HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 1997
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 Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
During the quarter ended September 30, 1997, investor perceptions
regarding the prospects for the US economy shifted dramatically. As
the period began, increasing evidence of noninflationary economic
growth boosted investor confidence when, as widely expected, the
Federal Reserve Board (FRB) chose to leave monetary policy unchanged
at its July and August meetings. This increased confidence was
reinforced further in late July by the passage of tax-cut and five-
year balanced budget bills.
By late August, the consensus outlook had changed, with forecasts of
overheating growth and inflationary expectations. These concerns
were reinforced by a large upward revision in second-quarter real
gross domestic product (GDP) growth from an original estimate of
2.2% to 3.6%. However, in September, this rate of growth was revised
downward to 3.3%. This report set the stage for renewed investor
confidence, which was bolstered further by the continued absence of
inflationary pressures.
Although it was widely anticipated that the FRB would not tighten
monetary policy at its September meeting, investors were pleasantly
surprised by the release of September employment data shortly after
the quarter's close, since the US economy added jobs at a slower-
than-expected pace during the month. Over the balance of 1997, the
determining factor in the investment outlook is likely to be whether
or not the US economy continues to follow a pattern of moderate,
noninflationary growth.
Outside of the United States, the most dramatic developments took
place in Southeast Asia. The investment boom in many developing
Asian economies came to an abrupt halt as the devaluation of the
Thai baht sparked a series of currency devaluations and financial
market volatility throughout the region. Countries have been forced
to raise interest rates to support their currencies, and this trend
may continue for some time. With higher debt-service costs,
corporate profitability is likely to erode, and lower economic
growth is expected.
The High-Yield Market
The high-yield bond market posted modest price gains in the
September quarter, in line with the performance of US Government
notes, as shown in the "Recent Performance Results" table on page 5
of this report to shareholders. In addition to the performance
results of two high-yield bond indexes and ten-year Treasury
securities, the table provides investment returns for all classes of
shares of High Income Portfolio.
High-yield market fundamentals remained positive during the quarter
ended September 30, 1997. Moderate economic growth kept corporate
earnings strong particularly among cyclical businesses such as
steel, chemicals and airlines. The paper industry, which has been
one of the few soft markets, recently saw price increases hold on
several paper grades and earnings appear to be recovering. Even oil
refining, a business that suffered overcapacity for years, is
experiencing strong earnings gains this year positively impacting
two of our holdings: Clark R&M Holdings, Inc. and TransAmerican
Energy.
In addition, merger and acquisition activity improved the credit
quality of high-yield issuers. During the September quarter,
portfolio holdings that merger and acquisition activity positively
impacted included Brooks Fiber Properties Inc. which WorldCom seeks
to acquire, and Orion Network Systems, Inc. which will be acquired
by Loral. Another factor affecting performance was that ready access
to equity provided high-yield issuers a source of financing that
improved balance sheets/credit quality. Three portfolio holdings,
Fresh Del Monte Corp., World Color Press, Inc., and Sinclair
Broadcasting Group Inc., all financed in the equity market during
the quarter ended September 30, 1997.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
The bar chart below reflects upgrades and downgrades of companies by
the rating service of Duff & Phelps since 1990. For the year-to-date
period ended September 30, 1997, upgrades have outpaced downgrades
by a better than 2:1 ratio, reflecting the positive fundamentals of
the high-yield market.
Bar chart depicting the number of companies experiencing upgrades
or downgrades by Duff & Phelps from 1990 through 9/30/97:
Year Upgrades Downgrades
1990 35 76
1991 105 49
1992 104 33
1993 107 23
1994 64 67
1995 103 66
1996 138 65
YTD
9/30/97 106 45
Source: KDP Investment Advisors, Inc.
Finally, stable short-term interest rates encourage investors to
seek higher-yielding alternatives. The FRB raised interest rates
0.25% in March. We believe that will likely be the only monetary
policy tightening move in 1997. Therefore, Treasury bonds should
continue to trade in a moderate range.
Portfolio Strategy
We believe that the positive fundamental trends experienced to date
will continue. However, valuations reflect these positive factors
and at times excessive enthusiasm has resulted in overvaluation of
many individual issues. Our approach to the market is therefore
quite selective. In general, we believe that BB-rated issues and
B+-rated issues have a more attractive risk/reward profile than
B-rated and CCC-rated issues. Yield spreads between quality sectors
are compressed historically, and we believe that incremental yield
in the lower quality end of the market is inadequate to compensate
for the incremental risk. Our quality profile is therefore
overweighted toward higher-quality issues.
Certain industry segments are also attractive to us. The domestic
cable sector is in a deleveraging mode, attempting to reduce debt
and improve cash flow. TCI Communications Inc., Comcast Corporation
and Cablevision System Corp. have been successful, and these
strategies are expected to continue. Mergers and acquisition
activity benefited several international cable holdings. The
emerging markets sector also represents above-average relative
value. This sector is defined as including issuers domiciled in
countries with below investment grade bond ratings on US dollar
borrowings. As the rating services will not generally rate a
company's bonds higher than the bonds issued by the country in which
it is domiciled, a number of world-class corporations from Brazil,
Mexico, Argentina, Venezuela, the Philippines and Indonesia have
issued high-yield bonds. These bonds offer higher yields than
similarly rated bonds of US domiciled issuers. We believe that the
magnitude of these yield spreads are unwarranted, particularly
during the period of currency turbulence experienced around the
world subsequent to the date of this report.
We used the trading volatility of the US Treasury market to our
advantage this year, purchasing long-term Treasury notes at what we
perceived to be the inexpensive end of a trading range and selling
at the more expensive end. In the September quarter, these holdings
moved from 2.1% of net assets to 1.5% because of sales.
At September 30, 1997, cash and cash equivalents totaled 10.8% of
net assets. The average maturity of the invested portion of the
portfolio was 6.4 years. Our largest industry concentrations were in
energy, 7.5%; cable--domestic, 7.2%; and cable--international, 6.6%.
Emerging market issues totaled 14.2% of net assets compared with 11%
of net assets at June 30. All holdings are denominated in US
dollars.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
Fiscal Year in Review
The fiscal year ended September 30, 1997 was one of continued strong
asset growth for the Portfolio. Net assets grew from $5.8 billion to
$7.7 billion or 31% over the course of the year. The year was quite
good for the high-yield bond market with total returns ranging from
+14.31% for the unmanaged Merrill Lynch High Yield Master Index to
+15.72% for the unmanaged CS First Boston High Yield Index. These
returns compared quite favorably with other US fixed-income markets.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio was
quite competitive with the Indexes. Performance was helped by our
generally good securities selection. Performance was hindered by an
inability to stay fully invested much of the year because of strong
net shareholder subscriptions requiring continuing investment in new
securities. Satisfactory supply was scarce at times. Cash balances
averaged 9%--11% during much of the fiscal year.
In Conclusion
We appreciate your ongoing investment in High Income Portfolio
of Merrill Lynch Corporate Bond Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years
ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
November 14, 1997
PORTFOLIO INFORMATION
As of September 30, 1997
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 5.0%
BB/Ba 35.0
B/B 48.6
CCC/Caa 4.1
Not Rated 5.2
US Government Securities 2.0
[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
Energy 7.5%
Cable--Domestic 7.2
Cable--International 6.6
Paper & Forest Products 4.8
Utilities 4.5
Geographic Profile Percent of
Top Five Countries* Net Assets
United Kingdom 4.3%
Brazil 4.1
Argentina 3.7
Mexico 2.5
Australia 1.5
[FN]
*All holdings are denominated in US dollars.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
PORTFOLIO INFORMATION (concluded)
<TABLE>
Percent of
Ten Largest Corporate Bond Holdings Net Assets
<S> <S> <C>
TransAmerican Energy TransAmerican is a privately held holding company whose principal subsidiaries are 3.0%
wholly-owned TransAmerican Refining Corp. (TARC) and 69%-owned TransTexas
Gas Corp., a publicly held company which explores for and produces oil and natural
gas primarily in South Texas. TARC is in the midst of a two-phase construction and
expansion program which, when finished, will give it one of the largest and most
complex refineries in the US. Our bonds are secured by some 33 million shares of
TransTexas common, and two intercompany loans secured by mortgages on substantially
all of the assets of TARC and TransTexas.
Nextel Communications Nextel offers digital and analog wireless communication services throughout the 1.6
Inc. United States. The company's digital service currently covers approximately 50% of the
Dial Call total US population and once completed, will enable Nextel to offer nationwide digital
Communications wireless service. Our Nextel holdings include Dial Call Communications, a 1995
acquisition.
Time Warner Inc. Time Warner is a media and entertainment company with interests in entertainment, 1.3
cable programming and sports franchises, publishing and cable. Our holding, a
preferred stock, can be paid in cash or preferred stock at the company's option.
Lenfest Through its primary subsidiary, Suburban Cable, Lenfest offers cable service to nearly 1.2
Communications, Inc. one million cable customers in Pennsylvania, New Jersey and Delaware.
Century Century owns and operates 70 cable systems in 25 states and Puerto Rico. In addition, 1.2
Communications the company has a 31.8% common equity interest in Centennial Cellular, a provider
Corporation of wireless telephone service in four geographic areas in the United States and
Puerto Rico.
Trump Atlantic City Trump Atlantic City owns and operates the Trump Taj Mahal, the Trump Plaza, and the 1.1
Associates Trump World's Fair hotel-casinos, all located on the boardwalk in Atlantic City,
New Jersey. These bonds are secured by mortgages on the properties.
NTL Inc. Through various subsidiaries, NTL Inc. owns and operates television and radio 1.1
broadcasting, cable television and telecommunications systems in the United Kingdom.
Prior to of March 1997, the company was called International Cabletel.
HMC Acquisition HMC, a wholly-owned subsidiary of Host Marriott Corporation, owns 50 full-service 1.1
Properties hotels and has investment stakes in eight others, comprising the majority of
Host Marriott's lodging properties. All but three are operated under Marriott or
Ritz-Carlton brand names. Host Marriott manages most of the properties for fees
based on revenues or operating profit.
Sinclair Broadcasting Sinclair Broadcasting Group Inc. is a diversified broadcasting company that owns or 1.0
Group Inc. provides programming services to television and radio stations across the United States.
Sinclair's radio station group offers a variety of programming formats including country,
urban, news/talk/sports and album/progressive rock.
Paging Network, The company is the largest provider of paging services in the United States with 1.0
Inc. operations in all 50 states, Puerto Rico, and Canada. A recently launched service
called "Voice Now" provides recorded voice messages plus CNN news, sports, and
stock quotes.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
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 "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" 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>
Standardized
12 Month 3 Month 30-day Yield
9/30/97 6/30/97 9/30/96 % Change % Change As of 9/30/97
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares* $8.29 $8.10 $7.93 + 4.54% +2.35% 8.16%
High Income Portfolio Class B Shares* 8.30 8.11 7.93 + 4.67 +2.34 7.73
High Income Portfolio Class C Shares* 8.30 8.11 7.94 + 4.53 +2.34 7.68
High Income Portfolio Class D Shares* 8.30 8.11 7.94 + 4.53 +2.34 7.92
High Income Portfolio Class A Shares--Total Return* +14.58(1) +4.65(2)
High Income Portfolio Class B Shares--Total Return* +13.86(3) +4.45(4)
High Income Portfolio Class C Shares--Total Return* +13.66(5) +4.43(6)
High Income Portfolio Class D Shares--Total Return* +14.29(7) +4.58(8)
Merrill Lynch High Yield Master Index**--Total Return +14.31 +3.91
CS First Boston High Yield Index**--Total Return +15.72 +4.70
Ten-Year US Treasury Securities--Total Return +10.64 +4.16
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**Unmanaged. These market-weighted Indexes mirror the high-yield
debt market of securities rated BBB or below.
(1)Percent change includes reinvestment of $0.742 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.183 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.681 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.167 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.677 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.166 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.722 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.178 per share ordinary
income dividends.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class
A Shares compared to growth of an investment in the CS First Boston
High Yield Index. Beginning and ending values are:
9/87 9/97
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class A Shares* $ 9,600 $30,565
CS First Boston High Yield Index++++ $10,000 $31,574
A line graph depicting the growth of an investment in the Fund's Class
B Shares compared to growth of an investment in the CS First Boston
High Yield Index. Beginning and ending values are:
9/87 9/97
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class B Shares* $10,000 $26,679
CS First Boston High Yield Index++++ $10,000 $27,378
A line graph depicting the growth of an investment in the Fund's Class
C Shares and Class D Shares compared to growth of an investment in the
CS First Boston High Yield Index. Beginning and ending values are:
9/87 9/97
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class C Shares* $10,000 $14,252
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class D Shares* $ 9,600 $13,909
CS First Boston High Yield Index++++ $10,000 $14,610
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests principally in fixed-income securities which
are rated in the lower rating categories of the established rating
services,or in unrated securities of comparable quality.
