<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1998
SECURITIES ACT FILE NO. 333-39839
INVESTMENT COMPANY ACT FILE NO. 811-6156
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
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. PATRICK D. SWEENEY, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
APRIL 21, 1998
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
TRANSACTION VALUATION: $45,840,000(A) AMOUNT OF FILING FEE: $9,168(B)
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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
($11.46) at April 16, 1998.
(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: _______________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 $.10 per share (the "Shares"). As of March 31, 1998 there were in excess
of 20 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 21, 1998 (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 that 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
i
<PAGE>
Shares, the Fund has sold approximately 721,470 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 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>
<CAPTION>
(a)(1) (i) --Advertisement to be printed in THE WALL STREET JOURNAL.
<C> <C> <S>
(ii) --Offer to Purchase.
(a)(2) --Form of Letter of Transmittal.
(a)(3) --Letter to Stockholders.
(b)-(f) --Not Applicable.
(g)(1) --Audited Financial Statements of the Fund for the fiscal year ended August
31, 1996.
(g)(2) --Audited Financial Statements of the Fund for the fiscal year ended August
31, 1997.
</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 21, 1998
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -----------
<S> <C> <C>
(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, 1996.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended August 31, 1997.
</TABLE>
<PAGE>
EXHIBIT (a)(1)(i)
<PAGE>
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 21, 1998, 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 18, 1998, 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 18, 1998, unless extended, upon
the terms and conditions set forth in the Offer to Purchase dated April 21, 1998
(the "Offer"). The NAV on April 16, 1998, was $11.46 per share. The purpose of
the Offer is to provide liquidity to stockholders since the Fund is unaware of
any secondary market that 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 that 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 18, 1998, unless the Offer is
extended, and, if not yet accepted for payment by the Fund, Shares may also be
withdrawn after June 16, 1998.
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.
1-800-MERRILL, EXT. 3518
1-800-637-7455
<TABLE>
<S> <C>
- -----------------------------------
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 MERRILL LYNCH FINANCIAL CONSULTANT:
_____________________________________________________________
3518
April 21, 1998
</TABLE>
[LOGO]
<PAGE>
EXHIBIT (a)(1)(ii)
<PAGE>
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 18, 1998, 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 18, 1998, 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 16, 1998
was $11.46 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 that 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 $5.35
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 NOR HAS THE 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 21, 1998 MERRILL LYNCH HIGH INCOME
MUNICIPAL BOND FUND, INC.
Merrill Lynch Response Center Transfer Agent: Merrill Lynch Financial
P.O. Box 30200 Data 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. 3131 Jacksonville, Florida 32232-5289
(800) 637-3863
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
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<C> <S> <C>
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.................................................................. 5
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........................................................ 6
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 that are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on May 18, 1998 (such time and date being hereinafter called
the "Initial Expiration Date"), unless it determines to accept none of them. 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 hereinafter called the "Expiration Date." 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 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 that 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, 1998, there were in excess of 20 million Shares issued and
outstanding and there were 278 holders of record of Shares (in addition, Merrill
Lynch maintains accounts for 6,487 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. 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. 3131.
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. 3131 as to any
additional documents that 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 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 $5.35 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.
3
<PAGE>
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, which 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. (the
"Distributor"), 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. 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 owned since purchase (separate purchases shall not be
aggregated for these purposes), as set forth in the following table:
<TABLE>
<CAPTION>
EARLY
YEAR OF TENDER AFTER PURCHASE WITHDRAWAL CHARGE
- --------------------------------------------------------------------- -----------------------
<S> <C>
First................................................................ 3.0%
Second............................................................... 2.0%
Third................................................................ 1.0%
Fourth and following................................................. 0%
</TABLE>
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. The
Early Withdrawal Charge will be waived on Shares tendered following the
4
<PAGE>
death of all beneficial owners of such Shares, provided the Shares are tendered
within one year of death (a death certificate and other applicable documents may
be required). At the time of acceptance of the Offer, the record or succeeding
beneficial owner must notify the Transfer Agent either directly or indirectly
through the Distributor that the Early Withdrawal Charge should be waived. Upon
confirmation of the owner's entitlement, the waiver will be granted; otherwise,
the waiver will be lost.
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 16, 1998.
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, which 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 that 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 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 $5.35 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
that is orderly and consistent with the Fund's investment objective and policies
in order to
5
<PAGE>
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 that is material to the Fund, or (e) other event or
condition that 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 16, 1998, the aggregate purchase price if 4,000,000
Shares are tendered and accepted for payment pursuant to the Offer would be
approximately $45,840,000. 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 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, 1996 and 1997. Such information has been excerpted from the
Fund's audited 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.
6
<PAGE>
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
YEAR
YEAR ENDED ENDED
AUGUST 31, AUGUST 31,
1996 1997
---------- ----------
<S> <C> <C>
INCOME STATEMENT
Investment income....................................................................... $ 14,914 $ 14,934
Expenses................................................................................ 3,016 2,964
---------- ----------
Investment income--net.................................................................. $ 11,898 $ 11,970
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on investments--net....................................................... 1,967 4,093
Change in unrealized appreciation on investments--net................................... (2,409) 4,045
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets............................................................................ $ 200,328 $ 212,349
Total liabilities....................................................................... 776 729
---------- ----------
Net assets.............................................................................. $ 199,552 $ 211,620
Net asset value per share............................................................... $ 10.94 $ 11.34
Shares of common stock outstanding...................................................... 18,234 18,655
PER SHARE
Investment income--net.................................................................. $ .66 $ .65
Dividends from net investment income to common stockholders............................. $ .66 $ .65
Distributions from net realized gain on investments to common stockholders.............. $ -- $ .04
RATIOS
Total expenses to average net assets.................................................... 1.50% 1.44%
Investment income--net, to average net assets........................................... 5.90% 5.83%
</TABLE>
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 that, 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 721,470 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 that 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 that 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. The Commission maintains a web site
(http://www.sec.gov) that contains the Schedule 13E-4 and other information
regarding the Fund.
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 equivalent to a dividend" requires that there be a
8
<PAGE>
"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. Recent legislation creates additional
categories of capital gains taxable at different rates. If the Stockholder has
held the Shares for more than 18 months, the maximum capital gains rate is
reduced to 20%. The maximum 28% rate is still applicable to a sale of Shares
held for more than one year but not more than 18 months.
