MERRILL LYNCH
HIGH INCOME
MUNICIPAL
BOND FUND, INC.
FUND LOGO
Semi-Annual Report
February 28, 1995
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
90 Washington Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
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 representation intended for use in the
purchase of shares of the Fund or any securities mentioned in the
report. Past performance results shown in this report should not be
considered 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, 1995, Merrill Lynch High
Income Municipal Bond Fund, Inc. earned $0.326 per share income
dividends, representing a net annualized yield of 6.15%, based on a
per share net asset value of $10.71 as of February 28, 1995. Over
the same period, the Fund's total investment return was 2.98%, based
on a change in per share net asset value from $10.92 to $10.71, and
assuming reinvestment of $0.359 per share income dividends and
$0.148 per share capital gains distributions.
For the three-month period ended February 28, 1995, the Fund's total
investment return was 8.10%, based on a change in per share net
asset value from $10.24 to $10.71, and assuming reinvestment of
$0.195 per share income dividends and $0.148 per share capital gains
distributions.
<PAGE>
The Environment
The combination of heightened inflationary concerns, anticipation of
further tightening of monetary policy by the Federal Reserve Board,
the turmoil of the Mexican currency crisis and a weakening US dollar
all exerted negative influences on the US financial markets during
the February quarter. On the positive side, increasing signs that
the US economy may be losing momentum suggested that most of the
interest rate increases for this economic cycle may be behind us. As
a result of these economic crosscurrents, the US stock and bond
markets continued to be volatile during the period, even though the
Dow Jones Industrial Average did close above the 4000 level for the
first time.
The manufacturing sector proved to be the driving force behind the
US economy through the final weeks of 1994, making an important
contribution to the substantial increase in corporate earnings. US
companies have been successful at containing labor costs, which are
an important component of the inflation outlook. Growth in the
economy has not been translated into higher wages and benefits for
US workers. Consumer spending is growing at a slower pace than in
previous economic recoveries, and was unchanged for the month of
January. Another encouraging sign was the January increase in the
personal savings rate to the highest level in two years. However,
this is following an all-time annual low for the savings rate in
1994.
In the weeks ahead, investors will continue to assess economic data
and inflationary trends in order to gauge whether inflationary
pressures have been tempered and the economy is headed for moderate
growth (a "soft landing"), or if the lagged effect of interest rate
rises will result in a curtailment of economic growth. Investors
will also focus on the progress that the new Congress makes on both
reducing spending and the Federal budget deficit and passing tax
cuts that promote savings and investment. At this time, the recent
defeat of the balanced budget amendment in the Senate does not bode
well for the passage of sweeping fiscal reforms.
The Municipal Market
Long-term municipal bond yields generally declined during the six-
month period ended February 28, 1995. As measured by the Bond Buyer
Revenue Bond Index, tax-exempt bond yields fell 12 basis points
(0.12%). While yields fell overall during the period, the tax-exempt
bond market continued to be very volatile. Municipal bonds continued
their earlier upward climb throughout September and October before
reaching a three-year high of 7.37% in mid-November. Yields then
began a steady and significant decline for the remainder of the six-
month period ended February 28, 1995. Tax-exempt bond yields
declined approximately 100 basis points to 6.34% at the end of
February. US Treasury bonds exhibited a similar pattern with the 30-
year Treasury bond yield rising almost 70 basis points from the end
of August 1994 to a high of 8.15% in mid-November 1994. Taxable
Treasury bond yields then declined 70 basis points to close the six-
month period ended February 28, 1995 essentially unchanged at 7.45%.
<PAGE>
The recent peak in interest rates last November and their subsequent
decline have coincided with an apparent change in investor
psychology. The series of interest rate increases engineered by the
Federal Reserve Board during 1994 ended with an aggressive
tightening of monetary policy in mid-November. This move has, at
least temporarily, restored the financial markets' confidence in the
central bank's resolve and ability to foster an environment of
moderate economic growth and minimal inflationary pressures.