++++This unmanaged market-weighted Index, which mirrors the high-
yield debt market, is comprised of 423 securities rated BBB or
below.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +14.58% +10.00%
Five Years Ended 9/30/97 +11.44 +10.53
Ten Years Ended 9/30/97 +12.28 +11.82
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +13.86% + 9.86%
Five Years Ended 9/30/97 +10.60 +10.60
Inception (10/21/88) through 9/30/97 +11.60 +11.60
[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 9/30/97 +13.66% +12.66%
Inception (10/21/94)
through 9/30/97 +12.80 +12.80
[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 9/30/97 +14.29% + 9.72%
Inception (10/21/94) through 9/30/97 +13.43 +11.87
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value
Period Covered Beginning Ending Dividends Paid* % Change**
<C> <C> <C> <C> <C>
11/10/78--12/31/78 $9.60 $9.54 $ 0.13 + 0.73%
1979 9.54 8.73 1.05(a) + 2.36
1980 8.73 7.91 1.07 + 3.08
1981 7.91 7.26 1.12 + 6.48
1982 7.26 7.74 1.04 +23.09
1983 7.74 8.10 1.01 +18.32
1984 8.10 7.72 1.02 + 8.66
1985 7.72 8.29 1.01 +21.61
1986 8.29 8.34 0.98 +12.91
1987 8.34 7.80 0.95 + 4.94
1988 7.80 7.80 0.95 +12.71
1989 7.80 7.17 0.97 + 4.33
1990 7.17 5.88 1.00 - 4.61
1991 5.88 7.21 0.90 +39.75
1992 7.21 7.78 0.86 +20.64
1993 7.78 8.32 0.76 +17.39
1994 8.32 7.31 0.80 - 2.69
1995 7.31 7.83 0.77 +18.38
1996 7.83 8.01 0.75 +12.45
1/1/97--9/30/97 8.01 8.29 0.53 +10.75
------
Total $17.67
Cumulative total return as of 9/30/97:+721.99%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
(a)Distribution includes $0.024 per share capital gains
distribution.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value
Period Covered Beginning Ending Dividends Paid* % Change**
<C> <C> <C> <C> <C>
10/21/88--12/31/88 $7.92 $7.80 $0.18 + 0.74%
1989 7.80 7.17 0.91 + 3.54
1990 7.17 5.89 0.95 - 5.18
1991 5.89 7.22 0.84 +38.67
1992 7.22 7.78 0.80 +19.57
1993 7.78 8.33 0.70 +16.65
1994 8.33 7.31 0.74 - 3.54
1995 7.31 7.83 0.72 +17.49
1996 7.83 8.01 0.69 +11.60
1/1/97--9/30/97 8.01 8.30 0.48 +10.26
-----
Total $7.01
Cumulative total return as of 9/30/97:+166.79%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value
Period Covered Beginning Ending Dividends Paid* % Change**
<C> <C> <C> <C> <C>
10/21/94--12/31/94 $7.59 $7.32 $0.18 - 1.15%
1995 7.32 7.83 0.71 +17.27
1996 7.83 8.02 0.68 +11.68
1/1/97--9/30/97 8.02 8.30 0.48 +10.08
-----
Total $2.05
Cumulative total return as of 9/30/97:+42.52%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value
Period Covered Beginning Ending Dividends Paid* % Change**
<C> <C> <C> <C> <C>
10/21/94--12/31/94 $7.59 $7.31 $0.19 - 1.17%
1995 7.31 7.83 0.75 +18.09
1996 7.83 8.01 0.73 +12.17
1/1/97--9/30/97 8.01 8.30 0.51 +10.67
-----
Total $2.18
Cumulative total return as of 9/30/97:+44.89%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds
<S> <S> <S> <C> <S> <C> <C>
Airlines--1.2% Piedmont Aviation, Inc.:
B+ B1 $ 1,304,000 Series 88J, 10.05% due 5/13/2005 $ 1,181,685 $ 1,408,529
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,226,462
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 4,164,004
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 3,045,444
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,384,647
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 2,932,093
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,841,491
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,205,543
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,171,052
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,632,517
USAir Inc.:
CCC+ B3 25,000,000 9.625% due 2/01/2001 20,109,906 26,062,500
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 23,528,295
B+ B1 4,726,090 Series 89A1, 9.33% due 1/01/2006++ 4,470,742 4,888,526
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,624,890
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 2,059,480
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,256,113
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,200,894
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,200,894
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,200,894
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,200,894
-------------- --------------
73,778,223 88,235,162
Automotive--1.0% B B3 10,000,000 Collins & Aikman Corp., 11.50%
due 4/15/2006 10,000,000 11,437,500
B+ B1 21,875,000 Exide Corp., 10.75% due 12/15/2002 22,358,281 23,296,875
B+ B2 42,500,000 Venture Holdings Trust, 9.50%
due 7/01/2005 (j) 40,988,260 41,968,750
-------------- --------------
73,346,541 76,703,125
Broadcasting-- B- Ba2 19,240,000 Argyle Television Inc., 9.75% due
Radio & 11/01/2005 19,003,950 20,923,500
Television--2.1% B- B2 17,500,000 EZ Communications, Inc., 9.75% due
12/01/2005 17,361,575 19,293,750
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 38,237,500
Sinclair Broadcasting Group Inc.:
B B2 15,000,000 10% due 12/15/2003 15,036,250 15,825,000
B B2 50,000,000 10% due 9/30/2005 50,343,269 52,750,000
B B2 9,700,000 9% due 7/15/2007 9,627,669 9,675,750
-------------- --------------
146,291,463 156,705,500
Building BB B1 15,000,000 Cemex S.A., 12.75% due 7/15/2006 (j) 15,000,000 18,187,500
Materials--1.0% Nortek Inc.:
B- B3 20,550,000 9.875% due 3/01/2004 20,362,365 21,089,438
B+ B1 9,000,000 9.25% due 3/15/2007 8,947,980 9,180,000
BB+ Ba1 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 29,920,165
-------------- --------------
70,200,351 78,377,103
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- American Telecasting, Inc. (a):
Domestic--7.2% CCC+ Caa $48,190,545 18.79% due 6/15/2004 $ 31,646,184 $ 18,071,454
CCC+ Caa 9,430,000 26.322% due 8/15/2005 3,209,009 3,394,800
NR* NR* 20,000,000 CCA Industries, Inc., 13% due
12/31/1999++++ 16,463,336 20,272,935
CCC+ Caa 10,500,000 CS Wireless Systems Inc., 12.041%
due 3/01/2001 (a) 6,885,078 2,861,250
Cablevision System Corp.:
BB- B1 13,750,000 9.875% due 5/15/2006 13,718,750 14,884,375
BB- B1 5,000,000 10.50% due 5/15/2016 4,900,000 5,681,250
Century Communications Corporation:
BB- Ba3 44,500,000 9.75% due 2/15/2002 44,895,938 47,003,125
BB- Ba3 42,000,000 9.50% due 3/01/2005 41,400,313 44,021,250
Comcast Corporation:
BB+ Ba3 5,000,000 9.125% due 10/15/2006 5,112,500 5,362,500
BB+ Ba3 30,000,000 9.50% due 1/15/2008 29,468,813 32,400,000
B- B2 70,000,000 Echostar Communications Corp.,
11.712% due 6/01/2004 (a)(g) 57,924,669 63,350,000
B- Caa 20,000,000 Echostar DBS Corp., 12.50% due
7/01/2002 (j) 20,000,000 22,150,000
B B2 31,000,000 Intermedia Capital Partners L.P.,
11.25% due 8/01/2006 31,002,500 34,565,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 50,312,500
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 44,150,000
B B1 50,000,000 Olympus Communications L.P.,
10.625% due 11/15/2006 50,282,500 54,437,500
CCC+ Caa 25,000,000 People's Choice T.V. Corporation,
15.21% due 6/01/2004 (a) 16,168,415 9,250,000
BB+ Ba3 40,000,000 TCI Communications Inc., 9.65% due
3/31/2027 40,258,360 44,361,200
B- B3 40,000,000 TCI Satellite Entertainment, Inc.,
12.15% due 2/15/2007 (a) 24,001,842 26,200,000
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a)(c) 30,495,169 12,584,500
-------------- --------------
556,265,026 555,313,639
Cable-- NR* NR* 79,117,000 Australis Media Ltd., 13.81% due
International-- 5/15/2003 (a)(d) 55,740,658 66,458,280
6.6% B- B2 10,000,000 Azteca Holdings S.A., 11% due
6/15/2002 (j) 9,962,200 10,575,000
BB- Baa3 59,000,000 Bell Cablemedia PLC, 11.86% due
9/15/2005 (a) 41,968,542 51,256,250
B- B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 39,047,129 43,312,500
Diamond Cable Communications PLC (a):
B- B3 15,000,000 11.366% due 12/15/2005 10,673,390 11,259,375
B- B3 25,000,000 10.87% due 2/15/2007 15,680,873 16,375,000
NTL Inc.:
B B3 25,000,000 10% due 2/15/2007 25,015,625 26,250,000
B- B3 80,000,000 Series B, 11.701% due 2/01/2006 (a) 54,361,484 60,000,000
BB+ Ba3 12,500,000 Rogers Cablesystems Ltd., 10% due
3/15/2005 12,769,375 13,734,375
BB- B2 2,000,000 Rogers Communications, Inc., 9.125%
due 1/15/2006 1,897,500 2,047,500
B+ B1 75,000,000 TeleWest Communications PLC, 11.02%
due 10/01/2007 (a) 54,312,926 56,343,750
B- B2 45,000,000 UIH Australia/Pacific Inc., Series B,
14% due 5/15/2006 (a) 27,607,851 32,343,750
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- United International Holdings,
International-- Inc. (a):
(concluded) B- B3 $ 5,000,000 12.18% due 11/15/1999 $ 3,831,962 $ 4,087,500
B- B3 19,800,000 13.973% due 11/15/1999 14,915,280 16,137,000
B- B3 50,000,000 13.99% due 11/15/1999 (f) 37,512,035 40,875,000
BBB- Ba3 11,250,000 Videotron Groupe L'TEE, 10.25%
due 10/15/2002 11,322,500 11,910,938
B+ Baa3 50,000,000 Videotron Holdings PLC, 12.08%
due 7/01/2004 (a) 39,279,465 46,750,000
-------------- --------------
455,898,795 509,716,218
Capital Goods-- BB- B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 22,629,750
0.9% International Wire Group, Inc.:
B- B3 25,000,000 11.75% due 6/01/2005 24,986,250 27,500,000
B- B3 15,000,000 11.75% due 6/01/2005 (j) 16,312,500 16,462,500
-------------- --------------
62,845,250 66,592,250
Chemicals-- BB- Ba3 11,000,000 Agriculture Minerals & Chemicals
0.6% Company, L.P., 10.75% due 9/30/2003 11,060,000 11,941,875
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,867,140
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,500,000
-------------- --------------
40,534,100 43,309,015
Computer BB- Ba1 38,500,000 Advanced Micro Devices, Inc., 11%
Services-- due 8/01/2003 38,938,750 43,408,750
Electronics-- ComputerVision Corp.:
1.5% B- B3 17,000,000 11.375% due 8/15/1999 16,438,750 12,920,000
B+ B2 12,500,000 8% due 12/01/2009 6,802,473 7,093,750
CCC B3 40,500,000 Dictaphone Corp., 11.75% due 8/01/2005 40,114,375 34,020,000
B+ B3 15,000,000 Jordan Telecom Products, 9.875% due
8/01/2007 (j) 14,882,460 15,487,500
-------------- --------------
117,176,808 112,930,000
Conglomerates-- NR* NR* 7,279,000 MacAndrews & Forbes Holdings, Inc.,
1.0% 13% due 3/01/1999 6,779,200 7,342,691
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 27,105,000
BB- NR* 45,000,000 Voto-Votorantim S.A., 8.50% due
6/27/2005 (j) 44,657,900 44,662,500
-------------- --------------
76,583,663 79,110,191
Consumer B B3 90,000,000 Coleman Escrow Corp., 11.621% due
Products-- 5/15/2001 (a)(j) 59,799,783 61,650,000
2.6% B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 16,162,500
B+ B1 45,880,000 International Semi-Tech Microelectronics,
Inc., 12.51% due 8/15/2003 (a) 31,498,207 28,789,700
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,213,774 3,605,000
B B2 27,000,000 9.375% due 4/01/2001 25,002,666 27,978,750
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 10,141,250
B+ B1 9,940,000 Samsonite Corporation, 11.125% due
7/15/2005 9,596,733 11,431,000
B+ B1 33,550,000 Sealy Corp., 10.25% due 5/01/2003 33,915,500 35,479,125
-------------- --------------
186,821,663 195,237,325
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Convertible NR* B3 $ 6,195,000 Builders Transport, Inc., 8%
Bonds**--0.2% due 8/15/2005 (3) $ 3,614,250 $ 4,026,750
BBB+ Ba1 6,375,000 Quantum Health Resources Inc.,
4.75% due 10/01/2000 (2) 5,956,562 5,992,500
AAA Caa 3,420,000 UNC, Inc., 7.50% due 3/31/2006 (1) 2,013,869 3,428,550
-------------- --------------
11,584,681 13,447,800
Diversified--0.1% B- B3 10,000,000 Foamex Capital Corp., 9.875%
due 6/15/2007 (j) 10,000,000 10,375,000
Energy--7.5% BB- Ba3 5,400,000 Chesapeake Energy Corporation, 9.125%
due 4/15/2006 5,386,850 5,535,000
B+ B2 50,000,000 Clark R&M Holdings, Inc., 10.997%
due 2/15/2000 (a) 38,779,932 39,562,500
B+ B3 9,000,000 Clark USA Inc., Series B, 10.875%
due 12/01/2005 9,000,000 9,787,500
BBB- Ba3 17,500,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due
1/30/2004 (j) 17,462,500 18,484,375
B B2 20,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 19,740,050 20,000,000
BBB- Baa1 20,000,000 Global Marine Inc., 12.75% due
12/15/1999 20,047,500 20,925,000
B B1 22,000,000 KCS Energy Inc., 11% due 1/15/2003 22,723,750 24,200,000
BBB- B1 17,750,000 Maxus Energy Corp., 9.875% due
10/15/2002 16,726,250 18,641,848
BBB- Baa3 28,000,000 Oleoducto Centrale S.A., 9.35%
due 9/01/2005 (j) 27,967,500 30,035,264
B+ B1 25,500,000 Parker Drilling Co., 9.75% due
11/15/2006 25,510,725 27,157,500
Petroleo Brasileiro S.A.--Petrobras:
BB- B1 15,000,000 10% due 10/17/2006 (j) 14,869,813 15,975,000
B+ B1 13,000,000 10% due 10/17/2006 13,107,500 13,845,000
B+ Ba2 11,250,000 Rowan Companies, Inc., 11.875% due
12/01/2001 11,335,000 11,812,500
BB+ Ba3 25,000,000 Seagull Energy Corp., 8.625% due
8/01/2005 24,990,000 26,312,500
TransAmerican Energy (j):
B+ B3 21,450,000 11.50% due 6/15/2002 21,264,000 21,450,000
B+ B3 265,700,000 13.206% due 6/15/2002 (a) 212,568,606 212,227,875
BB Ba2 15,000,000 Triton Energy Corp., 9.25% due
4/15/2005 14,936,550 15,843,750
B- B2 20,000,000 United Refining Co., 10.75% due
6/15/2007 (j) 20,000,000 20,700,000
BBB- Ba3 25,000,000 Yacimientos Petroliferos Fiscales S.A.
(YPF) (Sponsored), 8% due 2/15/2004 19,967,500 25,468,750
-------------- --------------
556,384,026 577,964,362
Entertainment-- B- B2 40,000,000 AMF Group Inc., Series B, 12.45%
1.2% due 3/15/2006 (a) 26,169,962 30,000,000
B B2 60,000,000 Six Flags Theme Parks Inc., 11.566%
due 6/15/2000 (a) 57,417,967 62,850,000
-------------- --------------
83,587,929 92,850,000
Finance--0.5% Polysindo International Finance Co.:
BB+ Ba2 5,800,000 11.375% due 6/15/2006 6,325,750 6,325,750
BB+ Ba2 10,000,000 9.375% due 7/30/2007 9,970,020 9,862,500
B- B3 17,500,000 Salem Communications Corp., 9.50% due
10/01/2007 (j) 17,589,375 17,893,750
-------------- --------------
33,885,145 34,082,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Financial First Nationwide Holdings Inc.:
Services--1.1% B B3 $17,000,000 12.50% due 4/15/2003 $ 16,806,710 $ 19,167,500
B Ba3 12,000,000 10.625% due 10/01/2003 12,000,000 13,290,000
BB+ B1 9,000,000 Penncorp Financial Group Inc., 9.25%
due 12/15/2003 9,090,000 9,517,500
Reliance Group Holdings Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,771,525
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 23,913,245
BB- NR* 13,000,000 Veritas Holdings GMBH, 9.625%
due 12/15/2003 (j) 13,000,000 13,877,500
-------------- --------------
79,057,335 87,537,270
Food & Chiquita Brands International Inc.:
Beverage--2.6% B+ B1 30,000,000 9.125% due 3/01/2004 29,585,625 30,975,000
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,850,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25%
due 2/01/2005 23,562,125 25,970,875
BB+ NR* 15,000,000 DGS International Finance Co.,
10% due 6/01/2007(j) 14,915,700 15,337,500
B- B3 23,463,000 Envirodyne Industries, Inc., 10.25%
due 12/01/2001 22,781,845 23,638,973
B+ B2 25,000,000 Fresh Del Monte Corp., 10% due
5/01/2003 25,012,500 26,500,000
B- B2 24,000,000 International Home Foods, Inc.,
10.375% due 11/01/2006 24,000,000 26,640,000
B B2 12,000,000 Southern Foods SFG, 9.875% due
9/01/2007 (j) 12,000,000 12,510,000
B+ B1 18,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 18,002,500 18,720,000
-------------- --------------
189,741,695 202,142,348
Foreign BB- NR* 7,000,000 City of Saint Petersburgh, 9.50% due
Government 6/18/2002 (j) 6,976,270 7,236,250
Obligations-- Republic of Argentina:
1.6% BB Ba3 35,000,000 11% due 10/09/2006 35,133,680 40,031,250
BB B3 30,750,000 Global Bonds, 11.375% due 1/30/2017 31,692,220 35,885,250
BB- B1 9,500,000 Republic of Brazil, Global Bonds,
10.125% due 5/15/2027 8,857,230 9,517,813
BB Ba2 25,000,000 United Mexican States, Government
Bonds, 11.50% due 5/15/2026 26,375,000 30,475,000
-------------- --------------
109,034,400 123,145,563
Gaming--3.8% BB- B1 15,000,000 Boyd Gaming Corporation, 9.50% due
