MERRILL LYNCH
CORPORATE
HIGH YIELD
FUND, INC.
FUND LOGO
Annual Report
March 31, 2000
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 HIGH YIELD FUND, INC.
TO OUR SHAREHOLDERS
Fiscal Year in Review
For the 12 months ended March 31, 2000, the Fund's Class A, Class B,
Class C and Class D Shares had total returns of -1.97%, -2.72%,
- -2.76% and -2.22%, respectively. (Results shown do not include sales
charges and would be lower if sales charges were included. Complete
performance information can be found on pages 5 and 6 of this report
to shareholders.) These returns were modestly lower than the CSFB
Global High Yield Index (an unmanaged benchmark which broadly
reflects the market as a whole), which returned +0.30% for the same
period. The Fund underperformed as a result of our somewhat more
aggressive portfolio structure with greater sensitivity to the
direction of the market.
The High-Yield Market
The six-month period ended March 31, 2000 was dominated by interest
rate tensions. On March 21, 2000, the Federal Reserve Board raised
the Federal Funds rate (the rate at which commercial banks borrow
from the Federal Reserve) from 5.75% to 6.00%. This action--the
fifth quarter point increase since last June--was generally
expected. The Federal Reserve Board has been clear that its intent
is to continue to raise interest rates until economic growth slows
to a pace that it considers noninflationary. Recent reported
increases in inflation can only reinforce this conviction. Most
forecasters anticipate one or more additional moves before the
Federal Reserve Board's objective is achieved. In this environment,
the high-yield market was weak. The flow of funds reported by high-
yield mutual funds remained negative, with a reported outflow for
the six-month period of $6.8 billion. There was also evidence of
diminished interest in the high-yield market by asset allocaters as
well. For example, it was recently reported that the San Francisco
City and County Retirement System will trim its high-yield exposure.
The reasons for the lack of investor interest in the high-yield
market and its lackluster performance seem to relate to the
following factors:
In an environment of rising interest rates, fixed-income securities
are not a compelling investment category, particularly during a
period of excellent equity returns.
The performance of the high-yield asset class has been lackluster
since the summer of 1998 when default by Russia on its local
currency debt ignited a rush to quality. While the market recovered
to an extent, the volatility exhibited during this period was a
turnoff.
The high-yield market grew at a compound annual rate of 18.2% over
the five years ended December 1999. The market is primarily an
institutional over-the-counter market with the liquidity necessary
to facilitate efficient trading provided by Wall Street. More
capital is required to support the larger market and heavier trading
volumes. In 1999, in response to capital losses experienced during
the market crash in the previous year, Wall Street significantly
reduced capital employed in corporate bond trading. This reduced
market ability and raised the level of volati-lity. Investors have
therefore demanded a higher risk premium.
Portfolio Matters
For the six-month period ended March 31, 2000, the Fund's Class A,
Class B, Class C and Class D Shares had total returns of +0.87%,
+0.48%, +0.46% and +0.74%, respectively. These returns were in line
with the +0.77% total return generated by the CSFB Global High Yield
Index.
At March 31, 2000, cash equivalents constituted 2.3% of the Fund's
net assets. The portfolio was broadly diversified by company and
industry. The largest industry represented in the Fund was
communications (Internet/telephone/wireless) at 21.1% of net assets.
(See page 4 of this report to shareholders for a list of the Fund's
Five Largest Industries and Top Five Foreign Countries.) At March
31, 2000, the average maturity of the portfolio was 7 years.
Investment Outlook and Strategy
Despite the market's poor performance, the fundamentals are
generally attractive and valuation is compelling. Credit quality is
generally improving. Large sectors of the high-yield market are
exhibiting excellent earnings momentum. Oil and gas producers, paper
and forest products, steel, non-ferrous metals, transportation and
chemicals are experiencing cyclical earnings recoveries. By March
31, 2000, these sectors comprised 19.9% of the CSFB Global High
Yield Index and 26.6% of the Fund. Cable, communications and
broadcasting continue to experience excellent fundamentals and
constituted 36.4% of the benchmark and 33.5% of the Fund. Default
rates (a lagging indicator) peaked last fall and have been
declining. Moody's Investors Service, Inc.'s trailing 12-month
default rates (as a percentage of issuers) was 5.64% through March
31, 2000, compared with a 6.06% rate at the October 1999 peak. We
believe the trend will continue down. Finally, the current yield on
the benchmark CSFB Global High Yield Index was 11.4% at March 31,
2000. At an average price of $83.3 per $100 of par value, the yield
to maturity was 12.9%. These are the highest levels since 1992. The
yield spread relative to Treasury securities of comparable maturity
was 6.75%, almost 2% higher than the average over the last eight
years.
