Merrill Lynch High Income Municipal Bond Fund, Inc.
Quarterly
Report
November 30, 1993
This report, including the financial information herein,
is transmitted to the shareholders of Merrill Lynch
High Income Municipal Bond Fund, Inc. for their informa-
tion. It is not a prospectus, circular or representation
intended for use in the purchase of shares of the Fund
or any securities mentioned in the report. Past perform-
ance 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 three-month period ended November 30, 1993, Merrill Lynch
High Income Municipal Bond Fund, Inc. earned $0.161 per share
income dividends, representing a net annualized yield of 5.66%,
based on a month-end per share net asset value of $11.43. Over
the same period, the Fund's total investment return was +1.32%,
based on a change in per share net asset value from $11.44 to
$11.43, and assuming reinvestment of $0.161 per share income
dividends.
The Environment
The US economy began to show some signs of improvement during the
November quarter with little evidence of an appreciable increase
in the rate of inflation. The industrial sector is demonstrating
growing strength, yet capacity utilization is still well below
the levels associated with rising inflation. Consumer spending
has improved, but the labor market remains soft. Despite the
areas of economic weakness that persist, concerns arose during
the quarter that the rate of business activity might increase
inflationary pressures.
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Other developments during the November quarter had significant
long-term implications for the US financial markets. Although
Boris Yeltsin's swift and apparently decisive victory over his
hard-line opponents in Russia created little immediate disruption
in the world financial markets, the future of political and
economic reform in the former Soviet Union is far from certain.
Evidence of greater progress toward a free-market economy and
democratic government in Russia would have more positive
implications for the US financial markets over the longer term.
The outline for proposed healthcare reform is also very important
for the US economy. As the various healthcare reform proposals
are debated, investors will focus on their potential effects on
the Federal budget, the US economy and the quality of healthcare
delivery in the United States. Finally, the ratification of the
North American Free Trade Agreement by the US Congress was
important not only for the prospect of expanding trade with
Canada and Mexico, but also as a positive influence on the
recently concluded round of negotiations on the General Agreement
on Tariffs and Trade. Further economic integration and growth
through trade liberalization would be positive for the
capital markets in the United States and around the world.
The Municipal Market
The municipal bond market exhibited considerable volatility
during the quarter ended November 30, 1993. From September
through mid-October, municipal bond yields continued their
earlier decline. By mid-October, yields on tax-exempt revenue
bonds maturing in 30 years, as reflected by the Bond Buyer
Revenue Bond Index, had declined an additional 15 basis points
(0.15%) to another record low of 5.41%. However, the municipal
bond market then reacted sympathetically to a nervous US Treasury
bond market during the remainder of the quarter, and tax-exempt
bond yields rose to end the quarter at 5.47%. Despite the
increase in bond yields late in the quarter, it is important to
note that tax-exempt bond yields have declined approximately 70
basis points since the beginning of 1993.
The pace of new municipal bond issuance slowed during the
November quarter. More than $62 billion in tax-exempt securities
were issued over the last three months, an increase of more than
5% versus the November 1992 quarter's issuance. In recent
quarters, however, new bond issuance had been increasing at a
rate of approximately 25%. Even this relative decline in supply
was unable to provide any technical support for the municipal
bond market as investors became extremely concerned that economic
growth would dramatically accelerate during the last calendar
quarter of 1993 and continue into early 1994. This projected
growth and expected associated inflationary pressures combined to
cause yields to rise significantly in late October and November.
<PAGE>
A number of additional factors have been involved in the recent
increase in tax-exempt bond yields. Individual investors have
demonstrated only limited interest in the municipal bond market
over the last month. This probably has been related to a
combination of seasonal factors and the desire to avoid the tax
liability resulting from the large capital gains expected to be
declared by most bond funds this year. Also, many larger
institutional investors have been reluctant participants in the
market in order not to jeopardize their already strong year-to-
date performances. Consequently, recent interest rate volatility
has been intensified by this decline in demand.
By early 1994, however, it is likely that demand will increase
significantly. The proceeds from bond maturities, bond calls and
coupon payments beginning in January will all need to be
reinvested. The new higher marginal Federal tax rates will also
go into effect in January. Given the ongoing attractive after-tax
benefits municipal bonds provide, it is likely that both
individual and institutional investors will return to the tax-
exempt bond market. This increased demand should serve to
stabilize the market in early 1994.
Portfolio Strategy
During the quarter ended November 30, 1993, our portfolio
strategy continued to focus on generating a generous level of
tax-exempt income for shareholders. Seeking to capitalize on
several attractive investment opportunities, we added
approximately $12.5 million in high-yielding tax-exempt bonds to
the Fund's portfolio, with an average yield of 7.23%.
These purchases reflect the Fund's continuing focus in the
healthcare sector of the municipal bond market as well as an
orientation toward more cyclical industries that stand to benefit
from the incipient economic recovery.
We remain constructive on undervalued, lower-rated securities
that demonstrate an upside potential both from a credit and
performance standpoint. Existing holdings are regularly monitored
for creditworthiness and ongoing viability. Throughout the
November quarter, the Fund's cash reserves were held below 5% of
net assets in an effort to sustain an attractive yield to
shareholders.
We appreciate your investment in Merrill Lynch High Income
Municipal Bond Fund, Inc., and we look forward to assisting you
with your financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
December 22, 1993
<PAGE>
PORTFOLIO COMPOSITION
For the Quarter Ended November 30, 1993
Top Ten States*
Texas 12.75%
Pennsylvania 9.16
Colorado 6.71
New Jersey 5.93
New York 5.61
Massachusetts 5.57
Louisiana 5.24
Missouri 5.22
Tennessee 3.37
Connecticut 3.28
---------
Total Top Ten 62.84
Total Others 37.16
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Total Portfolio 100.00%
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Net assets as of November 30, 1993 were $223,179,897.
Quality Ratings*
(Based on Nationally Recognized Rating Services)
GRAPHIC AND IMAGE MATERIALS APPEAR HERE. SEE APPENDIX ITEM 1.
[FN]
* Based on total market value of the portfolio as of November
30, 1993.
++Temporary investments in short-term municipal securities.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Marc A. White, 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
<PAGE>
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
APPENDIX: GRAPHIC AND IMAGE MATERIALS.
ITEM 1
Pie Chart illustrating the following percentages:
Quality Ratings*
(Based on Nationally Recognized Rating Services)
AAA/Aaa 11%
AA/Aa 1%
A/A 7%
BBB/Baa 43%
BB/Ba 11%
B/B 2%
NR 24%
Other++ 1%
[FN]
* Based on total market value of the portfolio as of November
30, 1993.
++Temporary investments in short-term municipal securities.
