MERRILL LYNCH
CORPORATE
HIGH YIELD
FUND, INC.
FUND LOGO
Semi-Annual Report
September 30, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate High Yield Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH CORPORATE HIGHYIELD FUND, INC.
TO OUR SHAREHOLDERS
The economic and interest rate consensus was confounded in the first
half of 1999 when the expected slowdown in the US economy failed to
materialize. In addition, a rebound occurred in Europe and Asia
(including long-dormant Japan). Investor focus then shifted from
recession to inflation. The Federal Reserve Board reversed its
policy of monetary easing and became restrictive, raising the
Federal Funds rate twice to slow economic growth. Long-term interest
rates soared. This environment proved both good and bad for the high-
yield market. The rise in interest rates was a negative. On the
other hand, the stronger economy proved helpful to a number of
economically sensitive industries. For example, paper, energy and
steel experienced volume increases and product price improvement,
thus easing credit concerns somewhat. Perceptions of credit risk in
emerging markets also eased, allowing this asset category to
rebound.
The illiquidity that gripped the corporate bond markets in late 1998
eased in 1999 but remained more pronounced than has been the norm
throughout much of the 1990s. A major reason would seem to be the
decision made by Wall Street market makers to reduce inventory
exposure to corporate bonds. Firms were surprised by the steep bond
price markdowns in 1998 on securities held in inventory for resale
and sought to reduce this exposure. In addition, many firms closed
proprietary trading portfolios that focused on producing profits by
buying distressed securities at low prices. Thus, the support for
high-yield issuers that experienced credit problems diminished
considerably. The result brought much steeper declines in the price
of bonds experiencing credit deterioration and default.
The third quarter of 1999 reflected this weak environment. For the
three-month period ended September 30, 1999, the Fund's Class A,
Class B, Class C and Class D Shares had total returns of -2.93%,
- -3.11%, -3.12% and -2.99%, respectively. This is compared to a
- -1.60% total return for the unmanaged Credit Suisse First Boston
(CSFB) Global High Yield Index for the same period. The Fund's
performance was hindered by a high exposure to the battered
healthcare service sector, relative to the benchmark. In addition,
sharp deterioration in individual credits also had a large impact on
results. Throughout the September quarter, liquidity was poor and
the market struggled to absorb a relatively heavy new-issue
calendar. By late August, the cost to finance had risen to a point
that many issuers cancelled financing plans. New-issue supply slowed
precipitously, and the market moved sideways for the remainder of
the September quarter.
Investment Outlook
The interest rate outlook hinges on the US economy. We believe the
Federal Reserve Board is committed to maintaining noninflationary
growth and can be counted on to tighten monetary policy until growth
slows. In the short run, this is negative for bonds. In the long run
it is extremely positive, ensuring that the United States will
continue to experience low inflation and interest rates. We believe
that while interest rates will probably rise further in this
tightening cycle, most of the damage has been done. Yields on ten-
year Treasury notes have risen from 4.65% at December 31, 1998 to
6.25% in late October.
At this time, we believe the high-yield market is attractive
relative to Treasury bonds. Yield spreads are well above the
historic norm. At September 30, 1999, the yield difference between
the CSFB Global High Yield Index and US Treasury issues of
comparable maturity was 6.32% compared to an average of 5.45% over
the last ten years, and yield premiums exceeding 100% are at the
wide end of the range that generally prevailed over the past ten
years. Overall credit quality is improving and even problem credits
appear to have declined more than is justified by the underlying
fundamentals. The yield-to-maturity on the CSFB Global High Yield
Index exceeded 12%.
The macroeconomic outlook also appears generally favorable for the
high-yield market. Economic growth is occurring around the world,
strengthening the demand for goods and services, particularly
commodities. We are seeing the effects of this growth reflected in
improved earnings and outlook for a number of companies held in the
Portfolio. We believe this improvement may continue.
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
Portfolio Strategy
We believe that the high-yield market offers exceptional value. In
our view, bond prices are likely to move higher, and yields will
move lower over the coming year. We do not necessarily believe that
a peak in interest rates is imminent; markets may continue to
deteriorate for a while longer. However, we are positioning for the
future. We prefer lower-coupon discount bonds to more defensive par
or premium bonds because of greater total return potential in a
falling interest rate environment.
During the September quarter, we maintained credit quality in the
Fund modestly above the benchmark CSFB Global High Yield Index.
There are currently no distortions (and therefore no investment
opportunities) between quality categories. Bond selection remains
important as disappointing earnings provide punishing price
declines.
The largest industry representation in the Fund, aggregating
subcategories such as telephony, Internet transport and wireless,
was communications, at 15.3% of net assets at September 30, 1999.
This industry includes Nextel Communications, Inc., a rapidly
growing wireless telephone operator, and other communications
companies with strong fundamentals. Cable television, the second-
largest industry in the Fund, constituted 10.0% of net assets. While
its traditional role as a provider of video programming is a highly
stable business, this industry has excellent growth prospects as an
increasingly important carrier of Internet traffic and telephony.