7/15/2007(j) 14,848,500 15,337,500
B+ B2 37,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 35,072,500 33,392,500
BB Ba3 20,000,000 Grand Casinos Inc., 10.125% due
12/01/2003 19,837,500 21,250,000
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001(i) 49,536,050 23,144,275
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,230,296 21,950,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 26,000,000
B+ B2 25,000,000 Station Casinos Inc., 9.75% due
4/15/2007 24,279,564 25,062,500
BB- B1 90,000,000 Trump Atlantic City Associates, 11.25%
due 5/01/2006 88,879,062 87,412,500
NR* Caa 40,000,000 Trump's Castle Funding, Inc., 11.75%
due 11/15/2003 36,141,840 37,550,000
-------------- --------------
313,089,937 291,099,275
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Health Care-- B- B2 $20,000,000 Sun Healthcare Group, Inc., 9.50%
0.3% due 7/01/2007 (j) $ 19,750,653 $ 20,700,000
Health Services-- B+ B1 45,200,000 Beverly Enterprises, Inc., 9%
2.0% due 2/15/2006 44,200,550 47,460,000
B+ Ba3 52,390,000 Fresensius Medical Care AG, 9%
due 12/01/2006 52,771,550 54,551,088
B B3 16,800,000 Imed Corp., 9.75% due 12/01/2006 (j) 16,994,312 17,472,000
B+ Ba3 30,000,000 Tenet Healthcare Corp., 8.625% due
1/15/2007 29,968,200 31,125,000
-------------- --------------
143,934,612 150,608,088
Home Builders-- B- B2 4,000,000 Del E. Webb Corp., 9% due 2/15/2006 3,140,000 3,990,000
0.9% B+ Ba3 20,000,000 Greystone Homes Inc., 10.75% due
3/01/2004 19,115,000 22,000,000
NR* Ba2 12,000,000 Ryland Group, Inc. (The), 10.50%
due 7/01/2006 11,818,440 13,380,000
BB- B1 32,000,000 U.S. Home Corp., 8.88% due 8/15/2007 32,017,500 32,640,000
-------------- --------------
66,090,940 72,010,000
Hotels--1.8% BB- Ba3 80,000,000 HMC Acquisition Properties, 9%
due 12/15/2007 79,272,500 82,600,000
HMH Properties Inc.:
BB- Ba3 40,000,000 9.50% due 5/15/2005 39,139,765 42,150,000
BB- Ba3 15,500,000 8.875% due 7/15/2007 (j) 15,519,375 15,984,375
-------------- --------------
133,931,640 140,734,375
Independent AES Corporation (The):
Power B+ Ba1 30,000,000 10.25% due 7/15/2006 30,000,000 32,850,000
Producers--2.6% B+ Ba1 21,000,000 8.375% due 8/15/2007 20,901,300 21,157,500
BB Ba2 30,000,000 CE Casecnan Water & Energy Co., 11.45%
due 11/15/2005 30,000,000 32,700,000
BB+ Ba2 20,000,000 California Energy Company, Inc.,
9.875% due 6/30/2003 20,122,500 21,567,500
BB- Ba3 36,000,000 Calpine Corporation, 8.75%
due 7/15/2007 (j) 36,018,825 36,810,000
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12.22%
due 7/15/2003 (a)(i) 15,656,356 12,117,500
Midland Cogeneration Venture Limited
Partnership:
BB Ba3 3,582,146 10.33% due 7/23/2002++ 3,834,394 3,897,875
BB Ba3 18,150,093 10.33% due 7/23/2002++ 18,802,604 19,752,655
B B2 11,250,000 11.75% due 7/23/2005 11,310,000 13,369,274
B B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,961,625
-------------- --------------
192,648,544 201,183,929
Industrial CCC B3 7,912,000 Thermadyne Industries, Inc., 10.75%
Services--0.1% due 11/01/2003 7,914,802 8,505,400
Insurance--0.1% BB+ Ba3 10,000,000 SIG Capital Trust I, 9.50% due
8/15/2027 (j) 10,000,000 10,100,000
Media & B Ba2 5,000,000 CANTV Finance Ltd., 9.25% due
Communications-- 2/01/2004 4,990,500 5,150,000
International-- Comtel Brasileira Ltd.:
2.6% BB- B1 29,500,000 10.75% due 9/26/2004 (j) 29,500,000 31,380,625
BB- B1 500,000 10.75% due 9/26/2004 (k) 517,500 529,287
BB- B1 39,000,000 Globo Communicacoes e Participacoes,
Ltd., 10.50% due 12/20/2006 (j) 39,179,450 40,803,750
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Media & Grupo Televisa, S.A. de C.V.:
Communications-- BB Ba3 $ 2,500,000 11.375% due 5/15/2003 $ 2,637,500 $ 2,771,875
International BB Ba3 39,000,000 11.875% due 5/15/2006 42,079,687 45,093,750
(concluded) BB Ba3 15,000,000 11.363% due 5/15/2008 (a) 10,867,924 11,287,500
NR* NR* 15,000,000 Orion Network Systems, Inc., 11.25%
due 1/15/2007 (e) 15,000,000 16,500,000
BBB- Ba3 40,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004 38,763,075 48,500,000
-------------- --------------
183,535,636 202,016,787
Metals & NR* B1 70,000,000 CSN Iron S.A., 9.125% due
Mining--2.5% 6/01/2007 (j) 68,687,500 69,125,000
CCC+ B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 51,088,125 54,031,250
Maxxam Group, Inc.:
CCC+ B3 11,750,000 11.25% due 8/01/2003 11,816,250 12,513,750
CCC+ B3 41,155,000 12.37% due 8/01/2003 (a) 37,122,869 38,068,375
BB- Ba3 18,000,000 Murrin Murrin Holdings, Inc., 9.375%
due 8/31/2007(j) 18,000,000 18,585,000
-------------- --------------
186,714,744 192,323,375
Packaging--0.5% B+ B3 15,000,000 Printpack Inc., 10.625% due 8/15/2006 15,000,000 16,237,500
B B1 12,000,000 Silgan Corp., 9% due 6/01/2009 12,000,000 12,315,000
B+ Ba3 10,000,000 Vicap S.A., 11.375% due 5/15/2007 (j) 9,947,000 11,137,500
-------------- --------------
36,947,000 39,690,000
Paper & Forest BB Ba3 35,500,000 APP International Finance Co., 11.75%
Products--4.8% due 10/01/2005 35,306,250 38,340,000
B B3 50,000,000 Ainsworth Lumber Company, 12.50% due
7/15/2007++++(j) 48,619,000 48,589,525
Container Corporation of America:
B+ B2 15,420,000 9.75% due 4/01/2003 15,433,400 16,730,700
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,381,250
BB- B1 60,000,000 Doman Industries Ltd., 8.75% due
3/15/2004 57,006,250 59,475,000
BB- Ba3 5,000,000 Indah Kiat Finance Maurtitius, 10% due
7/01/2007 4,875,000 4,937,500
BB Ba2 14,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 16,095,000
B B3 27,220,000 Pacific Lumber Co., 10.50% due
3/01/2003 26,868,237 28,308,800
Ba3 BB 5,000,000 Pindo Deli Finance Mauritius, 10.75%
due 10/01/2007 (j) 4,984,900 4,984,900
CC Caa 25,500,000 Repap New Brunswick, Inc., 10.625%
due 4/15/2005 25,597,500 25,181,250
BBB+ Ba2 25,000,000 Repap Wisconsin Inc., 9.25% due
2/01/2002 23,537,500 26,375,000
Riverwood International Corp.:
B- B3 15,000,000 10.25% due 4/01/2006 14,396,250 15,412,500
CCC+ Caa 30,000,000 10.875% due 4/01/2008 29,248,750 29,962,500
B+ B1 15,000,000 S.D. Warren Co., 12% due 12/15/2004 15,000,000 16,987,500
BB Ba3 25,000,000 Tjiwi Kimia Finance Mauritius, 10%
due 8/01/2004 (j) 24,680,750 24,718,750
-------------- --------------
353,126,287 370,480,175
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Product B- B3 $42,000,000 AmeriServ Food Company, 10.125% due
Distribution-- 7/15/2007 (j) $ 42,000,000 $ 43,680,000
0.7% B+ B3 12,000,000 Fleming Companies, Inc., 10.50% due
12/01/2004 (j) 11,930,280 12,600,000
-------------- --------------
53,930,280 56,280,000
Publishing & Hollinger International, Inc.:
Printing--0.7% BB+ Ba3 5,000,000 8.625% due 3/15/2005 4,975,000 5,156,250
BB- B1 21,500,000 9.25% due 2/01/2006 20,925,312 22,386,875
BB- B1 3,000,000 9.25% due 3/15/2007 2,980,740 3,135,000
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 21,000,000
-------------- --------------
48,900,427 51,678,125
Restaurants-- B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 26,216,200 28,215,000
0.4%
Specialty NR* NR* 25,087,000 Cumberland Farms, Inc. DE, 10.50%
Retailing--0.3% due 10/01/2003 23,922,651 25,212,435
Steel--2.0% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125%
due 12/15/2006 25,056,250 26,531,250
BB Ba3 17,000,000 Hysla, S.A. de C.V., 9.25% due
9/15/2007 (j) 16,902,930 17,351,900
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 11,025,000
B B3 25,000,000 Republic Engineered Steel Inc.,
9.875% due 12/15/2001 24,117,500 24,187,500
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 26,625,000
B B2 23,000,000 Weirton Steel Inc., 10.75% due
6/01/2005 22,413,750 24,552,500
BB- B2 20,000,000 Wheeling-Pittsburg Steel Corp.,
9.375% due 11/15/2003 18,670,000 20,650,000
-------------- --------------
141,960,430 150,923,150
Supermarkets-- Pueblo Xtra International Inc.:
0.7% B- B3 21,075,000 9.50% due 8/01/2003 19,460,250 20,916,938
B- B3 3,000,000 9.50% due 8/01/2003 2,721,362 3,000,000
Ralph's Grocery Co.:
B B1 20,000,000 10.45% due 6/15/2004 19,042,413 22,000,000
B B1 10,000,000 10.45% due 6/15/2004 9,702,500 10,975,000
-------------- --------------
50,926,525 56,891,938
Telephone CCC NR* 20,000,000 McCaw International Ltd., 12.47%
Communications-- due 4/15/2007 (a) 11,773,925 12,100,000
0.2%
Telephone-- Brooks Fiber Properties Inc. (a):
Competitive NR* NR* 42,000,000 11.399% due 3/01/2006 28,309,062 33,705,000
Local Exchange NR* NR* 39,000,000 11.568% due 11/01/2006 24,906,869 30,566,250
Carriers--1.5% B B3 8,000,000 Nextlink Communications, 9.625% due
10/01/2007 8,000,000 8,000,000
B B1 40,000,000 Teleport Communications Group Inc.,
9.875% due 7/01/2006 40,943,500 43,600,000
-------------- --------------
102,159,431 115,871,250
Textiles--0.4% B+ B2 25,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 25,100,000 26,312,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Transportation-- BB- NR* $38,000,000 Autopistas del Sol S.A., 10.25% due
3.5% 8/01/2009 (j) $ 38,000,000 $ 38,855,000
BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25% due
11/15/2003 24,472,500 25,625,000
BB Ba3 35,000,000 GS Superhighway Holdings, 10.25%
due 8/15/2007 (j) 34,719,800 35,087,500
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25% due
12/01/2004 20,518,750 22,150,000
BB- Ba3 10,000,000 Stena AB, 8.75% due 6/15/2007 10,000,000 10,000,000
TFM, S.A. de C.V. (j):
B+ B2 2,000,000 10.25% due 6/15/2007 2,000,000 2,110,000
B+ B2 21,500,000 11.767% due 6/15/2009 (a) 12,541,639 14,351,250
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba3 20,000,000 9.25% due 5/15/2003 17,092,750 20,450,000
BB- Ba3 29,800,000 (Class A), 10% due 11/15/2006 29,422,250 30,768,500
NR* B3 54,606,000 Transtar Holdings L.P., 12.04% due
12/15/2003 (a) 43,031,646 47,643,735
BB Ba2 19,841,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 19,886,000 20,833,050
-------------- --------------
251,685,335 267,874,035
US Government AAA Aaa 115,000,000 US Treasury Bonds, 6.25% due 8/15/2023 105,307,800 111,657,669
Obligations--1.5%
Utilities--4.5% BB- B1 34,469,000 Beaver Valley Funding Corp., 9%
due 6/01/2017 31,081,506 37,498,134
BB Ba2 7,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 6,986,560 7,706,370
NR* NR* 20,000,000 Companhia de Saneamento Basico do
Estado de Sao-Paulo, 10% due
7/28/2005 (j) 20,000,000 20,055,060
BB- B1 65,000,000 Espirito Santo-Escelsa S.A., 10%
due 7/15/2007 (j) 64,918,750 65,464,100
NR* NR* 37,000,000 Inversora de Electrica, 9% due
9/16/2004 (j) 36,895,000 36,958,190
BBB- B1 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 44,600,000
NR* NR* 15,546,848 Sunflower Electric Power Corp., 8% due
12/31/2016++ (k) 10,198,292 11,329,766
BB- Ba3 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 21,650,000
BBB- Baa3 41,823,600 Trans Gas de Occidente, 9.79% due
11/01/2010++ (j) 41,898,285 43,932,973
Tucson Electric & Power Co.++ (k):
NR* NR* 33,847,781 10.21% due 1/01/2009 32,005,359 34,631,696
NR* NR* 21,526,207 10.732% due 1/01/2013 20,326,836 22,176,083
-------------- --------------
324,407,463 346,002,372
Waste B+ B3 20,000,000 Allied Waste North America, 10.25%
Management-- due 12/01/2006 20,000,000 21,950,000
0.4% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 (i) 23,667,250 11,020,500
-------------- --------------
43,667,250 32,970,500
Wireless BB+ Ba3 35,000,000 Comcast Cellular Communications,
Communications-- Inc., 9.50% due 5/01/2007 (j) 35,271,750 36,750,000
Domestic Paging & CCC- B3 30,000,000 Dial Call Communications, 13.852%
Cellular--3.9% due 4/15/2004 (a) 22,966,039 28,125,000
Mobilemedia Communication, Inc. (i):
D C 33,000,000 11.58% due 12/01/2003 (a) 25,098,450 5,940,000
D C 12,126,000 9.375% due 11/01/2007 10,618,705 2,758,665
CCC B3 80,000,000 Nextel Communications Inc., 12.08%
due 8/15/2004 (a) 61,931,139 69,250,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (concluded)
<S> <S> <S> <C> <S> <C> <C>
Wireless NR* NR* $21,000,000 Page Mart Inc., 12.74% due
Communications-- 11/01/2003 (a) $ 18,096,286 $ 19,267,500
Domestic Paging & B B2 75,000,000 Paging Network, Inc., 10% due
Cellular 10/15/2008 74,756,250 77,625,000
(concluded) B- B2 19,730,000 USA Mobile Communications Holdings,
Inc., 9.50% due 2/01/2004 18,997,875 19,360,063
B+ B1 25,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006 24,975,250 25,937,500
B- B3 15,000,000 Western Wireless Corp., 10.50%
due 2/01/2007 15,062,500 15,787,500
-------------- --------------
307,774,244 300,801,228
Wireless B+ B3 53,472,000 Comunicacion Celular S.A., 12.76%
Communications-- due 11/15/2003 (a)(h) 36,454,358 41,708,160
International B- B3 90,000,000 Millicom International Cellular
Paging & S.A., 13.39% due 6/01/2006 (a) 56,124,360 69,975,000
Cellular--1.5% -------------- --------------
92,578,718 111,683,160
Total Investments in Bonds--84.7% 6,191,012,568 6,497,698,637
Shares
Held
Preferred Stocks
Broadcasting--Radio & 2,694 Paxson Communications Corp.
Television--0.2% Convertible)(j) 2,575,292 2,997,075
139,100 SFX Broadcasting Inc. (Convertible)(j) 13,910,000 16,066,050
-------------- --------------
16,485,292 19,063,125
Cable--Domestic--0.3% 177,276 Cablevision Systems Corp. (Series M) 14,634,820 19,478,201
Cable--International--0.3% 20,810 NTL Inc. 20,816,975 23,671,375
Entertainment--1.3% 87,097 Time Warner Inc. (Series M)++++ 87,692,511 99,399,451
Financial Services--0.4% 1,230,000 California Federal Bank (Series A) 30,815,000 32,287,500
Independent Power Producers--0.0% 29,517 Consolidated Hydro, Inc. (Series H)(i) 14,891,917 2,966,458
Paper & Forest Products--0.3% 435,000 S.D. Warren Co. (Series B) 13,847,190 20,118,750
Publishing & 421,000 K-III Communications Corp. 10,562,750 11,367,000
Printing--0.5% 152,870 K-III Communications Corp. (Series B) 15,398,238 16,605,495
125,000 K-III Communications Corp. (Series D) 12,500,000 13,343,750
-------------- --------------
38,460,988 41,316,245
Steel--0.2% 550,000 USX Capital LLC (Series A) 13,750,000 14,059,375
Telephone--Competitive 10,431 Intermedia Communications Inc.
Local Exchange Carriers--0.2% (Series B)(Convertible)(j) 10,452,011 12,517,200
Utilities--0.0% 6,446 El Paso Electric Company 701,722 717,117
Wireless Communications-- 20,000 Nextel Communications Inc. (j) 20,000,000 22,475,000
Domestic Paging & Cellular--0.3%
Total Investments in
Preferred Stocks--4.0% 282,548,426 308,069,797
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Common Stocks
<S> <C> <S> <C> <C>
Cable--Domestic--0.1% 2,887 CS Wireless Systems Inc. (i) $ 20,336 $ 58
195,096 Echostar Communications Corp.
(Series A)(i) 1,385,894 4,755,465
-------------- --------------
1,406,230 4,755,523
Consumer Products--0.1% 200,369 Culligan Water Technologies Inc. (i) 1,686,248 9,216,974
Energy--0.0% 8,176 Pioneer Natural Resources Co. 199,648 342,370
Entertainment--0.2% 1,191,381 On Command Corporation (i)(l) 52,121,914 16,158,105
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. (i) 165,300 340,575
Wireless Communications-- 170,421 Nextel Communications Inc. (i) 2,749,981 4,910,255
Paging & Cellular--0.1%
Total Investments in
Common Stocks--0.5% 58,329,321 35,723,802
Trusts & Warrants
Cable--Domestic--0.0% 177,500 American Telecasting Inc.
(Warrants)(b) 413,723 79,875
25,000 People's Choice T.V. Corp.
(Warrants)(b) 140,353 14,062
-------------- --------------
554,076 93,937
Entertainment--0.0% 370,886 On Command Corporation (Warrants)(b)(l) 2,967,104 2,318,037
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust (i) (k) 192,320 0
113,386 Trump Castle Funding, Inc.
(Warrants)(b) 0 0
-------------- --------------
192,320 0
Independent Power Producers--0.0% 18,000 Consolidated Hydro, Inc. (Warrants)(b) 390,123 261,000
Wireless Communications-- 57,040 Page Mart Inc. (Warrants)(b) 236,127 402,845
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular S.A.