Investors then turned their attention to potentially weaker economic
growth in 1995 and interest rates began to decline. As indications
of a slowing in economic growth were released in early 1995,
particularly in housing and employment, the bond market rally
intensified. The dramatic increase in bond yields seen in 1994 can
now be viewed as an overreaction to excessive inflationary fears in
combination with expected strong economic growth continuing
throughout 1995. As these fears have yet to be realized, investors
viewed the yields available in late 1994 as particularly attractive
and bond prices rose accordingly.
The strong technical position of the municipal market has
intensified the recent market rally. New-issue supply during the six
months ended February 28, 1995 totaled approximately $60 billion, a
decrease of over 50% versus the comparable period one year ago. In
recent months the pace of new issuance has slowed further. During
the February quarter, less than $25 billion in long-term securities
were issued, a decline of almost 60% versus year ago levels. Both
January and February monthly issuance were less than $8 billion,
which represents the lowest monthly issuance levels since January
1988. Issuance thus far in 1995 has led some analysts to lower their
projections for 1995 annual issuance from the $150 billion range to
the $120 billion range. This would represent a further 20% reduction
in an already recent historically low issuance environment.
At the same time, investor demand has slowly returned to the
municipal market. Both January and February saw net cash inflows
into tax-exempt mutual bond funds, a striking reversal of flows from
that which was experienced for much of late 1994. Much of the
increase in municipal bond yields in 1994 was in large part a
response to investor liquidation of municipal mutual funds in
anticipation of additional price declines associated with expected
increases in interest rates. As both bond yields and new bond
issuance have declined in recent months, both retail and
institutional investors have been hard pressed to repurchase
securities sold in late 1994. The relative scarcity of tax-exempt
bond products is expected to continue throughout 1995, and thus
expected scarcity has intensified the recent rise in municipal bond
prices.
Looking forward, while it is likely that interest rate volatility
will remain a factor in 1995, the magnitude of the increase in bond
yields is unlikely to be repeated. As the supply of tax-exempt
products is likely to remain very limited throughout 1995, presently
available bond yields should prove to be attractive to long-term
investors.
<PAGE>
Portfolio Strategy
Our portfolio strategy was unchanged during the quarter ended
February 28, 1995. Despite considerable volatility in the
marketplace, the Fund generated an attractive rate of return. Our
goal was to provide investors with tax-exempt income primarily
through the purchase of high-yield securities. We have periodically
sought to insulate the Fund from interest rate volatility through
the selective use of various hedging techniques; however, our main
focus was on the analysis and acquisition of high-yield tax-exempt
bonds.
Minimal restructuring occurred this February quarter as few
compelling opportunities arose in the marketplace. However, at the
present time there are several new prospective additions being
reviewed by our credit analysts. We continue to pursue situations
where proceeds from the sale of overvalued holdings can be
reinvested in other tax-exempt securities possessing greater
intrinsic value. Looking forward, we intend to maintain cash
reserves at or below current levels as technicals in the tax-exempt
arena appear increasingly favorable.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
March 30, 1995
PORTFOLIO ABBREVIATIONS
To simplify the listing 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 securities according to the list below and at right.