Health services accounted for 8.4% of net assets and consisted of a
well-balanced portfolio of product and service providers, nursing
home operators and one large acute care company. To date, nearly
every credit has been impacted by reimbursement cuts under Medicare
prospective payment system. While bond prices in this sector have
been under severe pressure, most companies have done an excellent
job in navigating through a difficult environment. The energy sector
comprised 7.6% of Fund assets and consisted largely of oil and gas
production and service companies. Earnings have surged in this
sector as a result of the sharp rise in oil and gas prices over the
last six months. (See page 4 of this report to shareholders for a
list of the Five Largest Industries and Top Five Foreign Countries
in the Fund.)
We held a major portfolio overweighting in emerging markets, which
constituted 13.2% of net assets and included corporate bonds from a
variety of industries. The credit quality parameters of these
holdings are typically much higher than US high-yield issuers and
the companies much more dominant in their respective industries.
Examples included Grupo Minero Mexico SA, the world's second-lowest
cost producer of copper domiciled in Mexico; Multicanal SA, the
largest cable television operator in Argentina and all of Latin
America; and APP International Finance, a Singapore domiciled
manufacturer of many types and grades of paper with distribution
around the world. The improving economy benefited emerging markets
more than the US high-yield market this year. We believe this sector
is likely to continue to outperform.
In Conclusion
We appreciate your ongoing investment in Merrill Lynch Corporate
High Yield Fund, Inc., and we look forward to assisting you with
your financial needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
November 10, 1999
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
PORTFOLIO INFORMATION
As of September 30, 1999
<TABLE>
<CAPTION>
Percent of
Ten Largest Holdings Net Assets
<S> <S> <C>
R&B Falcon Corporation* Formed through a merger of Reading & Bates Company and Falcon Drilling, 2.1%
R&B Falcon operates the world's largest fleet of marine-based drilling
rigs servicing the international oil and gas industry. Its fleet includes
135 marine-based drilling units, inlcuding the industry's largest fleets
of barge and jackup rigs.
Supercanal Holdings SA Supercanal is the third-largest cable TV provider in Argentina. It has 1.9
a well-positioned operation and almost no competition throughout its service
territory with good demand prospects.
Impsat Corp. Impsat provides telecommunications services throughout Latin America and 1.8
is one of the largest providers of data transmission services in Argentina.
United International The company has interests in and operates cable television, telephony, 1.8
Holdings, Inc. high speed Internet access and programming services in ten countries across
Europe and Israel.
Ameriserve Food Ameriserve Food Distributors, the largest systems foodservice distributor 1.7
Distributors, Inc.* in North America, specializes in distribution to chain restaurants. The
company supplies fresh and frozen food products, canned and dry goods,
beverages, paper goods, equipment and cleaning products to its customers.
AmeriServe currently serves 30 restaurant chains with approximately 36,000
locations in North America, including Burger King, KFC, Olive Garden, Pizza Hut,
Red Lobster, Subway and Taco Bell. Sales totaled $8.8 billion in the 12 months
ended June 30, 1999.
Stena AB Stena is one of the largest privately held companies in Sweden. The company's 1.7
operating activities include ownership and chartering of roll-on/roll-off
vessels; crude and petroleum product tankers; drilling rigs; and investing in
residential and commercial real estate. In addition to these activities, the
company has significant strategic investments in Stena Line AB, one of the world's
largest international passenger and freight ferry service operators, and Coflexip
SA, the world leader in engineering, manufacture and installation of offshore
flexible pipe and a leading subsea contractor to the offshore oil and gas industry.
Doman Industries Doman is an integrated forest products company. The company grows and 1.8
Limited* harvests timber, sawmills logs into lumber and wood chips, manufactures
value-added lumber and produces dissolving sulphite pulp and NBSK pulp.
Doman also provides reforestation services.
PSINet Inc.* PSINet, an independent global provider of Internet solutions to businesses, 1.6
provides Internet connectivity and Web hosting services. The company also
offers a suite of value-added products and services, including corporate
intranets and remote user access services. PSINet conducts operations in
the United States, Canada, Latin America, Europe and Asia.
TFM, SA de CV* TFM (Grupo Transportacion Ferroviaria Mexicana), a joint venture company 1.5
owned principally by Transportacion Maritima Mexicana, its affiliate
Grupo Servia, SA de CV and Kansas City Southern Industries, Inc.,
operates and provides freight transportation services over the Northeast
Rail Lines. The network of the Northeast Rail Lines consists of approximately
2,600 miles of main track and is the primary corridor of the Mexican railroad
system. As a major beneficiary of the North American Free Trade Agreement
and the most direct route for goods shipped between Mexico City and the
United States, TFM accounts for approximately 63% of the rail traffic
between Mexico and United States.
Millicom International Millicom International develops and operates cellular telephone systems 1.5
Cellular worldwide. The company has interest in 33 cellular systems in 20 countries,
primarily in emerging markets in Asia, Latin America, Europe and Africa.
