co. and Merrill Lynch
Investment Management, Inc. ("MLIM"), which is also an indirect wholly-owned
subsidiary of ML & Co. The Fund has also entered into a Distribution Agreement
with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of MLIM.
MLAM is responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other services
necessary to the operations of the Fund. For such services, the Fund pays
a monthly fee at an annual rate of 0.95% of the Fund's average daily net
assets.
The Fund also has an Administrative Services Agreement with MLAM whereby
MLAM will receive a fee equal to an annual rate of 0.25% of the Fund's
average daily net assets, in return for the performance of administrative
services (other than investment advice and related portfolio activities)
necessary for the operation of the Fund. The Investment Advisory Agreement
obligates MLAM to reimburse the Fund to the extent the Fund's expenses (ex-
cluding interest, taxes, brokerage fees and commissions, and extraordinary
items) exceed (a) 2.0% of the Fund's average daily net assets or (b) 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets, and 1.5% of the average daily net
assets in excess thereof. MLAM's obligation to reimburse the Fund is limited
to the amount of the investment advisory fee. No fee payment will be made to
the Investment Adviser during any fiscal year which will cause such expenses
to exceed the most restrictive expense limitation applicable at the time of
such payment. MLAM has voluntarily agreed to waive a portion of the combined
investment advisory and administrative fees. For the six months ended
February 28, 1994, MLAM earned fees of $1,345,311, of which $3,564 was
waived.
<PAGE>
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML &
Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors
of MLIM, MLFD, FDS, Merrill Lynch, Pierce, Fenner & Smith Inc., and/or ML
& Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
six months ended February 28, 1994 were $34,116,037 and $25,638,515,
respectively.
Net realized and unrealized gains as of February 28, 1994 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $ 1,327,371 $18,036,262
Financial future contracts 86,000 235,547
----------- -----------
Total $ 1,413,371 $18,271,809
=========== ===========
As of February 28, 1994, net unrealized appreciation for
Federal income tax purposes aggregated $18,271,809, of which
$19,969,942 related to appreciated securities and $1,698,133
related to depreciated securities. The aggregate cost of
investments at February 28, 1994 for Federal income tax purposes
was $206,276,857.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
February 28, 1994 Shares Amount
Shares sold 1,872,174 $21,514,495
Shares issued to share-
holders in reinvestment of
dividends and distributions 282,420 3,243,311
---------- -----------
Total issued 2,154,594 24,757,806
Shares tendered (1,016,577) (11,646,536)
---------- -----------
Net increase 1,138,017 $13,111,270
========== ===========
For the Year Ended Dollar
August 31, 1993 Shares Amount
Shares sold 4,347,002 $48,160,844
Shares issued to share-
holders in reinvestment of
dividends and distributions 465,531 4,748,066
---------- -----------
Total issued 4,812,533 52,908,910
Shares tendered (1,739,446) (19,048,826)
---------- -----------
Net increase 3,073,087 $33,860,084
========== ===========
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