<PAGE>
AMT Alternative Minimum Tax (subject to)
CPCR Collateralized Pollution Control Revenue Bonds
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
<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--0.5% B+ NR* $1,000 Brewton, Alabama, Industrial Development Board, PCR,
Refunding (Container Corporation American Project),
8% due 4/01/2009 $ 1,031
Arizona--3.3% NR* Ba 2,920 Arizona Health Facilities Authority, Hospital Systems
Revenue Refunding Bonds (Saint Luke's Health Systems),
7.25% due 11/01/2003 (d) 3,299
BB Ba2 1,000 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company--Palo Verde), Series A,
6.375% due 8/15/2023 902
NR* NR* 1,280 Pima County, Arizona, IDA, Revenue Bonds (La Hacienda
Project), 9.50% due 12/01/2016 1,280
AA P1 1,200 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corporation), VRDN, 3.75% due 12/01/2009 (a) 1,200
Arkansas--0.1% A1+ P1 200 Clark County, Arkansas, Solid Waste Disposal Revenue Bonds
(Reynolds Metals Co. Project), VRDN, AMT, 4.10% due 8/01/2022 (a) 200
California--0.7% NR* NR* 1,500 Long Beach, California, Redevelopment Agency, M/F Housing
Revenue Bonds (Pacific Court Apartments), AMT, Issue B, 6.80%
due 9/01/2013 1,396
Colorado--7.3% BBB+ Baa1 2,000 Colorado Health Facilities Authority, Hospital Revenue Bonds
(P/SL Healthcare System Project), Series A, 6.875% due 2/15/2023 1,920
Denver, Colorado, City and County Airport Revenue Bonds:
BB Baa 2,000 AMT, Series A, 7.50% due 11/15/2023 2,034
BB Baa 900 AMT, Series A, 8% due 11/15/2025 932
BB Baa 2,000 AMT, Series B, 7.50% due 11/15/2025 2,017
BB Baa 2,000 AMT, Series D, 7.75% due 11/15/2013 2,135
BB Baa 1,250 Series A, 7.50% due 11/15/2012 1,301
BB Baa 2,000 Series A, 7.25% due 11/15/2025 2,037
NR* NR* 2,000 Mountain Village Metropolitan District, Colorado, Refunding
Bonds (San Miguel County), UT, 8.10% due 12/01/2011 2,119
<PAGE>
Connecticut--1.0% NR* NR* 1,950 New Haven, Connecticut, Facilities Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 2,084
Florida--1.2% A+ VMIG1++ 1,500 Dade County, Florida, IDA, Exempt Facilities Revenue Refunding
Bonds (Florida Power & Lighting Co.), VRDN, 4% due 6/01/2021 (a) 1,500
BB NR* 960 Jacksonville, Florida, Port Authority, IDA, Revenue Refunding Bonds
(United States Gypsum Corporate Project), 7.25% due 10/01/2014 963
</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>
Georgia--2.4% NR* NR* $2,535 Atlanta, Georgia, Urban Residential Finance Authority, College
Facilities Revenue Bonds (Morris Brown College Project), 9.50%
due 6/01/2011 $ 2,611
NR* NR* 2,000 Atlanta, Georgia, Urban Residential Finance Authority, M/F
Housing Mortgage Revenue Bonds (Northside Plaza Apartments
Project), 9.75% due 11/01/2020 2,110
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, 8.78% due 11/01/2021 (g) 1,776
Illinois--4.6% Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds:
BB+ Baa2 4,000 Refunding (American Airlines Inc. Project), 8.20% due
12/01/2024 4,375
BB Baa2 470 (United Airlines), AMT, Series B, 8.95% due 5/01/2018 514
BBB+ NR* 2,000 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health System), 7.25% due 5/15/2022 2,006
NR* Baa1 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy
Cross Hospital Project), 6.75% due 3/01/2024 1,165
BBB NR* 1,000 Lansing, Illinois, Tax Increment Revenue Refunding Bonds,
7% due 12/01/2008 1,048
Indiana--0.8% A NR* 1,500 Indiana Bond Bank, Special Hospital Program Revenue Bonds
(Hendricks Community Hospital), Series A, 7.125% due 4/01/2013 1,570
Iowa--0.8% NR* NR* 1,500 Iowa Finance Authority, Health Care Facilities Revenue Bonds
(Mercy Health Initiatives Project), 9.95% due 7/01/2019 1,572
Kentucky--3.7% AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds, INFLOS, 8.933%
due 10/01/2014 (b)(g) 4,315
NR* NR* 3,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds,
AMT, 7% due 6/01/2024 2,916
<PAGE>
Louisiana--3.9% NR* Baa3 3,500 Lake Charles, Louisiana, Harbor and Terminal District, Port
Facilities Revenue Refunding Bonds (Trunkline LNG Company
Project), 7.75% due 8/15/2022 3,732
BBB+ Baa1 1,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds
(Woman's Hospital Foundation Project), 7.25% due 10/01/2022 991
BB- NR* 3,000 Port New Orleans, Louisiana, IDA, Revenue Refunding Bonds
(Continental Grain Company Project), 7.50% due 7/01/2013 3,030
Massachusetts-- NR* NR* 1,200 Boston, Massachusetts, Industrial Development Financing
10.3% Authority, Solid Waste Disposal Facility Revenue Bonds
(Jet-A-Way Project), AMT, 10.50% due 1/01/2011 1,313
NR* Ba 1,060 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 1,230
AAA Aaa 3,500 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (Beth Israel Hospital), INFLOS, 7.813% due
7/01/2025 (e)(g) 3,382
Massachusetts Health and Educational Facilities Authority
Revenue Bonds (New England Memorial Hospital):
NR* Ba 3,000 Refunding, Series B, 6.125% due 7/01/2013 2,476
NR* NR* 1,965 Series C, 7% due 4/01/2014 1,631
NR* NR* 1,205 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (North Adams Regional Hospital), Series B,
8% due 7/01/1998 1,299
NR* B1 1,675 Massachusetts Industrial Finance Agency Revenue Bonds (Bay
Cove Human Services Inc.), 8.375% due 4/01/2019 1,679
</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>
Massachusetts BB+ Ba1 $1,600 Massachusetts Industrial Finance Agency Revenue Bonds
(concluded) (Vinfen Corporate Issue), 7.10% due 11/15/2018 $ 1,484
NR* NR* 1,000 Massachusetts Industrial Finance Agency, Solid Waste
Disposal Revenue Bonds (Molten Metal Technology Project),
8.25% due 8/01/2014 1,011
NR* NR* 5,000 Massachusetts Port Authority Revenue Bonds (Harborside
Hyatt Project), AMT, 10% due 3/01/2026 5,335
Michigan--1.7% BBB Ba1 2,900 Detroit, Michigan, GO, UT, Series A, 8.70% due 4/01/2010 3,204
A1+ VMIG1++ 100 Grand Rapids, Michigan, Water Supply System, Revenue
Refunding Bonds, VRDN, 3.90% due 1/01/2020 (a)(h) 100
NR* P1 200 Michigan State Strategic Fund, PCR, Refunding (Consumers
Power Project), VRDN, Series A, 4% due 4/15/2018 (a) 200
Minnesota--1.8% A1+ NR* 400 Hubbard County, Minnesota, Solid Waste Disposal Revenue
Bonds (Potlatch Corporation Project), VRDN, AMT, 4.10% due
8/01/2014 (a) 400
Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 1,000 Series B, 6.625% due 11/01/2017 942
BBB- Baa 2,000 Series D, 9.75% due 11/01/2017 2,224
<PAGE>
Mississippi--0.1% NR* P1 200 Perry County, Mississippi, PCR, Refunding (Leaf River Forest
Project), VRDN, 3.75% due 3/01/2002 (a) 200
Missouri--5.3% BBB- NR* 2,935 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic Project), 8.25%
due 12/15/2014 2,957
BB NR* 4,595 Missouri Health and Educational Facilities Authority Revenue
Bonds (Southwest Baptist University Project), 9.50% due
10/01/2011 5,220
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds (Phelps
County Regional Medical Center), 8.30% due 3/01/2000 (d) 2,308
Nevada--1.4% BBB+ NR* 3,000 Las Vegas, Nevada, Downtown Redevelopment Agency, Tax
Increment Revenue Bonds (Fremont Street Project), Series A,
6.10% due 6/15/2014 2,822
New Hampshire-- BBB+ Baa1 1,845 New Hampshire Higher Educational and Health Facilities Authority
3.5% Revenue Bonds (Saint Joseph Hospital), 7.50% due 1/01/2016 1,872
BB+ Baa3 5,140 New Hampshire, IDA, PCR (Public Service Company New
Hampshire Project), Series B, 7.50% due 5/01/2021 5,286
New Jersey--6.1% BBB+ Ba 2,000 Camden County, New Jersey, Pollution Control Financing
Authority, Solid Waste Resource Recovery Revenue Bonds,
Series D, 7.25% due 12/01/2010 1,977
New Jersey Health Care Facilities, Financing Authority
Revenue Bonds:
NR* NR* 4,800 (Riverwood Center), Series A, 9.90% due 7/01/2021 5,299
BBB- Baa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 5,031
New Mexico--1.4% BB Ba2 2,000 Farmington, New Mexico, PCR, Refunding (Public Service
Company--San Juan Project), Series A, 6.40% due 8/15/2023 1,790
A A3 1,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
Corporate Project), 6.50% due 4/01/2013 1,013
New York--2.8% A- Baa1 5,260 New York City, New York, GO, UT, Series C, 7.50% due 8/01/2021 5,520
</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>
Ohio--3.3% AAA Aaa $2,000 Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT, Series A2,
9.279% due 3/24/2031 (c)(g) $ 2,065