International Paging & Cellular--0.0% (Warrants)(b)(j) 109,680 340,884
Total Investments in Trusts &
Warrants--0.0% 4,449,430 3,416,703
Face
Amount
Short-Term Securities
Commercial $30,000,000 Atlantic Asset Securitization Corp.,
Paper***--8.7% 5.56% due 10/15/1997 29,935,133 29,935,133
40,000,000 Corporate Receivables Corp., 5.53%
due 10/15/1997 39,913,978 39,913,978
Countrywide Home Loans Inc.:
70,000,000 5.53% due 10/23/1997 69,763,439 69,763,439
24,000,000 5.54% due 10/24/1997 23,915,053 23,915,053
30,000,000 Eureka Securitization Inc., 5.53%
due 10/09/1997 29,963,133 29,963,133
Finova Capital Corp.:
20,500,000 5.52% due 10/23/1997 20,430,847 20,430,847
15,000,000 5.54% due 11/06/1997 14,916,900 14,916,900
40,000,000 5.54% due 11/14/1997 39,729,156 39,729,156
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities (concluded)
<S> <C> <S> <C> <C>
Commercial General Motors Acceptance Corp.:
Paper*** $ 4,985,000 5.65% due 10/01/1997 $ 4,985,000 $ 4,985,000
(concluded) 68,197,000 6.50% due 10/01/1997 68,197,000 68,197,000
65,478,000 Lexington Parker, 5.54% due 11/04/1997 65,135,405 65,135,405
Morgan Stanley Group Inc.:
50,000,000 5.51% due 10/07/1997 49,954,083 49,954,083
50,000,000 5.52% due 10/29/1997 49,785,333 49,785,333
60,000,000 Navistar Financial Corp., 5.92%
due 10/22/1997 59,792,800 59,792,800
Onyx Corp.:
30,000,000 5.95% due 10/03/1997 29,990,082 29,990,082
15,000,000 5.95% due 10/14/1997 14,967,771 14,967,771
20,000,000 5.95% due 11/06/1997 19,884,216 19,884,216
35,000,000 Three Rivers Funding Inc., 5.53%
due 10/10/1997 34,951,613 34,951,613
-------------- --------------
666,210,942 666,210,942
US Government Agency Federal National Mortgage Association:
Obligations***--1.4% 35,000,000 5.42% due 10/08/1997 34,963,114 34,963,114
30,000,000 5.40% due 10/14/1997 29,941,500 29,941,500
45,000,000 5.48% due 10/14/1997 44,910,950 44,910,950
-------------- --------------
109,815,564 109,815,564
Total Investments in
Short-Term Securities--10.1% 776,026,506 776,026,506
Total Investments--99.3% $7,312,366,251 7,620,935,445
==============
Other Assets Less Liabilities--0.7% 54,813,952
--------------
Net Assets--100.0% $7,675,749,397
==============
<FN>
++Subject to principal paydowns.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
*Not Rated.
**Industry classifications for convertible bonds are:
(1) Conglomerates; (2) Health Services; (3) Transportation Services.
***Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Portfolio.
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(b)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock/face amount of bonds. The purchase price
and number of shares/face amount are subject to adjustment under
certain conditions until the expiration date.
(c)Each $1,000 face amount contains one warrant of Wireless One Inc.
(d)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(e)Each $1,000 face amount contains one warrant of Orion Network
Systems, Inc.
(f)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
See Notes to Financial Statements.
(g)Each $1,000 face amount contains six warrants of Echostar
Communications Corp.
(h)Each $1,000 face amount contains one warrant of Comunicacion
Celular S.A.
(i)Non-income producing security.
(j)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(k)Restricted security as to resale. The value of the Portfolio's
investments in restricted securities was approximately $68,667,000,
representing 0.9% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
Comtel Brasileira Ltd.,
10.75% due 9/26/2004 9/18/1996 $ 517,500 $ 529,287
Goldriver Hotel & Casino
Corp., Liquidating Trust 8/31/1992--11/17/1992 192,320 0
Sunflower Electric Power Corp.,
8% due 12/31/2016 11/29/1991--8/23/1995 10,198,292 11,329,766
Tucson Electric & Power Co.:
10.21% due 1/01/2009 7/27/1993--4/01/1996 32,005,359 34,631,696
10.732% due 1/01/2013 3/01/1993--7/16/1993 20,326,836 22,176,083
------------- -------------
Total $ 63,240,307 $ 68,666,832
============= =============
(l)Investments in companies 5% or more of whose outstanding
securities are held by the Portfolio (such companies are defined as
"Affiliated Companies" in section 2 (a) (3) of the Investment
Company Act of 1940) are as follows:
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <C>
Entertainment On Command Corporation 1,191,381 $52,121,914 (i)
Entertainment On Command Corporation (Warrants) 370,886 2,967,104 (i)
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of September 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$7,312,366,251) (Note 1a) $7,620,935,445
Cash 907,556
Receivables:
Interest $ 131,458,343
Capital shares sold 20,694,750
Securities sold 19,767,761
Dividends 444,280
Paydowns 87,365 172,452,499
--------------
Prepaid registration fees and other assets (Note 1e) 845,079
--------------
Total assets 7,795,140,579
--------------
Liabilities: Payables:
Securities purchased 79,614,046
Dividends to shareholders (Note 1f) 19,908,751
Capital shares redeemed 11,213,611
Distributor (Note 2) 3,713,413
Investment adviser (Note 2) 2,449,413 116,899,234
--------------
Accrued expenses and other liabilities 2,491,948
--------------
Total liabilities 119,391,182
--------------
Net Assets: Net assets $7,675,749,397
==============
Net Assets Class A Common Stock, $0.10 par value, 500,000,000
Consist of: shares authorized $ 12,596,094
Class B Common Stock, $0.10 par value 1,500,000,000
shares authorized 66,233,918
Class C Common Stock, $0.10 par value 200,000,000
shares authorized 7,691,945
Class D Common Stock, $0.10 par value 500,000,000
shares authorized 5,985,677
Paid-in capital in excess of par 7,262,439,136
Accumulated distributions in excess of investment
income--net (Note 1f) (3,127,933)
Undistributed realized capital gains on investments--net 15,361,366
Unrealized appreciation on investments--net 308,569,194
--------------
Net assets $7,675,749,397
==============
Net Asset Class A--Based on $1,044,799,502 and 125,960,942
Value: shares outstanding $ 8.29
==============
Class B--Based on $5,495,487,714 and 662,339,180
shares outstanding $ 8.30
==============
Class C--Based on $638,626,416 and 76,919,450
shares outstanding $ 8.30
==============
Class D--Based on $496,835,765 and 59,856,765
shares outstanding $ 8.30
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Year Ended September 30, 1997
<S> <S> <C> <C>
Investment Interest and discount earned $ 619,991,404
Income Dividends 21,574,487
(Note 1d): Other 9,038,853
--------------
Total income 650,604,744
--------------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 36,108,272
Investment advisory fees (Note 2) 27,345,032
Account maintenance and distribution fees--Class C (Note 2) 3,921,960
Transfer agent fees--Class B (Note 2) 3,552,943
Account maintenance fees--Class D (Note 2) 972,042
Registration fees (Note 1e) 815,844
Transfer agent fees--Class A (Note 2) 608,541
Accounting services (Note 2) 505,855
Printing and shareholder reports 497,444
Transfer agent fees--Class C (Note 2) 380,349
Professional fees 377,640
Transfer agent fees--Class D (Note 2) 241,677
Custodian fees 155,048
Directors' fees and expenses 34,354
Pricing fees (Note 2) 22,256
Other 56,246
--------------
Total expenses 75,595,503
--------------
Investment income--net 575,009,241
--------------
Realized & Realized gain on investments--net 20,040,352
Unrealized Gain on Change in unrealized appreciation on investments--net 292,161,549
Investments--Net --------------
(Notes 1b, 1d & 3): Net Increase in Net Assets Resulting from Operations $ 887,211,142
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 575,009,241 $ 452,381,675
Realized gain on investments--net 20,040,352 31,483,874
Change in unrealized appreciation/depreciation on
investments--net 292,161,549 65,146,802
-------------- --------------
Net increase in net assets resulting from operations 887,211,142 549,012,351
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (91,922,975) (87,755,895)
Shareholders Class B (407,172,006) (329,093,983)
(Note 1f): Class C (41,118,497) (21,699,154)
Class D (34,795,763) (16,708,496)
In excess of investment income--net:
Class A -- (505,842)
Class B -- (1,896,961)
Class C -- (125,078)
Class D -- (96,311)
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (575,009,241) (457,881,720)
-------------- --------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 1,535,324,290 1,376,309,947
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 1,847,526,191 1,467,440,578
Beginning of year 5,828,223,206 4,360,782,628
-------------- --------------
End of year $7,675,749,397 $5,828,223,206
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.93 $ 7.80 $ 7.66 $ 8.13 $ 7.84
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .74 .75 .81 .75 .79
Realized and unrealized gain
(loss) on investments--net .36 .14 .14 (.47) .29
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.10 .89 .95 .28 1.08
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.74) (.76) (.81) (.75) (.79)
In excess of investment
income--net -- --+++ -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.74) (.76) (.81) (.75) (.79)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.29 $ 7.93 $ 7.80 $ 7.66 $ 8.13
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.58% 11.95% 13.27% 3.42% 14.35%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .51% .51% .55% .53% .55%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 9.23% 9.57% 10.70% 9.27% 9.78%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $1,044,799 $ 947,479 $ 902,321 $ 876,573 $ 886,784
========== ========== ========== ========== ==========
Portfolio turnover 38.58% 32.44% 24.58% 32.52% 34.85%
========== ========== ========== ========== ==========
<FN>
++Based on average shares outstanding during the year.
*Total investment returns exclude the effects of sales loads.
+++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 7.93 $ 7.80 $ 7.66 $ 8.13 $ 7.85
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .68 .69 .75 .69 .72
Realized and unrealized gain
(loss) on investments--net .37 .15 .14 (.47) .28
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.05 .84 .89 .22 1.00
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.68) (.71) (.75) (.69) (.72)
In excess of investment
income--net -- --+++++ -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.68) (.71) (.75) (.69) (.72)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.30 $ 7.93 $ 7.80 $ 7.66 $ 8.13
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.86% 11.11% 12.41% 2.66% 13.35%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.27% 1.28% 1.32% 1.29% 1.31%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 8.46% 8.80% 9.81% 8.53% 8.94%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $5,495,488 $4,250,539 $3,220,767 $2,347,223 $1,823,275
========== ========== ========== ========== ==========
Portfolio turnover 38.58% 32.44% 24.58% 32.52% 34.85%
========== ========== ========== ========== ==========
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.94 $ 7.81 $ 7.59
Operating ---------- ---------- ----------
Performance: Investment income--net .68 .68 .71
Realized and unrealized gain on investments--net .36 .15 .22
---------- ---------- ----------
Total from investment operations 1.04 .83 .93
---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.68) (.70) (.71)
In excess of investment income--net -- --+++++ --
---------- ---------- ----------
Total dividends and distributions (.68) (.70) (.71)
---------- ---------- ----------
Net asset value, end of period $ 8.30 $ 7.94 $ 7.81
========== ========== ==========
Total Investment Based on net asset value per share 13.66% 11.05% 12.92%+++
Return:** ========== ========== ==========
Ratios to Average Expenses 1.32% 1.33% 1.38%*
Net Assets: ========== ========== ==========
Investment income--net 8.39% 8.73% 9.06%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 638,626 $ 362,518 $ 135,019
Data: ========== ========== ==========
Portfolio turnover 38.58% 32.44% 24.58%
========== ========== ==========
<FN>
++Based on average shares outstanding during the year.
++++Commencement of operations.
See Notes to Financial Statements.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 7.94 $ 7.80 $ 7.59
Operating ---------- ---------- ----------
Performance: Investment income--net .72 .72 .75
Realized and unrealized gain
on investments--net .36 .16 .21
---------- ---------- ----------
Total from investment operations 1.08 .88 .96
---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.72) (.74) (.75)
Realized gain on investments--net -- --+++++ --
---------- ---------- ----------
Total dividends and distributions (.72) (.74) (.75)
---------- ---------- ----------
Net asset value, end of period $ 8.30 $ 7.94 $ 7.80
========== ========== ==========
Total Investment Based on net asset value per share 14.29% 11.82% 13.37%+++
Return:** ========== ========== ==========
Ratios to Average Expenses .76% .76% .81%*
Net Assets: ========== ========== ==========
Investment income--net 8.95% 9.30% 9.70%*
========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 496,836 $ 267,687 $ 102,676
Data: ========== ========== ==========
Portfolio turnover 38.58% 32.44% 24.58%
========== ========== ==========
<FN>
++Based on average shares outstanding during the year.
++++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of three portfolios in
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Portfolio 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 Portfolio.
(a) Valuation of investments--Portfolio securities which 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 which 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 on debt securities, which are traded on exchanges, are
valued at the last asked price for options written and last bid
price for options purchased. Interest rate 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 Portfolio 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 Portfolio may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Portfolio deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction
is effected. Pursuant to the contract, the Portfolio 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
Portfolio as unrealized gains or losses. When the contract is
closed, the Portfolio 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 Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio 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 Portfolio enters into a closing transaction), the
Portfolio 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 Portfolio'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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS (continued)
(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) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of net investment income are due primarily to differing tax
treatments for various security transactions.
(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
$462,276 have been reclassified between undistributed net realized
capital gains 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 Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), 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 with respect to the Portfolio
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: 0.55% of the Fund's average
daily net assets not exceeding $250 million; 0.50% of average daily
net assets in excess of $250 million but not exceeding $500 million;
0.45% of average daily net assets in excess of $500 million but not
exceeding $750 million; and 0.40% of average daily net assets in
excess of $750 million. For the year ended September 30, 1997, the
aggregate average daily net assets of the Fund's three Portfolios
was approximately $8,540,033,000.
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
Portfolio as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("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 year ended September 30, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Class A $ 33,865 $ 319,692
Class D $172,340 $1,643,816
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
For the year ended September 30, 1997, MLPF&S received contingent
deferred sales charges of $7,544,693 and $293,302 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively, and front-end sales charge waivers of $111,064
relating to transactions in Class D Shares of the Portfolio.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
During the year ended September 30, 1997, the Portfolio paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $13,732 for
security price quotations to compute the net asset value of the
Portfolio.
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, MLFD, MLFDS and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1997, were $3,387,217,649 and
$2,295,874,067, respectively.
Net realized and unrealized gains (losses) as of
September 30, 1997 were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $20,041,280 $ 308,569,194
Short-term investments (928) --
----------- --------------
Total $20,040,352 $ 308,569,194
=========== ==============
As of September 30, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $295,844,113, of which $481,951,849
related to appreciated securities and $186,107,736 related to
depreciated securities. The aggregate cost of investments at
September 30, 1997 for Federal income tax purposes was
$7,325,091,332.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $1,535,324,290 and $1,376,309,947 for the years ended September
30, 1997 and September 30, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 31,134,080 $ 250,373,771
Shares issued to shareholders
in reinvestment of dividends 5,178,555 41,693,780
----------- --------------
Total issued 36,312,635 292,067,551
Shares redeemed (29,808,906) (240,009,423)
----------- --------------
Net increase 6,503,729 $ 52,058,128
=========== ==============
Class A Shares for the
Year Ended Dollar
September 30, 1996 Shares Amount
Shares sold 17,653,142 $ 138,206,292
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,577,702 43,685,460
----------- --------------
Total issued 23,230,844 181,891,752
Shares redeemed (19,467,577) (152,268,118)
----------- --------------
Net increase 3,763,267 $ 29,623,634
=========== ==============
Class B Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 201,694,285 $1,624,806,467
Shares issued to shareholders
in reinvestment of dividends 22,790,352 183,793,349
----------- --------------
Total issued 224,484,637 1,808,599,816
Automatic conversion of
shares (2,850,390) (22,812,891)
Shares redeemed (95,044,774) (764,885,115)
----------- --------------
Net increase 126,589,473 $1,020,901,810
=========== ==============
Class B Shares for the
Year Ended Dollar
September 30, 1996 Shares Amount
Shares sold 182,572,014 $1,430,080,855
Shares issued to shareholders
in reinvestment of dividends
and distributions 19,579,491 153,319,965
----------- --------------
Total issued 202,151,505 1,583,400,820
Automatic conversion of
shares (2,223,768) (17,369,063)
Shares redeemed (77,015,717) (603,076,378)
----------- --------------
Net increase 122,912,020 $ 962,955,379
=========== ==============
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 44,892,704 $ 362,128,191
Shares issued to shareholders
in reinvestment of dividends 2,808,746 22,682,139
----------- --------------
Total issued 47,701,450 384,810,330
Shares redeemed (16,444,400) (132,540,144)
----------- --------------
Net increase 31,257,050 $ 252,270,186
=========== ==============
Class C Shares for the
Year Ended Dollar
September 30, 1996 Shares Amount
Shares sold 35,104,878 $ 275,231,433
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,535,893 12,030,927
----------- --------------
Total issued 36,640,771 287,262,360
Shares redeemed (8,274,123) (64,777,972)
----------- --------------
Net increase 28,366,648 $ 222,484,388
=========== ==============
Class D Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 35,702,960 $ 287,604,383
Automatic conversion of
shares 2,846,330 22,812,891
Shares issued to shareholders
in reinvestment of dividends 2,248,145 18,168,882
----------- --------------
Total issued 40,797,435 328,586,156
Shares redeemed (14,668,105) (118,491,990)
----------- --------------
Net increase 26,129,330 $ 210,094,166
=========== ==============
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 45,431,713 $ 356,012,837
Automatic conversion of
shares 2,222,223 17,369,063
Shares issued to shareholders
in reinvestment of dividends
and distributions 997,894 7,813,928
----------- --------------
Total issued 48,651,830 381,195,828
Shares redeemed (28,082,126) (219,949,282)
----------- --------------
Net increase 20,569,704 $ 161,246,546
=========== ==============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate Bond Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of the High
Income Portfolio of Merrill Lynch Corporate Bond Fund, Inc. as of
September 30, 1997, the related statements of operations for the
year then ended, and changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended. These
financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the High Income Portfolio of Merrill Lynch Corporate Bond Fund, Inc.
as of September 30, 1997, the results of its operations, the changes
in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 18, 1997
</AUDIT-REPORT>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1997
IMPORTANT TAX INFORMATION (unaudited)
Of the ordinary income distributions paid monthly by High Income
Portfolio of Merrill Lynch Corporate Bond Fund, Inc. during the
fiscal year ended September 30, 1997, 3.57% qualifies for the
dividends received deduction for corporations. Additionally, there
were no long-term capital gain distributions paid during the year.