With attractive valuation dominating our strategic view, we are
structuring the Fund in an effort to enhance returns in a better
environment. An improved market is probably not near as the return
of investor interest in the high-yield asset class would seem to
require a more positive interest rate outlook and perhaps also some
measure of investor disenchantment with equities.
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
May 8, 2000
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
To reduce shareholders' expenses, Merrill Lynch Corporate High Yield
Fund, Inc. will no longer be printing and mailing quarterly reports
to shareholders. We will continue to provide you with reports on a
semi-annual and annual basis.
Effective May 15, 2000, Merrill Lynch Corporate High Yield Fund,
Inc. will change its name to Merrill Lynch U.S. High Yield Fund,
Inc. The Fund's management believes that the new name better
reflects the Fund's main investment strategies. The change in the
Fund's name does not connote a change in its investment objective,
which remains the same: to obtain current income, and secondarily,
to seek capital appreciation by investing primarily in a diversified
portfolio of fixed-income securities in the lower rating categories
of the recognized rating agencies or unrated but judged to be of
comparable quality. Also effective May 31, 2000, the Fund will limit
its investments in foreign securities to 10% of its assets. The Fund
will limit its future investments in foreign securities to issuers,
a majority of whose assets, or whose executive offices are located
in a country that is a member of the Organisation For Economic Co-
operation and Development.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
As of March 31, 2000
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
R&B Falcon Corporation* Formed through a merger of Reading & Bates Company and Falcon Drilling, 3.6%
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, including the industry's largest fleets
of barge and jackup rigs.
Nextel Communications, Nextel is the largest specialized mobile radio (SMR) and enhanced 2.8
Inc. specialized mobile radio (ESMR) provider in the United States, with
licenses covering 98% of the American population. While Nextel's SMR
system is virtually nationwide, the company is still building out a
national ESMR system. Through its 100%-owned subsidiary, Nextel Inter-
national Inc., Nextel is also building networks in Latin America and Asia.
Impsat Corp. Impsat provides telecommunications services throughout Latin America 2.4
and is one of the largest providers of data transmission services
in Argentina.
UnitedGlobalCom Inc. UnitedGlobalCom (formerly known as United International Holdings) is a 2.3
global broadband communications provider of video, voice and data services
with operations in various countries around the world. The company serves
video subscribers, telephony access lines, and high-speed broadband
accounts. United Global Communications also provides television programming
services to subscribers worldwide.
Supercanal Holdings SA Supercanal is the third-largest cable TV provider in Argentina. It has a 2.2
well-positioned operation and almost no competition throughout its service
territory with good demand prospects.
TFM, SA de CV* TFM (Grupo Transportacion Ferroviaria Mexicana), a joint venture company 2.1
owned principally by Transportacion Maritima Mexicana, its affiliate
Grupo Servia, SA de CV and Kansas City Southern Industries, Inc., operates
and provides freight transporation 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 the United States.
HMH Properties, Inc. HMH, a wholly-owned subsidiary of Host Marriott Corporation, owns or holds 2.1
controlling interests in 69 full-service hotels, comprising the majority of
Host Marriott's lodging properties. The properties are generally operated
under the Marriott and Ritz-Carlton brand names. Host Marriott manages most
of the properties for fees based on revenues or operating profit.
Autopistas del Sol SA Autopistas del Sol SA operates and maintains motorways in Argentina. The 2.1
company runs part of the Pan-American highway as a toll concession.
Doman Industries Doman is an integrated forest products company. The company grows and 2.0
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.
Millicom International Millicom International Cellular develops and operates cellular telephone 2.0
Cellular systems worldwide. The company has cellular interest in 33 cellular
systems in 20 countries, primarily in emerging markets.
*Includes combined holdings.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
PORTFOLIO INFORMATION (concluded)
As of March 31, 2000
Quality Profile* Percent of
S&P Rating/Moody's Rating Long-Term Investments
BB/Ba 28.6%
B/B 61.3
CCC/Caa 9.3
CC/Ca 0.1
C/C 0.1
NR (Not Rated) 0.6
*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 8.8%
Health Services 8.4
Transportation 7.6
Wireless Communications--International 6.7
Wireless Communications--Domestic 6.2
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Argentina 7.5%
Mexico 3.9
Canada 2.8
Indonesia 2.1
Luxembourg 2.0
*All holdings are denominated in US dollars.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
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. The Fund's Investment Adviser voluntarily waived a
portion of its management fee. Without such waiver, the Fund's
performance would have been lower.