<FN>
*Includes combined holdings.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
PORTFOLIO INFORMATION (concluded)
As of September 30, 1999
Quality Profile* Percent of
S&P Rating/Moody's Rating Long-Term Investments
BBB/Baa 4.6%
BB/Ba 31.0
B/B 55.6
CCC/Caa 8.3
C/C 0.5
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Cable--International 8.5%
Health Services 8.4
Energy 7.6
Transportation 5.4
Wireless Communications--
Domestic Paging & Cellular 4.4
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Argentina 5.8%
Mexico 3.1
Brazil 2.2
Indonesia 1.4
Hong Kong 0.7
[FN]
*All holdings are denominated in US dollars.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Aldona Schwartz, Vice President
Donald C. Burke, Vice President and Treasurer
William E. Zitelli, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
3 Month 12 Month Since Inception Standardized
As of September 30, 1999 Total Return Total Return Total Return 30-day Yield
<S> <C> <C> <C> <C>
ML Corporate High Yield Fund, Inc. Class A Shares* -2.93% +6.08% -0.37% 10.64%
ML Corporate High Yield Fund, Inc. Class B Shares* -3.11 +5.28 -1.44 10.19
ML Corporate High Yield Fund, Inc. Class C Shares* -3.12 +5.23 -1.51 10.15
ML Corporate High Yield Fund, Inc. Class D Shares* -2.99 +5.82 -0.73 10.30
Merrill Lynch High Yield US Corporates, Cash Pay Index** -1.25 +3.37 +0.80
CS First Boston Global High Yield Index** -1.60 +3.95 -1.95
Ten-Year US Treasury Securities*** +2.30 -7.50 +3.42
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's inception date is 5/01/98.
**Unmanaged. These market-weighted Indexes mirror the high-yield
debt market of securities rated BBB or lower. Since inception total
return for Merrill Lynch High Yield USCorporates, Cash Pay Index is
from 5/01/98. Since inception total return for CS First Boston
Global High Yield Index is from 4/30/98.
***Since inception total return is from 4/30/98.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 +6.08% +1.84%
Inception (5/01/98)
through 9/30/99 -0.26 -3.10
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 +5.28% +1.44%
Inception (5/01/98)
through 9/30/99 -1.02 -2.88
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/99 +5.23% +4.27%
Inception (5/01/98)
through 9/30/99 -1.07 -1.69
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/99 +5.82% +1.58%
Inception (5/01/98)
through 9/30/99 -0.51 -3.34
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Bonds (Note 1a)
Bonds
<S> <S> <S> <C> <S> <C>
Aerospace--3.1% B- B3 $10,000,000 Fairchild Corporation, 10.75% due 4/15/2009 $ 8,550,000
B+ B1 10,000,000 Hexcel Corporation, 9.75% due 1/15/2009 8,850,000
B+ B1 5,000,000 Kitty Hawk, Inc., 9.95% due 11/15/2004 4,875,000
--------------
22,275,000
Airlines--1.4% B B1 10,150,000 USAir Inc., 9.625% due 2/01/2001 10,260,635
Automotive--1.3% BB+ Ba2 10,000,000 Federal-Mogul Company, 7.375% due 1/15/2006 9,263,950
Broadcasting-- Globo Comunicacoes e Participacoes, Ltd.:
Radio & B+ B2 1,500,000 10.50% due 12/20/2006 1,117,500
Television--0.9% B+ B2 7,500,000 10.50% due 12/20/2006 (e) 5,658,750
--------------
6,776,250
Cable-- BB- Ba3 4,500,000 Century Communications Corporation, 9.75% due 2/15/2002 4,528,125
Domestic--1.5% B+ B2 7,000,000 Charter Communications Holdings LLC, 8.625% due
4/01/2009 (e) 6,650,000
--------------
11,178,125
Cable-- BB B1 10,000,000 Cablevision SA, 13.75% due 5/01/2009 (e) 9,325,000
International-- BB+ B1 10,000,000 Multicanal SA, 13.125% due 4/15/2009 (e) 9,325,000
8.5% B- B3 10,000,000 NTL Communications Corp., 11.753%** due 10/01/2008 6,825,000
D Caa3 25,000,000 Supercanal Holdings SA, 11.50%** due 5/15/2005 (e)(g) 13,375,000
Telewest Communications PLC:
B+ B1 7,000,000 10.793%** due 4/15/2004 (e) 4,270,000
B+ B1 5,000,000 11.25% due 11/01/2008 5,375,000
B B3 21,000,000 United International Holdings, Inc., 12.64%** due
2/15/2008 (b) 12,783,750
--------------
61,278,750
Chemicals--2.1% BB- Ba3 5,000,000 ISP Holdings Inc., 9.75% due 2/15/2002 5,050,000
B+ B2 10,000,000 Lyondell Chemical Company, 10.875% due 5/01/2009 10,100,000
--------------
15,150,000
Child Care--1.3% B- B3 10,000,000 Kindercare Learning Centers, Inc., 9.50% due 2/15/2009 9,475,000
Communications-- B+ B2 17,215,000 Impsat Corp., 12.375% due 6/15/2008 13,126,437
3.1% B+ B2 17,000,000 Orion Network Systems, Inc., 16.429%** due 1/15/2007 9,010,000
--------------
22,136,437
Computer Services/ B B2 10,000,000 Amkor Technologies Inc., 10.50% due 5/01/2009 (e) 9,775,000
Electronics--2.9% B B2 6,000,000 Hadco Corporation, 9.50% due 6/15/2008 5,715,000
B B2 5,000,000 SCG Holding Corporation, 12% due 8/01/2009 (e) 5,156,250
--------------
20,646,250
Conglomerates-- B- B3 5,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 4,475,000