Please retain this information for your records.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
MERRILL LYNCH CORPORATE BOND FUND, INC.
INVESTMENT GRADE PORTFOLIO & INTERMEDIATE TERM PORTFOLIO
September 30, 1997
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 1997
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 Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
During the quarter ended September 30, 1997, investor perceptions
regarding the prospects for the US economy shifted dramatically. As
the period began, increasing evidence of noninflationary economic
growth boosted investor confidence when, as widely expected, the
Federal Reserve Board (FRB) chose to leave monetary policy unchanged
at its July and August meetings. This increased confidence was
reinforced further in late July by the passage of tax-cut and five-
year balanced budget bills.
By late August, the consensus outlook had changed, with forecasts of
overheating growth and inflationary expectations. These concerns
were reinforced by a large upward revision in second-quarter real
gross domestic product (GDP) growth from an original estimate of
2.2% to 3.6%. However, in September, this rate of growth was revised
downward to 3.3%. This report set the stage for renewed investor
confidence, which was bolstered further by the continued absence of
inflationary pressures.
Although it was widely anticipated that the FRB would not tighten
monetary policy at its September meeting, investors were pleasantly
surprised by the release of September employment data shortly after
the quarter's close, since the US economy added jobs at a slower-
than-expected pace during the month. Over the balance of 1997, the
determining factor in the investment outlook is likely to be whether
or not the US economy continues to follow a pattern of moderate,
noninflationary growth.
Outside of the United States, the most dramatic developments took
place in Southeast Asia. The investment boom in many developing
Asian economies came to an abrupt halt as the devaluation of the
Thai baht sparked a series of currency devaluations and financial
market volatility throughout the region. Countries have been forced
to raise interest rates to support their currencies, and this trend
may continue for some time. With higher debt-service costs,
corporate profitability is likely to erode, and lower economic
growth is expected.
Fiscal Year in Review
Investment Grade Portfolio
Performance can be influenced by adjusting a portfolio's duration,
as well as the mix of industrial sectors and quality ratings of the
individual issues. For example, the longer the duration of a
portfolio, the more volatile the total return will be relative to
the price changes in the general market. Because Investment Grade
Portfolio invests in high-quality corporate and government issues,
we compare our Portfolio's performance to the Lehman Brothers
Aggregate Bond Index which consists of a representative sampling of
holdings of various maturities, industry sectors and quality ratings
which best represent the composition of the general high-quality
fixed-income market. When the Portfolio's duration is longer than
the Index, we are taking more risk of potential price volatility
than the general market. Conversely, when the Portfolio's duration
is shorter than the Index, we are taking less volatility risk. A
duration-neutral position means that we are taking the same risk in
terms of price movements as the general market.
Choice of industry sectors can influence the performance of the
Portfolio based on how the industries in the Portfolio perform
relative to other sectors. An industry-neutral position means that
the Portfolio is taking the same sector risks as the general market.
Overweighting or underweighting of specific industries will affect
the performance of the Portfolio relative to the general market.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
Corporate bond ratings reflect the creditworthiness of their
issuers; that is, their ability to repay principal at maturity.
Lower-quality bonds generally pay higher yields than high-quality
bonds--and their prices may fluctuate to a greater degree than high-
quality bonds--because they entail greater credit risk; that is,
there is greater risk that they would default on their obligations
to make timely payments of interest and principal. A quality-neutral
weighting for the Portfolio means that the Portfolio is holding
issues which match the average quality of the general market. A
quality average which is less than the general market indicates that
the Portfolio is taking more risk than the Index.
In September 1996, the duration of the Investment Grade Portfolio
was 4.8 years. We extended this duration to 5.0 years in early
December, which made the Portfolio duration neutral to the general
market. This was done because of a bond rally caused by low gross
domestic product growth and the FRB's decision not to tighten
monetary policy. On average, the Portfolio's holdings had a quality
rating of A, which was in line with the Index. We were underweighted
in the electric utility sector because of our concerns regarding
event risk in that industry. We were also underweighted in our
position in Canadian issues. These strategies enhanced the
Portfolio's total returns relative to the Index.
During the first calendar quarter of 1997, the fixed-income markets
fell on concern of growing inflationary pressures and a comment by
FRB Chairman Alan Greenspan that there was "irrational exuberance"
in the securities market. We shortened the duration of the Portfolio
to 4.6 years by increasing our cash reserve position to 7% of net
assets. With this more conservative investment strategy, we
protected the asset base of the Portfolio in a more negative market
environment.
At the end of March, the FRB launched a preemptive strike against
inflation by raising the Federal Funds rate by 25 basis points
(0.25%). Interest rates peaked in mid-April and began to drop
through the second quarter. This rally was fueled by a significant
change in expectations regarding the economy and a more optimistic
outlook for inflation. We planned to maintain a duration-neutral
posture for the Portfolio based on the volatility which
characterized the market. Accordingly, we set a range of 4.5 years--
4.6 years for the Portfolio's duration, based on the duration of the
Index. During this period, the Portfolio's total return lagged that
of the Index slightly, since we kept a relatively high percent of
net assets (7%) in cash reserves in response to our concern
regarding volatility.
The market continued to rally up to the middle of the summer, and we
extended the upper limit of the duration range to 4.7 years and
lengthened our positions accordingly, primarily by reducing our cash
reserve position to 3% of net assets. Our industrial sector and
quality mixes remained neutral to the Index. The market fell sharply
in August as a result of employment and purchasing manager reports.
These figures suggested substantially stronger consumer spending in
the third quarter of 1997. The market rallied again in September on
the belief that the FRB would not move to tighten interest rates
again this year. Prices then began to fall in early October in
response to concern about employment and wage pressure. In a period
of such volatility, we maintained a duration-neutral strategy which
kept the total returns of the Portfolio in line with that of the
Index for the fiscal year ended September 30, 1997.
Intermediate Term Portfolio
During the fiscal year ended September 30, 1997, we employed a
similar strategy for Intermediate Term Portfolio as to the one used
in Investment Grade Portfolio. We extended the Portfolio's duration
from 4.0 years in September 1996 to 4.25 years by December. We also
reduced our cash reserve position from 2.0% of net assets to 0.4%.
The quality mix remained virtually unchanged, with approximately 45%
of the Portfolio's net assets invested in A-rated issues. We had a
duration-neutral position of 4.0 years in March, and by April 1997,
we had shortened the Portfolio's duration to 3.9 years and increased
our cash position to 5% of net assets. During the summer rally, we
extended the Portfolio's duration to 4.1 years, which was neutral to
the intermediate corporate index. However, we followed a more
conservative strategy with a cash reserve position of 3.4% of net
assets and a Treasury position of 8% during the rally. As a result,
the Portfolio slightly underperformed the index on a total return
basis for the fiscal year ended September 30, 1997.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
In Conclusion
We appreciate your ongoing investment in Investment Grade and
Intermediate Term Portfolios of Merrill Lynch Corporate Bond Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
November 13, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricin 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 for Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears 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 for Investment Grade
Portfolio. Intermediate Term Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Investment Grade Portfolio is subject to a
distribution fee of 0.50% and an account maintenance fee of 0.25%.
Intermediate Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. These 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% for Investment Grade Portfolio.
Intermediate Term Portfolio is subject to a distribution fee of
0.25% 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) for
Investment Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" 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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
9/30/97 6/30/97 9/30/96 % Change % Change As of 9/30/97
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares $11.40 $11.24 $11.16 +2.15% +1.42% 6.06%
Investment Grade Portfolio Class B Shares 11.40 11.24 11.16 +2.15 +1.42 5.55
Investment Grade Portfolio Class C Shares 11.40 11.24 11.17 +2.06 +1.42 5.50
Investment Grade Portfolio Class D Shares 11.41 11.24 11.17 +2.15 +1.51 5.82
Intermediate Term Portfolio Class A Shares 11.49 11.35 11.28 +1.86 +1.23 5.95
Intermediate Term Portfolio Class B Shares 11.50 11.35 11.28 +1.95 +1.32 5.49
Intermediate Term Portfolio Class C Shares 11.49 11.35 11.28 +1.86 +1.23 5.60
Intermediate Term Portfolio Class D Shares 11.50 11.35 11.28 +1.95 +1.32 5.84
Investment Grade Portfolio Class A Shares--Total Return +9.22(1) +3.09(2)
Investment Grade Portfolio Class B Shares--Total Return +8.39(3) +2.90(4)
Investment Grade Portfolio Class C Shares--Total Return +8.23(5) +2.88(6)
Investment Grade Portfolio Class D Shares--Total Return +8.95(7) +3.12(8)
Intermediate Term Portfolio Class A Shares--Total Return +8.59(9) +2.84(10)
Intermediate Term Portfolio Class B Shares--Total Return +8.13(11) +2.80(12)
Intermediate Term Portfolio Class C Shares--Total Return +7.99(13) +2.69(14)
Intermediate Term Portfolio Class D Shares--Total Return +8.58(15) +2.90(16)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.756 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.185 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.670 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.163 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.664 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.162 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.728 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.178 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.729 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.180 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.670 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.165 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.665 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.164 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.718 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.177 per share
ordinary income dividends.
</TABLE>
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +9.22% +4.85%
Five Years Ended 9/30/97 +6.62 +5.75
Ten Years Ended 9/30/97 +9.30 +8.86
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +8.39% +4.39%
Five Years Ended 9/30/97 +5.81 +5.81
Inception (10/21/88) through 9/30/97 +7.95 +7.95
[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 9/30/97 +8.23% +7.23%
Inception (10/21/94)
through 9/30/97 +8.63 +8.63
[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 9/30/97 +8.95% +4.59%
Inception (10/21/94) through 9/30/97 +9.28 +7.77
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Investment Grade Portfolio
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the ML COAO
Index and Lehman Brothers Aggregate Bond Index. Beginning and ending
values are:
9/87 9/97
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class A Shares* $ 9,600 $23,361
ML COAO Index++++ $10,000 $27,026
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $24,731
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the ML COAO
Index and Lehman Brothers Aggregate Bond Index. Beginning and ending
values are:
10/21/88** 9/97
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class B Shares* $10,000 $19,826
ML COAO Index++++ $10,000 $23,248
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $21,425
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an investment
in the ML COAO Index and Lehman Brothers Aggregate Bond Index.
Beginning and ending values are:
10/21/94** 9/97
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class C Shares* $10,000 $12,757
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class D Shares* $ 9,900 $12,464
ML COAO Index++++ $10,000 $13,650
Lehman Brothers Aggregate
Bond Index $10,000 $13,138
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests primarily in long-term corporate bonds rated
A or better by Moody's Investors Service, Inc. or Standard & Poor's
Corp.
++++This unmanaged Index is comprised of all investment-grade
corporate bonds rated BBB3 or higher, of all maturities.
++++++This unmanaged market-weighted Index is comprised of
investment-grade corporate bonds (rated BBB or better), mortgages
and US Treasury and Government agency issues with at least one year
to maturity.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Intermediate Term Portfolio
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the ML C6AO
Index. Beginning and ending values are:
9/87 9/97
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class A Shares* $ 9,900 $23,338
ML C6AO Index++++ $10,000 $26,678
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the ML C6AO
Index. Beginning and ending values are:
11/13/92** 9/97
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class B Shares* $10,000 $13,688
ML C6AO Index++++ $10,000 $14,881
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an investment
in the ML C6AO Index. Beginning and ending values are:
10/21/94** 9/97
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class C Shares* $10,000 $12,717
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class D Shares* $ 9,900 $12,762
ML C6AO Index++++ $10,000 $13,578
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests primarily in bonds rated in the four highest
rating categories (Baa or higher by Moody's Investors Service, Inc.
or BBB or higher by Standard & Poor's Corp.), with a maximum remaining
maturity not to exceed ten years and, depending on market conditions,
an average remaining maturity of five to seven years.
