AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 23, 1996
SECURITIES ACT FILE NO. 33-36472
INVESTMENT COMPANY ACT FILE NO. 811-6156
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
(Name of Issuer)
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
589945 10 4
(CUSIP Number of Class of Securities)
ARTHUR ZEIKEL
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-2800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
<TABLE>
<S> <C>
THOMAS R. SMITH, JR., ESQ. PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
APRIL 23, 1996
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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TRANSACTION VALUATION: $43,720,000(A) AMOUNT OF FILING FEE:
$8,744(B)
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- --------------------------------------------------------------------------------
(a) Calculated as the aggregate estimated maximum purchase price to be paid for
4,000,000 shares in the offer, based upon the net asset value per share
($10.93) at April 18, 1996.
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
/ /
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid. Identify
the previous filing by registration statement number, or the Form or Schedule
and the date of its filing.
Amount Previously Paid: ________________________________________________________
Form or Registration No.: ______________________________________________________
Filing Party: __________________________________________________________________
Filing Date: ___________________________________________________________________
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Merrill Lynch High Income Municipal Bond Fund,
Inc., a closed-end investment company organized as a Maryland corporation (the
"Fund"). The principal executive offices of the Fund are located at 800 Scudders
Mill Road, Plainsboro, New Jersey 08536.
(b) The title of the securities being sought is shares of common stock, par
value $0.10 per share (the "Shares"). As of March 31, 1996 there were in excess
of 18 million Shares issued and outstanding.
The Fund is seeking tenders for 4,000,000 Shares (the "Offer"), at net asset
value per Share calculated on the day the tender offer terminates, less any
"Early Withdrawal Charge," upon the terms and subject to the conditions set
forth in the Offer to Purchase dated April 23, 1996 (the "Offer to Purchase"). A
copy of each of the Offer to Purchase and the related Letter of Transmittal is
attached hereto as Exhibit (a)(1)(ii) and Exhibit (a)(2), respectively.
Reference is hereby made to the Cover Page and Section 1 "Price; Number of
Shares" of the Offer to Purchase, which are incorporated herein by reference.
The Fund has been informed that no Directors, officers or affiliates of the Fund
intend to tender Shares pursuant to the Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 9 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Certain Effects of the Offer" and Section 9 "Source and Amount of Funds" of the
Offer to Purchase, which are incorporated herein by reference. The Fund
currently is engaged in a continuous public offering of its Shares. The Fund
otherwise has no plans or proposals which relate to or would result in (a) the
acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund; (d) any
change in the present Board of Directors or management of the Fund, including,
but not limited to, any plans or proposals to change the number or the term of
Directors, or to fill any existing vacancy on the Board or to change any
material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or Director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or Director of any such subsidiary, except that within the past 40
business days pursuant to a continuous public offering of its Shares, the Fund
has sold approximately 306,000 Shares at a price equal to the net asset value
("NAV") of the Fund on the date of each such sale.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The Fund does not know of any contract, arrangement, understanding or
relationship relating directly or indirectly, to the Offer (whether or not
legally enforceable) between the Fund, any of the
i
<PAGE>
Fund's executive officers or Directors, any person controlling the Fund or any
executive officer or Director of any corporation ultimately in control of the
Fund and any person with respect to any securities of the Fund (including, but
not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss, or the giving or withholding of proxies, consents or
authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the Fund
to make solicitations or recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements attached hereto as
Exhibits (g)(1) and (g)(2) which are incorporated herein by reference.
(b) Not applicable.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) Reference is made to Section 11 "Certain Information About the Fund" of
the Offer to Purchase, which is incorporated herein by reference.
(c) Not applicable.
(d) None.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <C> <S>
(a)(1) (i) --Advertisement to be printed in The Wall Street Journal.
(ii) --Offer to Purchase.
(a)(2) --Form of Letter of Transmittal.
(a)(3) --Letter to Stockholders.
(c)-(f) --Not Applicable
(g)(1) --Audited Financial Statements of the Fund for the fiscal year ended August
31, 1995.
(g)(2) --Audited Financial Statements of the Fund for the fiscal year ended August
31, 1994.
(g)(3) --Unaudited Financial Statements of the Fund for the six-month period ended
February 29, 1996.
</TABLE>
ii
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MERRILL LYNCH HIGH INCOME MUNICIPAL
BOND FUND, INC.
By /s/ TERRY K. GLENN
...................................
Terry K. Glenn,
Executive Vice President
Date: April 23, 1996
<PAGE>
EXHIBIT INDEX
<TABLE><CAPTION>
EXHIBIT
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(a)(1)(i) Advertisement to be printed in The Wall Street Journal
(a)(1)(ii) Offer to Purchase
(a)(2) Form of Letter of Transmittal
(a)(3) Letter to Stockholders
(g)(1) Audited Financial Statements of the Fund for the fiscal year ended August
31, 1995
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended August
31, 1994
(g)(3) Unaudited Financial Statements of the Fund for the six-month period ended
February 29, 1996 *
</TABLE>
* To be filed by amendment.
EXHIBIT (A)(1)(I)
THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO
SELL SHARES. THE OFFER
IS MADE ONLY BY THE OFFER TO PURCHASE DATED APRIL 23, 1996, AND THE RELATED
LETTER OF TRANSMITTAL. THE
OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF,
HOLDERS OF SHARES
IN ANY JURISDICTION IN WHICH MAKING OR ACCEPTING THE OFFER WOULD VIOLATE THAT
JURISDICTION'S LAWS.
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
NOTICE OF OFFER TO PURCHASE FOR CASH 4,000,000 OF ITS ISSUED
AND OUTSTANDING SHARES AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE ARE 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MAY 20, 1996, UNLESS EXTENDED.
Merrill Lynch High Income Municipal Bond Fund, Inc. (the "Fund") is offering
to purchase 4,000,000 of its issued and outstanding shares of common stock par
value $.10 per share (the "Shares") at a price equal to their net asset value
("NAV") less any applicable early withdrawal charge as of the close of the New
York Stock Exchange on the Expiration Date, May 20, 1996, unless extended, upon
the terms and conditions set forth in the Offer to Purchase dated April 23, 1996
(the "Offer"). The NAV on April 18, 1996, was $10.93 per share. The purpose of
the Offer is to provide liquidity to stockholders since the Fund is unaware of
any secondary market which exists for the Shares. The Offer is not conditioned
upon the tender of any minimum number of Shares.
If more than 4,000,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either extend
the Offer period, if necessary, and increase the number of Shares that the Fund
is offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered, as well as any Shares tendered during
the extended Offer period, or purchase 4,000,000 Shares (or such larger number
of Shares sought) on a pro rata basis.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 midnight, New York City time, on Monday, May 20, 1996, unless the offer is
extended, and, if not yet accepted for payment by the Fund, Shares may also be
withdrawn after June 18, 1996.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain important
information that should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance, for current NAV quotations or for
copies of the Offer to Purchase, Letter of Transmittal, and any other tender
offer documents, may be directed to the Merrill Lynch Response Center at the
address and telephone number below. Copies will be furnished promptly at no
expense to you and also may be obtained by completing and returning the coupon
below to the Merrill Lynch Response Center. Stockholders who do not own Shares
directly should effect a tender through their broker, dealer, or nominee. For
example, stockholders who purchased shares through Merrill Lynch, Pierce, Fenner
& Smith Incorporated should effect tenders through their Financial Consultant.
The difference is Merrill Lynch.
1-800-MERRILL, EXT. 7866
1-800-637-7455
- - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MAIL TO: MERRILL LYNCH RESPONSE CENTER
P.O. BOX 30200, NEW BRUNSWICK, NJ 08989-0200
/ / PLEASE SEND ME MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
TENDER OFFER MATERIALS.
NAME ADDRESS
------------------------------ -----------------------------
BUSINESS PHONE ( ) CITY
------------------- ------------------------------
HOME PHONE ( ) STATE ZIP
----------------------- ----------- -------------
MERRILL LYNCH CLIENTS, PLEASE GIVE THE NAME AND OFFICE ADDRESS OF YOUR
FINANCIAL CONSULTANT:
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7866
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(C) COPYRIGHT 1995. MERRILL LYNCH, PIERCE, FENNER & SMITH INC. MEMBER SIPC.
MERRILL LYNCH A TRADITION OF TRUST. APRIL 23, 1996
EXHIBIT (A)(1)(II)
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
OFFER TO PURCHASE FOR CASH 4,000,000
OF ITS ISSUED AND OUTSTANDING SHARES
AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MAY 20, 1996, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.:
The Fund is offering to purchase up to 4,000,000 of its shares of common
stock, par value $.10 per share (the "Shares"), for cash at a price equal to
their net asset value ("NAV"), less any applicable Early Withdrawal Charge, as
of the close of the New York Stock Exchange on May 20, 1996, the expiration
date, unless extended, upon the terms and conditions set forth in this Offer to
Purchase (the "Offer") and the related Letter of Transmittal. The Shares are not
currently traded on an established secondary market. The NAV on April 18, 1996
was $10.93 per Share. You can obtain current NAV quotations from your Merrill
Lynch Financial Consultant or the Merrill Lynch, Pierce, Fenner & Smith
Incorporated Response Center (the "Merrill Lynch Response Center") (see Section
1). The Fund presently intends each quarter to consider making a tender offer
for its Shares at a price equal to their then current NAV.
If more than 4,000,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either (i)
extend the Offer period, if necessary, and increase the number of Shares that
the Fund is offering to purchase to an amount which it believes will be
sufficient to accommodate the excess Shares tendered as well as any Shares
tendered during the extended Offer period or (ii) purchase 4,000,000 Shares (or
such larger number of Shares sought) on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL STOCKHOLDERS OF THE FUND AND IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
IMPORTANT
If you desire to tender all or any portion of your Shares, you should either
(1) request your broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for you or (2) if you own your Shares directly,
complete and sign the Letter of Transmittal and mail or deliver it along with
any Share certificate(s) and any other required documents to the Fund's transfer
agent, Merrill Lynch Financial Data Services, Inc. (the "Transfer Agent"). If
your Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee, you must contact such broker, dealer, commercial
bank, trust company or other nominee if you desire to tender your Shares. Shares
held in your Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") brokerage account are registered in the name of Merrill Lynch and are
not held by you directly. Merrill Lynch may charge its customers a $4.85
processing fee to confirm a repurchase of Shares from such customers pursuant to
the Offer.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
STOCKHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER SHARES, AND IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
Questions and requests for assistance may be directed to your Merrill Lynch
Financial Consultant or other nominee, or to the Transfer Agent at the address
and telephone number set forth below. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal should be directed to the
Merrill Lynch Response Center.