1.2% B+ NR* 5,000,000 Voto-Votorantim O/S Trading, 8.50% due 6/27/2005 (e) 4,448,000
--------------
8,923,000
Consumer B B3 10,000,000 Corning Consumer Products, 9.625% due 5/01/2008 7,962,500
Products--1.1%
Consumer B- Caa2 9,360,000 AP Holdings Inc., 14.85%** due 3/15/2008 4,750,200
Services--3.5% BB- B2 10,000,000 Avis Rent A Car Inc., 11% due 5/01/2009 (e) 10,300,000
BB+ Ba3 15,000,000 Protection One Alarm Monitoring, 8.625% due 1/15/2009 (e) 10,125,000
--------------
25,175,200
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Bonds (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C>
Energy--5.5% BB Ba2 $ 5,000,000 Eott Energy Partners LP, 11% due 10/01/2009 $ 5,000,000
Ocean Energy Inc.:
BB+ Ba2 4,000,000 7.625% due 7/01/2005 3,860,000
BB- B1 7,000,000 8.375% due 7/01/2008 6,790,000
CCC B3 6,000,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 4,710,000
B+ B1 6,000,000 Parker Drilling Co., 9.75% due 11/15/2006 5,820,000
BB- Ba3 5,000,000 RBF Finance Company, 11.375% due 3/15/2009 5,300,000
BB- B1 5,000,000 Tesoro Petroleum Corp., 9% due 7/01/2008 4,925,000
D C 9,000,000 TransAmerican Energy Corp., 0/13%** due 6/15/2002 (g) 1,012,500
B- B3 3,000,000 United Refining Co., 10.75% due 6/15/2007 1,995,000
--------------
39,412,500
Entertainment-- B+ B1 1,275,000 Intrawest Corp., 9.75% due 8/15/2008 1,230,375
1.1% B- Caa1 10,000,000 Regal Cinemas Inc., 9.50% due 6/01/2008 6,850,000
--------------
8,080,375
Financial CCC+ Caa3 5,000,000 Amresco Inc., 9.875% due 3/15/2005 3,225,000
Services--0.4%
Food & B- B3 5,000,000 Agrilink Foods, Inc., 11.875% due 11/01/2008 4,425,000
Beverage--1.3% B+ B1 5,000,000 Chiquita Brands International Inc., 9.125% due 3/01/2004 4,962,500
--------------
9,387,500
Gaming--3.0% Circus Circus Enterprises, Inc.:
BB+ Ba2 2,000,000 9.25% due 12/01/2005 2,005,000
BB+ Ba2 4,000,000 7.625% due 7/15/2013 3,435,000
BB+ Ba2 10,000,000 Park Place Entertainment, 7.875% due 12/15/2005 9,500,000
B B2 3,000,000 Trump Atlantic City Associates/Funding Inc., 11.25% due
5/01/2006 2,550,000
B- B3 5,000,000 Venetian Casino/LV Sands, 12.25% due 11/15/2004 4,025,000
--------------
21,515,000
Health Services-- B- Caa1 10,500,000 ALARIS Medical Inc., 14.993%** due 8/01/2008 5,460,000
8.4% B+ Ba3 5,000,000 Beverly Enterprises Inc., 9% due 2/15/2006 4,325,000
CCC+ B2 15,000,000 Extendicare Health Services, 9.35% due 12/15/2007 8,025,000
B+ Ba3 10,000,000 Fresenius Medical Capital Trust II, 7.875% due 2/01/2008 9,175,000
BB Ba3 8,000,000 ICN Pharmaceutical Inc., 8.75% due 11/15/2008 (e) 7,410,016
B- Caa1 10,000,000 Magellan Health Services, 9% due 2/15/2008 8,550,000
C C 7,000,000 Mariner Post--Acute Network, 9.50% due 11/01/2007 455,000
BBB Ba2 11,000,000 PharMerica, Inc., 8.375% due 4/01/2008 10,725,000
BB- Ba3 7,500,000 Tenet Healthcare Corp., 8.125% due 12/01/2008 6,881,250
--------------
61,006,266
Hotels--3.3% BB Ba2 5,000,000 HMH Properties, Inc., 8.45% due 12/01/2008 4,650,000
BB Ba2 10,000,000 Host Marriott LP, 8.375% due 2/15/2006 9,450,000
BB- B2 10,000,000 Signature Resorts, Inc., 9.25% due 5/15/2006 9,550,000
--------------
23,650,000
Independent Power B+ Ba3 8,000,000 The AES Corporation, 8.375% due 8/15/2007 7,320,000
Producers--1.0%
Industrial B B3 8,000,000 Neff Corp., 10.25% due 6/01/2008 7,960,000
Services--1.7% CCC+ Caa1 2,000,000 Thermadyne Holdings Corp., 12.50%** due 6/01/2008 880,000
CCC+ B3 4,250,000 Thermadyne Manufacturing, 9.875% due 6/01/2008 3,421,250
--------------
12,261,250
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Bonds (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C>
Internet PSINet Inc.:
Transport--1.6% B- B3 $ 7,000,000 10% due 2/15/2005 $ 6,728,750
B- B3 5,000,000 11% due 8/01/2009 (e) 4,962,500
--------------
11,691,250
Media & BB- B2 13,000,000 Call-Net Enterprises Inc., 8.94%** due 8/15/2008 6,825,000
Communications--
International--0.9%
Metals & Mining-- B- Caa1 11,000,000 AEI Resources Inc., 11.50% due 12/15/2006 (e) 9,735,000
4.1% BB Baa3 12,000,000 Grupo Minero Mexico SA, 8.25% due 4/01/2008 10,320,000
CCC+ B3 5,000,000 Kaiser Aluminum & Chemical Corp., 12.75% due 2/01/2003 5,075,000
B B3 5,000,000 Ormet Corporation, 11% due 8/15/2008 (e) 4,475,000
--------------
29,605,000
Paper & Forest CCC+ Caa1 6,000,000 APP International Finance, 11.75% due 10/01/2005 4,034,867
Products--4.0% B- B2 5,000,000 Container Corporation of America, 9.75% due 4/01/2003 5,131,250
Doman Industries Limited:
B Caa1 5,000,000 8.75% due 3/15/2004 3,562,500
B B3 5,000,000 12% due 7/01/2004 (e) 5,087,500
B Caa1 5,000,000 Series B, 9.25% due 11/15/2007 3,375,000
CCC+ Caa1 11,000,000 Pindo Deli Financial Mauritius, 10.75% due 10/01/2007 5,967,500
CCC+ Caa 2,000,000 Repap New Brunswick, 10.625% due 4/15/2005 1,755,000