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 applicable marginal tax rates
on long-term capital gains (20% or 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
9
<PAGE>
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 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 21, 1998
10
<PAGE>
EXHIBIT (a)(2)
<PAGE>
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 21, 1998
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, MAY 18, 1998, 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 21,
1998, 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)
NO. OF SHARES
CERTIFICATE LISTED NO. OF SHARES
NO.(S)* ON CERTIFICATE* TENDERED**
<S> <C> <C> <C>
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 ................ , 1998
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.
<PAGE>
EXHIBIT (a)(3)
<PAGE>
[LOGO]
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 21, 1998
(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 20, 1998 through March
19, 1998 based on the amounts actually distributed by the Fund, was 5.36% based
on the March 19, 1998 NAV of $11.47 per share. For the quarter ended March 31,
1998, the Fund's highest NAV was $11.52 per share and its lowest NAV was $11.42
per share. The Fund's NAV on April 16, 1998 was $11.46 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. 3131.
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
<PAGE>
Exhibit (g)(1)
<PAGE>
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, 1996, 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 five-year period then ended. 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, 1996 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, 1996, 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, 1996
<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
EDA Economic Development Authority
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)
<S> <C> <C> <C> <C> <C>
Alabama--1.3% B+ NR* $ 1,000 Brewton, Alabama, IDB, PCR, Refunding (Container Corporation
American Project), 8% due 4/01/2009 $ 1,055
BBB- Baa3 1,500 Mobile, Alabama, IDB, Solid Waste Disposal Revenue
Refunding Bonds (Mobile Energy Services Company Project),
6.95% due 1/01/2020 1,563
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Arizona--0.7% NR* NR* 1,235 Pima County, Arizona, IDA, Revenue Bonds (La Hacienda
Project), 9.50% due 12/01/2016 1,237
A1+ P1 100 Pinal County, Arizona, IDA, PCR (Magma Copper/Newmont
Mining Corporation), VRDN, 3.55% due 12/01/2009 (a) 100
California--2.4% NR* Aa3 100 California Pollution Control Financing Authority, Resource
Recovery Revenue Bonds (Honey Lake Power Project), VRDN,
AMT, 3.50% due 9/01/2018 (a) 100
BBB- Baa 10,000 Foothill/Eastern Transportation Corridor Agency, California,
Toll Road Revenue Bonds (Senior Lien), Series A, 6.50%**
due 1/01/2028 1,183
NR* NR* 1,500 Long Beach, California, Redevelopment Agency, M/F Housing
Revenue Bonds (Pacific Court Apartments), AMT, Issue B,
6.80% due 9/01/2013 1,214
NR* NR* 12,000 San Joaquin Hills, California, Transportation Corridor Agency,
Toll Road Revenue Bonds (Senior Lien), 6.425%** due 1/01/2022 2,199
Colorado--3.9% Denver, Colorado, City and County Airport Revenue Bonds:
BBB Baa 900 AMT, Series A, 8% due 11/15/2025 999
BBB Baa 2,000 AMT, Series D, 7.75% due 11/15/2013 2,332
AAA NR* 500 Series A, 7.25% due 11/15/2002 (d) 569
BBB Baa 1,500 Series A, 7.25% due 11/15/2025 1,664
NR* NR* 2,000 Mountain Village Metropolitan District, Colorado, Refunding
Bonds (San Miguel County), UT, 8.10% due 12/01/2011 2,220
Connecticut--1.0% NR* B1 1,895 New Haven, Connecticut, Facilities Revenue Bonds (Hill Health
Corporation Project), 9.25% due 5/01/2017 2,033
District of B- NR* 2,000 District of Columbia, COP, 7.30% due 1/01/2013 2,049
Columbia--1.0%
</TABLE>
<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--1.6% BB NR* $ 960 Jacksonville, Florida, Port Authority, IDR, Refunding
(United States Gypsum Corporate Project), 7.25% due 10/01/2014 $ 991
A1+ VMIG1++ 200 Manatee County, Florida, PCR, Refunding (Florida Power and
Light Company Project), VRDN, 3.55% due 9/01/2024 (a) 200
NR* VMIG1++ 100 Palm Beach County, Florida, Water and Sewer Revenue Bonds,
VRDN, 3.60% due 10/01/2011 (a) 100
A1 VMIG1++ 1,900 Pinellas County, Florida, Health Facilities Authority, Revenue
Refunding Bonds (Pooled Hospital Loan Program), DATES,
3.55% due 12/01/2015 (a) 1,900
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Georgia--3.7% NR* NR* 2,480 Atlanta, Georgia, Urban Residential Finance Authority, College
Facilities Revenue Bonds (Morris Brown College Project),
9.50% due 12/01/2001 (d) 3,068
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 2,191
NR* NR* 2,000 Hancock County, Georgia, COP, 8.50% due 4/01/2015 (h) 2,171
Hawaii--0.9% AA+ NR* 1,750 Hawaii State Department of Budget and Finance, Special