April 23, 1996 MERRILL LYNCH HIGH INCOME
MUNICIPAL BOND FUND, INC.
<TABLE>
<S> <C>
Merrill Lynch Response Center Transfer Agent: Merrill Lynch Financial Data
P.O. Box 30200 Services, Inc.
New Brunswick, New Jersey 08989-0200 Attn: Merrill Lynch High Income
Attn: Merrill Lynch High Income Municipal Bond Fund, Inc.
Municipal Bond Fund, Inc. P.O. Box 45289
(800) 637-7455, ext. 7866 Jacksonville, Florida 32232-5289
(800) 637-3863
</TABLE>
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TABLE OF CONTENTS
<TABLE><CAPTION>
SECTIONS PAGE
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1. Price; Number of Shares...................................................... 3
2. Procedure for Tendering Shares............................................... 3
3. Early Withdrawal Charge...................................................... 4
4. Withdrawal Rights............................................................ 5
5. Payment for Shares........................................................... 5
6. Certain Conditions of the Offer.............................................. 6
7. Purpose of the Offer......................................................... 6
8. Certain Effects of the Offer................................................. 6
9. Source and Amount of Funds................................................... 6
10. Summary of Selected Financial Information.................................... 7
11. Certain Information About the Fund........................................... 8
12. Additional Information....................................................... 8
13. Certain Federal Income Tax Consequences...................................... 8
14. Extension of Tender Period; Termination; Amendments.......................... 9
15. Miscellaneous................................................................ 10
</TABLE>
2
<PAGE>
1. PRICE; NUMBER OF SHARES. The Fund will, upon the terms and subject to the
conditions of the Offer, purchase up to 4,000,000 of its issued and outstanding
Shares which are tendered and not withdrawn prior to 12:00 MIDNIGHT, New York
City time, on May 20, 1996 (such time and date being hereinafter called the
"Initial Expiration Date"), unless it determines to accept none of them. The
purchase price of the Shares will be their NAV as of the close of the New York
Stock Exchange on the Expiration Date. An Early Withdrawal Charge to recover
distribution expenses will be assessed on most Shares accepted for purchase
which have been held for less than three years (see Section 3). The Fund
reserves the right to extend the Offer (see Section 14). The later of the
Initial Expiration Date or the latest time and date to which the Offer is
extended is herein referred to as the "Expiration Date."
The Offer is being made to all stockholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than 4,000,000
Shares are duly tendered prior to the Initial Expiration Date, assuming no
changes in the factors originally considered by the Board of Directors when it
initially determined to make the Offer, the Fund will either extend the Offer
period, if necessary, and increase the number of Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered as well as any Shares tendered during the
extended Offer period or purchase 4,000,000 Shares (or such larger number of
Shares sought) on a pro rata basis.
As of March 31, 1996, there were in excess of 18 million Shares issued and
outstanding and there were 296 holders of record of Shares (in addition, Merrill
Lynch maintains accounts for 6,782 beneficial owners of Shares). The Fund has
been informed that none of the Directors, officers or affiliates of the Fund
intends to tender any Shares pursuant to the Offer. The Shares currently are not
traded on any established secondary market. The following table sets forth
information relating to the Fund's NAV for the indicated periods:
NET ASSET VALUE
------------------
HIGH LOW
------ ------
Quarter ended:
June 30, 1994...................................... $11.05 $10.59
September 30, 1994................................. 10.94 10.72
December 31, 1994.................................. 10.72 10.08
March 31, 1995..................................... 10.74 10.15
June 30, 1995...................................... 11.02 10.69
September 30, 1995................................. 11.06 10.82
December 31, 1995.................................. 11.21 11.00
March 31, 1996..................................... 11.26 10.91
Current NAV quotations for the Shares can be obtained from your Merrill Lynch
Financial Consultant or from the Merrill Lynch Response Center at (800)
637-7455, ext. 7866.
2. PROCEDURE FOR TENDERING SHARES. In order for you to tender any of your
Shares pursuant to the Offer, you may either: (a) request your broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
you, in which case a Letter of Transmittal is not required or (b) if the Shares
are registered in your name, send to the Transfer Agent, at the address set
forth on page 2, any certificates for such Shares, a properly completed and
executed Letter of Transmittal and any other documents required therein. Please
contact the Merrill Lynch Response Center at (800) 637-7455, ext. 7866 as to any
additional documents which may be required.
A. Procedures for Beneficial Owners Holding Shares Through Merrill Lynch or
Other Brokers or Nominees.
If your Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you must contact such broker, dealer,
commercial bank, trust company or other nominee if you desire to tender your
Shares. You should contact such broker or other nominee in sufficient time
3
<PAGE>
to permit notification of your desire to tender to reach the Transfer Agent by
the Expiration Date. No brokerage commission will be charged on the purchase of
Shares by the Fund pursuant to the Offer. However, a broker or dealer may charge
a fee for processing the transaction on your behalf. Merrill Lynch may charge
its customers a $4.85 processing fee to confirm a purchase of Shares pursuant to
the Offer.
B. Procedures for Registered Stockholders.
If you will be mailing or delivering the Letter of Transmittal and any other
required documents to the Transfer Agent in order to tender your Shares, they
must be received on or prior to the Expiration Date by the Transfer Agent at its
address set forth on page 2 of this Offer to Purchase.
Signatures on the Letter of Transmittal must be guaranteed by a member firm
of a national securities exchange or a commercial bank or trust company having
an office, branch or agency in the United States ("Eligible Institution").
Notarized signatures are not sufficient.
Payment for Shares tendered and purchased will be made only after receipt by
the Transfer Agent on or before the Expiration Date of a properly completed and
duly executed Letter of Transmittal and any other required documents. If your
Shares are evidenced by certificates, those certificates must also be received
by the Transfer Agent on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING THE SHARES. IF DOCUMENTS ARE
SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. Determinations of Validity.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tenders will be determined by the Fund, in its sole
discretion, whose determination shall be final and binding. The Fund reserves
the absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for which would, in the opinion
of counsel for the Fund, be unlawful. The Fund also reserves the absolute right
to waive any of the conditions of the Offer or any defect in any tender with
respect to any particular Shares or any particular stockholder, and the Fund's
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such times as the Fund shall determine. Tenders will not be
deemed to have been made until the defects or irregularities have been cured or
waived. Neither the Fund, its investment adviser and administrator, Merrill
Lynch Asset Management, L.P. ("MLAM"), nor the Transfer Agent, nor any other
person shall be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give such
notice.
D. Tender Constitutes an Agreement.
A tender of Shares made pursuant to any one of the procedures set forth
above will constitute an agreement between the tendering stockholder and the
Fund in accordance with the terms and subject to the conditions of the Offer.
3. EARLY WITHDRAWAL CHARGE. The Fund will assess an Early Withdrawal Charge
on Shares accepted for purchase which have been held for less than three years.
The charge will be paid to Merrill Lynch Funds Distributor, Inc., an affiliate
of MLAM and the distributor of the Shares, to recover distribution expenses. The
Early Withdrawal Charge will be imposed on those Shares accepted for tender
based on an amount equal to the lesser of the NAV of the Shares on the
Expiration Date or the cost of the Shares being tendered. Accordingly, the Early
Withdrawal Charge is not imposed on increases in the net asset value above the
initial purchase price. In addition, the Early Withdrawal Charge is not imposed
on Shares derived from reinvestments of dividends or capital gains
distributions. The Early Withdrawal Charge imposed will vary depending on the
length of time the Shares have been
4
<PAGE>
owned since purchase (separate purchases shall not be aggregated for these
purposes), as set forth in the following table:
EARLY
YEAR OF TENDER AFTER PURCHASE WITHDRAWAL CHARGE
- -------------------------------------------------------- -----------------
First................................................... 3.0%
Second.................................................. 2.0%
Third................................................... 1.0%
Fourth and following.................................... 0%
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, the calculation will be determined in the manner that results in the
lowest possible amount being charged. Therefore, it will be assumed that the
tender is first of Shares acquired through dividend reinvestment and of Shares
held for over three years and then of Shares held longest during the three-year
period. The Early Withdrawal Charge will not be applied to dollar amounts
representing an increase in the net asset value since the time of purchase.
4. WITHDRAWAL RIGHTS. You may withdraw Shares tendered at any time prior to
the Expiration Date and, if the Shares have not yet been accepted for payment by
the Fund, at any time after June 18, 1996.
Stockholders whose accounts are maintained through Merrill Lynch should
notify their Financial Consultant prior to the Expiration Date if they wish to
withdraw Shares. Stockholders whose accounts are maintained through another
broker, dealer, commercial bank, trust company or other nominee should notify
such nominee prior to the Expiration Date. Stockholders whose accounts are
maintained directly through the Transfer Agent should submit written notice to
the Transfer Agent.
To be effective, any notice of withdrawal must be timely received by the
Transfer Agent at the address set forth on page 2 of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person having deposited the
Shares to be withdrawn, the number of Shares to be withdrawn, and, if the
certificates representing such Shares have been delivered or otherwise
identified to the Transfer Agent, the name of the registered holder(s) of such
Shares as set forth in such certificates and the number of Shares to be
withdrawn. If the certificates have been delivered to the Transfer Agent, then,
prior to the release of such certificates, you must also submit the certificate
numbers shown on the particular certificates evidencing such Shares and the
signature on the notice of the withdrawal must be guaranteed by an Eligible
Institution. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Fund in its sole
discretion, whose determination shall be final and binding. Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed to
have accepted for payment (and thereby purchased) Shares which are tendered as,
if and when it gives oral or written notice to the Transfer Agent of its
election to purchase such Shares.