BB Ba2 2,500 Ohio State Air Quality Development Authority, CPCR,
Refunding (Cleveland Electric Company), AMT, 6.85%
due 7/01/2023 2,288
BB Ba2 2,500 Ohio State Water Development Authority, Pollution Control
Facilities Revenue Bonds (Toledo Edison Company Project),
AMT, Series A, 7.40% due 11/01/2022 2,454
<PAGE>
Oklahoma--0.5% BB NR* 985 Blaine County, Oklahoma, Industrial Authority, IDA,
Revenue Bonds (United States Gypsum Corp. Project),
7.25% due 10/01/2010 1,012
Oregon--1.5% NR* NR* 1,000 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
7.40% due 1/01/2016 1,018
B+ NR* 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporate Project), 8% due 12/01/2003 2,000
Pennsylvania-- BB+ Baa3 1,750 Allegheny County, Pennsylvania, IDA, Revenue Refunding
10.3% Bonds (Environmental Improvement), Series A, 6.70% due
12/01/2020 1,679
BBB- NR* 5,000 McKean County, Pennsylvania, Hospital Authority Revenue Bonds
(Bradford Hospital Project), 8.875% due 10/01/2020 5,943
Montgomery County, Pennsylvania, IDA, Revenue Refunding Bonds:
NR* NR* 1,500 (1st Mortgage--Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,626
NR* Ba 3,500 (Pennsburg Nursing and Rehabilitation Center), 7.625% due
7/01/2018 3,456
BB Ba 1,500 Pennsylvania Convention Center Authority, Revenue Refunding
Bonds, Series A, 6.75% due 9/01/2019 1,428
NR* NR* 2,000 Pennsylvania Economic Development Financing Authority, IDR
(GEHL Company Inc. Project), AMT, Series F, 9% due 9/01/2010 2,078
BBB- NR* 1,500 Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Colver Project), AMT,
Series D, 7.15% due 12/01/2018 1,510
NR* NR* 3,000 Washington County, Pennsylvania, Hospital Authority Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 3,040
Rhode Island-- BBB+ NR* 1,500 Rhode Island Health and Educational Building Corporation,
1.6% Hospital Revenue Bonds (South County Hospital), 7.25% due
11/01/2011 1,532
NR* Ba 1,615 West Warwick, Rhode Island, GO, UT, Series A, 6.80%
due 7/15/1998 1,679
South Dakota-- BBB Baa 1,000 South Dakota Health and Educational Facilities Authority,
0.5% Revenue Refunding Bonds (Prairie Lakes Health Care), 7.25%
due 4/01/2022 980
Tennessee--3.5% NR* NR* 4,265 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health Systems of East Tennessee), 8.60% due 4/15/2016 4,502
BBB- Baa1 2,500 McMinn County, Tennessee, Industrial Development Board,
Solid Waste Disposal Revenue Bonds (Calhoun Newsprint), AMT,
7.40% due 12/01/2022 2,566
</TABLE>
<PAGE>
<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--7.1% BBB Baa2 $1,250 Brazos River Authority, Texas, PCR (Texas Utilities Electric
Company), AMT, Series A, 8.125% due 2/01/2020 $ 1,345
Dallas--Fort Worth, Texas, International Airport Facilities
Improvement Corporation Revenue Bonds:
BB+ Baa2 3,000 (American Airlines, Inc.), AMT, 7.25% due 11/01/2030 2,962
BB Ba1 3,375 Refunding (Delta Airlines Incorporated), 6.25% due 11/01/2013 3,080
BBB A 500 Ector County, Texas, Hospital Revenue Bonds (Ector County
Hospital), 7.30% due 4/15/2012 522
BBB- Baa 4,920 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
Systems Project), 8.875% due 6/01/2021 5,299
NR* NR* 1,845 Swisher County, Texas, Jail Facilities Financing Corporation
Revenue Bonds (Criminal Detention Center), 9.75% due
8/01/2009 (f) --
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 1,079
Utah--2.3% BBB+ Baa2 1,300 Carbon County, Utah, Solid Waste Disposal Revenue Refunding
Bonds (Laidlaw Inc.--ECDC Project), AMT, Series A, 7.50% due
2/01/2010 1,327
AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC
Hospitals, Inc.), INFLOS, 9.008% due 5/15/2020 (e)(g) 3,184
Vermont--0.7% NR* NR* 1,500 Vermont Educational and Health Buildings Financing Agency,
Revenue Refunding Bonds (College of St. Joseph Project),
8.50% due 11/01/2024 1,500
Wisconsin--1.2% NR* Ba3 2,350 Walworth, Wisconsin, IDA, Revenue Refunding Bonds (United
States Gypsum Corp. Project), 7.25% due 5/01/2010 2,365
Total Investments (Cost--$190,630)--98.1% 196,805
Other Assets Less Liabilities--1.9% 3,770
--------
Net Assets--100.0% $200,575
========
<PAGE>
<FN>
(a)The interest rate is subject to change periodically based upon