Purpose Mortgage Revenue Bonds (Citizens Utility Company),
RIB, Series 91-B, 9.232% due 11/01/2021 (g) 1,872
Illinois--5.6% BBB NR* 1,500 Alton, Illinois, Hospital Facility Revenue Refunding Bonds
(Saint Anthony's Health Center), 6% due 9/01/2014 1,384
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 4,599
BB Baa2 445 (United Airlines, Inc.), AMT, Series B, 8.95% due 5/01/2018 505
NR* NR* 2,000 Illinois Educational Facilities Authority Revenue Bonds
(Chicago Osteopathic Health System), 7.25% due 11/15/2019 (d) 2,272
NR* Baa1 1,250 Illinois Health Facilities Authority Revenue Bonds
(Holy Cross Hospital Project), 6.75% due 3/01/2024 1,243
BBB NR* 1,000 Lansing, Illinois, Tax Increment Revenue Refunding Bonds
(Sales Tax-Landings Redevelopment), 7% due 12/01/2008 1,085
Indiana--1.8% A NR* 1,500 Indiana Bond Bank, Special Hospital Program Revenue Bonds
(Hendricks Community Hospital), Series A, 7.125% due 4/01/2013 1,618
NR* NR* 2,000 Wabash, Indiana, Solid Waste Disposal Revenue Bonds (Jefferson
Smurfit Corporation Project), AMT, 7.50% due 6/01/2026 2,012
Iowa--0.9% NR* NR* 1,500 Iowa Finance Authority, Health Care Facilities Revenue
Refunding Bonds (Care Initiatives Project), 9.25% due 7/01/2025 1,720
Kentucky--2.2% AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds, INFLOS,
9.24% due 10/01/2014 (b)(g) 4,450
Louisiana--4.0% NR* Baa2 3,500 Lake Charles, Louisiana, Harbor and Terminal District,
Port Facilities Revenue Refunding Bonds (Trunkline LNG
Company Project), 7.75% due 8/15/2022 3,913
BBB+ A 1,000 Louisiana Public Facilities Authority, Hospital Revenue Bonds
(Woman's Hospital Foundation Project), 7.25% due 10/01/2022 1,054
BB- NR* 3,000 Port New Orleans, Louisiana, IDR, Refunding (Continental
Grain Company Project), 7.50% due 7/01/2013 3,104
</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-- NR* NR* $ 1,200 Boston, Massachusetts, Industrial Development Financing
10.0% Authority, Solid Waste Disposal Facility Revenue Bonds
(Jet-A-Way Project), AMT, 10.50% due 1/01/2011 $ 1,359
NR* Ba 795 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 877
AAA Aaa 3,460 Massachusetts Municipal Wholesale Electric Company,
Power Supply System, Revenue Refunding Bonds, Series B,
5% due 7/01/2017 (b) 3,101
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR* B 1,850 (New England Memorial Hospital Project), Series C,
7% due 4/01/2014 1,652
NR* NR* 605 (North Adams Regional Hospital), Issue B, 8% due 7/01/1998 629
NR* B 3,000 Refunding (New England Memorial Hospital), Series B,
6.125% due 7/01/2013 2,382
Massachusetts State Industrial Finance Agency Revenue Bonds:
NR* B1 1,675 (Bay Cove Human Services Inc.), 8.375% due 4/01/2019 1,782
BB+ Ba1 1,600 (Vinfen Corporation), 7.10% due 11/15/2018 1,574
NR* NR* 1,000 Massachusetts State Industrial Finance Agency, Solid Waste
Disposal Revenue Bonds (Molten Metal Technology Project),
8.25% due 8/01/2014 1,024
NR* NR* 5,000 Massachusetts State Port Authority, Special Project Revenue
Bonds (Harborside Hyatt Project), AMT, 10% due 3/01/2026 5,586
Michigan--1.7% AAA Ba1 2,900 Detroit, Michigan, GO, UT, Series A, 8.70% due 4/01/2000 (d) 3,323
Missouri--5.3% BBB- NR* 2,865 Joplin, Missouri, IDA, Hospital Facilities Revenue Refunding
and Improvement Bonds (Tri-State Osteopathic Project),
8.25% due 12/15/2014 3,044
Missouri Health and Educational Facilities Authority Revenue
Bonds (Southwest Baptist University Project):
BB NR* 905 9.50% due 10/01/2001 1,008
BB NR* 3,690 9.50% due 10/01/2011 4,238
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds (Phelps
County Regional Medical Center), 8.30% due 3/01/2000 (d) 2,269
New Hampshire-- BB- NR* 3,500 New Hampshire State Business Finance Authority, Pollution
1.8% Control and Solid Waste Revenue Refunding Bonds (Crown Paper
Company Project), 7.75% due 1/01/2022 3,525
New Jersey--9.0% NR* NR* 2,000 Camden County, New Jersey, Improvement Authority, Lease
Revenue Bonds (Holt Hauling & Warehousing), Series A,
9.875% due 1/01/2021 2,000
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 4,107
NR* NR* 1,500 New Jersey, EDA, IDR, Refunding (Newark Airport Marriott
Hotel), 7% due 10/01/2014 1,495
New Jersey Health Care Facilities Financing Authority
Revenue Bonds:
NR* NR* 4,725 (Riverwood Center Issue), Series A, 9.90% due 7/01/2021 5,244
BBB- Baa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due 7/01/2020 5,110
</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--1.0% BB Ba2 $2,000 Farmington, New Mexico, PCR, Refunding (Public Service
Company-San Juan Project), Series A, 6.40% due 8/15/2023 $ 1,939
New York--8.4% BBB+ Baa1 5,260 New York City, New York, GO, UT, Series C, Sub-Series C-1,
7.50% due 8/01/2021 5,795
NR* NR* 2,500 New York City, New York, IDA, Revenue Bonds (Visy Paer Inc.