Payment for Shares will be made promptly by the Transfer Agent to tendering
stockholders as directed by the Fund. Certificates for Shares not purchased (see
Sections 1 and 6), or for Shares not tendered included in certificates forwarded
to the Transfer Agent, will be returned promptly following the termination,
expiration or withdrawal of the Offer, without expense to the tendering
stockholder.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of any such transfer taxes (whether imposed on the
registered holder or such other person) payable on account of the transfer to
such person of such Shares will be deducted from the purchase price unless
satisfactory evidence of the payment of such
5
<PAGE>
taxes, or exemption therefrom, is submitted. The Fund will not pay any interest
on the purchase price under any circumstances.
As noted above, Merrill Lynch may charge its customers a $4.85 processing
fee to confirm a purchase of Shares from such customers pursuant to the Offer.
6. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to accept
for payment or pay for any Shares tendered, and may terminate or amend the Offer
or may postpone the acceptance for payment of or payment for Shares tendered,
if: (1) such purchases would impair the Fund's status as a regulated investment
company under the Internal Revenue Code (which would make the Fund a taxable
entity, causing the Fund's income to be taxed at the corporate level in addition
to the taxation of stockholders who receive dividends from the Fund); (2) the
Fund would not be able to liquidate portfolio securities in a manner which is
orderly and consistent with the Fund's investment objective and policies in
order to purchase Shares tendered pursuant to the Offer; or (3) there is, in the
Board of Directors' judgment, any (a) legal action or proceeding instituted or
threatened challenging the Offer or otherwise materially adversely affecting the
Fund, (b) declaration of a banking moratorium by Federal or state authorities or
any suspension of payment by banks in the United States or New York State, which
is material to the Fund, (c) limitation imposed by Federal or state authorities
on the extension of credit by lending institutions, (d) commencement of war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States which is material to the Fund, or (e)
other event or condition which would have a material adverse effect on the Fund
or its stockholders if Shares tendered pursuant to the Offer were purchased.
If the Fund determines to amend the Offer or to postpone the acceptance for
payment of or payment for Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in Section
14. Moreover, in the event any of the foregoing conditions are modified or
waived in whole or in part at any time, the Fund will promptly make a public
announcement of such waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 14.
7. PURPOSE OF THE OFFER. The Fund does not currently believe there will be
an active secondary market for its Shares. The Board of Directors has determined
that it would be in the best interest of stockholders for the Fund to take
action to attempt to provide liquidity to stockholders. To that end, the
Directors presently intend each quarter to consider the making of a tender offer
to purchase the Shares at NAV. The Fund will at no time be required to make any
such tender offer.
8. CERTAIN EFFECTS OF THE OFFER. The purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the Fund
of stockholders who do not tender their Shares. If you retain your Shares,
however, you will be subject to any increased risks that may result from the
reduction in the Fund's aggregate assets resulting from payment for the Shares,
including, for example, the potential for greater volatility due to decreased
diversification and higher expenses. However, the Fund believes that those risks
will be reduced to the extent new Shares of the Fund are sold. All Shares
purchased by the Fund pursuant to the Offer will be retired by the Board of
Directors of the Fund.
9. SOURCE AND AMOUNT OF FUNDS. The price to be paid by the Fund for shares
tendered in the Offer will equal their NAV as of the close of the New York Stock
Exchange on the Expiration Date, less any applicable Early Withdrawal Charge.
Based on the NAV on April 18, 1996, the aggregate purchase price if 4,000,000
Shares are tendered and accepted for payment pursuant to the Offer would be
approximately $43,720,000. The Fund anticipates that the purchase price for any
Shares acquired pursuant to the Offer will first be derived from cash on hand,
and then from the proceeds from the sale of cash equivalents held by the Fund.
Although the Fund is authorized to borrow money to finance the purchase of
Shares pursuant to tender offers, the Board of Directors believes that the Fund
currently has sufficient liquidity to repurchase the Shares without such
borrowing. However, if, in the judgment
6
<PAGE>
of the Directors, there is not sufficient liquidity of the assets of the Fund to
pay for tendered Shares, the Fund may, within the limits set forth in the
Prospectus, borrow money as described above or may terminate the Offer.
10. SUMMARY OF SELECTED FINANCIAL INFORMATION. Set forth below is a summary
of selected financial information for the Fund for the fiscal years ended August
31, 1994 and 1995 and the six-month period ended February 29, 1996. The
information with respect to the fiscal years ended August 31, 1994 and 1995 has
been excerpted from the Fund's audited financial statements and the information
with respect to the six-month period ended February 29, 1996 has been excerpted
from the Fund's unaudited financial statements. More comprehensive financial
information is included in such financial statements (copies of which have been
filed as exhibits to the Schedule 13E-4 filed with the Securities and Exchange
Commission (the "Commission") and may be obtained from the Transfer Agent) and
the summary of selected financial information set forth below is qualified in
its entirety by reference to such documents and the financial information, the
notes thereto and related matter contained therein.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE><CAPTION>
YEAR SIX-MONTHS
YEAR ENDED ENDED ENDED
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
---------- ---------- ------------
<S> <C> <C> <C>
INCOME STATEMENT
Investment income........................................ $ 16,203 $ 15,451 $ 7,352
Expenses................................................. 3,292 3,073 1,503
---------- ---------- ------------
Investment income--net................................... $ 12,911 $ 12,378 $ 5,849
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Realized gain (loss) on investments--net................. 3,571 (2,713) 846
Change in unrealized appreciation on investments--net.... (12,998) 6,520 2,144
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets............................................. $ 217,762 $ 199,381 $204,583
Total liabilities........................................ 4,804 806 5,255
---------- ---------- ------------
Net assets............................................... $ 212,958 $ 198,575 $199,328
Net asset value per share................................ $ 10.92 $ 10.97 $ 11.14
Shares of common stock outstanding....................... 19,506 18,096 17,898
PER SHARE
Investment income--net................................... $ .65 $ .65 $ .32
Dividends from net investment income to common
stockholders............................................... $ .65 $ .65 $ .32
Distributions from net realized gain on investments to
common stockholders........................................ $ .07 $ .15 $ --
In excess of realized gain on investments--net........... $ -- $ .03 $ --
RATIOS
Total expenses, net of reimbursement, to average net
assets..................................................... 1.48% 1.52% 1.50%*
Total expenses to average net assets..................... 1.48% 1.52% 1.50%*
Investment income--net, to average net assets............ 5.81% 6.11% 5.82%*
</TABLE>
- ------------
* Annualized.
7
<PAGE>
11. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under the
laws of the State of Maryland on August 16, 1990 and is a non-diversified,
closed-end, management investment company registered under the Investment
Company Act of 1940, as amended. The investment objective of the Fund is to
provide stockholders with high current income exempt from Federal income taxes
by investing primarily in a portfolio of medium to lower grade or unrated
municipal obligations the interest on which is exempt from Federal income taxes
in the opinion of bond counsel to the issuer. The Fund will seek to achieve its
objective by investing at least 80% of its assets, except during temporary
defensive periods, in a portfolio of obligations issued by or on behalf of
states, territories and possessions of the United States and their political
subdivisions, agencies or instrumentalities paying interest which, in the
opinion of bond counsel to the issuer, is exempt from Federal income taxes
("Municipal Bonds"). MLAM, an affiliate of Merrill Lynch, acts as investment
adviser and administrator for the Fund.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or Director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or Director of any such subsidiary, except that within the past 40
business days pursuant to a continuous public offering of its Shares, the Fund
has sold approximately 306,000 Shares at the NAV per Share on the date of each
such sale.
The Fund has been granted an exemption by the Commission relating to tender
offers which is based on representations by the Fund that no secondary market
for the Fund's Shares is expected to develop. The exemption is conditioned on
(1) the absence of a secondary market, (2) the Fund suspending the offering of
its Shares during the five business days preceding the termination of a tender
offer and (3) the Fund refraining from purchasing non-investment grade and
unrated Municipal Bonds in secondary market transactions during such five
business day period.
The principal executive offices of the Fund are located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
12. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule 13E-4
with the Commission which includes certain additional information relating to
the Offer. Such material may be inspected and copied at prescribed rates at the
Commission's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549; Seven World Trade Center, New York, New York
10048; and Room 3190, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material may also be obtained by mail at prescribed rates
from the Public Reference Branch of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the Federal income tax consequences of a sale of Shares
pursuant to the Offer. You should consult your own tax adviser for a complete
description of the tax consequences to you of a sale of Shares pursuant to the
Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction for
Federal income tax purposes, either as a "sale or exchange," or under certain
circumstances, as a "dividend." In general, the transaction should be treated as
a sale or exchange of the Shares under Section 302 of the Internal Revenue Code
of 1986, as amended (the "Code"), if the receipt of cash (a) is "substantially
disproportionate" with respect to the stockholder, (b) results in a "complete
redemption" of the stockholder's interest in the Fund, or (c) is "not
essentially equivalent to a dividend" with respect to the stockholder. A
"substantially disproportionate" distribution generally requires a reduction of
at least 20% in the stockholder's proportionate interest in the Fund after all
Shares are tendered. A "complete redemption" of a stockholder's interest
generally requires that the stockholder dispose of all Shares directly owned or
attributed to the stockholder under Section 318 of the Code. A distribution "not
essentially
8
<PAGE>
equivalent to a dividend" requires that there be a "meaningful reduction" in the
stockholder's interest, which should be the case if the stockholder has a
minimal interest in the Fund, exercises no control over Fund affairs and suffers
a reduction in proportionate interest in the Fund.
If any of these three tests for "sale or exchange" treatment is met, you
will recognize gain or loss equal to the difference between the amount of cash
received pursuant to the Offer and the adjusted tax basis of the Shares sold.
Such gain or loss will be a capital gain or loss if the Shares sold have been
held by you as a capital asset. In general, capital gain or loss with respect to
Shares sold will be long-term capital gain or loss if the holding period for
such Shares is more than one year.