<TABLE>
Recent Performance Results
<CAPTION>
6 Month 12 Month Since Inception Standardized
As of March 31, 2000 Total Return Total Return Total Return 30-day Yield
<S> <C> <C> <C> <C>
ML Corporate High Yield Fund, Inc. Class A Shares* +0.87% -1.97% +0.49% 11.56%
ML Corporate High Yield Fund, Inc. Class B Shares* +0.48 -2.72 -0.97 11.39
ML Corporate High Yield Fund, Inc. Class C Shares* +0.46 -2.76 -1.06 11.38
ML Corporate High Yield Fund, Inc. Class D Shares* +0.74 -2.22 +0.01 11.45
Merrill Lynch High Yield US Corporates, Cash Pay Index** -0.74 -1.33 +0.05 --
CS First Boston Global High Yield Index** +0.77 +0.30 -1.19 --
Ten-Year US Treasury Securities*** +2.75 -1.71 +4.83 --
<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.
March 31, 2000
PERFORMANCE DATA (concluded)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of Merrill Lynch Corporate High
Yield Fund, Inc.'s Class A Shares and Class B Shares compared to
growth of the CS First Boston High Yield Index++++. Beginning and
ending values are:
5/01/96** 3/00
Merrill Lynch Corporate
High Yield Fund, Inc.++
- --Class A Shares $ 9,600 $9,647
Merrill Lynch Corporate
High Yield Fund, Inc.++
- --Class B Shares $10,000 $9,659
CS Boston High Yield
Index++++ $10,000 $9,881
A line graph depicting the growth of Merrill Lynch Corporate High
Yield Fund, Inc.'s Class C Shares and Class D Shares compared to
growth of the CS First Boston High Yield Index++++. Beginning and
ending values are:
5/01/98** 3/00
Merrill Lynch Corporate
High Yield Fund, Inc.++
- --Class C Shares $10,000 $9,894
Merrill Lynch Corporate
High Yield Fund, Inc.++
- --Class D Shares $ 9,600 $9,601
CS Boston High Yield
Index++++ $10,000 $9,881
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++Merrill Lynch Corporate High Yield Fund, Inc. invests primarily in
a diversified portfolio of corporate fixed-income securities that
are rated in the lower rating categories of the established rating
services (BBB/Baa or lower).
++++This unmanaged market-weighted Index, which mirrors the high-
yield debt market, is comprised of securities rated BBB or below.
The starting date for the Index is from 4/30/98.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/00 -1.97% -5.89%
Inception (5/01/98)
through 3/31/00 +0.26 -1.85
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/00 -2.72% -6.20%
Inception (5/01/98) through 3/31/00 -0.51 -1.79
[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 3/31/00 -2.76% -3.63%
Inception (5/01/98)
through 3/31/00 -0.55 -0.98
[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 3/31/00 -2.22% -6.13%
Inception (5/01/98)
through 3/31/00 0.00 -2.10
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Value
Bonds
<S> <S> <S> <C> <S> <C>
Aerospace--2.8% B- B3 $10,000,000 Fairchild Corporation, 10.75% due 4/15/2009 $ 5,050,000
B B2 10,000,000 Hexcel Corporation, 9.75% due 1/15/2009 8,550,000
B+ B1 5,000,000 Kitty Hawk, Inc., 9.95% due 11/15/2004 4,425,000
--------------
18,025,000
Airlines--1.6% CCC+ B3 10,150,000 USAir Inc., 9.625% due 2/01/2001 10,050,023
Automotive--1.3% BB+ Ba2 10,000,000 Federal-Mogul Company, 7.375% due 1/15/2006 8,124,270
Broadcasting-- Globo Comunicacoes e Participacoes, Ltd.:
Radio & B+ B2 1,500,000 10.50% due 12/30/2006 1,312,500
Television-- B+ B2 7,500,000 10.50% due 12/20/2006 (e) 6,693,750
1.7% B- B3 2,975,000 Salem Communications Corp., 9.50% due 10/01/2007 2,781,625
--------------
10,787,875
Cable-- BB- B1 4,500,000 Century Communications Corporation, 9.75% due 2/15/2002 4,522,500
Domestic--2.1% Charter Communications Holdings LLC:
B+ B2 7,000,000 8.625% due 4/01/2009 6,212,500
B+ B2 3,000,000 10% due 4/01/2009 2,910,000
--------------
13,645,000
Cable-- BB B1 10,000,000 Cablevision SA, 13.75% due 5/01/2009 10,025,000
International-- BB+ B1 10,000,000 Multicanal SA, 13.125% due 4/15/2009 10,525,000
8.8% B- B3 5,000,000 NTL Communications Corp., 12.375%** due 10/01/2008 3,237,500
D Caa3 25,000,000 Supercanal Holdings SA, 11.50%** due 5/15/2005 (e)(g) 13,937,500
B- B3 21,000,000 UnitedGlobalCom Inc., 12.64%** due 2/15/2008 (b) 14,595,000
B B2 8,000,000 United Pan-Europe Communications, 13.466%** due
2/01/2005 (e) 4,040,000
--------------
56,360,000
Chemicals--2.9% BB- Ba3 5,000,000 ISP Holdings Inc., 9.75% due 2/15/2002 4,762,500