Project), AMT, 7.95% due 1/01/2028 2,616
Port Authority of New York and New Jersey, Special Obligation
Revenue Bonds (Special Project-KIAC), AMT, Series 4:
NR* NR* 2,250 3rd Installment, 7% due 10/01/2007 2,369
NR* NR* 2,750 5th Installment, 6.75% due 10/01/2019 2,737
Utica, New York, Public Improvement Bonds:
CCC B 635 8.50% due 8/15/2007 643
CCC B 635 8.50% due 8/15/2008 644
CCC B 500 8.50% due 8/15/2009 507
CCC B 500 8.50% due 8/15/2010 507
CCC B 500 8.50% due 8/15/2011 507
CCC B 500 8.50% due 8/15/2012 507
Ohio--2.3% NR* Ba1 2,325 Defiance County, Ohio, Economic Development Revenue Bonds
(Kroger Co. Project), 8% due 10/15/2015 2,537
AAA Aaa 1,950 Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT, Series A-2,
9.885% due 3/24/2031 (c)(g) 2,052
Oklahoma--0.5% BB NR* 985 Blaine County, Oklahoma, Industrial Authority, IDR
(United States Gypsum Corp. Project), 7.25% due 10/01/2010 1,029
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 1,031
B+ NR* 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit Newsprint
Corporate Project), 8% due 12/01/2003 2,071
Pennsylvania-- NR* NR* 2,000 Lehigh County, Pennsylvania, General Purpose Authority
12.5% Revenue Bonds (Wiley House Kids Peace), 8.75% due 11/01/2014 2,056
BBB- NR* 5,000 McKean County, Pennsylvania, Hospital Authority Revenue
Bonds (Bradford Hospital Project), 8.875% due 10/01/2020 5,814
Montgomery County, Pennsylvania, IDA, Revenue Bonds:
NR* Ba 3,400 (Pennsburg Nursing and Rehabilitation Center), 7.625%
due 7/01/2018 3,401
NR* NR* 1,500 Refunding (1st Mortgage-Meadowood Corporation Project),
Series A, 10.25% due 12/01/2020 1,649
NR* NR* 2,000 Pennsylvania Economic Development Financing Authority, IDR
(GEHL Company Inc. Project), AMT, Series F, 9% due 9/01/2010 2,181
NR* NR* 5,000 Pennsylvania Economic Development Financing Authority,
Recycling Revenue Bonds (Ponderosa Fibres Project), AMT,
Series A, 9.25% due 1/01/2022 4,703
NR* NR* 5,000 Philadelphia, Pennsylvania, Authority for IDR, Refunding
(Commercial Development Philadelphia Airport), AMT, 7.75%
due 12/01/2017 5,245
</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-- BBB+ NR* $ 1,500 Rhode Island State Health and Educational Building Corporation,
1.2% Hospital Financing Revenue Bonds (South County Hospital),
7.25% due 11/01/2011 $ 1,550
NR* Baa 875 West Warwick, Rhode Island, GO, UT, Series A, 6.80% due
7/15/1998 905
South Carolina-- AA- Aa 2,000 Greenville, South Carolina, Hospital System Revenue
0.9% Refunding Bonds, Series B, 5.25% due 5/01/2023 1,792
Tennessee--2.3% NR* NR* 4,265 Knox County, Tennessee, Health, Educational and Housing
Facilities Board, Hospital Facilities Revenue Bonds (Baptist
Health System of East Tennessee), 8.60% due 4/15/2016 4,494
Texas--6.4% 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 3,159
BB Ba1 4,805 Jefferson County, Texas, Health Facilities Development
Corporation, Hospital Revenue Bonds (Baptist Healthcare
System Project), 8.875% due 6/01/2021 5,022
BB Ba 3,270 Odessa, Texas, Junior College District, Revenue Refunding Bonds,
Series A, 8.125% due 12/01/2018 3,459
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
Disposal Revenue Bonds (Union Carbide Chemicals and Plastics),
AMT, 8.20% due 3/15/2021 1,112
Utah--1.7% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding Bonds
(IHC Hospitals, Inc.), INFLOS, 9.779% due 5/15/2020 (e)(g) 3,375
Vermont--0.8% NR* NR* 1,500 Vermont Educational and Health Buildings Financing
Agency Revenue Bonds (College of Saint Joseph's Project),
8.50% due 11/01/2024 1,608
Total Investments (Cost--$184,349)--98.4% 196,314
Other Assets Less Liabilities--1.6% 3,238
--------
Net Assets--100.0% $199,552
--------
--------
</TABLE>
<PAGE>
(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, 1996.
(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, 1996.
(h)Bank Qualified.
*Not Rated.
**Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
++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>
<CAPTION>
Statement of Assets and Liabilities as of August 31, 1996
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$184,348,939) (Note 1a) $196,313,800
Cash 6,042
Receivables:
Interest $ 3,922,428
Capital shares sold 76,072 3,998,500
------------
Prepaid registration fees and other assets (Note 1e) 9,942
------------
Total assets 200,328,284
------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 360,295
Investment adviser (Note 2) 172,947
Administration (Note 2) 45,513 578,755
------------
Accrued expenses and other liabilities 197,100
------------
Total liabilities 775,855
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Net Assets: Net assets $199,552,429
------------
------------
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $ 1,823,397
Consist of: Paid-in capital in excess of par 187,104,917
Accumulated realized capital losses on investments--net (1,340,746)
Unrealized appreciation on investments--net 11,964,861
------------
Net assets--Equivalent to $10.94 per share based on 18,233,970 shares of
capital outstanding $199,552,429
------------
------------
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
Statement of Operations
<TABLE>
<CAPTION>
For The Year Ended
August 31, 1996
<S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $ 14,914,448
(Note 1d):
Expenses: Investment advisory fees (Note 2) 1,911,059
Administrative fees (Note 2) 502,910
Transfer agent fees (Note 2) 123,874
Registration fees (Note 1e) 88,152
Professional fees 81,506
Accounting services (Note 2) 70,139
Printing and shareholder reports 68,644
Advertising 62,151
Listing fees 35,538
Directors' fees and expenses 24,597
Custodian fees 19,548
Pricing services 13,173
Amortization of organization expenses (Note 1e) 7,409
Other 7,695
------------
Total expenses 3,016,395
------------
Investment income--net 11,898,053
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Realized & Realized gain on investments--net 1,967,290
Unrealized Change in unrealized appreciation on investments--net (2,408,692)
Gain (Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 11,456,651
(Notes 1b, 1d & 3): ------------
------------
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Year Ended August 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <C> <C> <C>
Operations: Investment income--net $ 11,898,053 $ 12,378,384
Realized gain (loss) on investments--net 1,967,290 (2,713,001)
Change in unrealized appreciation on investments--net (2,408,692) 6,520,321
------------ ------------
Net increase in net assets resulting from operations 11,456,651 16,185,704
------------ ------------
Dividends & Investment income--net (11,898,053) (12,378,384)
Distributions to Realized gain on investments--net -- (2,796,951)
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 (11,898,053) (15,770,370)
------------ ------------
Capital Share Net increase (decrease) in net assets derived from
Transactions capital shares transactions 1,418,958 (14,798,840)
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets 977,556 (14,383,506)
Beginning of year 198,574,873 212,958,379
------------ ------------
End of year $199,552,429 $198,574,873
------------ ------------
------------ ------------
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION (concluded)
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements.