If none of the Code Section 302 tests are met, you may be treated as having
received, in whole or in part, a dividend, return of capital or capital gain,
depending on (i) whether the Fund has sufficient earnings and profits to support
a dividend and (ii) your tax basis in the Shares. The tax basis in the Shares
tendered to the Fund will be transferred to any remaining Shares held by you. In
addition, if the sale of Shares pursuant to the Offer is treated as a "dividend"
to a tendering stockholder, a Code Section 305(c) constructive dividend may
result to a non-tendering stockholder whose proportionate interest in the
earnings and assets of the Fund has been increased as a result of such tender.
Accordingly, the differentiation between "dividend" and "sale or exchange"
treatment is important with respect to the amount and character of income that
tendering stockholders are deemed to receive. In addition, while the marginal
tax rates for dividends and capital gains are the same for corporate
stockholders, currently under the Code the top income tax rate on ordinary
income of individuals (39.6%) exceeds the maximum marginal tax rate on long-term
capital gains (28%).
The Transfer Agent will be required to withhold 31% of the gross proceeds
paid to a stockholder or other payee pursuant to the Offer unless either: (a)
the stockholder has provided the stockholder's taxpayer identification
number/social security number and certifies under penalties of perjury: (i) that
such number is correct, and (ii) either that (A) the stockholder is exempt from
backup withholding, (B) the stockholder is not otherwise subject to backup
withholding as a result of a failure to report all interest or dividends, or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding; or (b) an exception applies under
applicable law and Treasury regulations. Foreign stockholders may be required to
provide the Transfer Agent with a completed Form W-8, available from the
Transfer Agent, in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is available
under an applicable tax treaty, a stockholder who is a nonresident alien or a
foreign entity may be subject to a 30% United States withholding tax on the
gross proceeds received by such stockholder, if the proceeds are treated as a
"dividend" under the rules described above. Foreign stockholders should consult
their tax advisers regarding application of these withholding rules.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. In
the event that the Fund so elects to extend the tender period, the NAV for the
Shares tendered will be determined as of the close of the New York Stock
Exchange on the Expiration Date, as extended. During any such extension, all
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Fund also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any Shares, and (b) amend the Offer in any respect by making
a public announcement. Such public announcement will be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date and will disclose the approximate number of Shares
tendered as of that date. Without limiting the manner in which the Fund may
choose to make a public announcement of extension, termination or amendment,
except as provided by applicable law (including Rule 13e-4(e)(2)), the Fund
shall have no obligation to publish, advertise or
9
<PAGE>
otherwise communicate any such public announcement, other than by making a
release to the Dow Jones News Service.
15. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, stockholders in any jurisdiction in which the Offer or its
acceptance would not comply with the securities or Blue Sky laws of such
jurisdiction. The Fund is not aware of any jurisdiction in which the Offer or
tenders pursuant thereto would not be in compliance with the laws of such
jurisdiction. However, the Fund reserves the right to exclude stockholders from
the Offer in any jurisdiction in which it is asserted that the Offer cannot
lawfully be made. The Fund believes such exclusion is permissible under
applicable tender offer rules, provided the Fund makes a good faith effort to
comply with any state law deemed applicable to the Offer. In any jurisdiction
the securities or Blue Sky laws of which require the Offer to be made by a
licensed broker or dealer the Offer shall be deemed to be made on the Fund's
behalf by Merrill Lynch.
MERRILL LYNCH HIGH INCOME
MUNICIPAL BOND FUND, INC.
April 23, 1996
10
EXHIBIT (A)(2)
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES OF
MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 23, 1996
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MAY 20, 1996, UNLESS EXTENDED
-------------------
Transfer Agent:
MERRILL LYNCH FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH HIGH INCOME MUNICIPAL BOND FUND, INC.
P.O. BOX 45289
JACKSONVILLE, FLORIDA 32232-5289
TELEPHONE INFORMATION NUMBER: (800) 637-3863
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE STOCKHOLDER IS A RECORD
OWNER OF SHARES WHO DESIRES TO EFFECT THE TENDER OFFER TRANSACTION HIMSELF BY
TRANSMITTING THE NECESSARY DOCUMENTS TO THE FUND'S TRANSFER AGENT AND DOES NOT
INTEND TO REQUEST HIS BROKER OR DEALER TO EFFECT THE TRANSACTION FOR HIM. A
STOCKHOLDER WHO HOLDS SHARES IN A MERRILL LYNCH ACCOUNT OR THROUGH ANOTHER
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE IS NOT THE
RECORD OWNER AND SHOULD INSTRUCT HIS FINANCIAL CONSULTANT OR SUCH OTHER NOMINEE
TO EFFECT THE TENDER ON HIS BEHALF.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Gentlemen:
The undersigned hereby tenders to the Merrill Lynch High Income Municipal
Bond Fund, Inc., a closed-end investment company incorporated under the laws of
the State of Maryland (the "Fund"), the shares described below of its common
stock, par value $.10 per share (the "Shares"), at a price equal to the net
asset value per Share ("NAV") calculated on the Expiration Date (as defined in
the Offer to Purchase), in cash, less any applicable Early Withdrawal Charge,
upon the terms and conditions set forth in the Offer to Purchase dated April 23,
1996, receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer").
The undersigned hereby sells to the Fund all Shares tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
the Transfer Agent as attorney in fact of the undersigned, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to present such Shares and any Share certificates for
cancellation of such Shares on the Fund's books. The undersigned hereby warrants
that the undersigned has full authority to sell the Shares tendered hereby and
that the Fund will acquire good title thereto, free and clear of all liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale thereof, and not subject to any adverse claim, when and to
the extent the same are purchased by it. Upon request, the undersigned will
execute and deliver any additional documents necessary to complete the sale in
accordance with the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may not be required to purchase any or all of the
Shares tendered hereby. In that event, the undersigned understands that, in the
case of Shares evidenced by certificates, the certificate(s) for any Shares not
purchased will be returned to the undersigned at the address indicated below. In
the case of Shares not evidenced by certificates and held in an Investment
Account, the Transfer Agent will cancel the tender order for any Shares not
purchased and only the purchased Shares will be withdrawn from the Account.
The check for the purchase price for the tendered Shares purchased will be
issued to the order of the undersigned and mailed to the address indicated in
the "Description of Shares Tendered" table below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and the obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE><CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY THE NAME(S) IN WHICH SHARES ARE SHARES TENDERED
REGISTERED) (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CERTIFICATE NO. OF SHARES LISTED NO. OF SHARES
NO.(S)* ON CERTIFICATE* TENDERED**
Account No. Total Shares Tendered...........
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders whose Shares are not evidenced by
certificates.
** To be completed by all tendering stockholders, whether or not your Shares
are evidenced by certificates. If you desire to tender fewer than all
Shares held in your account or evidenced by a certificate listed above,
please indicate in this column the number you wish to tender. Otherwise all
Shares evidenced by such certificate or held in your account will be deemed
to have been tendered.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE FORM
--SIGN HERE--
(SEE INSTRUCTIONS 1, 5 AND 8)
Social Security No.
or Taxpayer Identification No. ................
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security No. or Taxpayer Identification No. and (2) either
(A) that I am exempt from backup withholding or (B) that I am not subject to
backup withholding either because I have not been notified that I am subject
thereto as a result of failure to report all interest or dividends, or the
Internal Revenue Service ("IRS") has notified me that I am no longer subject
thereto. INSTRUCTION: You must strike out the language in (2) above if you
have been notified that you are subject to backup withholding due to
underreporting and you have not received a notice from the IRS that backup
withholding has been terminated.
............................................................................
............................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Date ................ , 1996
Name(s) and Address(es) ....................................................
............................................................................
(PLEASE PRINT)
Telephone Number ( ) ................
Signature(s) Guaranteed ....................................................
....................................................
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, or a commercial bank or trust company having an office, branch or
agency in the United States. This Letter of Transmittal is to be used only if
you may effect the tender offer transaction yourself and do not intend to
request your broker or dealer to effect the transaction for you.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all
tendered Shares, together with a properly completed and duly executed Letter of
Transmittal, should be mailed or delivered to the Transfer Agent on or prior to
the Expiration Date at the appropriate address set forth herein and must be
received by the Transfer Agent prior to the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares in your Investment
Account or evidenced by any certificate submitted are to be tendered, fill in
the number of Shares which are to be tendered in the column entitled "No. of
Shares Tendered." If applicable, a new certificate for the remainder of the
Shares evidenced by your old certificate(s) will be sent to you as soon as
practicable after the Expiration Date of the Offer. All Shares represented by
each certificate listed or in your Investment Account are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATION AND ENDORSEMENTS.
(a) If the Letter of Transmittal is signed by the registered holder(s) of
the Shares tendered hereby, the signature(s) must correspond with the name(s) in
which the Shares are registered.
(b) If the Shares are held of record by two or more joint holders, all such
holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Shares.
(d) When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and, if applicable, of the certificates transmitted hereby, no
endorsements of certificates or separate authorizations are required.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys in fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Fund of their authority so to act.
6. TRANSFER TAXES. The Fund will pay all the taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder or such other person) payable on account of the
transfer to such person of such Shares will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Shares will be
determined by the Fund, whose determinations shall be final and binding. The
Fund reserves the absolute right to reject any or all tenders determined by it
not to be in appropriate form or the acceptance of or payment for which would,
in the opinion of counsel for the Fund, be unlawful. The Fund also reserves the
absolute right to waive any of the conditions of the Offer or any defect in any
tender with respect to any particular Shares or any particular stockholder, and
the Fund's interpretations of the terms and conditions of the Offer (including
these instructions) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Fund shall determine. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived. Neither the Fund, Merrill
Lynch Asset Management, L.P. nor the Transfer Agent, nor any other person shall
be obligated to give notice of defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any such notice.
8. IMPORTANT TAX INFORMATION. Under Federal income tax law, a stockholder
whose tendered Shares are accepted for payment generally is required by law to
provide the Transfer Agent (as payer) with his correct taxpayer identification
number, which is accomplished by completing and signing the Signature Form.
EXHIBIT (A)(3)
[LOGO] MERRILL LYNCH
Dear Stockholder:
As you requested, we are enclosing a copy of the Merrill Lynch High Income
Municipal Bond Fund, Inc. (the "Fund") Offer to Purchase dated April 23, 1996
(the "Offer to Purchase") 4,000,000 issued and outstanding shares
(the "Shares"). The Offer to Purchase is for cash at Net Asset Value ("NAV") per
Share as of the expiration date of the Offer, less any Early Withdrawal Charge.
