MERRILL LYNCH
HIGH INCOME
MUNICIPAL BOND
FUND, INC.
FUND LOGO
Quarterly Report
November 30, 1996
This report, including the financial information herein, is
transmitted to the shareholders of Merrill Lynch High Income
Municipal Bond Fund, Inc. for their information. It is not a
prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in the
report. Past performance results shown in this report should not be
considered a representation of future performance. Statements and
other information herein are as dated and are subject to change.
<PAGE>
Merrill Lynch
High Income
Municipal Bond
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch High Income Municipal Bond Fund, Inc.
DEAR SHAREHOLDER
For the three-month period ended November 30, 1996, Merrill Lynch
High Income Municipal Bond Fund, Inc. earned $0.160 per share income
dividends, representing a net annualized yield of 5.77%, based on a
month-end per share net asset value of $11.21. Over the same period,
the Fund's total investment return was +3.95%, based on a change in
per share net asset value from $10.94 to $11.21, and assuming
reinvestment of $0.162 per share income dividends.
The Municipal Market Environment
The tax-exempt bond market continued to improve over the three
months ended November 30, 1996. As measured by the Bond Buyer Index,
yields on uninsured, long-term municipal revenue bonds declined an
additional 29 basis points (0.29%) to end the November 30, 1996
quarter at 5.80%. Current tax-exempt bond yields are at their lowest
levels in the last nine months. The economic environment remained
little changed in recent months. Economic growth continued to be
moderate, with some recent signs of reduced growth. Inflation
remained well-contained, reducing recent fears of an imminent
interest rate increase by the Federal Reserve Board. This reduction
in investor concerns regarding increases in short-term interest
rates helped support significant declines in US Treasury bond
yields. During the past three months, the yield on the 30-year
Treasury bond fell 77 basis points to end the November 30, 1996
quarter at 6.35%.
<PAGE>
Much of the tax-exempt bond market's strong technical position--one
of the primary reasons for the improvement in municipal bond yields
seen thus far in 1996--has remained intact. Just over $43 billion in
long-term tax-exempt bonds was issued during the November quarter,
essentially unchanged compared to the November 30, 1995 quarter. The
municipal bond market's recent underperformance relative to Treasury
issues was the result of a number of other factors. Among other
things, as tax-exempt bond yields declined below 6%, some investors
temporarily have lost interest in the municipal bond market. As
interest rates continue to decline, as they did in 1994, investors
in the past adjusted to the new levels.
In addition, the Presidential and Congressional elections earlier
this month resurrected some investor concerns regarding continued
Federal deficit reduction and potential legislative restrictions
upon the municipal bond market. This situation is similar to that
at the beginning of 1996 when tax-exempt bond yields were negatively
affected by fears that legislation reducing the tax advantage of
municipal bonds would be introduced to aid further deficit
reductions. Earlier fears that the Democratic party would regain
control of both houses of Congress, as well as maintain the White
House, may have caused some investors to delay any asset allocations
to the municipal bond market.
Currently, the future direction of interest rates still remains
unclear. The Federal Reserve Board's decision to hold interest rates
steady in late September temporarily relieved mounting fears of
rising interest rates for the remainder of 1996. Should economic
growth slow further in the February 28, 1997 quarter, as expected by
the Federal Reserve Board, and inflation remain well contained,
interest rates are poised to decline further. Under such a scenario,
municipal bond yields are also likely to decline.
Portfolio Strategy
Merrill Lynch High Income Municipal Bond Fund, Inc. remained fully
invested during the quarter ended November 30, 1996, a period that
saw long-term interest rates decline to levels not seen since last
spring. In addition to the maintenance of low cash reserves, our
investment strategy continued to focus on liquidity enhancement and
call extension as a means to seek to boost performance as well as to
provide protection of the shareholder's monthly dividend. As we
explained in our annual shareholder report dated August 31, 1996, we
expect to continue to follow this twofold investment strategy for
the forseeable future.
The Fund's portfolio structure varied little during the November
quarter, with a slight reduction in the Fund's healthcare holdings
being the only noteworthy development. Yields on lower rated
investment grade securities within this sector remain unattractive
compared to those available on their higher-rated counterparts.
Consequently, we are maintaining our health care holdings close to
the minimum percentage required by the Fund's prospectus. New cash
flows have remained sluggish, limiting our ability to purchase new
high-yield securities. Nevertheless, during the November quarter, we
acquired $2.0 million in bonds bearing a yield of 6.77%. An
examination of the portfolio's rating profile also reveals little
change, with over 80% of the Fund's holdings either rated in the
lowest investment grade category or below investment grade by at
least one of the major rating services or unrated.
<PAGE>
In Conclusion
We appreciate your investment in Merrill Lynch High Income Municipal
Bond Fund, Inc., and we look forward to assisting you with your
financial needs in the months and years to come.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Senior Vice President
(Kenneth A. Jacob)
Kenneth A. Jacob
Vice President and Portfolio Manager
(Theodore R. Jaeckel Jr.)
Theodore R. Jaeckel Jr.
Vice President and Portfolio Manager
December 26, 1996
PORTFOLIO COMPOSITION
For the Quarter Ended November 30, 1996
Top Ten States*
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Pennsylvania 12.67%
Massachusetts 10.02
New Jersey 9.11
New York 8.59
Texas 8.22
Missouri 5.35
Illinois 5.01
Louisiana 4.14
Georgia 3.72
Colorado 2.82
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Total Top Ten 69.65
Total Others 30.35
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Total Portfolio 100.00%
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Net assets as of November 30, 1996 were $202,636,754.
Quality Ratings*
(Based on Nationally Recognized Rating Services)
A pie chart illustrating the following percentages:
AAA/Aaa 12%
AA/Aa 2%
A/A 1%
BBB/Baa 23%
BB/Ba 17%
B/B 8%
NR++ 36%
Other++++ 1%
[FN]
*Based on total market value of the portfolio as of November 30,
1996.
++Not Rated.
++++Temporary investments in short-term municipal securities.
OFFICERS AND DIRECTORS
<PAGE>
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Vincent R. Giordano, Senior Vice President
Donald C. Burke, Vice President
Kenneth A. Jacob, Vice President
Theodore R. Jaeckel Jr., Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