For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.97 $ 10.92 $ 11.44 $ 10.74 $ 10.29
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .66 .65 .65 .68 .71
Realized and unrealized gain (loss) on
investments--net (.03) .23 (.45) .75 .50
-------- -------- -------- -------- --------
Total from investment operations .63 .88 .20 1.43 1.21
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.66) (.65) (.65) (.68) (.71)
Realized gain on investments--net -- (.15) (.07) (.05) (.05)
In excess of realized gain on investments--net -- (.03) -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (.66) (.83) (.72) (.73) (.76)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.94 $ 10.97 $ 10.92 $ 11.44 $ 10.74
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Investment Based on net asset value per share 5.81% 8.68% 1.75% 13.83% 12.29%
Return:* -------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratios to Average Expenses, net of reimbursement 1.50% 1.52% 1.48% 1.37% 1.30%
Net Assets: -------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Expenses 1.50% 1.52% 1.48% 1.47% 1.55%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Investment income--net 5.90% 6.11% 5.81% 6.17% 6.85%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Supplemental Net assets, end of year (in thousands) $199,552 $198,575 $212,958 $216,922 $170,735
Data: -------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Portfolio turnover 28.54% 21.28% 28.51% 28.74% 31.74%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
*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.
<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 Board of 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 wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner.
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, 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, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1996 were $57,059,552 and $55,429,659,
respectively.
Net realized and unrealized gains as of August 31, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $ 1,967,290 $ 11,964,861
------------ ------------
Total $ 1,967,290 $ 11,964,861
------------ ------------
------------ ------------
As of August 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $11,964,861, of which $13,087,215
related to appreciated securities and $1,122,354 related to
depreciated securities. The aggregate cost of investments at August
31, 1996 for Federal income tax purposes was $184,348,939.
<PAGE>
4. Capital Shares Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1996 Shares Amount
Shares sold 1,986,078 $ 21,952,170
Shares issued to share-
holders in reinvestment
of dividends 435,140 4,809,103
------------ ------------
Total issued 2,421,218 26,761,273
Shares tendered (2,283,709) (25,342,315)
------------ ------------
Net increase 137,509 $ 1,418,958
------------ ------------
------------ ------------
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)
------------ ------------
------------ ------------
<PAGE>
Exhibit (g)(2)
<PAGE>
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, 1997, 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
five-year period then ended. 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, 1997 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, 1997, 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, 1997
<PAGE>
<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 -- 1.3% B+ NR* $1,000 Brewton, Alabama, IDB, PCR, Refunding (Container
Corporation American Project), 8% due 4/01/2009 $1,083
BBB- Baa3 1,500 Mobile, Alabama, IDB, Solid Waste Disposal Revenue
Refunding Bonds (Mobile Energy Services Company
Project), 6.95% due 1/01/2020 1,631
Arizona -- 2.8% B B2 3,000 Coconino County, Arizona, Pollution Control
Corporation, Revenue Refunding Bonds (Tuscon
Electric Power - Navajo), AMT, Series A, 7.125%
due 10/01/2032 3,123
NR* NR* 1,500 Navajo County, Arizona, IDA, IDR (Stone Container
Corporation Project), AMT, 7.20% due 6/01/2027 1,598
NR* NR* 1,235 Pima County, Arizona, IDA, Revenue Bonds (La
Hacienda Project), 9.50% due 12/01/2016 1,272
California -- 1.3% AAA Aaa 10,000 Foothill/Eastern Transportation Corridor Agency,
California, Toll Road Revenue Bonds (Senior Lien),
Series A, 6.50%** due 1/01/2028 (h) 1,786
NR* NR* 1,500 Long Beach, California, Redevelopment Agency, M/F
Housing Revenue Bonds (Pacific Court Apartments),
AMT, Issue B, 6.80% due 9/01/2013 (f) 975
Colorado -- 7.4% NR* NR* 1,700 Colorado Postsecondary Educational Facilities
Authority Revenue Bonds (Colorado Ocean Journey
Incorporated Project), 8.30% due 12/01/2017 1,769
Denver, Colorado, City and County Airport Revenue
Bonds:
BBB Baa1 900 AMT, Series A, 8% due 11/15/2025 1,005
BBB Baa1 2,000 AMT, Series D, 7.75% due 11/15/2013 2,471
AAA Baa1 1,500 Series A, 7.25% due 11/15/2002 (d) 1,718
AAA NR* 500 Series A, 7.25% due 11/15/2002 (d) 573
NR* NR* 3,000 Denver, Colorado, Urban Renewal Authority, Tax
Increment Revenue Bonds (Downtown Denver), AMT,
Series A, 7.75% due 9/01/2017 3,080
NR* NR* 2,000 Mountain Village Metropolitan District, Colorado,
Refunding Bonds (San Miguel County), UT, 8.10% due
12/01/2011 2,254
Public Highway Authority, Colorado, Revenue
Refunding Bonds (E-470), Senior Series B (b):
AAA Aaa 5,000 5.47%** due 9/01/2019 1,474
AAA Aaa 5,000 5.50%** due 9/01/2020 1,378
</TABLE>
PORTFOLIO ABBREVIATIONS
To simplify the listings 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
EDA Economic Development Authority
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
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
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>
Connecticut -- 1.7% NR* NR* 1,500 Connecticut State Health and Educational Facilities
Authority Revenue Bonds (Edgehill Issue), Series A,
6.875% due 7/01/2027 1,525
NR* B1 1,875 New Haven, Connecticut, Facilities Revenue Bonds
(Hill Health Corporation Project), 9.25% due
5/01/2017 2,083
Florida -- 1.8% NR* NR* 1,000 Arbor Greene, Florida, Community Development
District, Special Assessment Revenue Bonds, 7.60%
due 5/01/2018 1,032
AA- VMIG1+ 800 Dade County, Florida, IDA, Exempt Facilities Revenue
Refunding Bonds (Florida Power and Light Company),
VRDN, 3.75% due 6/01/2021 (a) 800
NR* NR* 1,000 Grand Haven Community Development District, Florida,
Special Assessment, Series B, 6.90% due 5/01/2019 988
BB+ NR* 960 Jacksonville, Florida, Port Authority, IDR, Refunding
(United States Gypsum Company Project), 7.25% due
10/01/2014 1,040
Georgia -- 5.2% NR* Aaa 2,465 Atlanta, Georgia, Urban Residential Finance
Authority, College Facilities Revenue Bonds (Morris
Brown College Project), 9.50% due 12/01/2001 (d) 3,000
NR* NR* 1,975 Atlanta, Georgia, Urban Residential Finance
Authority, M/F Housing Mortgage Revenue Bonds
(Northside Plaza Apartments Project), 9.75% due
11/01/2020 2,143
NR* NR* 2,000 Hancock County, Georgia, COP, 8.50% due 4/01/2015 2,207
NR* NR* 1,485 Rockdale County, Georgia, Development Authority,
Solid Waste Disposal Revenue Bonds (Visy Paper Inc.