Together with the Offer to Purchase we are sending you a Letter of Transmittal
(the "Letter") for use by holders of record of Shares which you should read
carefully. Certain selected financial information with respect to the Fund is
set forth in the Offer to Purchase.
If, after reviewing the information set forth in the Offer to Purchase and
Letter, you wish to tender Shares for purchase by the Fund, please either
contact your Merrill Lynch Financial Consultant or other broker, dealer or
nominee to effect the tender for you or, if you are the record owner of the
Shares, you may follow the instructions contained in the Offer to Purchase and
Letter.
Neither the Fund nor its Board of Directors is making any recommendation to
any holder of Shares as to whether to tender Shares. Each stockholder is urged
to consult his or her broker or tax adviser before deciding whether to tender
any Shares.
The Fund's distribution rate for the period February 16, 1996 through March
21, 1996 based on the amounts actually distributed by the Fund, was 5.98% based
on the March 21, 1996 NAV of $10.99 per share. For the quarter ended March 31,
1996, the Fund's highest NAV was $11.26 per share and its lowest NAV was $10.91
per share. The Fund's NAV on April 18, 1996 was $10.93 per share. The Fund
publishes its NAV each week in Barron's. It appears in the "Investment Company
Institute List" under the sub-heading "Closed-End Bond Funds" within the
listings of mutual funds and closed-end funds.
Requests for current NAV quotations or for additional copies of the Offer to
Purchase, the Letter and any other tender offer documents may be directed to the
Merrill Lynch Response Center at (800) 637-7455, ext. 7866.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your Merrill Lynch Financial Consultant or other broker or
dealer or call the Fund's Transfer Agent, Merrill Lynch Financial Data Services,
Inc., at (800) 637-3863. We appreciate your continued interest in Merrill Lynch
High Income Municipal Bond Fund, Inc.
Yours truly,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
AUDIT-REPORT
EXHIBIT (g)(1)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch High Income Municipal
Bond Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
High Income Municipal Bond Fund, Inc. as of August 31, 1995, the
related statements of operations for the year then ended and changes
in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the years in the
four-year period then ended and the period November 2, 1990
(commencement of operations) to August 31, 1991. These financial
statements and the financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion
on these financial statements and the financial highlights based on
our audits.
We conducted our audits in accordance with gener-ally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the 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 at August
31, 1995 by correspondence with the custodian. 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, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch High Income Municipal Bond Fund, Inc. as of August 31,
1995, the results of its operations, the changes in its net assets,
and the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 29, 1995
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listing of Merrill Lynch High Income 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 below and at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
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
RIB Residual Interest Bonds
S/F Single-Family
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<C> <C> <C> <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 $ 1,049
Arizona--3.2% NR* Aaa 2,920 Arizona Health Facilities Authority, Hospital Systems Revenue
Refunding Bonds (Saint Luke's Health Systems), 7.25% due
11/01/2003 (d) 3,455
NR* NR* 1,280 Pima County, Arizona, IDA, Revenue Bonds (La Hacienda
Project), 9.50% due 12/01/2016 1,296
AA P1 1,500 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corporation), VRDN, 3.55% due 12/01/2009 (a) 1,500
California-- NR* NR* 1,500 Long Beach, California, Redevelopment Agency, M/F Housing
0.7% Revenue Bonds (Pacific Court Apartments), AMT, Issue B,
6.80% due 9/01/2013 1,380
Colorado-- BBB+ Baa1 2,000 Colorado Health Facilities Authority, Hospital Revenue Bonds
7.8% (P/SL Healthcare System Project), Series A, 6.875% due
2/15/2023 2,232
Denver, Colorado, City and County Airport Revenue Bonds:
BB Baa 2,000 AMT, Series A, 7.50% due 11/15/2023 2,149
BB Baa 900 AMT, Series A, 8% due 11/15/2025 993
BB Baa 2,000 AMT, Series B, 7.50% due 11/15/2025 2,073
BB Baa 2,000 AMT, Series D, 7.75% due 11/15/2013 2,430
BB Baa 1,250 Series A, 7.50% due 11/15/2012 1,349
BB Baa 2,000 Series A, 7.25% due 11/15/2025 2,138
NR* NR* 2,000 Mountain Village Metropolitan District, Colorado, Refunding
Bonds (San Miguel County), UT, 8.10% due 12/01/2011 2,173
Connecticut-- NR* NR* 1,925 New Haven, Connecticut, Facilities Revenue Bonds (Hill Health
1.0% Corporation Project), 9.25% due 5/01/2017 2,089
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<C> <C> <C> <C> <S> <C>
Florida--0.7% BB NR* $ 960 Jacksonville, Florida, Port Authority, IDA, Revenue Refunding
Bonds (United States Gypsum Corporate Project), 7.25% due
10/01/2014 $ 983
NR* VMIG1++ 100 Palm Beach County, Florida, Water and Sewer Revenue Bonds,
VRDN, 3.55% due 10/01/2011 (a) 100
A1 VMIG1++ 300 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES,
3.55% due 12/01/2015 (a) 300
Georgia--3.5% NR* NR* 2,520 Atlanta, Georgia, Urban Residential Finance Authority, College
Facilities Revenue Bonds (Morris Brown College Project), 9.50%
due 6/01/2011 2,804
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 2,113
NR* NR* 2,000 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,065
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, 9.085% due 11/01/2021 (g) 1,853
Illinois--4.7% 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 4,565
BB Baa2 450 (United Airlines, Inc.), AMT, Series B, 8.95% due 5/01/2018 508
BBB+ NR* 2,000 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health System), 7.25% due 5/15/2022 2,044
NR* Baa1 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy Cross
Hospital Project), 6.75% due 3/01/2024 1,216
BBB NR* 1,000 Lansing, Illinois, Sales Tax, Tax Increment Revenue Refunding
Bonds (Landing Redevelopment), 7% due 12/01/2008 1,074
Indiana--1.6% A NR* 1,500 Indiana Bond Bank, Special Hospital Program Revenue Bonds
(Hendricks Community Hospital), Series A, 7.125% due 4/01/2013 1,613
BB- Ba3 1,500 Indiana State Development Financing Authority, PCR, Refunding
(Inland Steel Company Project Number 12), 6.85% due 12/01/2012 1,527
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 1,583
Kentucky--2.2% AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds, INFLOS, 9.045%
due 10/01/2014 (b)(g) 4,375
Louisiana--4.1% 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 3,901
BBB+ Baa 1,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds
(Woman's Hospital Foundation Project), 7.25% due 10/01/2022 1,016
BB- NR* 3,000 Port New Orleans, Louisiana, IDR, Refunding (Continental Grain
Company Project), 7.50% due 7/01/2013 3,111
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<C> <C> <C> <C> <S> <C>
Massachusetts-- NR* NR* $ 1,200 Boston, Massachusetts, Industrial Development Financing
8.9% Authority, Solid Waste Disposal Facility Revenue Bonds
(Jet-A-Way Project), AMT, 10.50% due 1/01/2011 $ 1,339
NR* Ba 1,060 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 1,227
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 2,453
NR* NR* 1,930 Series C, 7% due 4/01/2014 1,723
NR* NR* 905 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (North Adams Regional Hospital), Series B,
8% due 7/01/1998 980
NR* B1 1,675 Massachusetts Industrial Finance Agency Revenue Bonds
(Bay Cove Human Services Inc.), 8.375% due 4/01/2019 1,802
BB+ Ba1 1,600 Massachusetts Industrial Finance Agency Revenue Bonds
(Vinfen Corporate Issue), 7.10% due 11/15/2018 1,584
NR* NR* 1,000 Massachusetts Industrial Finance Agency, Solid Waste Disposal
Revenue Bonds (Molten Metal Technology Project), 8.25% due
8/01/2014 1,031
NR* NR* 5,000 Massachusetts Port Authority, Special Project Revenue Bonds
(Harborside Hyatt Project), AMT, 10% due 3/01/2026 5,592
Michigan-- BBB Ba1 2,900 Detroit, Michigan, GO, UT, Series A, 8.70% due 4/01/2000 (d) 3,440
1.7%
Minnesota-- BBB- Baa 2,000 Saint Paul, Minnesota, Housing and Redevelopment Authority,
1.1% Hospital Revenue Bonds (Healtheast Project), Series D, 9.75%
due 11/01/2017 2,235
Missouri-- BBB- NR* 2,935 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
5.4% and Improvement Bonds (Tri-State Osteopathic Project), 8.25%
due 12/15/2014 3,000
Missouri Health and Educational Facilities Authority Revenue
Bonds (Southwest Baptist University Project):
BB NR* 905 9.50% due 10/01/2001 1,023
BB NR* 3,690 9.50% due 10/01/2011 4,253
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds (Phelps
County Regional Medical Center), 8.30% due 3/01/2000 (d) 2,342
Nevada--0.4% BBB+ NR* 750 Las Vegas, Nevada, Downtown Redevelopment Agency, Tax
Increment Revenue Bonds (Fremont Street Project), Series A,
6.10% due 6/15/2014 726
New Hampshire-- BBB+ Baa1 1,845 New Hampshire Higher Educational and Health Facilities
3.7% Authority Revenue Bonds (Saint Joseph Hospital), 7.50% due
1/01/2016 1,903
BB+ Baa3 5,140 New Hampshire, IDA, PCR (Public Service Company New
Hampshire Project), Series B, 7.50% due 5/01/2021 5,454
New Jersey-- NR* Ba 2,150 Atlantic County, New Jersey, Utilities Authority, Solid Waste
8.4% Revenue Bonds, 7.125% due 3/01/2016 2,174
BBB+ Ba 4,000 Camden County, New Jersey, Pollution Control Financing
Authority, Solid Waste Resource Recovery Revenue Bonds,
Series D, 7.25% due 12/01/2010 4,081
New Jersey Health Care Facilities, Financing Authority
Revenue Bonds:
NR* NR* 4,760 (Riverwood Center Issue), Series A, 9.90% due 7/01/2021 5,331
BBB- Baa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 5,074
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<C> <C> <C> <C> <S> <C>
New Mexico-- A A2 $ 1,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
0.5% Corporate Project), 6.50% due 4/01/2013 $ 1,032
New York-- BBB+ Baa1 5,260 New York City, New York, GO, UT, Series C, Sub-Series C-1,
2.8% 7.50% due 8/01/2021 5,618
