HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Quarterly Report
June 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.
<PAGE>
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
We are pleased to provide you with this quarterly report to
shareholders for High Income Portfolio. As of June 30, 1997, the
Investment Grade and Intermediate Term Portfolios will appear in a
separate report to shareholders.
The Environment
Shifting investor perceptions regarding the direction of the US
economy brought continued volatility to the US financial markets
during much of the quarter ended June 30, 1997. Increasing evidence
of noninflationary economic growth boosted investor confidence,
which was confirmed further shortly after the quarter's close when,
as widely expected, the Federal Reserve Board (FRB) chose to leave
monetary policy unchanged. This confluence of positive indicators
helped produce a significant rally in the US stock market. The
unmanaged Standard & Poor's 500 Composite Average, led by its 50
largest issues (in terms of stock market capitalization), generated
a +17.43% total return for the second quarter. A slight decline in
interest rates during the quarter resulted in a modest positive
total return for US fixed-income investments.
Current consensus expectations are for the US economy's rate of
growth to lose some momentum. Although gross domestic product growth
for the first quarter of the year was revised slightly upward to
5.9%, there are indications that the second quarter's rate of growth
will be lower. At the same time, inflationary pressures remain
contained, supported by the June employment report showing moderate
growth in wages along with a slight increase in unemployment. It
remains to be seen whether economic activity moderates enough to
rule out future FRB monetary policy tightenings.
<PAGE>
The US dollar continued to be strong relative to other currencies.
In Europe, investors are uncertain regarding the viability of
economic and monetary union, while scandals continue to depress
investor confidence in Japan. At present, it appears that the US
economy is perceived most favorably by investors for its ongoing
growth and limited inflationary pressures. If economic data releases
continue to support this point of view, the outlook for the US
capital markets will remain positive.
The High-Yield Market
The high-yield market experienced a strong June quarter, bouncing
back from the soft March quarter which largely resulted from an FRB
interest rate hike. Total returns for the June quarter and for the
year-to-date are compared in the table below:
Quarter Ended 1997
6/30/97 Year-to-Date
Merrill Lynch High
Yield Master Index +4.75% +5.84%
Ten-Year Treasury
Securities +4.72% +2.44%
High Income Portfolio:
Class A Shares +5.16% +5.83%
Class B Shares +5.09% +5.56%
Class C Shares +4.94% +5.40%
Class D Shares +5.22% +5.83%
Bond market fundamentals were generally favorable during the three
months ended June 30, 1997. Reported inflation remained low, and a
modest softening in the economy allowed the FRB to avoid another
monetary policy tightening. The high-yield market continued to
benefit from a positive environment. Default rates remain low with
Moody's Investors Service, Inc. reporting a rate of 1.7% for the 12
months ended June 30, 1997 as compared to 2.4% for the same period
in 1996.
Industry fundamentals in most of the areas of the high-yield market
have been positive. The domestic cable sector benefited from a $1
billion investment by Microsoft Corp. in Comcast Corporation.
Microsoft believes that upgraded cable systems will provide an
important information link between personal computer programmers
like Microsoft and the home. For the cable industry this would be a
major source of revenue. The improved perception of cable caused
yields on bonds in this sector to narrow by 0.5% to 1% off US
Treasury securities of comparable maturities. In the depressed paper
industry, it appeared that price increases on various paper grades
were holding at June quarter-end and that perhaps depressed earnings
in the industry would begin to expand. The paper industry is one of
the few cyclical industries experiencing weak earnings. In general,
the bond rating firm Duff & Phelps Corp., which covers a large
percentage of the high-yield universe and changes its ratings
aggressively to reflect changed credit quality, reported 28 upgrades
versus 14 downgrades for the June quarter. For the six months ended
June 30, 1997, 66 upgrades and 30 downgrades were reported.
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
Reflecting the positive fundamentals, valuations remain quite full.
As shown in the "Yield Spread History" line graph on page 3, yield
spreads between high-yield securities and Treasury bonds remained
relatively narrow by June quarter-end, while risk premiums stayed
historically low. In addition, the overall quality of new-issue
supply remains good. Bonds rated B or better constituted
approximately 80% of supply during the first half of 1997, which is
in line with the average of recent years. Supply has been building
during the June quarter, and it appears that the September quarter
may provide record issuance.
Portfolio Strategy
While we believe that the generally favorable environment for high-
yield securities should continue, small credit risk premiums leave
no room for negative surprises. In general, the most favorable
risk/reward ratio can be found in the higher-quality end of the high-
yield market. Currently, yield spreads are relatively narrow between
BB-rated and B-rated issues as shown in the "Quality Spread" line
graph on page 3.
The narrow yield spreads between high-yield securities and Treasury
bonds and between BB-rated and B-rated issues reflect investor fears
regarding defaults and future deterioration in credit quality when
yield spreads are extremely wide. For example, in late 1990, the
yield spread between BB-rated and B-rated issues reflected default
rates of 9%--10% and extreme investor sensitivity to credit risk.
The current spread of about 1.50% between rating categories reflects
investor complacency. The high-yield environment may not get any
better than this, although it could get worse. Conditions that could
increase investor sensitivity to credit risk include a significant
stock market correction, rising default rates, a slower economy or
slower profit growth.
Accordingly, we are overweighted in bonds rated at least BB, which
constituted 42% of invested assets at June 30, 1997. Cash
equivalents are also above average, constituting 13% of net assets
at June 30, 1997. This reflects our unwillingness to commit assets
to overvalued or poor quality issues. In the first half of 1997, we
did not believe enough attractive investments were available. We
anticipate the heavy increase in supply expected during the
September quarter to ameliorate this situation.
In Conclusion
We appreciate your ongoing investment in Merrill Lynch Corporate
Bond Fund, Inc., and we look forward to assisting you with your
financial needs in the months and years ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Vice President and Portfolio Manager
July 30, 1997
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
HIGH YIELD VALUATION MEASURES
Yield Spread History*
A line graph depicting the yield spread between the 10-year US
Treasury bond and the Merrill Lynch High Yield Master Index
over a ten-year period beginning at about 450 basis points on
1/88 and ending at about 300 basis points on 1/97.
[FN]
*Line graph depicts the yield spread between the 10-year US
Treasury bond and the Merrill Lynch High Yield Master Index.
Quality Spread*
A line graph depicting the yield spread between BB-rated
and B-rated quality issues over a nine-year period beginning
at about 195 basis points on 1/89 and ending at about 195 basis
points on 1/97.
[FN]
*Line graph depicts the yield spread between BB-rated and B-rated
quality issues.
<PAGE>
PORTFOLIO INFORMATION
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 4.0%
BB/Ba 35.0
B/B 49.0
CCC/Caa 4.0
Not Rated 5.0
US Government Securities 3.0
[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.