B+ B2 10,000,000 Lyondell Chemical Company, 10.875% due 5/01/2009 9,475,000
B Caa3 5,000,000 Sterling Chemicals Inc., 11.75% due 8/15/2006 4,250,000
--------------
18,487,500
Child Care-- B- B3 5,000,000 Kindercare Learning Centers, Inc., 9.50% due 2/15/2009 4,525,000
0.7%
Communications-- B B3 17,215,000 Impsat Corp., 12.375% due 6/15/2008 15,106,163
3.8% B+ B2 17,000,000 Orion Network Systems, Inc., 16.429%** due 1/15/2007 8,925,000
--------------
24,031,163
Computer Services/ B B2 5,000,000 Amkor Technologies Inc., 10.50% due 5/01/2009 4,912,500
Electronics-- CCC Caa1 7,750,000 Dictaphone Corp., 11.75% due 8/01/2005 7,711,250
2.0% --------------
12,623,750
Conglomerates-- B- B3 5,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 4,275,000
0.7%
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Value
Bonds (continued)
<S> <S> <S> <C> <S> <C>
Consumer B B3 $10,000,000 Corning Consumer Products, 9.625% due 5/01/2008 $ 6,550,000
Products--1.0%
Consumer CCC+ Caa2 9,360,000 AP Holdings Inc., 14.85%** due 3/15/2008 1,918,800
Services--1.7% B- B2 15,000,000 Protection One Alarm Monitoring, 8.125% due 1/15/2009 (e) 8,775,000
--------------
10,693,800
Energy--5.7% B B3 2,000,000 Benton Oil and Gas Co., 11.625% due 5/01/2003 1,355,000
BB- Ba3 7,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 6,545,000
CCC B3 10,500,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 8,767,500
B+ B1 6,000,000 Parker Drilling Co., 9.75% due 11/15/2006 5,715,000
BB- Ba3 5,000,000 RBF Finance Company, 11.375% due 3/15/2009 5,325,000
BB- B1 5,000,000 Tesoro Petroleum Corp., 9% due 7/01/2008 4,650,000
B- B3 6,000,000 United Refining Co., 10.75% due 6/15/2007 3,630,000
--------------
35,987,500
Entertainment-- B- Caa2 10,000,000 Regal Cinemas Inc., 9.50% due 6/01/2008 4,250,000
0.7%
Financial CCC- Caa3 5,000,000 Amresco Inc., 9.875% due 3/15/2005 3,725,000
Services--0.6%
Food & B B1 5,000,000 Chiquita Brands International Inc., 9.125% due 3/01/2004 4,287,500
Beverage--0.7%
Gaming--1.5% BB+ Ba2 5,000,000 Park Place Entertainment, 7.875% due 12/15/2005 4,625,000
B- Caa1 5,000,000 Venetian Casino/LV Sands, 12.25% due 11/15/2004 4,737,500
--------------
9,362,500
Health Services B- Caa1 10,500,000 ALARIS Medical Inc., 14.993%** due 8/01/2008 3,360,000
- --8.4% B+ B1 5,000,000 Beverly Enterprises Inc., 9% due 2/15/2006 4,256,250
CCC+ B3 15,000,000 Extendicare Health Services, 9.35% due 12/15/2007 7,875,000
B+ ba3 10,000,000 Fresenius Medical Capital Trust II, 7.875% due 2/01/2008 8,825,000
BB Ba3 8,000,000 ICN Pharmaceutical Inc., 8.75% due 11/15/2008 (e) 7,480,000
B- Caa1 10,000,000 Magellan Health Services, 9% due 2/15/2008 6,950,000
D C 7,000,000 Mariner Post--Acute Network, 9.50% due 11/01/2007 (g) 175,000
B+ B3 15,000,000 PharMerica, Inc., 8.375% due 4/01/2008 8,025,000
BB- Ba3 7,500,000 Tenet Healthcare Corp., 8.125% due 12/01/2008 6,881,250
--------------
53,827,500
Hotels--3.0% BB Ba2 5,000,000 HMH Properties, Inc., 8.45% due 12/01/2008 4,368,750
BB Ba2 10,000,000 Host Marriott LP, 8.375% due 2/15/2006 9,050,000
B B2 10,000,000 Signature Resorts, Inc., 9.25% due 5/15/2006 6,050,000
--------------
19,468,750
Independent Power B+ Ba3 8,000,000 The AES Corporation, 8.375% due 8/15/2007 7,000,000
Producers--1.1%
Industrial B B3 8,000,000 Neff Corp., 10.25% due 6/01/2008 7,100,000
Services--1.8% CCC+ Caa1 2,000,000 Thermadyne Holdings Corp., 12.50%** due 6/01/2008 850,000
CCC+ B3 4,250,000 Thermadyne Manufacturing, 9.875% due 6/01/2008 3,421,250
--------------
11,371,250
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Value
Bonds (continued)
<S> <S> <S> <C> <S> <C>
Internet PSINet Inc.:
Transport--1.5% B- B3 $ 5,000,000 10% due 2/15/2005 $ 4,725,000
B- B3 5,000,000 11% due 8/01/2009 4,875,000
--------------
9,600,000
Metals & CC Ca 11,000,000 AEI Resources Inc., 11.50% due 12/15/2006 (e)(g) 605,000
Mining--2.6% B+ B3 4,000,000 Asarco Inc., 8.50% due 5/01/2025 2,791,140
BB Ba1 10,000,000 Grupo Minero Mexico SA, 8.25% due 4/01/2008 8,550,000
B B3 5,000,000 Ormet Corporation, 11% due 8/15/2008 (e) 4,575,000
--------------
16,521,140
Paper & Forest CCC+ B3 6,000,000 APP International Finance, 11.75% due 10/01/2005 5,160,000
Products--4.1% Doman Industries Limited:
B Caa1 5,000,000 8.75% due 3/15/2004 4,125,000
B+ B3 5,000,000 12% due 7/01/2004 5,075,000
B Caa1 5,000,000 Series B, 9.25% due 11/15/2007 3,825,000
CCC+ B3 11,000,000 Pindo Deli Financial Mauritius, 10.75% due 10/01/2007 7,892,500
--------------
26,077,500
Product D Caa3 8,500,000 Ameriserve Food Distributors, 8.875% due 10/15/2006 (g) 1,062,500
Distribution-- D C 5,000,000 Nebco Evans Holding Co., 16.34%** due 7/15/2007 (g) 31,250
0.8% CCC- Caa1 10,350,000 US Office Products Co., 9.75% due 6/15/2008 (g) 3,777,750
--------------
4,871,500
Publishing & BB- Ba3 5,000,000 Primedia, Inc., 7.625% due 4/01/2008 4,525,000
Printing--0.7%
Real Estate-- BB- Ba3 4,875,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 4,509,375
0.7%
Steel--1.7% NR* B2 5,000,000 CSN Iron SA, 9.125% due 6/01/2007 (e) 4,187,500
B Caa1 7,000,000 Republic Technology, 13.75% due 7/15/2009 (a)(e)(g) 1,575,000
B B2 5,000,000 Weirton Steel Corp., 11.375% due 7/01/2004 5,125,000
--------------
10,887,500
Telephony--2.9% B B2 10,000,000 Intermedia Communications Inc., 8.60% due 6/01/2008 8,850,000
B B2 10,000,000 Nextlink Communications Inc., 10.75% due 6/01/2009 9,600,000
--------------
18,450,000
Textiles--0.6% B Caa3 10,000,000 Galey & Lord, Inc., 9.125% due 3/01/2008 3,650,000
Transportation-- BB- NR* 16,000,000 Autopistas del Sol SA, 10.25% due 8/01/2009 (e) 13,320,000
7.2% BB- B1 10,000,000 GS Superhighway Holdings, 10.25% due 8/15/2007 7,025,000
BB Ba2 12,500,000 Stena AB, 10.50% due 12/15/2005 11,687,500
TFM, SA de CV:
B+ B2 5,000,000 10.25% due 6/15/2007 4,812,500
B+ B2 12,500,000 14.03%** due 6/15/2009 8,781,250
--------------
45,626,250
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Value
Bonds (concluded)
<S> <S> <S> <C> <S> <C>
Utilities--0.4% BB+ Ba2 $ 2,700,000 Monterrey Power, SA de CV, 9.625% due 11/15/2009 (e) $ 2,538,000
Waste BB- Ba3 10,000,000 Allied Waste North America, 7.375% due 1/01/2004 8,600,000
Management--
1.3%
Wireless CCC Caa1 5,000,000 Airgate PCS Inc., 12.837%** due 10/01/2004 2,750,000
Communications-- CCC+ B3 7,000,000 Metrocall Inc., 11% due 9/15/2008 (e) 5,810,000
Domestic--4.0% CCC+ B3 8,000,000 Nextel Partners Inc., 13.303%** due 2/01/2009 5,120,000
C Caa3 5,000,000 Paging Network, Inc., 10.125% due 8/01/2007 (g) 3,475,000
NR* NR* 5,000,000 SBA Communications Corp., 13.76%** due 3/01/2003 3,250,000
B- B3 10,000,000 Spectrasite Holdings Inc., 12.875%** due 3/15/2005 (e) 4,925,000
--------------
25,330,000
Wireless CCC+ Caa1 10,000,000 Dolphin Telecom PLC, 17.059%** due 6/01/2003 3,950,000
Communications-- B- Caa1 15,000,000 Millicom International Cellular, 16.028%** due 6/01/2006 12,825,000
International-- B- Caa1 17,000,000 Nextel International Inc., 14.07%** due 4/15/2008 10,455,000
6.7% B+ B1 5,000,000 Nuevo Grupo Iusacell SA, 14.25% due 12/01/2006 (e) 5,362,500
Telesystem International Wireless Inc.:
CCC+ Caa1 7,000,000 14.26%** due 6/30/2007 4,515,000
CCC+ Caa1 10,000,000 14.014%** due 11/01/2007 5,650,000
--------------
42,757,500
Total Investments in Bonds
(Cost--$666,873,243)--89.8% 571,402,146
<CAPTION>
Shares
Held Issue
Common Stocks
<S> <C> <S> <C>
Transportation--0.4% 204,166 Hvide Marine Incorporated 2,590,356
Total Investments in Common Stocks
(Cost--$3,487,881)--0.4% 2,590,356
Preferred Stocks & Warrants
Energy--2.7% 10,347 R&B Falcon Corporation 11,511,037
15,000 R&B Falcon Corporation (Warrants) (e)(f) 5,857,500
TCR Holdings (Convertible Preferred) (d):
6,426 (Class B) 64
3,534 (Class C) 35
9,317 (Class D) 93
19,277 (Class E) 193
--------------
17,368,922
Product 6,208 Nebco Evans Holding Co. (c) 2,328
Distribution--0.0%
Publishing & 50,000 Primedia, Inc. (Series H) 4,312,500
Printing--0.7%
Wireless Communications 3,580 Crown Castle International Corporation (Preferred) (c) 3,553,150
- --Domestic--2.2% 7,154 Nextel Communications, Inc. (Series D) (c) 7,475,930
3,042 Rural Cellular Corp. (Series B) (c) 2,897,505
--------------
13,926,585
Total Investments in Preferred Stocks & Warrants
(Cost--30,922,413)--5.6% 35,610,335
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Value
Short-Term Securities
<S> <C> <S> <C>
Commercial $14,547,000 The CIT Group Holdings, Inc., 6.30% due 4/03/2000 $ 14,547,000
Paper***--2.3%
Total Investments in Short-Term Securities