Ohio--2.4% NR* Ba2 2,325 Defiance County, Ohio, Economic Development Revenue Bonds
(Kroger Co. Project), 8% due 10/15/2015 2,519
AAA Aaa 2,000 Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT, Series A-2,
9.538% due 3/24/2031 (c)(g) 2,112
Oklahoma-- BB NR* 985 Blaine County, Oklahoma, Industrial Authority, IDA, Revenue
0.5% Bonds (United States Gypsum Corp. Project), 7.25% due 10/01/2010 1,031
Oregon--1.6% NR* NR* 1,000 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), AMT, Series B,
7.40% due 1/01/2016 1,039
B+ NR* 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporate Project), 8% due 12/01/2003 2,027
Pennsylvania-- NR* NR* 2,000 Lehigh County, Pennsylvania, General Purpose Authority
12.4% Revenue Bonds (Wiley House), 8.75% due 11/01/2014 2,038
BBB- NR* 5,000 McKean County, Pennsylvania, Hospital Authority Revenue
Bonds (Bradford Hospital Project), 8.875% due 10/01/2020 6,020
Montgomery County, Pennsylvania, IDA, Revenue Refunding Bonds:
NR* NR* 1,500 (1st Mortgage--Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,662
NR* Ba 3,400 (Pennsburg Nursing and Rehabilitation Center), 7.625% due
7/01/2018 3,456
NR* NR* 2,000 Pennsylvania Economic Development Financing Authority, IDR
(GEHL Company Inc. Project), AMT, Series F, 9% due 9/01/2010 2,157
NR* NR* 5,000 Pennsylvania Economic Development Financing Authority,
Recycling Revenue Bonds (Ponderosa Fibres Project), AMT,
Series A, 9.25% due 1/01/2022 5,287
BBB- NR* 1,000 Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue Bonds (Colver Project), AMT,
Series D, 7.15% due 12/01/2018 1,025
NR* NR* 3,000 Washington County, Pennsylvania, Hospital Authority, Revenue
Refunding Bonds (Canonsburg General Hospital Project), 7.35%
due 6/01/2013 3,031
Rhode Island-- BBB+ NR* 1,500 Rhode Island Health and Educational Building Corporation,
1.5% Hospital Revenue Bonds (South County Hospital), 7.25% due
11/01/2011 1,551
NR* Ba 1,260 West Warwick, Rhode Island, GO, UT, Series A, 6.80% due
7/15/1998 1,325
Tennessee-- NR* NR* 4,265 Knox County, Tennessee, Health, Educational and Housing
4.2% Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health System of East Tennessee), 8.60% due 4/15/2016 4,624
BBB- Baa1 3,500 McMinn County, Tennessee, IDB, Solid Waste Revenue Bonds
(Calhoun Newsprint), AMT, 7.40% due 12/01/2022 3,741
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<C> <C> <C> <C> <S> <C>
Texas--6.7% BB+ Baa2 $ 3,000 Dallas-Fort Worth, Texas, International Airport Facilities
Improvement Corporation Revenue Bonds (American Airlines,
Inc.), AMT, 7.25% due 11/01/2030 $ 3,118
BBB- Ba1 4,870 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
System Project), 8.875% due 6/01/2021 5,346
BB Ba 3,270 Odessa, Texas, Junior College District, Revenue Refunding
Bonds, Series A, 8.125% due 12/01/2018 3,305
NR* VMIG1++ 500 Southwest Higher Education Authority Incorporated, Texas,
Revenue Refunding Bonds (Southern Methodist University),
VRDN, 3.50% due 7/01/2015 (a) 500
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 Chemicals and Plastics),
AMT, 8.20% due 3/15/2021 1,108
Utah--2.4% 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 1,384
AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC
Hospitals, Inc.), INFLOS, 9.211% due 5/15/2020 (e)(g) 3,292
Vermont--0.8% 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 1,577
Wisconsin--1.2% NR* Ba3 2,350 Walworth, Wisconsin, IDA, Revenue Refunding Bonds (United
States Gypsum Corp. Project), 7.25% due 5/01/2010 2,398
Total Investments (Cost--$180,774)--98.3% 195,147
Other Assets Less Liabilities--1.7% 3,428
--------
Net Assets--100.0% $198,575
========
</TABLE>
[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 August 31, 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
based upon prevailing market rates. The interest rate shown is the
rate in effect at August 31, 1995.
*Not Rated.
++Highest short-term rating by Moody's Investors Service, Inc.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
<PAGE>FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of August 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$180,773,886) (Note 1a) $195,147,439
Cash 135,000
Receivables:
Interest $ 4,037,207
Capital shares sold 43,743 4,080,950
------------
Deferred organization expenses (Note 1e) 7,409
Prepaid registration fees and other assets (Note 1e) 10,152
------------
Total assets 199,380,950
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 446,050
Investment adviser (Note 2) 161,945
Administration (Note 2) 42,617 650,612
------------
Accrued expenses and other liabilities 155,465
------------
Total liabilities 806,077
------------
Net Assets: Net assets $198,574,873
============
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $ 1,809,646
Consist of: Paid-in capital in excess of par 185,699,710
Accumulated realized capital losses on investments--net (2,713,001)
Accumulated distributions in excess of realized capital gains--net (595,035)
Unrealized appreciation on investments--net 14,373,553
------------
Net assets--Equivalent to $10.97 per share based on 18,096,461
shares of capital outstanding $198,574,873
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE><CAPTION>
Statement of Operations
August 31, 1995
<C> <S> <C>
Investment Income Interest and amortization of premium and discount earned $ 15,451,765
(Note 1d):
Expenses: Investment advisory fees (Note 2) 1,923,921
Administrative fees (Note 2) 506,295
Professional fees 152,333
Transfer agent fees (Note 2) 124,881
Printing and shareholder reports 63,356
Advertising 57,409
Registration fees (Note 1e) 51,811
Accounting services (Note 2) 49,486
Amortization of organization expenses (Note 1e) 43,665
Listing fees 34,342
Directors' fees and expenses 26,422
Custodian fees 20,612
Pricing services 12,973
Other 5,875
------------
Total expenses 3,073,381
------------
Investment income--net 12,378,384
------------
Realized & Realized loss on investments--net (2,713,001)
Unrealized Change in unrealized appreciation on investments--net 6,520,321
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 16,185,704
(Notes 1b, 1d & 3): ============
</TABLE>
<PAGE>
<TABLE><CAPTION>
Statements of Changes in Net Assets
For the Year Ended August 31,
Increase (Decrease) in Net Assets: 1995 1994
<C> <S> <C> <C>
Operations: Investment income--net $ 12,378,384 $ 12,911,107
Realized gain (loss) on investments--net (2,713,001) 3,571,349
Change in unrealized appreciation on investments--net 6,520,321 (12,998,193)
------------ ------------
Net increase in net assets resulting from operations 16,185,704 3,484,263
------------ ------------
Dividends & Investment income--net (12,378,384) (12,911,107)
Distributions Realized gain on investments--net (2,796,951) (1,365,806)
To Shareholders In excess of realized gain on investments--net (595,035) --
(Note 1f): ------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (15,770,370) (14,276,913)
------------ ------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (14,798,840) 6,828,611
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (14,383,506) (3,964,039)
Beginning of year 212,958,379 216,922,418
------------ ------------
End of year $198,574,873 $212,958,379
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE><CAPTION>
FINANCIAL INFORMATION (concluded)
Financial Highlights
For the
Period
The following per share data and ratios have been derived Nov. 2,
from information provided in the financial statements. 1990++ to
For the Year Ended August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.92 $ 11.44 $ 10.74 $ 10.29 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .65 .65 .68 .71 .63
Realized and unrealized gain (loss) on
investments--net .23 (.45) .75 .50 .29
-------- -------- -------- -------- --------
Total from investment operations .88 .20 1.43 1.21 .92
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.65) (.65) (.68) (.71) (.63)
Realized gain on investments--net (.15) (.07) (.05) (.05) --
In excess of realized gain on investments--net (.03) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.83) (.72) (.73) (.76) (.63)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.97 $ 10.92 $ 11.44 $ 10.74 $ 10.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 8.74% 1.75% 13.83% 12.29% 9.43%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, net of reimbursement 1.52% 1.48% 1.37% 1.30% .84%*
Net Assets: ======== ======== ======== ======== ========
Expenses 1.52% 1.48% 1.47% 1.55% 1.76%*
======== ======== ======== ======== ========
Investment income--net 6.11% 5.81% 6.17% 6.85% 7.43%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $198,575 $212,958 $216,922 $170,735 $114,628
Data: ======== ======== ======== ======== ========
Portfolio turnover 21.28% 28.51% 28.74% 31.74% 75.92%
======== ======== ======== ======== ========
</TABLE>
[FN]
*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.
<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
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 interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. Upon entering into a contract, the 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 is authorized to 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. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses.
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"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect whollyowned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner.
<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 MLAM
during any fiscal year which will cause such expenses to exceed
the most restrictive expense limitation applicable at the time
of such payment.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1995 were $41,657,329 and $58,801,563,
respectively.
Net realized and unrealized gains (losses) as of August 31, 1995
were as follows:
Realized Unrealized
Losses Gains
Long-term investments $ (678,301) $14,373,553
Short-term investments (156,729) --
Financial futures contracts (1,877,971) --
----------- -----------
Total $(2,713,001) $14,373,553
=========== ===========
<PAGE>
As of August 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $14,373,553, of which $14,520,979
related to appreciated securities and $147,426 related to
depreciated securities. The aggregate cost of investments at August
31, 1995 for Federal income tax purposes was $180,773,886.