Geographic Profile Percent of
Top Five Countries Net Assets
United Kingdom 4.3%
Argentina 2.9
Mexico 2.9
Canada 2.1
Brazil 2.0
Percent of
Five Largest Industries Net Assets
Energy 7.7%
Cable--Domestic 7.2
Cable--International 7.1
Paper & Forest Products 4.0
Gaming 3.9
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<PAGE>
PORTFOLIO INFORMATION (concluded)
<TABLE>
Percent of
Ten Largest Holdings Net Assets
<S> <S> <C>
Transamerican Energy TransAmerican is a privately held holding company whose principal subsidiaries are 2.8%
11.50% 6/15/2002 wholly-owned by TransAmerican Refining Corp. (TARC) and 69%-owned TransTexas Gas
13% 6/15/2002 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 United States. 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.
Time Warner Inc. Time Warner is a media and entertainment company with interests in entertainment, 1.3
Preferred Stock cable programming and sports franchises, publishing and cable. Our holding, a
(Series K) preferred stock, can be paid in cash or preferred stock at the company's option.
Lenfest Communications, Through its primary subsidiary, Suburban Cable, Lenfest offers cable service to 1.3
Inc. nearly one million cable customers in Pennsylvania, New Jersey and Delaware.
8.375% 11/01/2005
10.50% 6/15/2006
Century Communications Century owns and operates 70 cable systems in 25 states and Puerto Rico. In addition, 1.3
Corporation the company has a 31.8% common equity interest in Centennial Cellular, a provider of
9.75% 2/15/2002 wireless telephone service in four geographic areas in the United States and Puerto Rico.
9.50% 3/01/2005
Trump Atlantic City Trump Atlantic City owns and operates the Trump Taj Mahal, the Trump Plaza and the 1.2
Associates Trump World's Fair hotel-casinos, all located on the boardwalk in Atlantic City,
11.25% 5/01/2006 New Jersey. These bonds are secured by mortgages on the properties.
Nextel Communications Nextel offers digital and analog wireless communication services throughout the United 1.2
Inc. States. The company's digital service currently covers approximately 50% of the total
12.08% 8/15/2004 US population and will, once completed, enable Nextel to offer nationwide digital
13.852% 4/15/2004 wireless service. (Our Nextel holdings include Dial Call Communications, a 1995
acquisition.)
US Air Inc. US Air is the sixth-largest US airline, with major hubs in Pittsburgh, Charlotte, 1.2
Philadelphia and Baltimore and routes covering most of the Eastern half of the
9.625% 2/01/2001 country. Our investment includes a sizable amount of equipment trust certificates
10.375% 3/01/2013 secured by modern, saleable aircraft.
Series 89A1,
9.33% 1/01/2006
Series A, 10.70% 1/15/2007
Series C, 10.70% 1/15/2007
Series E, 10.70% 1/15/2007
Series F, 10.70% 1/01/2003
Series G, 10.70% 1/01/2003
Series H, 10.70% 1/01/2003
Series I, 10.70% 1/01/2003
<PAGE>
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
9% 12/15/2007 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.
NTL Incorporated Through various subsidiaries, NTL Inc. owns and operates television and radio 1.1
10% 2/15/2007 broadcasting, cable television and telecommunications systems in the United
Series B, 11.702% 2/01/2006 Kingdom. Prior to March of 1997, the company was called International Cabletel.
Preferred Stock
Paging Network, Inc. The company is the largest provider of paging services in the United States with 1.0
10% 10/15/2008 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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
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).
<PAGE>
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +14.43% + 9.85%
Five Years Ended 6/30/97 +11.36 +10.46
Ten Years Ended 6/30/97 +11.61 +11.15
<FN>
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +13.71% + 9.71%
Five Years Ended 6/30/97 +10.55 +10.55
Inception (10/21/88) through 6/30/97 +11.39 +11.39
<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**
<PAGE>
Class C Shares*
Year Ended 6/30/97 +13.65% +12.65%
Inception (10/21/94)
through 6/30/97 +12.25 +12.25
<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 6/30/97 +14.29% + 9.72%
Inception (10/21/94) through 6/30/97 +12.88 +11.18
<FN>
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
PERFORMANCE DATA (continued)
</TABLE>
<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--6/30/97 8.01 8.10 0.34 + 5.83
------
Total $17.48
Cumulative total return as of 6/30/97: +685.47%**
</TABLE>
<PAGE>
<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--6/30/97 8.01 8.11 0.32 + 5.56
-----
Total $6.85
Cumulative total return as of 6/30/97: +155.43%***
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
(a)Distribution includes $0.024 per share capital gains
distributions.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
PERFORMANCE DATA (concluded)
<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--6/30/97 8.02 8.11 0.31 + 5.40
-----
Total $1.88
Cumulative total return as of 6/30/97: +36.46%**
<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>
<PAGE>
<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--6/30/97 8.01 8.11 0.34 + 5.83
-----
Total $2.01
Cumulative total return as of 6/30/97: +38.54%**
<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>
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
6/30/97 3/31/97 6/30/96 % Change % Change As of 6/30/97
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares $8.10 $7.88 $7.77 + 4.25% +2.79% 8.45%
High Income Portfolio Class B Shares 8.11 7.88 7.77 + 4.38 +2.92 8.02
High Income Portfolio Class C Shares 8.11 7.89 7.77 + 4.38 +2.79 7.97
High Income Portfolio Class D Shares 8.11 7.88 7.77 + 4.38 +2.92 8.20
High Income Portfolio Class A Shares--Total Return +14.43(1) +5.16(2)
High Income Portfolio Class B Shares--Total Return +13.71(3) +5.09(4)
High Income Portfolio Class C Shares--Total Return +13.65(5) +4.94(6)
High Income Portfolio Class D Shares--Total Return +14.29(7) +5.22(8)
<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 $0.745 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.183 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.685 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.168 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.681 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.167 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.726 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.179 per share ordinary
income dividends.