--------------
28,913,617
Product Ameriserve Food Distributors:
Distribution-- B- B3 8,500,000 8.875% due 10/15/2006 6,715,000
2.8% CCC+ Caa1 9,000,000 10.125% due 7/15/2007 5,805,000
CCC+ Caa1 5,000,000 Nebco Evans Holding Co., 16.34%** due 7/15/2007 2,025,000
CCC+ Caa1 10,350,000 US Office Products Co., 9.75% due 6/15/2008 5,718,375
--------------
20,263,375
Publishing & BB- Ba3 5,000,000 Primedia, Inc., 7.625% due 4/01/2008 4,700,000
Printing--2.0% BB- Baa3 10,000,000 World Color Press Inc., 7.75% due 2/15/2009 9,450,000
--------------
14,150,000
Real Estate--0.6% BB- Ba3 4,875,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 4,655,625
Steel--2.1% NR* B2 5,000,000 CSN Iron SA, 9.125% due 6/01/2007 (e) 3,712,500
B B3 7,000,000 Republic Technology, 13.75% due 7/15/2009 (a)(e) 6,685,000
B B2 5,000,000 Weirton Steel Corp., 11.375% due 7/01/2004 4,987,500
--------------
15,385,000
Telephone-- B B2 10,000,000 Intermedia Communications Inc., 8.60% due 6/01/2008 8,625,000
Competitive Local B B3 10,000,000 Nextlink Communications Inc., 10.75% due 6/01/2009 10,075,000
Exchange B- B2 2,000,000 RSL Communications PLC, 12.793%** due 3/01/2008 1,140,000
Carriers--2.8% --------------
19,840,000
Textiles--0.4% B Caa3 10,000,000 Galey & Lord, Inc., 9.125% due 3/01/2008 2,550,000
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS(continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Bonds (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C>
Transportation-- BB- NR* $11,000,000 Autopistas del Sol SA, 10.25% due 8/01/2009 (e) $ 8,085,000
5.4% BB B1 10,000,000 GS Superhighway Holdings, 10.25% due 8/15/2007 5,137,500
NR* C 5,000,000 Hvide Marine, Inc., 8.375% due 2/15/2008 (g) 2,225,000
BB Ba2 12,500,000 Stena AB, 10.50% due 12/15/2005 12,468,750
TFM, SA de CV:
B+ B2 5,000,000 10.25% due 6/15/2007 4,362,500
B+ B2 12,500,000 14.03%** due 6/15/2009 6,781,250
--------------
39,060,000
Waste Manage- BB- Ba3 6,500,000 Allied Waste North America, 7.375% due 1/01/2004 5,980,000
ment--0.8%
Wireless CCC+ B3 7,000,000 Metrocall Inc., 11% due 9/15/2008 (e) 4,550,000
Communications-- CCC+ B3 5,000,000 Nextel Partners Inc., 14%** due 2/01/2004 2,950,000
Domestic Paging & CCC+ B3 4,000,000 Omnipoint Corporation, 11.50% due 9/15/2009 (e) 4,140,000
Cellular--2.5% B- B2 5,000,000 Paging Network, Inc., 10.125% due 8/01/2007 1,425,000
NR* B3 8,775,000 TeleCorp PCS Inc., 11.625%** due 4/15/2009 (e) 5,122,406
--------------
18,187,406
Wireless CCC+ Caa1 10,000,000 Dolphin Telecom PLC, 17.059%** due 6/01/2008 4,500,000
Communications-- B- Caa1 15,000,000 Millicom International Cellular, 16.028%** due 6/01/2006 10,800,000
International B- Caa1 12,000,000 Nextel International Inc., 13.258%** due 4/15/2008 6,300,000
Paging & Telesystem International Wireless Inc.:
Cellular--4.1% CCC+ Caa1 7,000,000 14.26%** due 6/30/2007 3,605,000
CCC+ Caa1 10,000,000 14.014%** due 11/01/2007 4,150,000
--------------
29,355,000
Total Investments in Bonds (Cost--$735,104,596)--91.7% 662,820,261
Shares
Held Issue
Preferred Stocks & Warrants
Energy--2.1% 15,572 R&B Falcon Corporation (c) 14,832,330
15,000 R&B Falcon Corporation (Warrants)(e)(f) 375,000
TCR Holdings (Convertible Preferred)(d):
6,426 (Class B) 386
3,534 (Class C) 198
9,317 (Class D) 494
19,277 (Class E) 1,214
--------------
15,209,622
Product Distribution--0.0% 6,039 Nebco Evans Holding Co. (c) 224,953
Publishing & Printing--0.6% 50,000 Primedia, Inc. (Series H) 4,512,500
Wireless Communications-- 3,362 Crown Castle International Corporation (c) 3,404,025
Domestic Paging & Cellular--1.9% 6,711 Nextel Communications, Inc. (Series D)(c) 7,012,995
2,875 Rural Cellular Corp. (Series B)(c) 2,939,688
--------------
13,356,708
Total Investments in Preferred Stocks & Warrants
(Cost--$35,321,898)--4.6% 33,303,783
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue (Note 1a)
Short-Term Securities
<S> <C> <S> <C>
Commercial Paper***--1.2% $8,610,000 General Electric Capital Corp., 5.60% due 10/01/1999 $ 8,610,000
Total Investments in Short-Term Securities
(Cost $8,610,000)--1.2% 8,610,000
Total Investments (Cost--$779,036,494)--97.5% 704,734,044
Other Assets Less Liabilities--2.5% 18,006,920
--------------
Net Assets--100.0% $ 722,740,964
==============
<FN>
*Not Rated.
**Represents a zero coupon or step bond; the interest rate shown
reflects the effective yield at the time of purchase by the Fund.
***Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
(a)Each $1,000 face amount contains one warrant of Republic
Technology.
(b)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(c)Represents a pay-in-kind security which may pay
interest/dividends in additional face amount/shares.
(d)Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $2,000,