++++This unmanaged Index is comprised of all investment-grade
corporate bonds maturing in from five to ten years.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
PERFORMANCE DATA (concluded)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +8.59% +7.51%
Five Years Ended 9/30/97 +6.54 +6.32
Ten Years Ended 9/30/97 +8.96 +8.85
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +8.13% +7.13%
Inception (11/13/92) through 9/30/97 +6.65 +6.65
[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 % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/97 +7.99% +6.99%
Inception (10/21/94)
through 9/30/97 +8.51 +8.51
[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 9/30/97 +8.58% +7.50%
Inception (10/21/94) through 9/30/97 +9.01 +8.64
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury
Obligations--6.0% Bonds & Notes:
AAA Aaa $19,300,000 6.375% due 5/15/1999 $ 19,345,234 $ 19,471,963
AAA Aaa 2,500,000 6.375% due 8/15/2002 2,494,531 2,538,275
AAA Aaa 11,000,000 6.25% due 8/31/2002 11,002,310 11,099,660
AAA Aaa 9,000,000 5.75% due 8/15/2003 8,744,766 8,860,770
AAA Aaa 8,000,000 6.50% due 5/15/2005 8,032,335 8,170,000
AAA Aaa 20,500,000 6.125% due 8/15/2007 20,286,580 20,509,635
AAA Aaa 3,000,000 6.625% due 2/15/2027 2,974,687 3,071,730
-------------- --------------
72,880,443 73,722,033
Asset-Backed AAA Aaa 4,350,000 Arcadia Automobile Receivables
Securities++-- Trust, 6.10% due 6/15/2000 4,349,153 4,366,661
7.1% AAA Aaa 26,905,000 Banc One, Master Trust (Series B),
7.55% due 12/15/1999 27,427,315 26,955,312
Citibank Credit Card Master Trust I:
AAA Aaa 8,000,000 6.35% due 8/15/2002 7,993,600 8,038,750
AAA Aaa 10,000,000 5.838% due 12/10/2008 (a) 9,996,100 9,984,300
AAA Aaa 6,000,000 First Bank Corporate Card Master Trust,
6.40% due 2/15/2003 5,992,634 6,032,580
AAA Aaa 16,970,541 GMAC Grantor Trust, 6.50% due 4/15/2002 16,965,809 17,117,676
AAA Aaa 15,000,000 Household Affinity Credit Card,
Master Trust, 5.752% due
8/16/2004 (a) 15,000,000 15,003,000
-------------- --------------
87,724,611 87,498,279
Banking--9.0% BBB+ A3 6,250,000 BB&T Corporation, 7.25% due 6/15/2007 6,220,813 6,436,000
BankAmerica Corp.:
A+ Aa3 3,000,000 6.65% due 5/01/2001 2,997,090 3,031,290
A+ Aa3 3,000,000 7.125% due 5/12/2005 3,087,560 3,072,000
BBB+ Aa3 5,000,000 Chase Capital II, 6.218% due
2/01/2027 (a) 4,886,400 4,864,775
A- A1 10,300,000 Chase Manhattan Bank Corporation,
8.65% due 2/13/1999 10,805,215 10,668,534
A- A1 10,000,000 First Bank System, Inc., 6.375%
due 3/15/2001 9,880,007 10,021,400
A A2 3,000,000 First Chicago Corp., 9% due 6/15/1999 3,182,940 3,135,570
A- A1 12,900,000 First Chicago NBD Capital I, 6.268%
due 2/01/2027(a) 12,765,788 12,582,002
BBB A2 4,750,000 Fleet Capital Trust II, 7.92%
due 12/11/2026 4,690,720 4,805,908
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,098,050
BBB+ A2 14,000,000 HSBC Americas Inc., 7.808% due
12/15/2026 (b) 13,838,440 14,010,304
BBB+ A2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 5,988,360
Norwest Corp.:
AA- Aa3 17,000,000 6.25% due 4/15/1999 16,944,240 17,075,820
AA- Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,550,400
BBB+ A1 5,500,000 Wells Fargo Capital I, 7.96%
due 12/15/2026 5,401,385 5,589,870
-------------- --------------
109,874,083 109,930,283
Canadian Province of Quebec (Canada)(1):
Provinces*--1.9% A+ A2 7,035,000 7.50% due 7/15/2002 7,440,311 7,322,380
A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,622,560
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 4,995,000
A+ A2 4,000,000 7.125% due 2/09/2024 3,701,900 3,933,400
-------------- --------------
23,622,856 22,873,340
Federal AAA Aaa 15,000,000 Federal National Mortgage
Agencies--1.3% Association, 7.85% due 9/10/2004 14,817,438 15,442,950
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance--3.4% A+ A2 $ 1,300,000 American General Finance Corp.,
7.70% due 11/15/1997 $ 1,322,074 $ 1,302,262
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,042,540
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,987,320
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,529,730
AA- Aa3 5,000,000 6.375% due 6/15/2000 5,008,300 5,018,850
A A2 9,500,000 Beneficial Corporation, 6.80%
due 9/16/2003 9,500,000 9,605,915
A Aa3 1,250,000 CIT Capital Trust I, 7.70% due
2/15/2027 1,244,300 1,242,621
A+ Aa3 10,000,000 CIT Group Holdings, Inc., 6.10%
due 8/09/1999 9,984,200 9,997,200
A+ A1 5,000,000 Commercial Credit Co., 6.45%
due 7/01/2002 5,009,800 4,995,150
-------------- --------------
41,508,604 41,721,588
Finance-- Bear Stearns Companies, Inc.:
Other-- A A2 10,000,000 6.50% due 7/05/2000 9,981,800 10,054,500
10.7% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,021,460
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,676,911
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,323,610
A+ A1 3,500,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 3,486,805 3,541,230
A- Baa1 11,000,000 Donaldson, Lufkin & Jenrette Inc.,
6.875% due 11/01/2005 10,952,615 11,032,670
A A2 7,500,000 Equitable Life Assurance Society
of the US, 7.70% due 12/01/2015 (b) 7,448,310 7,860,000
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,940,323 3,995,306
BBB+ Baa2 5,000,000 MBNA Corporation, 6.068% due
6/17/2002 (a) 5,000,000 4,985,600
A+ A1 9,200,000 Morgan Stanley Group Inc., 6.875%
due 3/01/2007 9,166,972 9,257,316
BBB+ Baa1 7,500,000 PaineWebber Group Inc., 7.99%
due 6/09/2017 7,500,000 7,861,800
Salomon Inc.:
BBB Baa1 20,000,000 6.50% due 3/01/2000 20,000,000 20,058,400
BBB Baa1 10,000,000 7.20% due 2/01/2004 9,991,700 10,235,600
Smith Barney Holdings, Inc.:
A A2 7,000,000 6.50% due 10/15/2002 6,961,080 6,998,110
A A2 2,850,000 7.375% due 5/15/2007 2,847,463 2,951,175
The Travelers Corp.:
AA- Aa3 3,000,000 9.50% due 3/01/2002 3,163,980 3,342,990
AA- Aa3 10,800,000 7.875% due 5/15/2025 10,845,324 11,536,452
-------------- --------------
127,171,912 130,733,130
Industrial-- A+ A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--1.8% due 12/01/1999 3,367,590 3,155,430
BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 9,223,200
A A2 9,500,000 Philip Morris Companies, Inc., 9%
due 1/01/2001 9,698,815 10,147,710
-------------- --------------
22,048,365 22,526,340
Industrial-- BBB Baa3 5,500,000 Arkla Inc., 8.875% due 7/15/1999 5,819,675 5,746,785
Energy--2.7% BP America Inc.:
AA Aa2 4,075,000 9.375% due 11/01/2000 4,488,287 4,436,086
AA Aa2 11,000,000 10% due 7/01/2018 11,869,080 11,777,040
BBB Baa3 5,000,000 Noram Energy Corp., 7.50%
due 8/01/2000 5,113,400 5,139,500
A+ A1 5,500,000 Texaco Capital Inc., 9% due
12/15/1999 6,215,190 5,818,450
-------------- --------------
33,505,632 32,917,861
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A A3 $ 7,000,000 Chrysler Corp., 7.45% due 3/01/2027 $ 6,965,980 $ 7,189,910
Manufacturing-- AA- Aa3 4,500,000 du Pont (E.I.) de Nemours & Co.,
10.4% 8.25% due 1/15/2022 4,676,445 4,821,660
Ford Motor Credit Co.:
A+ A1 5,000,000 7% due 9/25/2001 4,980,100 5,109,500
A+ A1 5,000,000 8% due 6/15/2002 5,286,350 5,310,050
A+ A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,242,300
A+ A1 1,000,000 7.75% due 3/15/2005 999,090 1,059,660
General Motors Acceptance Corp.:
A- A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,038,880
A- A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,142,334
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 4,022,920
A- A3 7,000,000 7.125% due 5/01/2003 6,964,230 7,200,060
Lockheed Martin Corp.:
BBB+ A3 10,000,000 6.625% due 6/15/1998 9,998,700 10,050,900
BBB+ A3 8,750,000 6.55% due 5/15/1999 8,745,800 8,809,412
BBB+ A3 5,000,000 6.85% due 5/15/2001 4,995,950 5,069,800
BBB+ A3 11,000,000 Loral Corporation, 8.375%
due 6/15/2024 11,056,040 12,493,360
BBB+ A3 4,000,000 Martin Marietta Corp., 7.375%
due 4/15/2013 3,846,440 4,119,080
McDonnell Douglas Financial Corp.:
AA+ Baa2 7,500,000 6.13% due 12/23/1998 7,484,550 7,404,150
AA+ Baa2 5,000,000 6.30% due 10/20/1999 5,029,550 4,950,500
BBB Baa1 3,000,000 Raytheon Co., 7.20% due 8/15/2027 2,995,560 2,994,360
BBB Baa3 17,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 16,970,250 17,304,810
-------------- --------------
124,048,723 127,333,646
Industrial-- A+ A1 10,000,000 Bass America, Inc., 8.125%
Services--15.2% due 3/31/2002 10,250,610 10,673,800
A A2 8,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 8,076,380 8,457,680
BBB Baa2 10,000,000 Circus Circus Enterprises, Inc.,
6.70% due 11/15/2096 9,977,700 9,864,400
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,080,680
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,996,700
A+ A1 2,000,000 Electronic Data Systems Corp., 6.85%
due 5/15/2000 (b) 1,998,420 2,032,396
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due
11/01/2024 7,057,420 7,992,110
News American Holdings, Inc.:
BBB Baa3 4,000,000 9.125% due 10/15/1999 4,298,640 4,213,480
BBB Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,472,335
BBB Baa3 10,000,000 8% due 10/17/2016 9,699,900 10,230,700
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 4,990,800
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 4,026,040
BBB Baa2 7,200,000 Safeway, Inc., 7% due 9/15/2007 7,196,760 7,270,704
Sears, Roebuck & Co.:
A- A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,088,650
A- A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,001,814
A- A2 8,000,000 6.82% due 10/17/2002 8,016,320 8,112,960
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 7,074,060
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,235,900 9,736,265
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- Time Warner Entertainment Co.:
Services BBB- Baa3 $ 6,000,000 10.15% due 5/01/2012 $ 7,356,180 $ 7,533,480
(concluded) BBB- Baa3 9,900,000 8.375% due 3/15/2023 10,525,871 10,632,600
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024 14,488,240 15,905,879
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,527,995
A A2 14,678,505 6.85% due 1/10/2007 (b)++ 14,668,671 14,819,419
-------------- --------------
183,641,860 186,734,947
Industrial-- BBB Baa2 11,500,000 CSX Corporation, 7.95% due
Transporation-- 5/01/2027 (b) 11,440,430 12,376,507
4.2% BBB Baa2 9,000,000 Federal Express Corporation, 9.65%
due 6/15/2012 10,137,590 11,102,220
Norfolk Southern Corporation:
BBB+ Baa1 1,000,000 6.95% due 5/01/2002 998,480 1,020,590
BBB+ Baa1 4,000,000 7.35% due 5/15/2007 3,997,240 4,157,880
BBB+ Baa1 5,500,000 7.80% due 5/15/2027 5,493,070 5,890,335
Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,955,300
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,147,920
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,238,290
-------------- --------------
48,366,020 50,889,042
Utilities-- A+ A2 8,700,000 ALLTEL Corporation, 6.75%
Communications-- due 9/15/2005 8,566,020 8,751,939
3.9% GTE Corp.:
A A3 3,000,000 8.85% due 3/01/1998 3,081,000 3,035,730
A A3 7,500,000 9.375% due 12/01/2000 8,235,170 8,156,400
A A3 4,000,000 9.10% due 6/01/2003 4,242,720 4,484,600
A A3 3,000,000 10.30% due 11/15/2017 3,285,270 3,167,100
AA Aa3 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,999,080
US West Capital Funding, Inc.:
BBB+ Baa1 5,000,000 6.85% due 1/15/2002 4,998,050 5,063,950
BBB+ Baa1 3,500,000 7.30% due 1/15/2007 3,608,640 3,579,100
BBB+ Baa1 6,000,000 7.90% due 2/01/2027 6,000,000 6,322,440
BBB+ Baa1 3,000,000 7.95% due 2/01/2097 2,970,000 3,160,260
-------------- --------------
46,998,120 47,720,599
Utilities-- BBB+ Baa1 13,500,000 Arizona Public Service Co., 7.625%
Electric--6.0% due 3/15/1998 13,708,305 13,611,915
A+ Aa3 6,675,000 Duke Power Co., 8% due 11/01/1999 6,666,714 6,916,168
A+ A1 2,000,000 Georgia Power Co., 6.125% due
9/01/1999 1,961,420 2,000,600
AA- Aa3 5,000,000 Northern States Power Company,
7.125% due 7/01/2025 5,305,900 5,101,700
Pennsylvania Power & Light Co.:
A- A3 6,000,000 5.50% due 4/01/1998 5,972,220 5,992,020
A- A3 3,000,000 6.875% due 2/01/2003 3,048,870 3,050,850
Public Service Electric & Gas Co.:
A- A3 7,000,000 7.125% due 11/01/1997 7,058,870 7,005,530
A- A3 10,000,000 6.50% due 6/01/2000 9,995,705 10,082,100
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due
6/12/2000 5,000,000 5,370,050
BBB Baa2 5,000,000 Texas Utilities Electric Company,
8.175% due 1/30/2037 5,000,000 5,240,350
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 9,305,885
-------------- --------------
72,095,164 73,677,168
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee AA- Aa2 $ 6,000,000 ABN AMRO Bank N.V., 7.125%
Corporates*-- due 6/18/2007 (2) $ 5,997,060 $ 6,177,660
10.5% A+ A1 6,000,000 Australia & New Zealand Banking
Group Ltd., 7.55% due
9/15/2006 (2) 5,990,880 6,292,320
BBB Baa1 5,075,000 China International Trust, 9%
due 10/15/2006 (2) 5,544,336 5,622,136
Enersis S.A.(5):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,499,150
A- Baa1 7,000,000 7.40% due 12/01/2016 6,963,040 7,032,550
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,978,800
BBB+ Baa3 9,800,000 Fairfax Financial Holdings Ltd.,
7.75% due 7/15/2037 (2)(b) 9,751,098 9,836,260
Ford Capital B.V. (2):
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,328,000
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,837,905
A+ A2 4,000,000 Grand Metropolitan Investment Corp.,
6.50% due 9/15/1999 (2) 4,000,000 4,031,760
A- A3 6,000,000 HSBC Americas Inc., 7% due
11/01/2006 (2) 5,949,600 6,058,380
Hutchison Whampoa Finance (2):
A+ A3 7,000,000 6.95% due 8/01/2007 7,004,020 6,899,900
A+ A3 6,500,000 7.45% due 8/01/2017 (b) 6,563,055 6,445,894
A- A3 5,000,000 Israel Electric Corp. Ltd., 7.25%
due 12/15/2006 (5)(b) 4,990,500 5,079,615
A+ A3 5,500,000 Mass Transit Railway Corp., 7.25%
due 10/01/2005 (6) 5,663,700 5,608,185
A Aa3 2,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (2) 1,995,240 2,110,320
Petroliam Nasional BHD(5)(b):
A+ A1 12,000,000 6.875% due 7/01/2003 11,929,530 11,856,000
A+ A1 6,500,000 7.125% due 10/18/2006 6,482,515 6,416,917
A+ A2 5,000,000 Pohang Iron and Steel Industries
Co., Ltd., 7.125% due 7/15/2004 (4) 4,987,250 4,901,250
BBB+ Baa2 2,000,000 Saga Petroleum ASA, 7.25% due
9/23/2027 (5) 1,979,980 1,972,460
BBB+ A3 9,500,000 State Development Bank of China,
7.375% due 2/01/2007 (2) 9,496,865 9,601,745
-------------- --------------
126,736,034 128,587,207
Yankee AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
Sovereign*--0.6% due 12/01/1999 (3) 4,226,640 4,178,680
AA- A1 4,000,000 Korea Development Bank, 6.625% due
11/21/2003 (2) 4,031,560 3,895,000
-------------- --------------
8,258,200 8,073,680
Total Investments in
Bonds & Notes--94.7% 1,143,298,065 1,160,382,093
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities Investment Grade Portfolio
<S> <C> <S> <C> <C>
Repurchase $ 49,199,000 UBS Securities Funding Inc.,
Agreements**--4.0% purchased on 9/30/1997 to
yield 6.06% to 10/01/1997 $ 49,199,000 $ 49,199,000
Total Investments in
Short-Term Securities--4.0% 49,199,000 49,199,000
Total Investments--98.7% $1,192,497,065 1,209,581,093
==============
Other Assets Less Liabilities--1.3% 15,432,333
--------------
Net Assets--100.0% $1,225,013,426
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity; Guaranteed by the Province.
(2)Financial Institution.
(3)Government Entity; Guaranteed by Japan.
(4)Industrial; Metals.
(5)Industrial.
(6)Transportation.