(Cost--$14,547,000)--2.3% 14,547,000
Total Investments (Cost--$715,830,537)--98.1% 624,149,837
Other Assets Less Liabilities--1.9% 12,389,786
--------------
Net Assets--100.0% $ 636,539,623
==============
*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 $400,
representing 0.0% of net assets.
Acquisition
Issue Date Cost Value
TCR Holdings
(Convertible Preferred):
(Class B) 12/10/1998 $ 386 $ 64
(Class C) 12/10/1998 198 35
(Class D) 12/10/1998 494 93
(Class E) 12/10/1998 1,214 193
Total $ 2,292 $ 385
========== =========
(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.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
FINANCIAL INFORMATION
</TABLE>
<TABLE>
Statement of Assets and Liabilities as of March 31, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$715,830,537) $ 624,149,837
Cash 23,070
Receivables:
Interest $ 16,108,986
Capital shares sold 914,769
Dividends 107,812 17,131,567
--------------
Prepaid expenses and other assets 352,287
--------------
Total assets 641,656,761
--------------
Liabilities: Payables:
Capital shares redeemed 2,324,561
Dividends to shareholders 1,745,875
Distributor 415,132
Investment adviser 302,630 4,788,198
--------------
Accrued expenses and other liabilities 328,940
--------------
Total liabilities 5,117,138
--------------
Net Assets: Net assets $ 636,539,623
==============
Capital: Class A Shares of Common Stock, $.10 par value, 100,000,000
shares authorized $ 138,297
Class B Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 5,671,844
Class C Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 1,137,392
Class D Shares of Common Stock, $.10 par value, 100,000,000
shares authorized 755,390
Paid-in capital in excess of par 733,767,947
Accumulated distributions in excess of investment income--net (698,000)
Accumulated realized capital losses on investments--net (5,929,756)
Accumulated distributions in excess of realized capital gains
on investments--net (6,622,791)
Unrealized depreciation on investments--net (91,680,700)
--------------
Net assets $ 636,539,623
==============
Net Asset Class A--Based on net assets of $11,426,753 and 1,382,966
Value: shares outstanding $ 8.26
==============
Class B--Based on net assets of $468,705,474 and 56,718,444
shares outstanding $ 8.26
==============
Class C--Based on net assets of $93,984,567 and 11,373,921
shares outstanding $ 8.26
==============
Class D--Based on net assets of $62,422,829 and 7,553,904
shares outstanding $ 8.26
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended March 31, 2000
<S> <S> <C> <C>
Investment Interest and discount earned $ 74,691,187
Income: Dividends 3,247,577
--------------
Total income 77,938,764
--------------
Expenses: Investment advisory fees $ 4,316,385
Account maintenance and distribution fees--Class B 3,905,361
Account maintenance and distribution fees--Class C 925,701
Transfer agent fees--Class B 367,679
Registration fees 341,675
Printing and shareholder reports 288,055
Accounting services 209,423
Account maintenance fees--Class D 176,462
Professional fees 104,124
Transfer agent fees--Class C 80,591
Amortization of organization expenses 67,017
Custodian fees 50,692
Transfer agent fees--Class D 39,951
Directors' fees and expenses 27,003
Pricing services 10,371
Transfer agent fees--Class A 6,980
Other 17,472
--------------
Total expenses 10,934,942
--------------
Investment income--net 67,003,822
--------------
Realized & Realized loss on investments--net (6,976,470)
Unrealized Change in unrealized depreciation on investments--net (79,226,434)
Loss on --------------
Investments-- Net Decrease in Net Assets Resulting from Operations $ (19,199,082)
Net: ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the For the Period
Year Ended May 1, 1998++ to
March 31, March 31,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 67,003,822 $ 36,331,838
Realized gain (loss) on investments--net (6,976,470) 1,099,637
Change in unrealized depreciation on investments--net (79,226,434) (12,454,266)
-------------- --------------
Net increase (decrease) in net assets resulting from operations (19,199,082) 24,977,209
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (1,236,053) (826,433)
Shareholders: Class B (48,253,891) (24,983,066)
Class C (10,633,947) (6,174,842)