representing 0.00% of net assets.
Acquisition Value
Issue Date Cost (Note 1a)
TCR Holdings
(Convertible Preferred):
(Class B) 12/10/1998 $ 386 $ 386
(Class C) 12/10/1998 198 198
(Class D) 12/10/1998 494 494
(Class E) 12/10/1998 1,214 1,214
--------- ---------
Total $ 2,292 $ 2,292
========= =========
(e)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(f)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(g)Non-income producing security.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of September 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$779,036,494) (Note 1a) $ 704,734,044
Cash 2,439,627
Receivables:
Securities sold $ 20,991,323
Interest 17,414,598
Capital shares sold 1,075,158
Dividends 107,812 39,588,891
--------------
Deferred organization expenses (Note 1e) 67,017
Prepaid expenses and other assets (Note 1e) 117,948
--------------
Total assets 746,947,527
--------------
Liabilities: Payables:
Securities purchased 19,653,486
Dividends to shareholders (Note 1f) 2,471,254
Capital shares redeemed 1,600,062
Distributor (Note 2) 416,727
Investment adviser (Note 2) 37,897 24,179,426
--------------
Accrued expenses and other liabilities 27,137
--------------
Total liabilities 24,206,563
--------------
Net Assets: Net assets $ 722,740,964
==============
Capital: Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized $ 130,972
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 5,973,888
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 1,336,061
Class D Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 835,117
Paid-in capital in excess of par 782,532,255
Undistributed realized capital gains on investments--net 6,235,121
Unrealized depreciation on investments--net (74,302,450)
--------------
Net assets $ 722,740,964
==============
Net Asset Class A--Based on net assets of $11,436,021 and 1,309,716
Value: shares outstanding $ 8.73
==============
Class B--Based on net assets of $521,699,285 and 59,738,884
shares outstanding $ 8.73
==============
Class C--Based on net assets of $116,673,747 and 13,360,608
shares outstanding $ 8.73
==============
Class D--Based on net assets of $72,931,911 and 8,351,171
shares outstanding $ 8.73
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended September 30, 1999
<S> <S> <C> <C>
Investment Interest and discount earned $ 36,641,377
Income Dividends 1,319,449
(Note 1d): Other 43,153
--------------
Total income 38,003,979
--------------
Expenses: Investment advisory fees (Note 2) $ 2,225,795
Account maintenance and distribution fees--Class B (Note 2) 1,991,385
Account maintenance and distribution fees--Class C (Note 2) 491,864
Registration fees (Note 1e) 193,054
Transfer agent fees--Class B (Note 2) 144,900
Account maintenance fees--Class D (Note 2) 93,194
Printing and shareholder reports 75,059
Accounting services (Note 2) 50,833
Amortization of organization expenses (Note 1e) 40,931
Transfer agent fees--Class C (Note 2) 33,230
Professional fees 29,255
Custodian fees 23,357
Transfer agent fees--Class D (Note 2) 15,468
Directors' fees and expenses 11,932
Pricing services 5,009
Transfer agent fees--Class A (Note 2) 2,766
Other 5,223
--------------
Total expenses 5,433,255
--------------
Investment income--net 32,570,724
--------------
Realized & Realized gain on investments--net 5,135,484
Unrealized Gain Change in unrealized depreciation on investments--net (61,848,184)
(Loss) on --------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $ (24,141,976)
(Notes 1b, ==============
1d & 3):
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
For the Six For the Period
Months Ended May 1, 1998++ to
September 30, March 31,
Increase (Decrease) in Net Assets: 1999 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 32,570,724 $ 36,331,838
Realized gain on investments--net 5,135,484 1,099,637
Change in unrealized depreciation on investments--net (61,848,184) (12,454,266)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations (24,141,976) 24,977,209
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (634,443) (826,433)
(Note 1f): Class B (23,159,773) (24,983,066)
Class C (5,333,538) (6,174,842)
Class D (3,442,970) (4,347,497)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (32,570,724) (36,331,838)
-------------- --------------
Capital Stock Net increase in net assets derived from capital share
Transactions transactions 70,914,922 719,793,371
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 14,202,222 708,438,742
Beginning of period 708,538,742 100,000
-------------- --------------
End of period $ 722,740,964 $ 708,538,742
============== ==============
<FN>
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
Class A Class B