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds
<S> <C> <C> <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 $ 1,336,600
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,153,632
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 3,889,295
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 2,825,324
B+ B1 104,000 Series 88J, 10.20% due 5/13/2012 90,874 105,904
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,274,783
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 2,748,366
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,645,727
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,076,072
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,061,920
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,510,575
USAir Inc.:
B+ B3 25,000,000 9.625% due 2/01/2001 20,109,906 25,687,500
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 22,785,000
B+ B1 4,917,665 Series 89A1, 9.33% due 1/01/2006++ 4,651,966 4,628,752
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,532,684
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,942,613
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,184,833
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,161,702
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,161,702
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,161,702
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,161,702
-------------- --------------
74,050,321 85,036,388
Automotive--0.5% B B3 10,000,000 Collins & Aikman Corp., 11.50% due
4/15/2006 10,000,000 11,300,000
B+ B1 21,875,000 Exide Corp., 10.75% due 12/15/2002 22,358,281 23,050,781
-------------- --------------
32,358,281 34,350,781
Broadcasting-- B- B2 19,240,000 Argyle Television Inc., 9.75% due
Radio & 11/01/2005 19,003,950 20,057,700
Television--2.0% B- B2 17,500,000 EZ Communications, Inc., 9.75% due
12/01/2005 17,361,575 18,462,500
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 37,975,000
Sinclair Broadcasting Group Inc.:
B B2 15,000,000 10% due 12/15/2003 15,036,250 15,487,500
B B2 50,000,000 10% due 9/30/2005 50,343,269 51,625,000
-------------- --------------
136,663,794 143,607,700
<PAGE>
Building BB B1 15,000,000 Cemex S.A., 12.75% due 7/15/2006 15,000,000 17,437,500
Materials--1.1% Nortek Inc.:
B- B2 20,550,000 9.875% due 3/01/2004 20,362,365 21,166,500
B+ Ba3 9,000,000 9.25% due 3/15/2007 8,947,980 9,225,000
BB+ Ba2 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 30,029,230
-------------- --------------
70,200,351 77,858,230
Cable-- American Telecasting, Inc. (a):
Domestic-- CCC+ Caa 48,190,545 18.79% due 6/15/2004 30,470,215 14,878,831
7.2% CCC+ Caa 9,430,000 26.322% due 8/15/2005 2,990,397 2,593,250
NR* NR* 20,000,000 CCA Industries, Inc., 13% due
12/31/1999++++ 16,463,336 17,822,935
CCC+ Caa 10,500,000 CS Wireless Systems Inc., 12.041% due
3/01/2001 (a) 6,687,129 2,467,500
Cablevision System Corp.:
B B2 13,750,000 9.875% due 5/16/2006 13,718,750 14,678,125
B B2 5,000,000 10.50% due 5/15/2016 4,900,000 5,462,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Cable-- Century Communications Corporation:
Domestic BB- Ba3 $ 44,500,000 9.75% due 2/15/2002 $ 44,895,938 $ 46,558,125
(concluded) BB- Ba3 42,000,000 9.50% due 3/01/2005 41,400,313 43,155,000
Comcast Corporation:
BB+ Ba3 5,000,000 9.125% due 10/15/2006 5,112,500 5,237,500
BB+ Ba3 30,000,000 9.50% due 1/15/2008 29,468,813 31,575,000
B B2 55,000,000 Echostar Communications Corp., 12.77%
due 6/01/2004 (a)(i) 43,275,801 46,543,750
NR* Caa 20,000,000 Echostar DBS Corp., 12.50% due 7/01/2002 20,000,000 19,812,500
B B2 31,000,000 Intermedia Capital Partners L.P., 11.25%
due 8/01/2006 31,002,500 33,945,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 49,375,000
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 43,550,000
B B1 50,000,000 Olympus Communications L.P., 10.625% due
11/15/2006 50,282,500 52,750,000
CCC+ Caa 25,000,000 People's Choice T.V. Corporation, 15.21%
due 6/01/2004 (a) 15,584,609 9,187,500
BB+ Ba3 40,000,000 TCI Communications Inc., 9.65% due
3/31/2027 40,258,360 42,348,200
B- B3 20,000,000 TCI Satellite Entertainment, Inc., 6.03%
due 2/15/2007 (a) 11,269,491 11,900,000
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a)(d) 29,509,860 13,591,260
-------------- --------------
525,722,162 507,431,976
<PAGE>
Cable-- CCC Caa 79,117,000 Australis Media Ltd., 13.81%
International-- due 5/15/2003 (a)(f) 53,991,500 58,150,995
7.1% B- B2 10,000,000 Azteca Holdings S.A., 11% due
6/15/2002 9,962,200 10,112,500
BB- Baa3 59,000,000 Bell Cablemedia PLC, 11.86% due
9/15/2005 (a) 40,779,849 49,412,500
B- B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 37,995,571 41,525,000
B- B3 25,000,000 Diamond Cable Communications PLC,
10.87% due 2/15/2002 (a) 15,268,988 14,500,000
NTL Inc.:
B B3 25,000,000 10% due 2/15/2007 25,015,625 25,562,500
B B3 80,000,000 Series B, 11.702% due 2/01/2006 (a) 52,838,376 55,800,000
BB+ Ba3 12,500,000 Rogers Cablesystems Ltd., 10% due
3/15/2005 12,769,375 13,531,250
Rogers Communications, Inc.:
BB- B2 35,925,000 10.875% due 4/15/2004 36,431,094 37,766,156
BB- B2 2,000,000 9.125% due 1/15/2006 1,897,500 2,015,000
BB B1 75,000,000 TeleWest Communications PLC, 11.02%
due 10/01/2007 (a) 52,871,827 54,187,500
B- B2 45,000,000 UIH Australia/Pacific Inc., Series B,
14% due 5/15/2006 (a) 26,693,533 28,125,000
United International Holdings, Inc. (a):
B- B3 5,000,000 12.18% due 11/15/1999 3,715,340 3,875,000
B- B3 50,000,000 13.99% due 11/15/1999 (h) 36,265,187 38,750,000
B- B3 18,750,000 14% due 11/15/1999 13,596,737 14,437,500
BBB- Ba3 11,250,000 Videotron Groupe L'TEE, 10.25% due
10/15/2002 11,322,500 11,953,125
B+ Baa3 50,000,000 Videotron Holdings PLC, 12.08% due
7/01/2004 (a) 38,169,131 45,125,000
-------------- --------------
469,584,333 504,829,026
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Capital Goods-- B+ B1 $21,450,000 Essex Group Inc., 10% due 5/01/2003 $ 21,546,500 $ 22,576,125