Class D (6,879,931) (4,347,497)
In excess of investment income--net:
Class A (13,853) --
Class B (540,789) --
Class C (119,176) --
Class D (77,105) --
In excess of realized gain on investments--net:
Class A (109,227) --
Class B (4,854,944) --
Class C (1,024,292) --
Class D (634,328) --
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (74,377,536) (36,331,838)
-------------- --------------
Capital Stock Net increase in net assets derived from capital share
Transactions: transactions 21,577,499 719,793,371
-------------- --------------
Net Assets: Total increase (decrease) in net assets (71,999,119) 708,438,742
Beginning of period 708,538,742 100,000
-------------- --------------
End of period $ 636,539,623 $ 708,538,742
============== ==============
++Commencement of operations.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
Class A Class B
For the For the
The following per share data and ratios have been derived For the Period For the Period
from information provided in the financial statements. Year Ended May 1, 1998++ Year Ended May 1, 1998++
March 31, to March 31, March 31, to March 31,
Increase (Decrease) in Net Asset Value: 2000 1999 2000 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 .90 .79 .83 .73
Realized and unrealized loss on investments--net (1.07) (.58) (1.07) (.58)
---------- ---------- ---------- ----------
Total from investment operations (.17) .21 (.24) .15
---------- ---------- ---------- ----------
Less dividends and distributions from:
Investment income--net (.90) (.79) (.83) (.73)
In excess of investment income--net (.01) -- (.01) --
In excess of realized gain on investments--net (.08) -- (.08) --
---------- ---------- ---------- ----------
Total dividends and distributions (.99) (.79) (.92) (.73)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.26 $ 9.42 $ 8.26 $ 9.42
========== ========== ========== ==========
Total Investment Based on net asset value per share (1.97%) 2.51%+++ (2.72%) 1.80%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement .81% .52%* 1.57% 1.27%*
Net Assets: ========== ========== ========== ==========
Expenses .81% .76%* 1.57% 1.52%*
========== ========== ========== ==========
Investment income--net 9.97% 9.39%* 9.24% 8.61%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 11,427 $ 12,864 $ 468,705 $ 502,377
Data: ========== ========== ========== ==========
Portfolio turnover 59.25% 49.40% 59.25% 49.40%
========== ========== ========== ==========
*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.
March 31, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
The following per share data and ratios have been derived For the Period For the Period
from information provided in the financial statements. Year Ended May 1, 1998++ Year Ended May 1, 1998++
March 31, to March 31, March 31, to March 31,
Increase (Decrease) in Net Asset Value: 2000 1999 2000 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 .83 .72 .88 .77
Realized and unrealized loss on investments--net (1.07) (.58) (1.07) (.58)
---------- ---------- ---------- ----------
Total from investment operations (.24) .14 (.19) .19
---------- ---------- ---------- ----------
Less dividends and distributions from:
Investment income--net (.83) (.72) (.88) (.77)
In excess of investment income--net (.01) -- (.01) --
In excess of realized gain on investments--net (.08) -- (.08) --
---------- ---------- ---------- ----------
Total dividends and distributions (.92) (.72) (.97) (.77)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.26 $ 9.42 $ 8.26 $ 9.42
========== ========== ========== ==========
Total Investment Based on net asset value per share (2.76%) 1.75%+++ (2.22%) 2.28%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses, net of reimbursement 1.62% 1.31%* 1.06% .75%*
Net Assets: ========== ========== ========== ==========
Expenses 1.62% 1.57%* 1.06% 1.01%*
========== ========== ========== ==========
Investment income--net 9.17% 8.53%* 9.73% 9.10%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 93,985 $ 119,281 $ 62,423 $ 74,017
Data: ========== ========== ========== ==========
Portfolio turnover 59.25% 49.40% 59.25% 49.40%
========== ========== ========== ==========
*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.