For the Six For the For the Six For the
The following per share data and ratios have been derived Months Period Months Period
from information provided in the financial statements. Ended May 1, 1998++ Ended May 1, 1998++
Sept. 30, to March 31, Sept. 30, to March 31,
Increase (Decrease) in Net Asset Value: 1999 1999 1999 1999
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.42 $ 10.00 $ 9.42 $ 10.00
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .44 .79 .40 .73
Realized and unrealized loss on investments--net (.69) (.58) (.69) (.58)
---------- ---------- ---------- ----------
Total from investment operations (.25) .21 (.29) .15
---------- ---------- ---------- ----------
Less dividends from investment income--net (.44) (.79) (.40) (.73)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.73 $ 9.42 $ 8.73 $ 9.42
========== ========== ========== ==========
Total Investment Based on net asset value per share (2.82%)+++ 2.51%+++ (3.18%)+++ 1.80%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement .76%* .52%* 1.52%* 1.27%*
Net Assets: ========== ========== ========== ==========
Expenses .76%* .76%* 1.52%* 1.52%*
========== ========== ========== ==========
Investment income--net 9.46%* 9.39%* 8.70%* 8.61%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 11,436 $ 12,864 $ 521,699 $ 502,377
Data: ========== ========== ========== ==========
Portfolio turnover 31.84% 49.40% 31.84% 49.40%
========== ========== ========== ==========
<CAPTION>
Class C Class D
For the Six For the For the Six For the
The following per share data and ratios have been derived Months Period Months Period
from information provided in the financial statements. Ended May 1, 1998++ Ended May 1, 1998++
Sept. 30, to March 31, Sept. 30, to March 31,
Increase (Decrease) in Net Asset Value: 1999 1999 1999 1999
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.42 $ 10.00 $ 9.42 $ 10.00
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .40 .72 .42 .77
Realized and unrealized loss on investments--net (.69) (.58) (.69) (.58)
---------- ---------- ---------- ----------
Total from investment operations (.29) .14 (.27) .19
---------- ---------- ---------- ----------
Less dividends from investment income--net (.40) (.72) (.42) (.77)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.73 $ 9.42 $ 8.73 $ 9.42
========== ========== ========== ==========
Total Investment Based on net asset value per share (3.21%)+++ 1.75%+++ (2.94%)+++ 2.28%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.57%* 1.31%* 1.01%* .75%*
Net Assets: ========== ========== ========== ==========
Expenses 1.57%* 1.57%* 1.01%* 1.01%*
========== ========== ========== ==========
Investment income--net 8.65%* 8.53%* 9.21%* 9.10%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 116,674 $ 119,281 $ 72,932 $ 74,017
Data: ========== ========== ========== ==========
Portfolio turnover 31.84% 49.40% 31.84% 49.40%
========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Corporate High Yield Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares under the
Merrill Lynch Select Pricing SM System. Shares of Class A and Class
D are sold with a front-end sales charge. Shares of Class B and
Class C may be subject to a contingent deferred sales charge. All
classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that Class B,
Class C and Class D Shares bear certain expenses related to the
account maintenance of such shares, and Class B and Class C Shares
also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distribution
expenditures. The following is a summary of significant accounting
policies followed by the Fund.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
mean of the most recent bid and ask prices as obtained from one or
more dealers that make markets in the securities. Portfolio
securities that are traded both in the over-the-counter market and
on a stock exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities
this ordinarily will be the over-the-counter market. Short-term
securities are valued at amortized cost, which approximates market
value.
Options written or purchased are valued at the last sale price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price at the close of such
exchanges. 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 use a matrix system for valuations.
(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 equity, debt and currency
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
financial 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.
* Options--The Fund is authorized to purchase and write call and 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 loss or gain to the extent the cost of the
closing transaction exceeds the premium paid or received).