0.9% International Wire Group, Inc.:
B- B3 15,000,000 11.75% due 6/01/2005 16,312,500 16,350,000
B- B3 25,000,000 11.75% due 6/01/2005 24,986,250 27,312,500
-------------- --------------
62,845,250 66,238,625
<PAGE>
Chemicals--0.7% BB- Ba3 15,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 15,060,000 16,275,000
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,769,630
B+ Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,412,500
-------------- --------------
44,534,100 47,457,130
Computer BB- Ba1 38,500,000 Advanced Micro Devices, Inc., 11%
Services--1.6% due 8/01/2003 38,938,750 43,071,875
B B2 5,500,000 Celestica International Inc., 10.50%
due 12/31/2006 5,500,000 5,940,000
ComputerVision Corp.:
B- B3 17,000,000 11.375% due 8/15/1999 16,438,750 16,872,500
B+ B2 12,500,000 8% due 12/01/2009 6,802,472 8,781,250
B- B3 40,500,000 Dictaphone Corp., 11.75% due 8/01/2005 40,114,375 37,462,500
-------------- --------------
107,794,347 112,128,125
Conglomerates-- NR* NR* 7,279,000 MacAndrews & Forbes Holdings, Inc.,
0.9% 13% due 3/01/1999 6,779,200 7,333,592
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,562 26,650,000
BB- NR* 30,000,000 Voto-Votorantim S.A., 8.50% due 6/27/2005 29,862,900 29,850,000
-------------- --------------
61,788,662 63,833,592
Consumer B NR* 65,000,000 Coleman Escrow Corp., 11.40% due
Products--2.6% 5/15/2001 (a) 42,341,889 41,437,500
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 15,975,000
B+ Ba2 45,880,000 International Semi-Tech Microelectronics,
Inc., 12.51% due 8/15/2000 (a) 30,576,082 27,642,700
B B2 8,000,000 Polymer Group Inc., 12.25% due 7/15/2002 8,323,750 8,840,000
Revlon Consumer Products Corp.:
B B2 3,500,000 9.50% due 6/01/1999 3,210,168 3,605,000
B B2 27,000,000 9.375% due 4/01/2001 24,985,048 27,877,500
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 10,153,125
B+ B1 9,940,000 Samsonite Corporation, 11.125% due
7/15/2005 9,596,732 11,132,800
B+ B1 33,550,000 Sealy Corp., 10.25% due 5/01/2003 33,915,500 35,311,375
-------------- --------------
176,744,169 181,975,000
Convertible NR* B3 6,195,000 Builders Transport, Inc., 8%
Bonds**--0.2% due 8/15/2005 (3) 3,614,250 2,911,650
BBB+ Baa1 6,375,000 Quantum Health Resources Inc., 4.75%
due 10/01/2000 (2) 5,956,562 5,896,875
B CCC1 3,420,000 UNC, Inc., 7.50% due 3/31/2006 (1) 2,013,869 3,402,900
-------------- --------------
11,584,681 12,211,425
<PAGE>
Diversified--0.1% B- B3 10,000,000 Foamex Capital Corp., 9.875% due
Energy--7.7% 6/15/2007 10,000,000 10,225,000
B+ B1 50,000,000 Clark R&M Holdings, Inc., 10.997%
due 2/15/2000 (a) 37,748,088 38,125,000
B+ B2 9,000,000 Clark USA Inc., Series B, 10.875%
due 12/01/2005 9,000,000 9,601,875
BBB- B1 17,500,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due 1/30/2004 17,462,500 18,003,125
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Energy B B2 $ 20,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 $ 19,740,050 $ 19,650,000
(concluded) B+ Ba1 20,000,000 Global Marine Inc., 12.75% due
12/15/1999 20,047,500 21,000,000
B B1 22,000,000 KCS Energy Inc., 11% due 1/15/2003 22,723,750 23,870,000
BBB- B1 17,750,000 Maxus Energy Corp., 9.875% due 10/15/2002 16,726,250 18,703,175
BBB- Baa3 28,000,000 Oleoducto Centrale S.A., 9.35% due
9/01/2005 27,967,500 29,637,440
B+ B1 25,500,000 Parker Drilling Co., 9.75% due 11/15/2006 25,510,725 26,806,875
Petroleo Brasileiro S.A.--Petrobras:
BB- B1 13,000,000 10% due 10/17/2006 13,107,500 13,828,750
BB- B1 15,000,000 10% due 10/17/2006 14,869,812 15,956,250
BB- Ba3 10,000,000 Pride Petroleum Services Inc., 9.375%
due 5/01/2007 10,000,000 10,475,000
B+ Ba2 11,250,000 Rowan Companies, Inc., 11.875% due
12/01/2001 11,335,000 12,030,469
BB- B1 25,000,000 Seagull Energy Corp., 8.625% due
8/01/2005 24,990,000 25,625,000
Transamerican Energy:
B+ B3 21,340,000 11.50% due 6/15/2002 21,173,750 20,753,150
B+ B3 247,661,000 13% due 6/15/2002 (a) 192,557,471 180,173,378
BB Ba2 15,000,000 Triton Energy Corp., 9.25% due 4/15/2005 14,936,550 15,900,000
B- B2 20,000,000 United Refining Co., 10.75% due 6/15/2007 20,000,000 19,800,000
BBB- B1 25,000,000 Yacimientos Petroliferos Fiscales S.A.
(YPF) (Sponsored), 8% due 2/15/2004 19,967,500 25,467,500
-------------- --------------
539,863,946 545,406,987
<PAGE>
Entertainment-- B- B2 40,000,000 AMF Group Inc., Series B, 12.45%
1.0% due 3/15/2006 (a) 25,391,419 28,650,000
B B2 40,000,000 Six Flags Theme Parks Inc., 12.18% due
6/15/2005 (a) 35,738,891 41,350,000
-------------- --------------
61,130,310 70,000,000
Financial BB- B2 5,000,000 Arcadia Financial Ltd., 11.50% due
Services--1.3% 3/15/2007 (e) 5,000,000 5,118,750
First Nationwide Holdings Inc.:
B B2 17,000,000 12.50% due 4/15/2003 16,806,710 19,040,000
NR* Ba3 12,000,000 10.625% due 10/01/2003 12,000,000 13,320,000
BB+ B1 9,000,000 Penncorp Financial Group Inc., 9.25%
due 12/15/2003 9,090,000 9,585,000
Reliance Group Holdings Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,759,125
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 24,042,375
BB- NR* 13,000,000 Veritas Holdings GMBH, 9.625% due
12/15/2003 13,000,000 13,455,000
-------------- --------------
84,057,335 92,320,250
Food & Beverage-- Chiquita Brands International Inc.:
2.7% B+ B1 30,000,000 9.125% due 3/01/2004 29,585,625 30,675,000
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,650,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25% due
2/01/2005 23,562,125 26,000,187
BB+ Ba2 15,000,000 DGS International Finance Co., 10% due
6/01/2007 14,915,700 15,187,500
B- B3 23,463,000 Envirodyne Industries, Inc., 10.25% due
12/01/2001 22,781,845 23,609,644
CCC+ Caa 25,000,000 Fresh Del Monte Corp., 10% due 5/01/2003 25,012,500 25,937,500
B- B2 24,000,000 International Home Foods, Inc., 10.375%
due 11/01/2006 24,000,000 24,840,000
B+ B1 20,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 20,002,500 20,450,000
-------------- --------------