prevailing market rates. The interest rate shown is the rate in
effect at February 28, 1995.
(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 prevailing market rates. The interest rate shown is the rate in
effect at February 28, 1995.
(h)FGIC Insured.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of February 28, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$190,630,488) (Note 1a) $196,804,922
Cash 24,776
Receivables:
Interest $ 3,923,378
Capital shares sold 473,242 4,396,620
------------
Deferred organization expenses (Note 1e) 51,074
Prepaid registration fees and other assets (Note 1e) 10,703
------------
Total assets 201,288,095
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 397,549
Investment adviser (Note 2) 146,542
Administration (Note 2) 38,564 582,655
------------
Accrued expenses and other liabilities 130,137
------------
Total liabilities 712,792
------------
Net Assets: Net assets $200,575,303
============
<PAGE>
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $ 1,872,573
Consist of: Paid-in capital in excess of par 192,411,227
Undistributed realized capital gains--net 117,069
Unrealized appreciation on investments--net 6,174,434
------------
Net assets--Equivalent to $10.71 per share based on 18,725,726
shares of capital outstanding $200,575,303
============
</TABLE>
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended February 28, 1995
<S> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 7,806,777
(Note 1d):
Expenses: Investment advisory fees (Note 2) 952,276
Administrative fees (Note 2) 250,599
Transfer agent fees (Note 2) 67,145
Professional fees 55,609
Printing and shareholder reports 33,147
Registration fees (Note 1e) 27,942
Advertising 27,363
Accounting services (Note 2) 21,032
Amortization of organization expenses (Note 1e) 20,911
Listing fees 16,406
Directors' fees and expenses 12,814
Custodian fees 11,231
Pricing services 7,183
Other 3,592
------------
Total expenses 1,507,250
------------
Investment income--net 6,299,527
------------
Realized & Realized gain on investments--net 712,105
Unrealized Change in unrealized appreciation on investments--net (1,678,798)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 5,332,834
(Notes 1b, 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 6,299,527 $ 12,911,107
Realized gain on investments--net 712,105 3,571,349
Change in unrealized appreciation on investments--net (1,678,798) (12,998,193)
------------ ------------
Net increase in net assets resulting from operations 5,332,834 3,484,263
------------ ------------
Dividends & Investment income--net (6,299,527) (12,911,107)
Distributions Realized gain on investments--net (3,391,987) (1,365,806)
To Shareholders ------------ ------------
(Note 1f): Net decrease in net assets resulting from dividends and
distributions to shareholders (9,691,514) (14,276,913)
------------ ------------
Capital Share Net increase (decrease) in net assets derived from
Transactions capital share transactions (8,024,396) 6,828,611
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (12,383,076) (3,964,039)
Beginning of period 212,958,379 216,922,418
------------ ------------
End of period $200,575,303 $212,958,379
============ ============
</TABLE>
<PAGE>
<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 1990++ to
Feb. 28, For the Year Ended Aug. 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S>
Per Share Net asset value, beginning of period $ 10.92 $ 11.44 $ 10.74 $ 10.29 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .33 .65 .68 .71 .63
Realized and unrealized gain (loss) on
investments--net (.03) (.45) .75 .50 .29
-------- -------- -------- -------- --------
Total from investment operations .30 .20 1.43 1.21 .92
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.33) (.65) (.68) (.71) (.63)
Realized gain on investments--net (.18) (.07) (.05) (.05) --
-------- -------- -------- -------- --------