Project), AMT, 7.40% due 1/01/2016 1,587
NR* NR* 2,000 Savannah, Georgia, EDA, IDR (Stone Container
Corporation Project), AMT, 7.40% due 4/01/2026 2,152
Hawaii -- 0.9% AA+ NR* 1,750 Hawaii State Department of Budget and Finance,
Special Purpose Mortgage Revenue Bonds (Citizens
Utility Company), RIB, AMT, Series 91-B, 9.132% due
11/01/2021 (g) 1,984
Illinois -- 6.2% BBB - Baa2 4,000 Chicago, Illinois, O'Hare International Airport,
Special Facilities Revenue Refunding Bonds (American
Airlines Inc. Project), 8.20% due 12/01/2024 4,784
NR* NR* 3,195 Illinois Development Finance Authority, Acquisition
Program Revenue Bonds (Prime Health Care Centers
Facilities), 7.75% due 12/01/2016 3,406
NR* NR* 2,000 Illinois Educational Facilities Authority Revenue
Bonds (Chicago Osteopathic Health System), 7.25% due
11/15/2019 (d) 2,419
NR* Baa1 1,250 Illinois Health Facilities Authority Revenue Bonds
(Holy Cross Hospital Project), 6.75% due 3/01/2024 1,319
BBB NR* 1,000 Lansing, Illinois, Tax Increment Revenue Refunding
Bonds (Sales Tax - Landings Redevelopment), 7% due
12/01/2008 1,108
Indiana -- 1.8% A NR* 1,500 Indiana Bond Bank, Special Hospital Program
(Hendricks Community Hospital), Series A, 7.125%
due 4/01/2013 1,647
NR* NR* 2,000 Wabash, Indiana, Solid Waste Disposal Revenue Bonds
(Jefferson Smurfit Corporation Project), AMT, 7.50%
due 6/01/2026 2,145
Iowa -- 0.9% NR* NR* 1,500 Iowa Finance Authority, Health Care Facilities
Revenue Refunding Bonds (Care Initiatives Project),
9.25% due 7/01/2025 1,959
Kentucky -- 2.2% AAA Aaa 4,000 Louisville, Kentucky, Hospital Revenue Bonds,
INFLOS, 9.288% due 10/01/2014 (b)(g) 4,605
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
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>
Louisiana -- 4.0% NR* A3 3,500 Lake Charles, Louisiana, Harbor and Terminal
District, Port Facilities Revenue Refunding Bonds
(Trunkline LNG Company Project), 7.75% due 8/15/2022 3,998
NR* A3 1,000 Louisiana Public Facilities Authority, Hospital
Revenue Bonds (Woman's Hospital Foundation Project),
7.25% due 10/01/2002 (d) 1,138
BB NR* 3,000 Port New Orleans, Louisiana, IDR, Refunding
(Continental Grain Company Project), 7.50% due
7/01/2013 3,277
Maryland -- 1.0% NR* NR* 2,000 Maryland State Energy Financing Administration,
Limited Obligation Revenue Bonds (Cogeneration -
AES Warrior Run), AMT, 7.40% due 9/01/2019 2,151
Massachusetts -- 7.4% NR* NR* 1,145 Boston, Massachusetts, Industrial Development
Financing Authority, Solid Waste Disposal Facility
Revenue Bonds (Jet-A-Way Project), AMT, 10.50% due
1/01/2011 1,293
NR* Ba2 530 Lawrence, Massachusetts, GO, 9.875% due 12/15/1998 562
Massachusetts State Health and Educational Facilities
Authority Revenue Bonds:
NR* B 1,810 (New England Memorial Hospital Project), Series C,
7% due 4/01/2014 1,700
NR* NR* 305 (North Adams Regional Hospital), Issue B, 8% due
7/01/1998 312
NR* B2 3,000 Refunding (New England Memorial Hospital), Series B,
6.125% due 7/01/2013 2,590
Massachusetts State Industrial Finance Agency Revenue
Bonds:
NR* B1 1,675 (Bay Cove Human Services Incorporated), 8.375% due
4/01/2019 1,861
BBB Ba1 1,600 (Vinfen Corporation), 7.10% due 11/15/2018 1,734
NR* NR* 5,000 Massachusetts State Port Authority, Special Project
Revenue Bonds (Harborside Hyatt), AMT, 10% due
3/01/2026 5,582
Missouri -- 4.6% BBB- NR* 2,830 Joplin, Missouri, IDA, Hospital Facilities Revenue
Refunding and Improvement Bonds (Tri-State
Osteopathic), 8.25% due 12/15/2014 3,122
BB NR* 3,690 Missouri State Health and Educational Facilities
Authority Revenue Bonds (Southwest Baptist University
Project), 9.50% due 10/01/2011 4,347
AAA Aaa 2,000 Phelps County, Missouri, Hospital Revenue Bonds
(Phelps County Regional Medical Center), 8.30% due
3/01/2000 (d) 2,227
New Jersey -- 12.3% Camden County, New Jersey, Improvement Authority,
Lease Revenue Bonds (Holt Hauling & Warehousing),
Series A:
NR* NR* 4,600 9.625% due 1/01/2011 5,298
NR* NR* 2,000 9.875% due 1/01/2021 2,334
BB B2 4,000 Camden County, New Jersey, Pollution Control
Financing Authority, Solid Waste Resource Recovery
Revenue Bonds, Series D, 7.25% due 12/01/2010 4,093
NR* NR* 1,500 New Jersey, EDA, IDR, Refunding (Newark Airport
Marriott Hotel), 7% due 10/01/2014 1,596
NR* Aaa 8,070 New Jersey, EDA, Revenue Bonds (Saint Barnabas
Project), 5.625%** due 7/01/2024 (b) 1,839
New Jersey Health Care Facilities Financing Authority
Revenue Bonds (d):
NR* NR* 4,725 (Riverwood Center Issue), Series A, 9.90% due
7/01/2001 5,686
AAA Aaa 4,700 (Saint Elizabeth Hospital), Series B, 8.25% due
7/01/2000 5,236
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