179,741,695 188,349,831
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Foreign BB- NR* $ 7,000,000 City of Saint Petersburgh, 9.50%
Government due 6/18/2002 $ 6,976,270 $ 7,008,750
Obligations--1.9% Republic of Argentina:
BB B1 35,000,000 11% due 10/09/2006 35,133,680 38,937,500
BB B1 30,750,000 Global Bonds, 11.375% due 1/30/2017 31,692,220 34,347,750
BB- B1 9,500,000 Republic of Brazil, Global Bonds,
10.125% due 5/15/2027 8,857,230 9,155,625
BB Ba2 40,000,000 United Mexican States, Government Bonds,
11.50% due 5/15/2026 42,453,750 45,800,000
-------------- --------------
125,113,150 135,249,625
Gaming--3.9% B+ B2 37,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 35,072,500 33,115,000
BB Ba3 20,000,000 Grand Casinos Inc., 10.125% due
12/01/2003 19,837,500 20,900,000
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001 (k) 49,536,050 23,144,275
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,210,109 21,325,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 25,875,000
B+ B2 22,000,000 Station Casinos Inc., 9.75% due
4/15/2007 21,318,000 21,917,500
B+ Ba3 10,000,000 Sun International Hotels Ltd., 9%
due 3/15/2007 9,967,110 10,150,000
BB- B1 90,000,000 Trump Atlantic City Associates, 11.25%
due 5/01/2006 88,879,062 88,087,500
NR* Caa 40,000,000 Trump's Castle Funding, Inc., 11.75%
due 11/15/2003 36,103,265 35,800,000
-------------- --------------
305,188,221 280,314,275
Health Services-- B+ B1 45,200,000 Beverly Enterprises, Inc., 9% due
2.1% 2/15/2006 44,200,550 46,725,500
B+ Ba3 52,390,000 Fresensius Medical Care AG, 9% due
12/01/2006 52,771,550 53,306,825
B B3 16,800,000 Imed Corp., 9.75% due 12/01/2006 16,994,312 17,136,000
B+ Ba3 30,000,000 Tenet Healthcare Corp., 8.625%
due 1/15/2007 29,968,200 30,712,500
-------------- --------------
143,934,612 147,880,825
Home Builders-- Del E. Webb Corp.:
1.3% B- B2 7,000,000 9.75% due 3/01/2003 6,944,910 7,245,000
B- B2 4,000,000 9% due 2/15/2006 3,140,000 3,960,000
B+ Ba3 20,000,000 Greystone Homes Inc., 10.75%
due 3/01/2004 19,115,000 21,700,000
BB Ba2 20,000,000 Ryland Group, Inc. (The), 10.50%
due 7/01/2006 19,697,400 21,337,500
BB Ba2 36,300,000 U.S. Home Corp., 9.75% due 6/15/2003 36,367,250 38,205,750
-------------- --------------
85,264,560 92,448,250
<PAGE>
Hotels--1.7% BB- Ba3 80,000,000 HMC Acquisition Properties, 9%
due 12/15/2007 79,272,500 81,400,000
BB- Ba3 40,000,000 HMH Properties Inc., 9.50% due 5/15/2005 39,121,066 41,700,000
-------------- --------------
118,393,566 123,100,000
Independent B+ Ba1 30,000,000 AES Corporation (The), 10.25% due
Power Producers-- 7/15/2006 30,000,000 32,925,000
2.0% BB Ba2 30,000,000 CE Casecnan Water & Energy Co., 11.45%
due 11/15/2005 30,000,000 33,412,500
BB Ba2 20,000,000 California Energy Company, Inc., 9.875%
due 6/30/2003 20,122,500 21,307,499
NR* NR* 18,500,000 Consolidated Hydro, Inc., 12.22% due
7/15/2003 (a) 15,656,356 10,267,500
Midland Cogeneration Venture Limited
Partnership:
BB- Ba3 3,899,832 10.33% due 7/23/2002 4,174,453 4,192,320
BB- Ba3 19,759,759 10.33% due 7/23/2002 20,470,139 21,266,441
B- B2 11,250,000 11.75% due 7/23/2005 11,310,000 13,111,256
B- B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,705,270
-------------- --------------
137,736,013 143,187,786
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Industrial CCC Caa $ 7,912,000 Thermadyne Industries, Inc., 10.75%
Services--0.1% due 11/01/2003 $ 7,914,802 $ 8,327,380
Media & B Ba2 5,000,000 CANTV Finance Ltd., 9.25% due 2/01/2004 4,990,500 5,118,750
Communications Comtel Brasileira Ltd.:
International-- NR* NR* 500,000 10.75% due 9/26/2004 517,500 536,250
2.8% BB- B1 29,500,000 10.75% due 9/26/2004 29,500,000 31,638,750
B+ B2 39,000,000 Globo Communicacoes e Participacoes,
Ltd., 10.50% due 12/20/2006 39,179,450 41,535,000
Grupo Televisa, S.A. de C.V.:
BB Ba3 2,500,000 11.375% due 5/15/2003 2,637,500 2,740,625
BB Ba3 39,000,000 11.875% due 5/15/2006 42,079,687 44,167,500
BB Ba3 15,000,000 11.363% due 5/15/2008 (a) 10,647,655 10,462,500
B B2 15,000,000 Orion Network Systems, Inc., 11.25% due
1/15/2007 (g) 15,000,000 15,750,000
BBB- B1 40,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004 38,763,075 47,800,000
-------------- --------------
183,315,367 199,749,375
<PAGE>
Metals & Mining-- B- B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
1.5% 12.75% due 2/01/2003 51,088,125 54,406,250
Maxxam Group, Inc.:
B- B3 11,750,000 11.25% due 8/01/2003 11,816,250 12,234,687
B- B3 41,155,000 12.37% due 8/01/2003 (a) 36,018,039 37,862,600
-------------- --------------
98,922,414 104,503,537
Packaging--0.6% BB- Ba2 6,000,000 Owens-Illinois, Inc., 9.95% due
10/15/2004 5,931,250 6,360,000
B+ B3 15,000,000 Printpack Inc., 10.625% due 8/15/2006 15,000,000 15,825,000
B B1 12,000,000 Silgan Corp., 9% due 6/01/2009 12,000,000 12,180,000
B+ Ba3 10,000,000 Vicap S.A., 11.375% due 5/15/2007 9,947,000 10,525,000
-------------- --------------
42,878,250 44,890,000
Paper & Forest BB Ba3 35,500,000 APP International Finance Co., 11.75%
Products--4.0% due 10/01/2005 35,306,250 39,271,875
Container Corporation of America:
B+ B1 15,420,000 9.75% due 4/01/2003 15,433,400 16,268,100
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,105,000
BB- Ba3 60,000,000 Doman Industries Ltd., 8.75% due
3/15/2004 57,006,250 58,200,000
BB Ba2 14,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 16,475,625
B+ B3 27,220,000 Pacific Lumber Co., 10.50% due 3/01/2003 26,868,237 28,172,700
CC Caa 25,500,000 Repap New Brunswick, Inc., 10.625%
due 4/15/2005 25,597,500 24,129,375
CCC B2 25,000,000 Repap Wisconsin Inc., 9.25% due 2/01/2002 23,537,500 25,375,000
Riverwood International Corp.:
B- B3 15,000,000 10.25% due 4/01/2006 14,396,250 14,850,000
CCC Caa 30,000,000 10.875% due 4/01/2008 29,248,750 27,187,500
B+ B1 15,000,000 S.D. Warren Co., 12% due 12/15/2004 15,000,000 16,715,625
-------------- --------------
269,966,637 280,750,800