See Notes to Financial Statements.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
(a)Floating Rate Note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations--6.2% AAA Aaa $ 3,000,000 7.75% due 12/31/1999 $ 3,122,344 $ 3,118,110
AAA Aaa 1,000,000 5.875% due 2/15/2000 989,375 1,000,160
AAA Aaa 2,000,000 5.75% due 10/31/2000 1,963,750 1,990,320
AAA Aaa 4,500,000 5.625% due 2/28/2001 4,383,281 4,455,720
AAA Aaa 1,000,000 8% due 5/15/2001 1,070,000 1,065,620
AAA Aaa 1,000,000 6.50% due 5/15/2005 1,003,420 1,021,250
AAA Aaa 11,800,000 6.125% due 8/15/2007 11,609,838 11,805,546
-------------- --------------
24,142,008 24,456,726
Asset-Backed AAA Aaa 2,000,000 First Bank Corporate Card Master
Securities++--0.5% Trust, 6.40% due 2/15/2003 1,997,545 2,010,860
Banking--16.4% BBB+ A3 4,000,000 BB&T Corporation, 7.25% due 6/15/2007 3,981,320 4,119,040
A A2 3,500,000 Bank of New York Company, Inc. (The),
7.875% due 11/15/2002 3,873,450 3,714,130
BankAmerica Corp.:
A A1 4,000,000 7.50% due 10/15/2002 4,268,880 4,171,720
A+ Aa3 3,000,000 7.125% due 5/12/2005 2,956,500 3,072,000
A A2 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,406,710
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 6,078,780
A+ A1 11,500,000 NationsBank Corporation, 6.65% due
4/09/2002 11,423,540 11,579,120
Norwest Corp.:
AA- Aa3 5,000,000 6.25% due 4/15/1999 4,983,600 5,022,300
AA- Aa3 2,000,000 6.125% due 10/15/2000 1,996,440 1,996,440
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 1,004,210
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 5,012,900
BBB+ A3 9,000,000 Washington Mutual Inc., 7.25% due
8/15/2005 8,930,520 9,206,730
-------------- --------------
63,340,300 64,384,080
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Canadian Province of Quebec (Canada)(1):
Provinces*--2.7% A+ A2 $ 5,000,000 7.50% due 7/15/2002 $ 5,296,190 $ 5,204,250
A+ A2 5,000,000 8.80% due 4/15/2003 5,538,670 5,518,800
-------------- --------------
10,834,860 10,723,050
Federal AAA Aaa 2,500,000 Federal National Mortgage
Agencies--0.7% Association, 7.85% due 9/10/2004 2,496,484 2,573,825
Finance--3.1% A A2 9,250,000 Beneficial Corporation, 6.80% due
9/16/2003 9,250,000 9,353,128
A+ A1 3,000,000 Commercial Credit Company, 6.45%
due 7/01/2002 3,005,880 2,997,090
-------------- --------------
12,255,880 12,350,218
Finance-- A Baa2 11,580,000 Bankers Trust New York Corporation,
Other--9.2% 7.625% due 8/15/2005 11,797,083 12,106,543
Bear Stearns Companies, Inc.:
A A2 2,000,000 6.50% due 7/05/2000 1,996,360 2,010,900
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,323,610
A+ A1 6,250,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 6,226,438 6,323,625
Salomon Inc.:
BBB Baa1 5,000,000 6.50% due 3/01/2000 5,000,000 5,014,600
BBB Baa1 4,000,000 7.20% due 2/01/2004 3,996,680 4,094,240
A A2 1,000,000 Smith Barney Holdings Inc., 7.375%
due 5/15/2007 999,110 1,035,500
AA- Aa3 2,000,000 The Travelers Corp., 9.50%
due 3/01/2002 2,168,400 2,228,660
-------------- --------------
35,408,501 36,137,678
Industrial-- A+ A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--4.5% due 12/01/1999 6,189,909 5,764,971
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 5,020,100
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 3,005,760
A A2 3,500,000 Philip Morris Cos., Inc., 9%
due 1/01/2001 3,576,195 3,738,630
-------------- --------------
17,757,454 17,529,461
Industrial-- Texaco Capital Inc.:
Energy--1.1% A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,028,260
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,115,800
-------------- --------------
4,338,580 4,144,060
Industrial-- BBB+ A3 4,000,000 Applied Materials Inc., 6.65%
Manufacturing-- due 9/05/2000 4,000,000 4,030,200
11.7% A+ A1 5,000,000 Ford Motor Credit Co., 7.75%
due 3/15/2005 4,995,450 5,298,300
General Motors Acceptance Corp.:
A- A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,009,720
A- A3 5,000,000 6.625% due 10/01/2002 4,991,000 5,037,750
A- A3 2,000,000 7.125% due 5/01/2003 1,989,780 2,057,160
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,005,090
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,516,975
BBB+ A3 8,000,000 6.85% due 5/15/2001 8,018,810 8,111,680
AA+ Baa2 5,000,000 McDonnell Douglas Corporation, 6.30%
due 10/20/1999 5,029,550 4,950,500
BBB Baa1 5,000,000 Raytheon Company, 6.75% due 8/15/2007 4,987,750 4,991,900
BBB Baa3 6,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 5,989,500 6,107,580
-------------- --------------
45,457,910 46,116,855
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A+ A1 $3,000,000 Bass America, Inc., 6.625%
Services--17.8% due 3/01/2003 $ 2,825,520 $ 3,020,970
A A2 6,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 5,952,060 6,343,260
BBB- Baa3 4,000,000 Comcast Corporation, 8.375%
due 5/01/2007 (a) 4,060,680 4,387,152
A+ A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (a) 3,497,235 3,556,693
News American Holdings, Inc.:
BBB Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,330,200
BBB Baa3 4,500,000 8.50% due 2/15/2005 4,677,305 4,871,745
BBB+ Baa2 1,000,000 Oracle Corporation, 6.91% due 2/15/2007 1,000,000 1,006,510
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,544,325
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,172,760
A- A2 5,550,000 Sears Roebuck Acceptance Corp.,
6.22% due 3/25/1999 5,478,183 5,566,483
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 1,010,580
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,537,305
TCI Communications Inc.:
BBB- Ba1 3,000,000 8.65% due 9/15/2004 3,099,270 3,247,020
BBB- Ba1 5,500,000 8% due 8/01/2005 5,561,380 5,737,160
BBB- Baa3 5,000,000 Time Warner Inc., 9.625% due 5/01/2002 5,586,000 5,580,000
BBB- Ba1 5,000,000 Turner Broadcasting System, Inc.
(Class B), 7.40% due 2/01/2004 5,108,150 5,120,350
A A2 4,812,625 Walt Disney Co., 6.85% due
1/10/2007 (a)++ 4,809,400 4,858,826
-------------- --------------
69,033,673 69,891,339
Industrial-- BBB- Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,425,637
Transportation-- AA+ Aa3 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,988,400
5.8% Norfolk Southern Corporation:
BBB+ Baa1 5,000,000 6.95% due 5/01/2002 4,992,400 5,102,950
BBB+ Baa1 1,000,000 7.35% due 5/15/2007 999,310 1,039,470
Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,120,945
A- A3 1,000,000 8% due 3/01/2005 994,610 1,073,960
-------------- --------------
22,756,988 22,751,362
Utilities-- A+ A2 4,000,000 Alltel Corporation, 6.75% due
Communications-- 9/15/2005 3,938,400 4,023,880
5.8% GTE Corporation:
A A3 1,000,000 9.375% due 12/01/2000 1,090,310 1,087,520
A A3 2,000,000 9.10% due 6/01/2003 2,194,920 2,242,300
A A2 6,000,000 MCI Communications Corporation, 6.95%
due 8/15/2006 5,980,200 6,153,540
AA Aa3 2,200,000 Southwestern Bell Capital Corp., 6.625%
due 4/01/2005 2,108,590 2,208,338
US West Capital Funding, Inc.:
BBB+ Baa1 2,000,000 6.85% due 1/15/2002 1,979,920 2,025,580
BBB+ Baa1 2,000,000 7.30% due 1/15/2007 2,062,080 2,045,200
BBB- Ba1 3,000,000 WorldCom, Inc., 7.75% due 4/01/2007 3,095,220 3,145,020
-------------- --------------
22,449,640 22,931,378
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- BBB+ Baa1 $4,000,000 Arizona Public Service Company,
Electric--2.8% 6.75% due 11/15/2006 $ 3,905,840 $ 4,009,520
A- A3 2,000,000 PSE&G Capital Corp., 6.50% due
6/01/2000 1,999,120 2,016,420
Pennsylvania Power & Light Co.:
A- A3 4,000,000 5.50% due 4/01/1998 3,991,280 3,994,680
A- A3 1,000,000 6.875% due 2/01/2003 1,016,290 1,016,950
-------------- --------------
10,912,530 11,037,570
Yankee A- Baa1 1,500,000 Enersis S.A., 6.90% due 12/01/2006 (3) 1,496,130 1,499,490
Corporates*-- A+ A1 2,000,000 Ford Capital B.V., 9.875% due
7.6% 5/15/2002 (4) 2,300,380 2,265,600
A+ A2 3,000,000 Grand Metropolitan Investment Corp.,
6.50% due 9/15/1999 (4) 3,040,120 3,023,820
A- A3 1,000,000 HSBC Americas Inc., 7% due 11/01/2006 (4) 991,600 1,009,730
A+ A3 4,500,000 Hutchison Whampoa Finance Ltd., 6.95%
due 8/01/2007 (4) 4,429,590 4,435,650
A- A3 2,000,000 Israel Electric Corp. Ltd., 7.25% due
12/15/2006 (3)(a) 1,996,200 2,031,846
Petroliam Nasional BHD (3)(a):
A+ A1 2,000,000 6.875% due 7/01/2003 1,972,960 1,976,000
A+ A1 7,500,000 7.125% due 10/18/2006 7,479,825 7,404,135
BBB+ A3 5,000,000 Philips Electronics N.V., 7.75%
due 4/15/2004 (3) 5,430,750 5,246,750
A+ A2 1,000,000 Pohang Iron & Steel Company Ltd.,
7.125% due 7/15/2004 (5) 997,450 980,250
-------------- --------------
30,135,005 29,873,271
Yankee AA- A1 1,000,000 Korea Development Bank, 6.625% due
Sovereign*-- 11/21/2003 (2) 1,007,890 973,750
0.9% People's Republic of China (1):
BBB+ A3 1,000,000 6.625% due 1/15/2003 995,160 991,580
BBB+ A3 1,500,000 7.75% due 7/05/2006 1,475,865 1,566,180
-------------- --------------
3,478,915 3,531,510
Total Investments in
Bonds & Notes--96.8% 376,796,273 380,443,243
Short-Term Securities
Repurchase 7,935,000 UBS Securities Funding, Inc.,
Agreements**--2.0% purchased on 9/30/1997 to yield
6.06% to 10/01/1997 7,935,000 7,935,000
Total Investments in
Short-Term Securities--2.0% 7,935,000 7,935,000
Total Investments--98.8% $ 384,731,273 388,378,243
==============
Other Assets Less Liabilities--1.2% 4,790,834
--------------
Net Assets--100.0% $ 393,169,077
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution; Government-Owned & Guaranteed.
(3)Industrial.
(4)Financial Institution.
(5)Industrial; Metals.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of September 30, 1997
<CAPTION>
Investment Intermediate
Grade Portfolio Term Portfolio
<S> <S> <C> <C>
Assets: Investments, at value* (Note 1a) $1,209,581,093 $ 388,378,243
Cash 6,694,633 7,820,086
Receivables:
Interest 20,333,995 6,978,442
Capital shares sold 1,890,457 792,151
Securities sold -- 2,065,693
Loans 10,667 5,779
Prepaid registration fees and other assets (Note 1e) 29,886 28,272
-------------- --------------
Total assets 1,238,540,731 406,068,666
-------------- --------------
Liabilities: Payables:
Securities purchased 6,690,921 9,773,900
Capital shares redeemed 3,029,702 1,908,754
Dividends to shareholders (Note 1f) 2,462,296 785,402
Investment adviser (Note 2) 348,865 113,156
Distributor (Note 2) 392,541 65,463
Accrued expenses and other liabilities 602,980 252,914
-------------- --------------
Total liabilities 13,527,305 12,899,589
-------------- --------------
Net Assets: Net assets $1,225,013,426 $ 393,169,077
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 4,558,678 $ 1,558,257
Consist of: Class B Common Stock, $.10 par value++++ 5,069,839 1,288,787
Class C Common Stock, $.10 par value++++++ 437,696 13,668
Class D Common Stock, $.10 par value++++++++ 678,493 559,642
Paid-in capital in excess of par 1,235,789,880 397,492,839
Accumulated realized capital losses on investments--net (6,840,481) (5,870,447)
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) (31,764,707) (5,520,639)
Unrealized appreciation on investments--net 17,084,028 3,646,970
-------------- --------------
Net assets $1,225,013,426 $ 393,169,077
============== ==============
Net Class A: Net assets $ 519,708,420 $ 179,115,016
Asset ============== ==============
Value: Shares outstanding 45,586,778 15,582,572
============== ==============
Net asset value and redemption price per share $ 11.40 $ 11.49
============== ==============
Class B: Net assets $ 577,989,206 $ 148,147,805
============== ==============
Shares outstanding 50,698,388 12,887,867
============== ==============
Net asset value and redemption price per share $ 11.40 $ 11.50
============== ==============
Class C: Net assets $ 49,918,132 $ 1,570,857
============== ==============
Shares outstanding 4,376,961 136,676
============== ==============
Net asset value and redemption price per share $ 11.40 $ 11.49
============== ==============
Class D: Net assets $ 77,397,668 $ 64,335,399
============== ==============
Net asset value and redemption price per share $ 11.41 $ 11.50
============== ==============
<FN>
*Identified cost $1,192,497,065 $ 384,731,273
============== ==============
++Authorized shares--Class A 250,000,000 100,000,000
============== ==============
++++Authorized shares--Class B 250,000,000 50,000,000
============== ==============
++++++Authorized shares--Class C 100,000,000 50,000,000
============== ==============
++++++++Authorized shares--Class D 100,000,000 50,000,000
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Year Ended September 30, 1997
<CAPTION>
Investment Intermediate
Grade Term
Portfolio Portfolio
<S> <S> <C> <C>
Investment Interest and discount earned $ 101,496,218 $ 32,416,240
Income Loaned securities 81,037 51,929
(Note 1d): Other -- 9,051
-------------- --------------
Total income 101,577,255 32,477,220
-------------- --------------
Expenses: Investment advisory fees (Note 2) 4,995,553 1,644,791
Account maintenance and distribution fees--Class B (Note 2) 4,943,306 950,958
Transfer agent fees--Class B (Note 2) 1,245,495 498,740
Transfer agent fees--Class A (Note 2) 1,036,847 505,386
Account maintenance and distribution fees--Class C (Note 2) 471,625 35,211
Accounting services (Note 2) 153,971 75,374
Account maintenance fees--Class D (Note 2) 176,298 51,884
Transfer agent fees--Class D (Note 2) 121,991 130,341
Registration fees (Note 1e) 126,239 63,810
Printing and shareholder reports 119,089 36,152
Transfer agent fees--Class C (Note 2) 114,179 20,331
Custodian fees 74,392 40,921
Professional fees 27,441 12,588
Pricing fees (Note 2) 15,879 8,399
Directors' fees and expenses 8,263 3,406
Other 15,977 7,053
-------------- --------------
Total expenses 13,646,545 4,085,345
-------------- --------------
Investment income--net 87,930,710 28,391,875
-------------- --------------
Realized & Realized loss on investments--net (160,363) (507,524)
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net 28,265,493 8,329,252
(Loss) on -------------- --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 116,035,840 $ 36,213,603
(Notes 1b, 1d & 3): ============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets Investment Grade Portfolio
<CAPTION>
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 87,930,710 $ 83,065,190
Realized gain (loss) on investments--net (160,363) 1,240,458
Change in unrealized appreciation/depreciation on
investments--net 28,265,493 (44,461,678)
-------------- --------------
Net increase in net assets resulting from operations 116,035,840 39,843,970
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (40,601,509) (36,619,895)
(Note 1f): Class B (39,286,289) (40,835,373)
Class C (3,483,463) (2,822,765)
Class D (4,559,449) (2,787,157)
-------------- --------------
Net decrease in net assets resulting from dividends
to shareholders (87,930,710) (83,065,190)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (264,834,589) 350,127,963
(Note 4):
Net Assets: Total increase (decrease) in net assets (236,729,459) 306,906,743
Beginning of year 1,461,742,885 1,154,836,142
-------------- --------------
End of year $1,225,013,426 $1,461,742,885
============== ==============
See Notes to Financial Statements.