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
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). Dividend income is recorded on the ex-
dividend dates. Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(e) Deferred organization and prepaid registration fees--Deferred
organization expenses are amortized on a straight line basis over a
period not exceeding five years. 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 Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co., which is the limited partner. The Fund has
also entered into a Distribution Agreement and Distribution Plans
with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"),
a division of Princeton Funds Distributor, Inc. ("PFD"), which is a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM 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 of .60%, on an annual basis,
of the average daily value of the fund's net assets.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of the Fund as
follows:
Account Distribution
Maintenance Fee Fee
Class B .25% .50%
Class C .25% .55%
Class D .25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended September 30, 1999, MLFD earned
underwriting discounts and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 77 $ 1,101
Class D $8,487 $69,613
For the six months ended September 30, 1999, MLPF&S received
contingent deferred sales charges of $822,369 and $86,476 relating
to transactions in Class B and Class C Shares of the Portfolio,
respectively.
During the six months ended September 30, 1999, the Fund paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $799
for security price quotations to compute the net asset value of the
Fund.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended September 30, 1999 were $297,904,255 and
$222,677,548, respectively.
Net realized gains for the six months ended September 30, 1999 and
net unrealized losses as of September 30, 1999 were as follows:
Realized Unrealized
Gains Losses
Long-term investments $ 5,135,331 $ (74,302,450)
Short-term investments 153 --
------------ --------------
Total $ 5,135,484 $ (74,302,450)
============ ==============
As of September 30, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $74,302,450, of which $5,666,148
related to appreciated securities and $79,968,598 related to
depreciated securities. The aggregate cost of investments at
September 30, 1999 for Federal income tax purposes was $779,036,494.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $70,914,922 and $719,793,371 for the six months ended September
30, 1999 and for the period May 1, 1998 to March 31, 1999,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
September 30, 1999 Shares Amount
Shares sold 414,989 $ 3,845,741
Shares issued to shareholders
in reinvestment of dividends 44,386 408,128
---------- -------------
Total issued 459,375 4,253,869
Shares redeemed (516,008) (4,655,121)
---------- -------------
Net decrease (56,633) $ (401,252)
========== =============
Class A Shares for the
Period May 1, 1998++ to Dollar
March 31, 1999 Shares Amount
Shares sold 2,330,105 $ 21,930,940
Shares issued to shareholders
in reinvestment of dividends 57,215 529,164
---------- -------------
Total issued 2,387,320 22,460,104
Shares redeemed (1,023,471) (9,511,391)
---------- -------------
Net increase 1,363,849 $ 12,948,713
========== =============
[FN]
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class B Shares for the
Six Months Ended Dollar
September 30, 1999 Shares Amount
Shares sold 12,447,507 $ 115,349,532
Shares issued to shareholders
in reinvestment of dividends 1,118,735 10,286,824
---------- -------------
Total issued 13,566,242 125,636,356
Automatic conversion of
shares (43,379) (392,739)
Shares redeemed (7,135,277) (65,236,490)
---------- -------------
Net increase 6,387,586 $ 60,007,127
========== =============
Merrill Lynch Corporate High Yield Fund, Inc.
September 30, 1999
Class B Shares for the
Period May 1, 1998++ to Dollar
March 31, 1999 Shares Amount
Shares sold 61,308,556 $ 583,441,531
Shares issued to shareholders
in reinvestment of dividends 1,188,964 11,030,045
---------- -------------
Total issued 62,497,520 594,471,576
Automatic conversion of
shares (23,309) (221,805)
Shares redeemed (9,125,413) (84,440,756)
---------- -------------
Net increase 53,348,798 $ 509,809,015
========== =============
[FN]
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class C Shares for the
Six Months Ended Dollar
September 30, 1999 Shares Amount
Shares sold 2,951,371 $ 27,465,107
Shares issued to shareholders
in reinvestment of dividends 306,272 2,817,782
---------- -------------
Total issued 3,257,643 30,282,889
Shares redeemed (2,564,934) (23,517,884)
---------- -------------
Net increase 692,709 $ 6,765,005
========== =============
Class C Shares for the
Period May 1, 1998++ to Dollar
March 31, 1999 Shares Amount
Shares sold 15,012,995 $ 143,340,616
Shares issued to shareholders
in reinvestment of dividends 351,594 3,266,291
---------- -------------
Total issued 15,364,589 146,606,907
Shares redeemed (2,699,190) (25,083,407)
---------- -------------
Net increase 12,665,399 $ 121,523,500
========== =============
[FN]
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class D Shares for the
Six Months Ended Dollar
September 30, 1999 Shares Amount
Shares sold 1,987,845 $ 18,458,728
Automatic conversion of
shares 43,379 392,739
Shares issued to shareholders
in reinvestment of dividends 153,249 1,409,079
---------- -------------
Total issued 2,184,473 20,260,546
Shares redeemed (1,693,563) (15,716,504)
---------- -------------
Net increase 490,910 $ 4,544,042
========== =============
Class D Shares for the
Period May 1, 1998++ to Dollar
March 31, 1999 Shares Amount
Shares sold 10,622,611 $ 101,293,239
Automatic conversion of
shares 23,308 221,805
Shares issued to shareholders
in reinvestment of dividends 197,476 1,830,079
---------- -------------
Total issued 10,843,395 103,345,123
Shares redeemed (2,985,634) (27,832,980)
---------- -------------
Net increase 7,857,761 $ 75,512,143
========== =============
[FN]
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