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <C> <C> <C> <S> <C> <C>
Publishing & Hollinger International, Inc.:
Printing--0.7% BB+ Ba3 $ 5,000,000 8.625% due 3/15/2005 $ 4,975,000 $ 5,075,000
BB- B1 21,500,000 9.25% due 2/01/2006 20,925,312 21,983,750
BB- B1 3,000,000 9.25% due 3/15/2007 2,980,740 3,075,000
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,500,000
-------------- --------------
48,900,427 50,633,750
<PAGE>
Restaurants--0.4% B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 26,216,200 27,945,000
Specialty NR* NR* 25,304,000 Cumberland Farms, Inc. DE, 10.50%
Retailing--0.3% due 10/01/2003 24,135,040 25,050,960
Steel--1.8% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125% due
12/15/2006 25,056,250 25,812,500
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 10,775,000
B B3 25,000,000 Republic Engineered Steel Inc.,
9.875% due 12/15/2001 24,117,500 23,250,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 26,000,000
B B2 23,000,000 Weirton Steel Inc., 10.75% due 6/01/2005 22,413,750 24,265,000
BB- B1 20,000,000 Wheeling-Pittsburg Steel Corp., 9.375%
due 11/15/2003 18,670,000 19,300,000
-------------- --------------
125,057,500 129,402,500
Supermarkets-- Pueblo Xtra International Inc.:
0.8% B- B3 3,000,000 9.50% due 8/01/2003 2,713,036 2,895,000
B- B2 21,075,000 9.50% due 8/01/2003 19,460,250 20,548,125
Ralph's Grocery Co.:
B B1 10,000,000 10.45% due 6/15/2004 9,702,500 10,725,000
B B1 20,000,000 10.45% due 6/15/2004 19,018,648 21,575,000
-------------- --------------
50,894,434 55,743,125
Telephone-- Brooks Fiber Properties Inc. (a):
Competitive NR* NR* 42,000,000 11.399% due 3/01/2006 27,550,756 28,665,000
Local Exchange NR* NR* 39,000,000 11.568% due 11/01/2006 24,241,738 25,545,000
Carriers--1.4% B B1 40,000,000 Teleport Communications Group Inc.,
9.875% due 7/01/2006 40,943,500 42,800,000
-------------- --------------
92,735,994 97,010,000
Textiles--0.4% B+ B2 25,000,000 Westpoint Stevens Inc., 9.375% due
12/15/2005 25,100,000 26,218,750
Transportation-- BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25% due
2.5% 11/15/2003 24,472,500 25,250,000
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25% due
12/01/2004 20,518,750 22,300,000
TFM, S.A de C.V:
B+ B2 2,000,000 10.25% due 6/15/2007 2,000,000 2,030,000
B+ B2 21,500,000 11.767% due 6/15/2009 (a) 12,185,835 12,470,000
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba2 20,000,000 9.25% due 5/15/2003 17,092,750 19,875,000
BB Ba2 29,800,000 (Class A), 10% due 11/15/2006 29,422,250 30,247,000
B- B3 54,606,000 Transtar Holdings L.P., 12.04% due
12/15/2003 (a) 41,911,831 46,142,070
BB Ba2 19,841,000 Viking Star Shipping Co., Inc., 9.625%
due 7/15/2003 19,886,000 20,337,025
-------------- --------------
167,489,916 178,651,095
US Government AAA Aaa 160,000,000 US Treasury Bonds, 6.25% due 8/15/2023 146,515,200 148,149,800
Obligations--2.1%
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded)
<S> <C> <C> <C> <S> <C> <C>
Utilities--3.1% B+ B1 $34,469,000 Beaver Valley Funding Corp.,
9% due 6/01/2017 $ 31,081,506 $ 36,134,713
BB Ba2 7,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 6,986,560 7,540,085
BB- B1 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 44,700,000
NR* NR* 15,634,214 Sunflower Electric Power Corp., 8%
due 12/31/2016 10,255,601 11,491,147
B+ B1 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 21,725,000
BBB- NR* 41,823,600 Trans Gas de Occidente, 9.79% due
11/01/2010 41,898,285 44,248,700
Tucson Electric & Power Co.:
NR* NR* 33,847,782 10.21% due 1/01/2009 32,005,359 33,622,355
NR* NR* 21,526,207 10.732% due 1/01/2013 20,326,836 21,448,713
-------------- --------------
202,651,022 220,910,713
Waste B+ B3 20,000,000 Allied Waste North America, 10.25%
Management-- due 12/01/2006 20,000,000 21,500,000
0.5% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 23,667,250 13,923,750
-------------- --------------
43,667,250 35,423,750
Wireless BB+ A3 25,000,000 Comcast Cellular Communications, Inc.,
Communications-- 9.50% due 5/01/2007 24,959,250 25,187,500
Domestic Paging & CCC- B3 30,000,000 Dial Call Communications, 13.852%
Cellular--3.8% due 4/15/2004 (a) 22,230,655 24,787,500
Mobilemedia Communication, Inc.:
D C 33,000,000 11.58% due 12/01/2003 (a) 25,098,450 4,455,000
D C 12,126,000 9.375% due 11/01/2007 10,618,705 2,031,105
B- B3 80,000,000 Nextel Communications Inc., 12.08%
due 8/15/2004 (a) 60,266,968 61,600,000
NR* NR* 21,000,000 Page Mart Inc., 12.74% due 11/01/2003 (a) 17,532,783 18,480,000
B B2 75,000,000 Paging Network, Inc., 10% due 10/15/2008 74,756,250 72,843,750
B- B2 19,730,000 USA Mobile Communications Holdings, Inc.,
9.50% due 2/01/2004 18,997,875 18,644,850
B+ B1 25,000,000 Vanguard Cellular Systems, Inc., 9.375%
due 4/15/2006 24,975,250 25,375,000
B- B3 15,000,000 Western Wireless Corp., 10.50% due
2/01/2007 15,062,500 15,656,250
-------------- --------------
294,498,686 269,060,955
<PAGE>
Wireless B+ B3 53,472,000 Comunicacion Celular S.A., 12.76% due
Communications-- 11/15/2003 (a)(j) 35,388,324 38,366,160
International B- B3 90,000,000 Millicom International Cellular S.A.,
Paging & 13.39% due 6/01/2006 (a) 54,359,982 66,150,000
Cellular--1.5% -------------- --------------
89,748,306 104,516,160
Total Investments in Bonds--80.0% 5,504,901,304 5,672,378,477
Shares
Held
Preferred Stocks
Broadcasting--Radio & 7,774 Paxson Communications Corp. 6,916,967 8,182,135
Television--0.4% 200,000 SFX Broadcasting Inc. 20,000,000 22,863,400
-------------- --------------
26,916,967 31,045,535
Cable--Domestic--0.3% 172,479 Cablevision Systems Corp., Series M 14,634,820 17,377,259
Cable--International--0.3% 20,155 NTL Inc. 20,109,575 21,061,975
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Preferred Stocks (concluded)
<S> <C> <S> <C> <C>
Energy--0.0% 250 Transamerican Energy $ 25,000 $ 27,375
Entertainment--1.3% 84,922 Time Warner Inc. (Series K) 85,252,671 94,263,420