<CAPTION>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 28,391,875 $ 29,804,225
Realized gain (loss) on investments--net (507,524) 3,880,395
Change in unrealized appreciation/depreciation on
investments--net 8,329,252 (13,083,867)
-------------- --------------
Net increase in net assets resulting from operations 36,213,603 20,600,753
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (13,458,213) (14,523,748)
(Note 1f): Class B (11,241,646) (13,124,698)
Class C (414,942) (542,378)
Class D (3,277,074) (1,613,401)
-------------- --------------
Net decrease in net assets resulting from dividends
to shareholders (28,391,875) (29,804,225)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (91,252,583) 32,787,882
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (83,430,855) 23,584,410
Beginning of year 476,599,932 453,015,522
-------------- --------------
End of year $ 393,169,077 $ 476,599,932
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Investment Grade Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.16 $ 11.51 $ 10.77 $ 12.81 $ 12.30
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .76 .76 .80 .75 .81
Realized and unrealized gain (loss) on
investments--net .24 (.35) .74 (1.49) .67
--------- --------- --------- --------- ---------
Total from investment operations 1.00 .41 1.54 (.74) 1.48
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.76) (.76) (.80) (.75) (.81)
Realized gain on investments--net -- -- -- (.10) (.16)
In excess of realized gain on
investments--net -- -- -- (.45) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.76) (.76) (.80) (1.30) (.97)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.40 $ 11.16 $ 11.51 $ 10.77 $ 12.81
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 9.22% 3.60% 14.93% (6.03%) 12.76%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .57% .56% .58% .53% .56%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.73% 6.64% 7.30% 6.61% 6.94%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 519,708 $ 608,901 $ 472,388 $ 366,792 $ 407,625
Data: ========= ========= ========= ========= =========
Portfolio turnover 113.46% 88.53% 108.07% 159.05% 121.34%
========= ========= ========= ========= =========
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.16 $ 11.51 $ 10.77 $ 12.81 $ 12.30
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .67 .67 .72 .66 .72
Realized and unrealized gain (loss) on
investments--net .24 (.35) .74 (1.49) .67
--------- --------- --------- --------- ---------
Total from investment operations .91 .32 1.46 (.83) 1.39
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.67) (.67) (.72) (.66) (.72)
Realized gain on investments--net -- -- -- (.10) (.16)
In excess of realized gain on
investments--net -- -- -- (.45) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.67) (.67) (.72) (1.21) (.88)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.40 $ 11.16 $ 11.51 $ 10.77 $ 12.81
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 8.39% 2.81% 14.04% (6.73%) 11.91%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.34% 1.32% 1.35% 1.29% 1.29%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.96% 5.88% 6.52% 5.85% 5.80%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 577,989 $ 724,089 $ 631,517 $ 483,053 $ 515,402
Data: ========= ========= ========= ========= =========
Portfolio turnover 113.46% 88.53% 108.07% 159.05% 121.34%
========= ========= ========= ========= =========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- ---------
Performance: Investment income--net .67 .66 .67
Realized and unrealized gain (loss)
on investments--net .23 (.34) .84
--------- --------- ---------
Total from investment operations .90 .32 1.51
--------- --------- ---------
Less dividends from investment income--net (.67) (.66) (.67)
--------- --------- ---------
Net asset value, end of period $ 11.40 $ 11.17 $ 11.51
========= ========= =========
Total Investment Based on net asset value per share 8.23% 2.85% 14.60%+++
Return:** ========= ========= =========
Ratios to Average Expenses 1.39% 1.38% 1.40%*
Net Assets: ========= ========= =========
Investment income--net 5.91% 5.83% 6.27%*
========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 49,918 $ 64,931 $ 25,778
Data: ========= ========= =========
Portfolio turnover 113.46% 88.53% 108.07%
========= ========= =========
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- ---------
Performance: Investment income--net .73 .73 .73
Realized and unrealized gain (loss)
on investments--net .24 (.34) .84
--------- --------- ---------
Total from investment operations .97 .39 1.57
--------- --------- ---------
Less dividends from investment income--net (.73) (.73) (.73)
--------- --------- ---------
Net asset value, end of period $ 11.41 $ 11.17 $ 11.51
========= ========= =========
Total Investment Based on net asset value per share 8.95% 3.43% 15.22%+++
Return:** ========= ========= =========
Ratios to Average Expenses .82% .81% .83%*
Net Assets: ========= ========= =========
Investment income--net 6.47% 6.40% 6.91%*
========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 77,398 $ 63,822 $ 25,153
Data: ========= ========= =========
Portfolio turnover 113.46% 88.53% 108.07%
========= ========= =========
<FN>
++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Intermediate Term Portfolio
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 11.28 $ 11.50 $ 10.90 $ 12.44 $ 12.03
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .73 .73 .79 .75 .76
Realized and unrealized gain (loss) on
investments--net .21 (.22) .60 (1.26) .55
--------- --------- --------- --------- ---------
Total from investment operations .94 .51 1.39 (.51) 1.31
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.73) (.73) (.79) (.75) (.76)
Realized gain on investments--net -- -- -- -- (.14)
In excess of realized gain on
investments--net -- -- -- (.28) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.73) (.73) (.79) (1.03) (.90)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.49 $ 11.28 $ 11.50 $ 10.90 $ 12.44
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 8.59% 4.56% 13.33% (4.25%) 11.39%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .65% .59% .59% .53% .58%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.43% 6.41% 7.14% 6.48% 6.42%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 179,115 $ 216,545 $ 217,714 $ 170,222 $ 193,505
Data: ========= ========= ========= ========= =========
Portfolio turnover 76.99% 96.40% 142.84% 155.42% 180.52%
========= ========= ========= ========= =========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Intermediate Term Portfolio
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. Class B Nov. 13, 1992++
For the Year Ended September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.90 $ 12.44 $ 11.68
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .67 .67 .74 .69 .61
Realized and unrealized gain (loss) on
investments--net .22 (.22) .60 (1.26) .90
--------- --------- --------- --------- ---------
Total from investment operations .89 .45 1.34 (.57) 1.51
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.67) (.67) (.74) (.69) (.61)
Realized gain on investments--net -- -- -- -- (.14)
In excess of realized gain on
investments--net -- -- -- (.28) --
--------- --------- --------- --------- ---------
Total dividends and distributions (.67) (.67) (.74) (.97) (.75)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.50 $ 11.28 $ 11.50 $ 10.90 $ 12.44
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 8.13% 4.02% 12.73% (4.72%) 13.30%+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.17% 1.11% 1.11% 1.04% 1.07%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.91% 5.89% 6.61% 5.98% 5.61%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 148,148 $ 216,641 $ 212,146 $ 141,212 $ 134,122
Data: ========= ========= ========= ========= =========
Portfolio turnover 76.99% 96.40% 142.84% 155.42% 180.52%
========= ========= ========= ========= =========
<FN>
++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- ---------
Performance: Investment income--net .67 .67 .70
Realized and unrealized gain (loss)
on investments--net .21 (.22) .69
--------- --------- ---------
Total from investment operations .88 .45 1.39
--------- --------- ---------
Less dividends from investment income--net (.67) (.67) (.70)
--------- --------- ---------
Net asset value, end of period $ 11.49 $ 11.28 $ 11.50
========= ========= =========
Total Investment Based on net asset value per share 7.99% 3.99% 13.25%+++
Return:** ========= ========= =========
Ratios to Average Expenses 1.20% 1.15% 1.14%*
Net Assets: ========= ========= =========
Investment income--net 5.89% 5.86% 6.24%*
========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 1,571 $ 10,144 $ 6,806
Data: ========= ========= =========
Portfolio turnover 76.99% 96.40% 142.84%
========= ========= =========
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived For the Oct. 21,
from information provided in the financial statements. Year Ended 1994++ to
September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1997 1996 1995
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- ---------
Performance: Investment income--net .72 .72 .74
Realized and unrealized gain (loss) on
investments--net .22 (.22) .69
--------- --------- ---------
Total from investment operations .94 .50 1.43
--------- --------- ---------
Less dividends from investment income--net (.72) (.72) (.74)
--------- --------- ---------
Net asset value, end of period $ 11.50 $ 11.28 $ 11.50
========= ========= =========
Total Investment Based on net asset value per share 8.58% 4.46% 13.65%+++
Return:** ========= ========= =========
Ratios to Average Expenses .77% .71% .70%*
Net Assets: ========= ========= =========
Investment income--net 6.32% 6.32% 6.81%*
========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 64,335 $ 33,270 $ 16,349
Data: ========= ========= =========
Portfolio turnover 76.99% 96.40% 142.84%
========= ========= =========
<FN>
++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
The Investment Grade Portfolio and the Intermediate Term Portfolio
("Portfolio" or "Portfolios") are two of three portfolios in
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. Each
Portfolio 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 Portfolios.
(a) Valuation of investments--Portfolio securities which 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
most recent bid prices as obtained from one or more dealers that
make mar-kets in the securities. Portfolio securities which 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 on debt securities, which are traded on exchanges, are
valued at the last asked price for options written and last bid
price for options purchased. Interest rate 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 Portfolios 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 Portfolios may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, each Portfolio deposits and maintains as collateral such
initial margin as required by the exchange on which the transaction
is effected. Pursuant to the contract, each Portfolio 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 each
Portfolio as unrealized gains or losses. When the contract is
closed, each Portfolio 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 Portfolios are authorized to purchase and write call
and put options. When each Portfolio writes an option, an amount
equal to the premium received by each Portfolio 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 each Portfolio enters into a closing transaction), each
Portfolio 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 Portfolios' 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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS (continued)
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade 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) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
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 Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: 0.50% of the Fund's average
daily net assets not exceeding $250 million; 0.45% of the average
daily net assets in excess of $250 million but not exceeding $500
million; 0.40% of average daily net assets in excess of $500 million
but not exceeding $750 million; and 0.35% of average daily net
assets in excess of $750 million. For the year ended September 30,
1997, the aggregate average daily net assets of the Fund, including
the Fund's High Income Portfolio, was approximately $8,540,033,000.
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 each
Portfolio as follows:
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Investment Grade 0.25% 0.25% 0.25% 0.50% 0.55%
Intermediate Term 0.25% 0.25% 0.10% 0.25% 0.25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("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 year ended September 30, 1997, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of each Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
Investment Grade $4,495 $10,022 $44,314 $98,097
Intermediate Term $ 281 $ 1,225 $ 3,586 $21,553
For the year ended September 30, 1997, MLPF&S received contingent
deferred sales charges of $2,901,291 relating to transactions in
Class B Shares, amounting to $2,478,912 and $422,379 in the
Investment Grade Portfolio and Intermediate Term Portfolio,
respectively, $41,546 relating to transactions in Class C Shares,
amounting to $38,878 and $2,668 in the Investment Grade Portfolio
and Intermediate Term Portfolio, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $1,006 relating to
transactions subject to front-end sales charge waivers in Class A
Shares in the Intermediate Term Portfolio and $24,265 relating to
transactions subject to front-end sales charge waivers in Class D
Shares, amounting to $22,295 and $1,970 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
During the year ended September 30, 1997, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$14,572 for security price quotations to compute the net asset
values of the Portfolios.
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, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1997 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $1,509,405,080 $ 338,576,717
============== =============
Sales $1,770,345,873 $ 427,651,394
============== =============
Net realized and unrealized gains (losses) as of September 30, 1997
were as follows:
Realized Unrealized
Investment Grade Portfolio Losses Gains
Long-term investments $ (160,363) $ 17,084,028
------------- -------------
Total . $ (160,363) $ 17,084,028
============= =============
Realized Unrealized
Intermediate Term Portfolio Losses Gains
Long-term investments $ (507,524) $ 3,646,970
------------- -------------
Total $ (507,524) $ 3,646,970
============= =============
As of September 30, 1997, net unrealized appreciation (depreciation)
for Federal income tax purposes was as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Gross unrealized appreciation $ 23,815,943 $ 6,747,361
Gross unrealized depreciation (7,147,332) (3,160,742)
------------- -------------
Net unrealized appreciation $ 16,668,611 $ 3,586,619
============= =============
The aggregate cost of investments at September 30, 1997 for Federal
income tax purposes was $1,192,912,482 for the Investment Grade
Portfolio, and $384,791,624 for the Intermediate Term Portfolio.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
for the year ended September 30, 1997, was $264,834,589 for the
Investment Grade Portfolio and $91,252,583 for the Intermediate Term
Portfolio. Net increase in net assets derived from capital share
transactions for the year ended September 30, 1996, was $350,127,963
for the Investment Grade Portfolio and $32,787,882 for the
Intermediate Term Portfolio.
Transactions in capital shares for each class were as follows:
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 28,203,393 $ 318,761,187
Shares issued to shareholders
in reinvestment of dividends 1,509,176 17,026,213
----------- --------------
Total issued 29,712,569 335,787,400
Shares redeemed (38,665,524) (437,385,917)
----------- --------------
Net decrease (8,952,955) $ (101,598,517)
=========== ==============
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 21,512,307 $ 245,167,944
Shares issued to shareholders
in reinvestment of dividends 1,723,312 19,614,975
----------- --------------
Total issued 23,235,619 264,782,919
Shares redeemed (9,749,755) (110,603,218)
----------- --------------
Net increase 13,485,864 $ 154,179,701
=========== ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 12,089,795 $ 136,401,227
Shares issued to shareholders
in reinvestment of dividends 2,232,218 25,197,726
----------- --------------
Total issued 14,322,013 161,598,953
Automatic conversion of shares (922,371) (10,376,812)
Shares redeemed (27,559,852) (310,463,146)
----------- --------------
Net decrease (14,160,210) $ (159,241,005)
=========== ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 25,682,986 $ 293,704,255
Shares issued to shareholders
in reinvestment of dividends 2,302,336 26,218,517
----------- --------------
Total issued 27,985,322 319,922,772
Automatic conversion of shares (492,211) (5,556,607)
Shares redeemed (17,518,653) (199,596,946)
----------- --------------
Net increase 9,974,458 $ 114,769,219
=========== ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 1,929,404 $ 21,778,762
Shares issued to shareholders
in reinvestment of dividends 217,626 2,457,064
----------- --------------
Total issued 2,147,030 24,235,826
Shares redeemed (3,583,955) (40,346,764)
----------- --------------
Net decrease (1,436,925) $ (16,110,938)
=========== ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 4,830,230 $ 55,222,029
Shares issued to shareholders
in reinvestment of dividends 170,995 1,937,935
----------- --------------
Total issued 5,001,225 57,159,964
Shares redeemed (1,426,919) (16,176,400)
----------- --------------
Net increase 3,574,306 $ 40,983,564
=========== ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 2,634,267 $ 29,755,828
Automatic conversion of shares 921,766 10,376,812
Shares issued to shareholders
in reinvestment of dividends 244,941 2,766,560
----------- --------------
Total issued 3,800,974 42,899,200
Shares redeemed (2,729,223) (30,783,329)
----------- --------------
Net increase 1,071,751 $ 12,115,871
=========== ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 4,314,720 $ 49,192,753
Automatic conversion of shares 491,987 5,556,607
Shares issued to shareholders
in reinvestment of dividends 169,863 1,927,735
----------- --------------
Total issued 4,976,570 56,677,095
Shares redeemed (1,448,119) (16,481,616)
----------- --------------
Net increase 3,528,451 $ 40,195,479
=========== ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 8,879,479 $ 101,009,465
Shares issued to shareholders
in reinvestment of dividends 536,407 6,105,063
----------- --------------
Total issued 9,415,886 107,114,528
Shares redeemed (13,031,273) (148,126,147)
----------- --------------
Net decrease (3,615,387) $ (41,011,619)
=========== ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 7,219,026 $ 82,894,354
Shares issued to shareholders
in reinvestment of dividends 697,766 8,005,089
----------- --------------
Total issued 7,916,792 90,899,443
Shares redeemed (7,646,836) (87,796,852)
----------- --------------
Net increase 269,956 $ 3,102,591
=========== ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 4,113,147 $ 46,806,563
Shares issued to shareholders
in reinvestment of dividends 648,555 7,381,806
----------- --------------
Total issued 4,761,702 54,188,369
Automatic conversion of shares (121,230) (1,377,088)
Shares redeemed (10,958,440) (124,411,387)
----------- --------------
Net decrease (6,317,968) $ (71,600,106)
=========== ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 8,947,464 $ 102,809,743
Shares issued to shareholders
in reinvestment of dividends 750,062 8,601,518
----------- --------------
Total issued 9,697,526 111,411,261
Automatic conversion of shares (94,088) (1,066,696)
Shares redeemed (8,841,519) (101,696,552)
----------- --------------
Net increase 761,919 $ 8,648,013
=========== ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 217,464 $ 2,473,168
Shares issued to shareholders
in reinvestment of dividends 26,883 305,857
----------- --------------
Total issue 244,347 2,779,025
Shares redeemed (1,006,967) (11,417,394)
----------- --------------
Net decrease (762,620) $ (8,638,369)
=========== ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 807,328 $ 9,279,082
Shares issued to shareholders
in reinvestment of dividends 36,273 415,777
----------- --------------
Total issued 843,601 9,694,859
Shares redeemed (536,033) (6,197,495)
----------- --------------
Net increase 307,568 $ 3,497,364
=========== ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 4,009,184 $ 45,468,396
Automatic conversion of
shares 121,231 1,377,088
Shares issued to shareholders
in reinvestment of dividends 167,855 1,910,367
----------- --------------
Total issued 4,298,270 48,755,851
Shares redeemed (1,651,097) (18,758,340)
----------- --------------
Net increase 2,647,173 $ 29,997,511
=========== ===============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1996 Shares Amount
Shares sold 2,494,925 $ 28,661,987
Automatic conversion of
shares 94,087 1,066,696
Shares issued to shareholders
in reinvestment of dividends 95,536 1,090,298
----------- --------------
Total issued 2,684,548 30,818,981
Shares redeemed (1,156,648) (13,279,067)
----------- --------------
Net increase 1,527,900 $ 17,539,914
=========== ==============
5. Loaned Securities:
At September 30, 1997, the Investment Grade Portfolio held US
Treasury Bonds/Notes having an aggregate value of approximately
$35,401,000 as collateral for Portfolio securities loaned, having a
market value of approximately $34,707,000. The Intermediate Term
Portfolio held US Treasury Bonds/Notes having an aggregate value of
approximately $12,146,000 as collateral for Portfolio securities
loaned, having a market value of approximately $11,817,000.
6. Capital Loss Carryforward:
At September 30, 1997, the Fund had a capital loss carryforward of
approximately $36,992,000 in the Investment Grade Portfolio, of
which $34,388,000 expires in 2003 and $2,604,000 expires in 2005
and approximately $10,983,000 in the Intermediate Term Portfolio,
of which $10,707,000 expires in 2003 and $276,000 expires in 2005.
These amounts will be available to offset like amounts of any future
taxable gains.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate Bond Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedule of investments, of the Investment
Grade and Intermediate Term Portfolios of Merrill Lynch Corporate
Bond Fund, Inc. as of September 30, 1997, the related statements of
operations for the year then ended, and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at
September 30, 1997 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the Investment Grade and Intermediate Term Portfolios of Merrill
Lynch Corporate Bond Fund, Inc. as of September 30, 1997, the
results of their operations, the changes in their net assets, and
the financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 18, 1997
</AUDIT-REPORT>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1997
IMPORTANT TAX INFORMATION (unaudited)
None of the ordinary income distributions paid monthly by Investment
Grade and Intermediate Term Portfolios during the fiscal year ended
September 30, 1997 qualify for the dividends received deduction for
corporations. Additionally, there were no long-term capital gain
distributions paid during the year.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Listed below are the percentages of total assets of the Portfolios
invested in Federal obligations* as of the end of each quarter of
the fiscal year.
For the Quarter Investment Grade Intermediate Term
Ended Portfolio Portfolio
December 31, 1996 3.96% 3.60%
March 31, 1997 4.92% 11.01%
June 30, 1997 3.44% 5.65%
September 30, 1997 5.95% 6.02%
Of the Fund's ordinary income dividends paid monthly to shareholders
from the Intermediate Term and Investment Grade Portfolios during
the fiscal year ended September 30, 1997, 6.01% and 4.04%,
respectively, were attributable to Federal obligations. In
calculating the foregoing percentages, expenses of the Portfolios
have been allocated on a pro rata basis.
Please retain this information for your records.
[FN]
*For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Banks, and the Student Loan Marketing Association.
Repurchase agreements are not included in this calculation.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Jay C. Harbeck, Vice President
Vincent T. Lathbury III, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