March 31, 2000
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 accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. The Fund
offers four classes of shares under the Merrill Lynch Select
Pricingsm 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 invesment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
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).
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.
(g) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$52,923 have been reclassified between accumulated net realized
capital losses and accumulated distributions in excess of net
investment income. These reclassifications have no effect on net
assets or net asset values per share.
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
Maintenance Distribution
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.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
For the year ended March 31, 2000, 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 $ 148 $ 1,966
Class D $15,576 $130,453
For the year ended March 31, 2000, MLPF&S received contingent
deferred sales charges of $1,968,954 and $151,051 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively.
During the year ended March 31, 2000, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $200 for security
price quotations to compute the net asset value of the Fund.
In addition, MLPF&S received $5,938 in commissions on the execution
of portfolio security transactions for the fund for the year ended
March 31, 2000.
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.
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 year ended March 31, 2000 were $413,418,631 and
$402,329,575, respectively.
Net realized gains (losses) for the year ended March 31, 2000 and
net unrealized losses as of March 31, 2000 were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ (6,976,623) $ (91,680,700)
Short-term investments 153 --
------------ --------------
Total $ (6,976,470) $ (91,680,700)
============ ==============
As of March 31, 2000, net unrealized depreciation for Federal income
tax purposes aggregated $92,144,278, of which $22,687,099 related to
appreciated securities and $114,831,377 related to depreciated
securities. The aggregate cost of investments at March 31, 2000 for
Federal income tax purposes was $716,294,115.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $21,577,499 and $719,793,371 for the year ended March 31, 2000
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 Year Dollar
Ended March 31, 2000 Shares Amount
Shares sold 869,095 $ 7,757,049
Shares issued to shareholders
in reinvestment of dividends
and distributions 93,454 829,898
Total issued 962,549 8,586,947
Shares redeemed (945,932) (8,349,835)
------------ --------------
Net increase 16,617 $ 237,112
============ ==============
Class A Shares for the Period Dollar
May 1, 1998++ to 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
============ ==============
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class B Shares for the Year Dollar
Ended March 31, 2000 Shares Amount
Shares sold 20,150,141 $ 181,713,205
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,718,121 24,046,667
------------ --------------
Total issued 22,868,262 205,759,872
Automatic conversion of
shares (83,586) (739,770)
Shares redeemed (19,417,530) (170,922,374)
------------ --------------
Net increase 3,367,146 $ 34,097,728
============ ==============
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Period Dollar
May 1, 1998++ to 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
============ ==============
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class C Shares for the Year Dollar
Ended March 31, 2000 Shares Amount
Shares sold 4,710,900 $ 42,619,654
Shares issued to shareholders
in reinvestment of dividends
and distributions 692,998 6,142,451
------------ --------------
Total issued 5,403,898 48,762,105
Shares redeemed (6,697,876) (59,083,125)
------------ --------------
Net decrease (1,293,978) $ (10,321,020)
============ ==============
Class C Shares for the Period Dollar
May 1, 1998++ to 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
============ ==============
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
Class D Shares for the Year Dollar
Ended March 31, 2000 Shares Amount
Shares sold 4,076,100 $ 36,441,804
Automatic conversion of
shares 83,587 739,770
Shares issued to shareholders
in reinvestment of dividends and
distributions 374,255 3,308,410
------------ --------------
Total issued 4,533,942 40,489,984
Shares redeemed (4,840,299) (42,926,305)
------------ --------------
Net decrease (306,357) $ (2,436,321)
============ ==============
Class D Shares for the Period Dollar
May 1, 1998++ to 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
============ ==============
++Prior to May 1, 1998 (commencement of operations), the Fund issued
2,500 shares to MLAM for $25,000.
5. Organizational Change:
On or about May 15, 2000, the Fund will change its name to Merrill
Lynch U.S. High Yield Fund, Inc.
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate High Yield Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Corporate High Yield Fund, Inc. as of March 31, 2000, the related
statements of operations for the year then ended and changes in net
assets and the financial highlights for the year then ended and the
period May 1, 1998 (commencement of operations) to March 31, 1999.
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 auditing standards
generally accepted in the United States of America. 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 March 31, 2000 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 Corporate High Yield Fund, Inc. as of March 31, 2000,
the results of its operations, the changes in its net assets, and
the financial highlights for the respective stated periods in
accordance with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
May 12, 2000
</AUDIT-REPORT>
Merrill Lynch Corporate High Yield Fund, Inc.
March 31, 2000
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