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 -- 0.5% B B2 1,000 Farmington, New Mexico, PCR (Tucson Electric Power
Company - San Juan), Series A, 6.95% due 10/01/2020 1,046
New York -- 5.1% BBB+ Baa1 310 New York City, New York, GO, UT, Series C, Sub-Series
C-1, 7.50% due 8/01/2021 348
BB+ Baa3 2,750 New York City, New York, IDA, Special Facilities
Revenue Bonds (United Airlines Inc. Project), AMT,
5.65% due 10/01/2032 2,686
Port Authority of New York and New Jersey, Special
Obligation Revenue Bonds (Special Project - KIAC),
AMT, Series 4:
NR* NR* 1,000 3rd Installment, 7% due 10/01/2007 1,114
NR* NR* 2,750 5th Installment, 6.75% due 10/01/2019 2,961
Utica, New York, Public Improvement, UT:
CCC B 635 8.50% due 8/15/2007 706
CCC B 635 8.50% due 8/15/2008 708
CCC B 500 8.50% due 8/15/2009 557
CCC B 500 8.50% due 8/15/2010 557
CCC B 500 8.50% due 8/15/2011 557
CCC B 500 8.50% due 8/15/2012 557
Ohio -- 0.9% AAA Aaa 1,700 Ohio, HFA, S/F Mortgage Revenue Bonds, RIB, AMT,
Series A-2, 9.72% due 3/24/2031 (c)(g) 1,895
Oregon -- 1.5% NR* NR* 1,000 Western Generation Agency, Oregon, Cogeneration
Project Revenue Bonds (Wauna Cogeneration Project),
AMT, Series B, 7.40% due 1/01/2016 1,069
B+ NR* 1,955 Yamhill County, Oregon, PCR, Refunding (Smurfit
Newsprint Corporation Project), 8% due 12/01/2003 2,126
Pennsylvania -- 10.4% NR* NR* 2,000 Lehigh County, Pennsylvania, General Purpose
Authority Revenue Bonds (Wiley House Kids Peace),
8.75% due 11/01/2014 2,092
BBB- NR* 5,000 McKean County, Pennsylvania, Hospital Authority
Revenue Bonds (Bradford Hospital Project), 8.875%
due 10/01/2020 5,685
Montgomery County, Pennsylvania, IDA, Revenue Bonds:
NR* Ba3 3,400 (Pennsburg Nursing and Rehabilitation Center),
7.625% due 7/01/2018 3,832
NR* NR* 1,500 Refunding (1st Mortgage - Meadowood Corporation
Project), Series A, 10.25% due 12/01/2020 1,663
NR* NR* 5,000 Pennsylvania Economic Development Financing
Authority, Recycling Revenue Bonds (Ponderosa Fibres
Project), AMT, Series A, 9.25% due 1/01/2022 3,262
NR* NR* 5,000 Philadelphia, Pennsylvania, Authority for IDR,
Refunding (Commercial Development - Philadelphia
Airport), AMT, 7.75% due 12/01/2017 5,511
Rhode Island -- 0.8% AAA NR* 1,500 Rhode Island State Health and Educational Building
Corporation, Hospital Financing Revenue Bonds (South
County Hospital), 7.25% due 11/01/2001 (d) 1,671
Tennessee -- 1.2% BBB Baa2 2,500 Memphis - Shelby County, Tennessee, Airport
Authority, Special Facilities and Projects Revenue
Refunding Bonds (Federal Express Corporation), 5.35%
due 9/01/2012 2,528
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
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>
Texas -- 8.6% BBB- Baa2 3,000 Dallas - Fort Worth, Texas, International Airport
Facilities Improvement Corporation Revenue Bonds
(American Airlines, Inc.), AMT, 7.25% due 11/01/2030 3,297
BB Ba2 3,000 Houston, Texas, Airport System Revenue Bonds,
Special Facilities (Continental Airline Airport
Improvement), AMT, Series C, 6.125% due 7/15/2027 3,043
BB Ba1 4,650 Jefferson County, Texas, Health Facilities
Development Corporation, Hospital Revenue Bonds
(Baptist Healthcare System Project), 8.875% due
6/01/2021 4,897
BB Ba 3,270 Odessa, Texas, Junior College District, Revenue
Refunding Bonds, Series A, 8.125% due 12/01/2018 3,624
NR* VMIG1+ 2,200 Port Arthur, Texas, Navigational District, PCR,
Refunding (Texaco Incorporated Project), VRDN,
3.80% due 10/01/2024 (a) 2,200
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 Disposal Revenue Bonds (Union
Carbide Chemicals and Plastics), AMT, 8.20% due
3/15/2021 1,114
Utah -- 2.9% AAA Aaa 3,000 Salt Lake City, Utah, Hospital Revenue Refunding
Bonds (IHC Hospitals, Incorporated), INFLOS, 9.616%
due 5/15/2020 (e)(g) 3,514
NR* NR* 2,600 Tooele County, Utah, PCR, Refunding (Laidlaw
Environmental), AMT, Series A, 7.55% due 7/01/2027 2,675
Vermont -- 0.8% NR* NR* 1,500 Vermont Educational and Health Buildings Financing
Agency Revenue Bonds (College of Saint Joseph's
Project), 8.50% due 11/01/2024 1,692
Virginia -- 1.8% A+ A2 1,500 Henry County, Virginia, IDA, Hospital Revenue
Refunding Bonds (Martinsville and Henry Memorial
Hospital), 6% due 1/01/2027 1,539
NR* NR* 2,000 Pittsylvania County, Virginia, IDA, Multi-Trade
Revenue Bonds, AMT, Series A, 7.50% due 1/01/2014 2,176
Total Investments (Cost -- $189,991) -- 97.3% 206,001
Other Assets Less Liabilities -- 2.7% 5,619
--------
Net Assets -- 100.0% $211,620
========
</TABLE>
(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, 1997.
(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, 1997.
(h) FSA Insured.
* Not Rated.
** Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
+ 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>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
FINANCIAL INFORMATION
Statements of Assets and Liabilities as of August 31, 1997
<S> <C> <C>
Assets: Investments, at value (identified cost -- $189,990,692) (Note 1a) $206,000,786
Cash 51,512
Receivables:
Interest $3,832,233
Securities sold 1,876,749
Capital shares sold 544,416 6,253,398
-----------
Prepaid registration fees and other assets (Note 1e) 43,400
-------------
Total assets 212,349,096
-------------
Liabilities: Payables:
Dividends to shareholders (Note 1f) 360,144
Investment adviser (Note 2) 178,298
Administrator (Note 2) 46,920 585,362
-----------
Accrued expenses and other liabilities 143,599
-------------
Total liabilities 728,961
-------------
Net Assets: Net assets $211,620,135
=============
Net Assets Common stock, $.10 par value, 200,000,000 shares authorized $1,865,498
Consist of: Paid-in capital in excess of par 191,672,043
Undistributed realized capital gains on investments -- net 2,072,500
Unrealized appreciation on investments -- net 16,010,094
-------------
Net assets -- Equivalent to $11.34 per share based on 18,654,978 shares of
capital outstanding $211,620,135
=============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (Continued)
Statement of Operations
<S> <C> <C>
Investment Income Interest and amortization of premium and discount earned $14,933,718
(Note 1d):
Expenses: Investment advisory fees (Note 2) 1,950,602
Administrative fees (Note 2) 513,316
Transfer agent fees (Note 2) 119,690
Advertising 66,715
Printing and shareholder reports 60,505
Accounting services (Note 2) 52,907
Professional fees 51,421
Registration fees (Note 1e) 48,359
Listing fees 35,882
Directors' fees and expenses 24,683
Custodian fees 18,746
Pricing services 14,215
Other 6,476
------------
Total expenses 2,963,517
------------
Investment income -- net 11,970,201
------------
Realized & Realized gain on investments -- net 4,093,259
Unrealized Change in unrealized appreciation on investments -- net 4,045,233
Gain on ------------
Investments -- Net Net Increase in Net Assets Resulting from Operations $20,108,693
(Notes 1b, 1d & 3): ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (Continued)
Statement of Changes in Net Assets
For the Year Ended
August 31, 1997
Increase (Decrease) in Net Assets 1997 1996
<S> <C> <C> <C>
Operations: Investment income -- net $11,970,201 $11,898,053
Realized gain on investments -- net 4,093,259 1,967,290
Change in unrealized appreciation on investments -- net 4,045,233 (2,408,692)
------------- -------------
Net increase in net assets resulting from operations 20,108,693 11,456,651
------------- -------------
Dividends & Investment income -- net (11,970,201) (11,898,053)
Distributions to Realized gain on investments -- net (680,014) --
Shareholders ------------- -------------
(Note 1f): Net decrease in net assets resulting from dividends and distributions
to shareholders (12,650,215) (11,898,053)
------------- -------------
Capital Share Net increase in net assets derived from capital share transactions 4,609,228 1,418,958
Transactions ------------- -------------
(Note 4):
Net Assets: Total increase in net assets 12,067,706 977,556
Beginning of year 199,552,429 198,574,873
------------- -------------
End of year $211,620,135 $199,552,429
============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
FINANCIAL INFORMATION (Concluded)
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements.
<S> <C> <C> <C> <C> <C> <C>
For the Year Ended August 31,
1997 1996 1995 1994 1993
Increase (Decrease) in Net Asset Value:
Per Share Net asset value, beginning of year $10.94 $10.97 $10.92 $11.44 $10.74
Operating --------- --------- --------- --------- ---------
Performance: Investment income -- net .65 .66 .65 .65 .68
Realized and unrealized gain (loss) on
investments -- net .44 (.03) .23 (.45) .75
--------- --------- --------- --------- ---------
Total from investment operations 1.09 .63 .88 .20 1.43
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income -- net (.65) (.66) (.65) (.65) (.68)
Realized gain on investments -- net (.04) -- (.15) (.07) (.05)
In excess of realized gain on investments -- net -- -- (.03) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.69) (.66) (.83) (.72) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of year $11.34 $10.94 $10.97 $10.92 $11.44
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 10.20% 5.81% 8.68% 1.75% 13.83%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses, net of reimbursement 1.44% 1.50% 1.52% 1.48% 1.37%
Net Assets: ========= ========= ========= ========= =========
Expenses 1.44% 1.50% 1.52% 1.48% 1.47%
========= ========= ========= ========= =========
Investment income -- net 5.83% 5.90% 6.11% 5.81% 6.17%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $211,620 $199,552 $198,575 $212,958 $216,922
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.07% 28.54% 21.28% 28.51% 28.74%
========= ========= ========= ========= =========
</TABLE>
* Total investment returns exclude the effects of the early withdrawal charge,
if any. 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.
<PAGE>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
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 Board of 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.
[bullet] 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.
[bullet] 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
<PAGE>
Merrill Lynch High Income Municipal Bond Fund, Inc. August 31, 1997
income. Realized gains and losses on security transactions are
determined on the identified cost basis.
(e) Prepaid registration fees -- Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions -- Dividends from net investment income
are declared daily and paid monthly. Distributions of capital gains are
recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill
Lynch Asset Management, L.P. ("MLAM"). The general partner of MLAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of
Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner.
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 the Fund pays a monthly fee at 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.
For the year ended August 31, 1997, Merrill Lynch Funds Distributor,
Inc. ("MLFD") earned early withdrawal charges of $44,647 relating to the
tender of the Fund's shares.
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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the year ended August 31, 1997 were $86,555,822 and $85,811,091,
respectively.
Net realized and unrealized gains as of August 31, 1997 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $4,093,259 $16,010,094
----------- -----------
Total $4,093,259 $16,010,094
=========== ===========
As of August 31, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $15,989,952, of which $18,452,554 related to
appreciated securities and $2,462,602 related to depreciated securities.
The aggregate cost of investments at August 31, 1997 for Federal income
tax purposes was $190,010,834.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1997 Shares Amount
Shares sold 2,126,310 $23,757,046
Shares issued to share-
holders in reinvestment of
dividends and distributions 447,856 4,995,614
----------- -----------
Total issued 2,574,166 28,752,660
Shares tendered (2,153,158) (24,143,432)
----------- -----------
Net increase 421,008 $4,609,228
=========== ===========
For the Year Ended Dollar
August 31, 1996 Shares Amount
Shares sold 1,986,078 $21,952,170
Shares issued to share-
holders in reinvestment
of dividends 435,140 4,809,103
----------- -----------
Total issued 2,421,218 26,761,273
Shares tendered (2,283,709) (25,342,315)
----------- -----------
Net increase 137,509 $1,418,958
=========== ===========