Financial 1,230,000 California Federal Bank (Series A) 30,815,000 31,749,375
Services--0.5%
Independent Power 29,517 Consolidated Hydro, Inc. 14,891,917 2,966,458
Producers--0.0%
Paper & Forest 435,000 S.D. Warren Co. (Series B) 13,847,190 18,813,750
Products--0.3%
Publishing & 421,000 K-III Communications Corp. 10,562,750 11,314,375
Printing--0.6% 152,870 K-III Communications Corp., Series B 15,398,238 16,548,169
125,000 K-III Communications Corp., Series C 12,500,000 12,750,000
-------------- --------------
38,460,988 40,612,544
<PAGE>
Steel--0.2% 550,000 USX Capital LLC 13,750,000 13,818,750
Telephone--Competitive 10,000 Intermedia Communications Inc. 10,000,000 10,375,000
Local Exchange Carriers--0.1%
Utilities--0.0% 6,268 El Paso Electric Company 681,987 706,717
Total Investments in
Preferred Stocks--4.0% 269,386,115 282,818,158
Common Stocks
Cable-- 2,887 CS Wireless Systems Inc. 20,336 58
Domestic--0.1% 195,096 Echostar Communications Corp. 1,385,894 3,060,568
-------------- --------------
1,406,230 3,060,626
Consumer 200,369 Culligan Water Technologies Inc. 1,686,248 8,966,513
Products--0.1%
Energy--0.0% 57,237 Mesa Inc. 199,648 329,113
Entertainment--0.2% 1,191,381 On Command Corporation 52,121,914 14,668,879
Gaming--0.0% 75,500 Goldriver Hotel & Casino Corporation
(Class B) (b) 540,045 0
Industrial 11,400 Thermadyne Industries, Inc. 165,300 351,262
Services--0.0%
Supermarkets--0.0% 120,194 ABCO Markets Inc. 4,054,875 0
521,389 Grand Union Co. 29,475,625 1,189,419
-------------- --------------
33,530,500 1,189,419
Total Investments in Common Stocks--0.4% 89,649,885 28,565,812
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
<PAGE>
Trusts & Warrants
<S> <C> <S> <C> <C>
Cable-- 177,500 American Telecasting Inc.
Domestic--0.0% (Warrants) (c) $ 413,723 $ 75,437
25,000 People's Choice T.V. Corp.
(Warrants) (c) 140,353 7,812
-------------- --------------
554,076 83,249
Entertainment--0.1% 379,186 On Command Corporation (Warrants) (c) 3,033,504 2,180,319
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust 192,320 0
113,386 Trump Castle Funding, Inc.
(Warrants) (c) 0 0
-------------- --------------
192,320 0
Independent 18,000 Consolidated Hydro Inc. (Warrants) (c) 390,123 258,750
Power Producers--0.0%
Paper & Forest 60,000 S.D. Warren Co. (Warrants) (c) 165,310 262,500
Products--0.0%
Wireless Communications-- 57,040 Page Mart Inc. (Warrants) (c) 236,127 188,945
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular S.A. (Warrants) (c) 109,680 340,884
International Paging &
Cellular--0.0%
Total Investments in
Trusts & Warrants--0.1% 4,681,140 3,314,647
Face
Amount
Short-Term Securities
Commercial $ 24,713,000 A.H. Robins Co., Inc., 5.55% due
Paper***--11.8% 7/30/1997 24,602,512 24,602,512
20,000,000 American Home Products Corporation,
5.59% due 7/28/1997 19,916,150 19,916,150
50,000,000 Atlantic Asset Securitization Corp.,
5.57% due 7/15/1997 49,891,694 49,891,694
13,000,000 CSW Credit, Inc., 5.56% due 7/15/1997 12,971,891 12,971,891
CXC Inc.:
25,000,000 5.58% due 8/01/1997 24,879,875 24,879,875
50,000,000 5.57% due 8/11/1997 49,682,819 49,682,819
25,000,000 Corporate Asset Funding Co. Inc.,
5.57% due 7/14/1997 24,949,715 24,949,715
7,000,000 Countrywide Home Loans Inc., 5.57%
due 7/09/1997 6,991,336 6,991,336
30,000,000 Finova Capital Corp., 5.66% due 7/18/1997 29,919,817 29,919,817
44,000,000 GTE Corp., 5.55% due 7/10/1997 43,938,950 43,938,950
14,000,000 General Electric Capital Corp., 5.54%
due 8/12/1997 13,909,513 13,909,513
59,528,000 General Motors Acceptance Corp., 6.25%
due 7/01/1997 59,528,000 59,528,000
Goldman Sachs Group L.P.:
20,000,000 5.57% due 8/01/1997 19,904,072 19,904,072
10,000,000 5.57% due 8/04/1997 9,947,394 9,947,394
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
<S> <C> <S> <C> <C>
Commercial Lehman Brothers Holdings, Inc.:
Paper*** $ 50,000,000 5.65% due 7/03/1997 $ 49,984,306 $ 49,984,306
(concluded) 19,000,000 5.70% due 7/08/1997 18,978,942 18,978,942
20,000,000 5.76% due 7/16/1997 19,952,000 19,952,000
34,805,000 Lexington Parker, 5.58% due 7/21/1997 34,697,105 34,697,105
Morgan Stanley Group Inc.:
19,000,000 5.58% due 8/08/1997 18,888,090 18,888,090
50,000,000 5.55% due 8/13/1997 49,668,542 49,668,542
NYNEX Corporation:
50,000,000 5.54% due 7/14/1997 49,899,972 49,899,972
50,000,000 5.56% due 7/25/1997 49,814,667 49,814,667
60,000,000 Navistar Financial Corp., 5.95%
due 7/22/1997 59,791,750 59,791,750
50,000,000 Preferred Receivable Funding Corp.,
5.55% due 7/17/1997 49,876,667 49,876,667
25,000,000 WCP Funding Inc., 5.55% due 7/14/1997 24,949,896 24,949,896
21,000,000 Xerox Credit Corp., 5.55% due 7/11/1997 20,967,625 20,967,625
-------------- --------------
838,503,300 838,503,300
US Government Agency 25,000,000 Federal Home Loan Banks, 5.42% due
Obligations***--0.8% 7/25/1997 24,909,667 24,909,667
31,000,000 Federal Home Loan Mortgage Corp., 5.43%
due 7/14/1997 30,939,214 30,939,214
-------------- --------------
55,848,881 55,848,881
Total Investments in
Short-Term Securities--12.6% 894,352,181 894,352,181
Total Investments--97.1% $6,762,970,625 6,881,429,275
==============
Other Assets Less Liabilities--2.9% 207,132,324
--------------
Net Assets--100.0% $7,088,561,599
==============
Net Asset Class A--Based on net assets of $1,003,826,784 and 123,858,792 shares outstanding $ 8.10
Value: ==============
Class B--Based on net assets of $5,082,452,622 and 626,929,439 shares outstanding $ 8.11
==============
Class C--Based on net assets of $551,018,213 and 67,923,298 shares outstanding $ 8.11
==============
Class D--Based on net assets of $451,263,980 and 55,641,809 shares outstanding $ 8.11
==============
<PAGE>
<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)Each share of Series B Stock contains a right which entitles the
Portfolio to purchase a predetermined number of shares of preferred
stock. The purchase price and number of shares are subject to
adjustment.