4. Capital Shares Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1995 Shares Amount
Shares sold 1,405,923 $ 15,030,501
Shares issued to share-
holders in reinvestment of
dividends and distributions 630,887 6,628,373
---------- ------------
Total issued 2,036,810 21,658,874
Shares tendered (3,446,599) (36,457,714)
---------- ------------
Net decrease (1,409,789) $(14,798,840)
========== ============
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 and distributions 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
=========== ============
AUDIT-REPORT
EXHIBIT (g)(2)
The Board of Directors and Shareholders,
Merrill Lynch High Income Municipal
Bond Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch High
Income Municipal Bond Fund, Inc. as of August 31, 1994, the related
statements of operations for the year then ended and changes in net assets
for each of the years in the two-year period then ended, and the financial
highlights for each of the years in the three-year period then ended and the
period November 2, 1990 (commencement of operations) to August 31, 1991.
These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and the financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
and the 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 at August 31, 1994 by
correspondence with the custodian and brokers. 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
High Income Municipal Bond Fund, Inc. as of August 31, 1994, the results of
its operations, the changes in its net assets, and the financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 30, 1994
<PAGE>
PORTFOLIO ABBREVIATIONS
To simplify the listing of Merrill Lynch High Income 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 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
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Alabama--0.5% B+ NR $1,000 Brewton, Alabama, Industrial Development Board, PCR,
Refunding (Container Corporation American Project), 8% due
4/01/2009 $ 1,006
Arizona--2.7% NR Ba 3,000 Arizona Health Facilities Authority, Hospital Systems Revenue
Refunding Bonds (Saint Luke's Health Systems), 7.25% due
11/01/2014 3,009
BB Ba2 1,000 Maricopa County, Arizona, Pollution Control Corporation, PCR,
Refunding (Public Service Company--Palo Verde), 6.375% due
8/15/2023 917
NR NR 1,280 Pima County, Arizona, IDA, Revenue Bonds (La Hacienda
Project), 9.50% due 12/01/2016 1,254
Pinal County, Arizona, IDA, PCR (Magma--Copper/Newmont
Mining Corporation) (a):
A1+ P1 200 DATES, 2.35% due 12/01/2009 200
AA P1 300 VRDN, 3.25% due 12/01/2009 300
California--0.7% 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 1,470
Colorado--7.1% BBB+ Baa1 2,000 Colorado Health Facilities Authority, Hospital Revenue Bonds
(P/SL Healthcare System Project), Series A, 6.875% due
2/15/2023 1,991
BBB- NR 1,000 Colorado Health Facilities Financial Authority, Revenue
Refunding Bonds (National Jewish Center Immunization Project),
6.875% due 2/15/2012 994
Denver, Colorado, City and County Airport Revenue Bonds:
BB Baa 2,000 AMT, Series A, 7.50% due 11/15/2023 1,931
BB Baa 900 AMT, Series A, 8% due 11/15/2025 909
BB Baa 2,000 AMT, Series B, 7.50% due 11/15/2025 1,957
BB Baa 2,000 AMT, Series D, 7.75% due 11/15/2013 2,012
BB Baa 1,250 Series A, 7.50% due 11/15/2012 1,250
BB Baa 2,000 Series A, 7.25% due 11/15/2025 1,949
NR NR 2,000 Mountain Village Metropolitan District, Colorado, Refunding
Bonds (San Miguel County), UT, 8.10% due 12/01/2011 2,179
Connecticut--1.0% NR NR 1,950 New Haven, Connecticut, Facilities Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 2,134
District of BBB NR 3,000 District of Columbia, COP, GO, 7.30% due 1/01/2013 3,067
Columbia--1.4%
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Florida--0.7% BB- NR $ 960 Jacksonville, Florida, Port Authority, IDA, Revenue Refunding
Bonds (United States Gypsum Corporate Project), 7.25% due
10/01/2014 $ 947
A1 VMIG1 400 Pinellas County, Florida, Health Facilities Authority,
Revenue Refunding Bonds (Pooled Hospital Loan Project), DATES,
3.25% due 12/01/2015 (a) 400
A1 VMIG1 200 Saint Lucie County, Florida, PCR, Refunding (Florida Power
and Light Company Project), VRDN, 3.25% due 1/01/2026 (a) 200
Georgia--2.2% NR NR 2,535 Atlanta, Georgia, Urban Residential Finance Authority, College
Facilities Revenue Bonds (Morris Brown College Project),
9.50% due 6/01/2011 2,484
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 2,110
Hawaii--0.8% AAA NR 1,750 Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Citizens Utility Company),
RIB, Series 91-B, 9.689% due 11/01/2021 (g) 1,811
Illinois--2.3% BB Baa2 470 Chicago, Illinois, O'Hare International Airport, Special
Facilities Revenue Bonds (United Airlines), AMT, Series B,
8.95% due 5/01/2018 512
BBB+ NR 2,000 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health System), 7.25% due 5/15/2022 2,032
NR Baa1 1,250 Illinois Health Facilities Authority Revenue Bonds (Holy Cross
Hospital Project), 6.75% due 3/01/2024 1,222
BBB NR 1,000 Lansing, Illinois, Tax Increment Revenue Refunding Bonds, 7%
due 12/01/2008 1,038
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 1,570
Iowa--0.7% NR NR 1,500 Iowa Finance Authority, Health Care Facilities Revenue Bonds
(Mercy Health Initiatives Project), 9.95% due 7/01/2019 1,579
Kentucky--4.1% Jefferson County, Kentucky, First Mortgage Revenue Bonds
(Christian Church Homes):
BBB NR 600 6.125% due 11/15/2013 556
BBB NR 1,165 6.125% due 11/15/2018 1,034
AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds, INFLOS, 9.612%
due 10/01/2014 (b)(g) 4,235
NR NR 3,000 Perry County, Kentucky, Solid Waste Disposal Revenue Bonds,
AMT, 7% due 6/01/2024 2,977
Louisiana--5.2% 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 3,773
BBB+ Baa1 1,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds
(Woman's Hospital Foundation Project), 7.25% due 10/01/2022 1,016
NR A 1,000 Louisiana Public Facilities Authority, Student Loan Revenue
Bonds, AMT, Series A-3, 7% due 9/01/2006 1,041
BB- NR 3,000 Port New Orleans, Louisiana, IDA, Revenue Refunding Bonds
(Continental Grain Company Project), 7.50% due 7/01/2013 3,017
BBB- NR 2,000 West Feliciana Parish, Louisiana, PCR (Gulf States Utilities),
Series II, 7.70% due 12/01/2014 2,171
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Massachusetts--8.1% 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 $ 1,326
NR Ba 1,325 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 1,546
AAA Aaa 3,500 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (Beth Israel Hospital), INFLOS, 8.472% due
7/01/2025 (e)(g) 3,325
NR NR 1,205 Massachusetts Health and Educational Facilities Authority
Revenue Bonds (North Adams Regional Hospital), Series B,
8% due 7/01/1998 1,301
NR B1 1,675 Massachusetts Industrial Finance Agency Revenue Bonds (Bay
Cove Human Services Inc.), 8.38% due 4/01/2019 1,717
NR NR 1,000 Massachusetts Industrial Finance Agency, Solid Waste
Disposal Revenue Bonds (Molten Metal Technology Project),
AMT, 8.25% due 8/01/2014 1,000
BB+ Ba1 1,600 Massachusetts Industrial Finance Authority Revenue Bonds
(Vinfen Corporate Issue), 7.10% due 11/15/2018 1,512
NR NR 5,000 Massachusetts Port Authority Revenue Bonds (Harborside Hyatt
Project), AMT, 10% due 3/01/2026 5,450
Michigan--2.3% BBB Ba1 2,900 Detroit, Michigan, GO, UT, Series A, 8.70% due 4/01/2010 3,276
A1+ VMIG1 1,700 Grand Rapids, Michigan, Water Supply System, Revenue
Refunding Bonds, VRDN, 3.30% due 1/01/2020 (a)(h) 1,700
Minnesota--3.1% Saint Paul, Minnesota, Housing and Redevelopment Authority,
Hospital Revenue Bonds (Healtheast Project):
BBB- Baa 1,000 Series B, 6.625% due 11/01/2017 955
BBB- Baa 4,820 Series D, 9.75% due 11/01/2017 5,583
Mississippi--0.5% NR Baa 1,000 Mississippi Hospital Equipment and Facilities Authority
Revenue Bonds (Riley Memorial Hospital), Series B, 7.125%
due 5/01/2022 1,004
Missouri--5.2% BBB- NR 3,000 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic Project), 8.25%
due 12/15/2014 3,254
Missouri Health and Educational Facilities Authority Revenue
Bonds (Southwest Baptist University Project):
BB NR 905 9.50% due 10/01/2001 1,041
BB NR 3,690 9.50% due 10/01/2011 4,367
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds (Phelps
County Regional Medical Center), 8.30% due 3/01/2000 (d) 2,343
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 1,944
Nevada--1.3% 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 2,854
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 1,906
BB+ Baa3 3,450 New Hampshire, IDA, PCR (Public Service Company New
Hampshire Project), Series B, 7.50% due 5/01/2021 3,575
New Jersey--5.8% 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 2,014
New Jersey Health Care Facilities, Financing Authority
Revenue Bonds:
NR NR 4,800 (Riverwood Center), Series A, 9.90% due 7/01/2021 5,304
BBB- Baa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 5,075
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
New Mexico--1.3% BB Ba2 $2,000 Farmington, New Mexico, PCR, Refunding (Public Service
Company--San Juan Project), Series A, 6.40% due 8/15/2023 $ 1,840
A A3 1,000 Lordsburg, New Mexico, PCR, Refunding (Phelps Dodge
Corporate Project), 6.50% due 4/01/2013 1,016
New York--3.8% New York City, New York, GO, UT:
A- Aaa 1,850 Series B, 8.25% due 6/01/2001 (d) 2,213
A- Baa1 5,260 Series C, 7.50% due 8/01/2021 5,683
A1+ NR 200 New York City, New York, IDA, IDR (Japan Airlines Company
Ltd. Project), AMT, VRDN, 2.75% due 11/01/2015 (a) 200
North NR VMIG1 100 Person County, North Carolina, Industrial Facilities and
Carolina--0.0% Pollution Control Financing Authority, Solid Waste Disposal
Revenue Bonds (Carolina Power and Light Company), AMT, DATES,
3.30% due 11/01/2016 (a) 100
Ohio--4.1% NR NR 1,725 Cincinnati, Ohio, Student Loan Funding Corporation, Revenue
Refunding Bonds, AMT, Series B, 6.75% due 1/01/2007 1,761
AAA Aaa 2,000 Ohio, HFA, S/F Mortgage Revenue Bonds, Series A2, AMT, RIB,
10.287% due 3/24/2031 (c)(g) 2,040
BB Baa3 2,500 Ohio State Air Quality Development Authority, CPCR, Refunding
(Cleveland Electric Company), AMT, 6.85% due 7/01/2023 2,406
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 2,528
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 989
Oregon--1.4% NR NR 1,000 Western Generation Agency, Oregon, Cogeneration Project