Total dividends and distributions (.51) (.72) (.73) (.76) (.63)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.71 $ 10.92 $ 11.44 $ 10.74 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.98%+++ 1.75% 13.83% 12.29% 9.43%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.50%* 1.48% 1.37% 1.30% .84%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.50%* 1.48% 1.47% 1.55% 1.76%*
======== ======== ======== ======== ========
Investment income--net 6.28%* 5.81% 6.17% 6.85% 7.43%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $200,575 $212,958 $216,922 $170,735 $114,628
Data: ======== ======== ======== ======== ========
Portfolio turnover 8.64% 28.51% 28.74% 31.74% 75.92%
======== ======== ======== ======== ========
*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.
++Commencement of Operations.
+++Aggregate total investment return.
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. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period presented. All
such adjustments are of a normal recurring nature. The following is
a summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds and other portfolio
securities in which the Fund invests are traded primarily in the
over-the-counter municipal bond and money markets and are valued at
the last available bid price in the over-the-counter market or on
the basis of yield equivalents as obtained from one or more dealers
that make markets in the securities. Financial futures contracts and
options thereon, which are traded on exchanges, are valued at their
settlement 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. Short-term investments with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets 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, 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 Directors.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund 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.
<PAGE>
* Options--The Fund can write covered call options and purchase put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense 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.
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" or "Adviser"). The
general partner of MLAM 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 with Merrill Lynch Funds Distributor, Inc.
("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
<PAGE>
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 entered into 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 (excluding interest,
taxes, distribution fees, 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 net
assets, 2.0% of the next $70 million of average daily net assets,
and 1.5% of the average 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.
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 MLAM, PSI, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 1995 were $16,961,980 and
$29,929,648, respectively.
Net realized and unrealized gains (losses) as of February 28, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 1,292,809 $ 6,174,434
Short-term investments (9,028) --
Financial futures contracts (571,676) --
----------- -----------
Total $ 712,105 $ 6,174,434
=========== ===========
<PAGE>
As of February 28, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $6,174,434, of which $9,260,648
related to appreciated securities and $3,086,214 related to
depreciated securities. The aggregate cost of investments at
February 28, 1995 for Federal income tax purposes was $190,630,488.
4. Capital Shares Transactions:
Transactions in capital shares were as follows:
For the Six Months Dollar
Ended February 28, 1995 Shares Amount
Shares sold 636,372 $ 6,691,568
Shares issued to share-
holders in reinvestment
of dividends 406,203 4,196,049
----------- -----------
Total issued 1,042,575 10,887,617
Shares tendered (1,823,099) (18,912,013)
----------- -----------
Net decrease (780,524) $(8,024,396)
=========== ===========
For the Year Ended Dollar
August 31, 1994 Shares Amount
Shares sold 2,811,953 $31,764,655
Shares issued to share-
holders in reinvestment
of dividends 526,098 5,902,562
----------- -----------
Total issued 3,338,051 37,667,217
Shares tendered (2,797,604) (30,838,606)
----------- -----------
Net increase 540,447 $ 6,828,611
=========== ===========