Revenue Bonds (Wauna Cogeneration Project), Series B, AMT,
7.40% due 1/01/2016 1,011
B+ NR 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporate Project), 8% due 12/01/2003 1,984
Pennsylvania--10.8% BB+ Baa3 1,750 Allegheny County, Pennsylvania, IDA, Revenue Refunding Bonds
(Environmental Improvement), Series A, 6.70% due 12/01/2020 1,751
BBB- NR 5,000 McKean County, Pennsylvania, Hospital Authority Revenue
Bonds (Bradford Hospital Project), 8.875% due 10/01/2020 5,920
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) 2,045
Montgomery County, Pennsylvania, IDA, Revenue Refunding
Bonds:
NR NR 1,500 (1st Mortgage-Meadowood Corporation Project), Series A,
10.25% due 12/01/2020 1,635
NR Ba 3,500 (Pennsburg Nursing and Rehabilitation Center), 7.625% due
7/01/2018 3,498
BB Ba 1,500 Pennsylvania Convention Center Authority, Revenue Refunding
Bonds, Series A, 6.75% due 9/01/2019 1,477
NR NR 2,000 Pennsylvania Economic Development Financing Authority, IDR
(GEHL Company Inc. Project), AMT, Series F, 9% due 9/01/2010 2,054
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 3,035
</TABLE>
<PAGE>
<TABLE><CAPTION>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
S&P Moody's Face Value
State Ratings Ratings Amount Issue (Note 1a)
<S> <C> <C> <C> <C> <C>
Rhode Island--1.5% BBB+ NR $1,500 Rhode Island Health and Educational Building Corporation,
Hospital Revenue Bonds (South County Hospital), 7.25% due
11/01/2011 $ 1,544
NR Ba 1,615 West Warwick, Rhode Island, GO, UT, Series A, 6.80% due
7/15/1998 1,670
South Carolina--0.7% NR Baa1 1,500 Horry County, South Carolina, Hospital Facilities Revenue
Refunding Bonds (Conway Hospital, Inc.), 6.75% due 7/01/2012 1,508
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 1,012
Tennessee--3.3% 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 4,516
BBB- Baa1 2,500 McMinn County, Tennessee, Industrial Development Board,
Solid Waste Disposal Revenue Bonds (Calhoun Newsprint), AMT,
7.40% due 12/01/2022 2,594
Texas--8.5% BBB Baa2 1,250 Brazos River Authority, Texas, PCR (Texas Utilities
Electric Company), AMT, Series A, 8.125% due 2/01/2020 1,367
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 2,892
BB Ba1 3,375 (Delta Airlines Incorporated), 6.25% due 11/01/2013 3,047
BBB A 1,500 Ector County, Texas, Hospital Revenue Bonds (Ector County
Hospital), 7.30% due 4/15/2012 1,550
NR NR 1,000 Gulf Coast, Texas, Waste Disposal Authority, PCR and Solid
Waste Disposal Revenue Bonds (Diamond Shamrock Corporation
Project), 6.75% due 6/01/2009 1,000
BBB- Baa 4,920 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
Systems Project), 8.875% due 6/01/2021 5,489
BBB NR 1,500 Midland County, Texas, Hospital District Revenue Bonds
(Midland Memorial Hospital), 7.50% due 6/01/2016 1,572
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 1,091
Utah--1.5% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds (IHC
Hospitals, Inc.), INFLOS, 10.123% due 5/15/2020 (e)(g) 3,176
Wisconsin--1.1% NR B1 2,350 Walworth, Wisconsin, IDA, Revenue Refunding Bonds (United
States Gypsum Corp. Project), 7.25% due 5/01/2010 2,360
Total Investments (Cost--$202,857)--98.9% 210,710
Other Assets Less Liabilities--1.1% 2,248
--------
Net Assets--100.0% $212,958
========
<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 August 31, 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 August 31, 1994.
(h)FGIC Insured.
NR--Not Rated.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE><CAPTION>
Statement of Assets and Liabilities as of August 31, 1994
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$202,856,604) (Note 1a) $210,709,836
Cash 8,513
Receivables:
Interest $ 4,070,376
Securities sold 2,647,647
Capital shares sold 264,576 6,982,599
------------
Deferred organization expenses (Note 1e) 51,074
Prepaid registration fees and other assets (Note 1e) 10,703
------------
Total assets 217,762,725
------------
Liabilities: Payables:
Securities purchased 3,954,072
Dividends to shareholders (Note 1g) 455,273
Investment adviser (Note 2) 173,804
Administration (Note 2) 45,738
Capital shares redeemed 366 4,629,253
------------
Accrued expenses and other liabilities 175,093
------------
Total liabilities 4,804,346
------------
Net Assets: Net assets $212,958,379
============
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $ 1,950,625
Consist of: Paid-in capital in excess of par 200,357,571
Undistributed realized capital gains--net 2,796,951
Unrealized appreciation on investments--net 7,853,232
------------
Net assets--Equivalent to $10.92 per share based on 19,506,250 shares
of capital outstanding $212,958,379
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE><CAPTION>
Statement of Operations
For the Year Ended
August 31, 1994
<S> <C> <C>
Investment Interest and amortization of premium and discount earned $ 16,203,513
Income
(Note 1d):
Expenses: Investment advisory fees (Note 2) 2,111,003
Administrative fees (Note 2) 555,527
Transfer agent fees (Note 2) 109,848
Professional fees 94,021
Listing fees 89,348
Printing and shareholder reports 77,621
Advertising 55,909
Registration fees (Note 1e) 52,694
Amortization of organization expenses (Note 1e) 43,665
Accounting services (Note 2) 39,397
Directors' fees and expenses 25,613
Custodian fees 23,853
Pricing services 11,524
Other 5,946
------------
Total expenses before reimbursement 3,295,969
Reimbursement of expenses (Note 2) (3,563)
------------
Total expenses after reimbursement 3,292,406
------------
Investment income--net 12,911,107
------------
Realized & Realized gain on investments--net 3,571,349
Unrealized Change in unrealized appreciation on investments--net (12,998,193)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 3,484,263
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE><CAPTION>
Statements of Changes in Net Assets
For the Year Ended August 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <C> <C> <C>
Operations: Investment income--net $ 12,911,107 $ 11,632,598
Realized gain on investments--net 3,571,349 1,137,534
Change in unrealized appreciation on investments--net (12,998,193) 12,041,409
------------ ------------
Net increase in net assets resulting from operations 3,484,263 24,811,541
------------ ------------
Dividends & Investment income--net (12,911,107) (11,632,598)
Distributions Realized gain on investments--net (1,365,806) (851,810)
To Shareholders ------------ ------------
(Note 1g): Net decrease in net assets resulting from dividends and
distributions to shareholders (14,276,913) (12,484,408)
------------ ------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 6,828,611 33,860,084
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets (3,964,039) 46,187,217
Beginning of year 216,922,418 170,735,201
------------ ------------
End of year $212,958,379 $216,922,418
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
FINANCIAL INFORMATION (concluded)
Financial Highlights
For the
Period
The following per share data and ratios have been derived Nov. 2,
from information provided in the financial statements. 1990++ to
For the Year Ended August 31, Aug, 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991
<S> <C> <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 .65 .68 .71 .63
Realized and unrealized gain (loss) on
investments--net (.45) .75 .50 .29
--------- --------- --------- ---------
Total from investment operations .20 1.43 1.21 .92
--------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.65) (.68) (.71) (.63)
Realized gain on investments--net (.07) (.05) (.05) --
--------- --------- --------- ---------
Total dividends and distributions (.72) (.73) (.76) (.63)
--------- --------- --------- ---------
Net asset value, end of period $ 10.92 $ 11.44 $ 10.74 $ 10.29
========= ========= ========= =========
Total Investment Based on net asset value per share 1.75% 13.83% 12.29% 9.43%+++
Return:** ========= ========= ========= =========
Ratios to Expenses, net of reimbursement 1.48% 1.37% 1.30% .84%*
Average ========= ========= ========= =========
Net Assets: Expenses 1.48% 1.47% 1.55% 1.76%*
========= ========= ========= =========
Investment income--net 5.81% 6.17% 6.85% 7.43%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 212,958 $ 216,922 $ 170,735 $ 114,628
Data: ========= ========= ========= =========
Portfolio turnover 28.51% 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 accounting 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 value. 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.
<PAGE>
(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 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 non-
income 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" or "Adviser"). 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. ("PSI"), 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"), an indirect wholly- owned subsidiary of ML & Co.
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.
<PAGE>
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, 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 year ended August 31,
1994, MLAM earned fees of $2,111,003, of which $3,563 was waived.
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, PSI, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended August 31, 1994 were $59,834,412 and $57,064,356, respectively.
Net realized and unrealized gains as of August 31, 1994 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 2,846,080 $ 7,853,232
Financial futures contracts 725,269 --
----------- ------------
Total $ 3,571,349 $ 7,853,232
=========== ============
As of August 31, 1994, net unrealized appreciation for Federal income tax
purposes aggregated $7,853,232, of which $10,724,635 related to appreciated
securities and $2,871,403 related to depreci- ated securities. The aggregate
cost of investments at August 31, 1994 for Federal income tax purposes was
$202,856,604.
<PAGE>
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1994 Shares Amount
Shares sold 2,811,953 $ 31,764,655
Shares issued to share-
holders in reinvest-
ment 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
=========== ============
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 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
=========== ============