(c)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.
(d)Each $1,000 face amount contains one warrant of Wireless One Inc.
(e)Each $1,000 face amount contains one warrant of Olympic Financial
Ltd.
(f)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(g)Each $1,000 face amount contains one warrant of Orion Network
Systems, Inc.
(h)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(i)Each $1,000 face amount contains six warrants of Echostar
Communications Corp.
(j)Each $1,000 face amount contains one warrant of Comunicacion
Celular.
(k)Floating Rate Bond.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
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
Ira P. Shapiro, Secretary
<PAGE>
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
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Quarterly Report
June 30, 1997
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
Ira P. Shapiro, Secretary
<PAGE>
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
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
<PAGE>
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
We are pleased to provide you with this quarterly report to
shareholders. Starting with this shareholder report, we will be
reviewing the Investment Grade and Intermediate Term Portfolios.
High Income Portfolio will appear in a separate report to
shareholders.
The Environment
Shifting investor perceptions regarding the direction of the US
economy brought continued volatility to the US financial markets
during much of the quarter ended June 30, 1997. Increasing evidence
of noninflationary economic growth boosted investor confidence,
which was confirmed further shortly after the quarter's close when,
as widely expected, the Federal Reserve Board (FRB) chose to leave
monetary policy unchanged. This confluence of positive indicators
helped produce a significant rally in the US stock market. The
unmanaged Standard & Poor's 500 Composite Average, led by its 50
largest issues (in terms of stock market capitalization), generated
a +17.43% total return for the second quarter of 1997. A slight
decline in interest rates during the quarter resulted in a modest
positive total return for US fixed-income investments. In addition,
the yield on the long-term bellwether US Treasury bond rallied,
peaking at 7.17% in mid-April before dropping to its current level
of 6.57%. In addition, the Consumer Price Index rose only 1.4% for
the first five months of the year, compared with a 3.8% increase
over the same period in 1996. At the same time, retail sales figures
continued to decline. As a result, the May increase in interest
rates did not occur, and the bond rally continued to gain momentum.
Current consensus expectations are for the US economy's rate of
growth to lose some momentum. Although gross domestic product growth
for the first quarter of the year was revised slightly upward to
5.9%, there are indications that the second quarter's rate of growth
will be lower. At the same time, inflationary pressures remain
contained, supported by the June employment report showing moderate
growth in wages along with a slight increase in unemployment. It
remains to be seen whether economic activity moderates enough to
rule out future FRB monetary policy tightenings.
The US dollar continued to be strong relative to other currencies.
In Europe, investors are uncertain regarding the viability of
economic and monetary union, while scandals continue to depress
investor confidence in Japan. At present, it appears that the US
economy is perceived most favorably by investors for its ongoing
growth and limited inflationary pressures. If economic data releases
continue to support this point of view, the outlook for the US
capital markets will remain positive.
<PAGE>
Portfolio Strategy
Investment Grade Portfolio
The FRB tightened monetary policy on March 25, 1997. In the weeks
that followed, the bond market's yield rose to its peak of 7.17%. In
response, we prudently shortened the duration of the Portfolio from
4.59 years to 4.45 years to seek to protect the Portfolio against
the erosion of net asset value. We took a more optimistic view of
market conditions at the beginning of May, when we began to invest
more aggressively, and by the end of June had extended the duration
of the Portfolio to 4.69 years. Currently, the average maturity of
the Portfolio is 10.8 years. The average credit quality remained the
same at A+ as measured by Standard & Poor's Corp. Most of the credit
quality risk was taken in financial institutions, followed by
industrials and utilities. We hold underweighted positions in
Canadian bonds and Yankee bonds.
Intermediate Term Portfolio
While we maintained the average duration of the Portfolio at
approximately 4.0 years, we changed the maturity mix by reducing our
exposure in the three year--seven year part of the yield curve and
by overweighting our position in issues with shorter terms to
maturity. We added to our positions in securities rated BBB by
Standard & Poor's Corp. in order to seek to take advantage of the
greater yield spreads which are available in that category. We
remain underweighted in the electric utility industry because we are
concerned that potential mergers or acquisitions may jeopardize
certain bond values. We are also underweighted in Canadian and
Yankee issues because we believe the yield spreads are too tight to
domestic issues.
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
In Conclusion
Because we expect a resumption of strength in the third and fourth
quarters of 1997, we believe that the FRB may resume a tightening
mode in the second half of the year. With the yield curve remaining
relatively flat, we expect further duration extensions to be
moderate. We do not anticipate any significant changes in each
Portfolio's asset allocation mix during the summer.
We appreciate your ongoing investment in 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
<PAGE>
(Jay C. Harbeck)
Jay C. Harbeck
Vice President and Portfolio Manager
July 29, 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 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.
<PAGE>
* 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
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
6/30/97 3/31/97 6/30/96 % Change % Change As of 6/30/97
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares $11.24 $11.08 $11.17 +0.63% +1.44% 6.32%
Investment Grade Portfolio Class B Shares 11.24 11.08 11.17 +0.63 +1.44 5.80
Investment Grade Portfolio Class C Shares 11.24 11.08 11.17 +0.63 +1.44 5.74
Investment Grade Portfolio Class D Shares 11.24 11.08 11.18 +0.54 +1.44 6.07
Intermediate Term Portfolio Class A Shares 11.35 11.18 11.28 +0.62 +1.52 6.32
Intermediate Term Portfolio Class B Shares 11.35 11.18 11.28 +0.62 +1.52 5.85
Intermediate Term Portfolio Class C Shares 11.35 11.18 11.28 +0.62 +1.52 5.80
Intermediate Term Portfolio Class D Shares 11.35 11.18 11.28 +0.62 +1.52 6.21
Investment Grade Portfolio Class A Shares--Total Return +7.63(1) +3.16(2)
Investment Grade Portfolio Class B Shares--Total Return +6.82(3) +2.96(4)
Investment Grade Portfolio Class C Shares--Total Return +6.76(5) +2.95(6)
Investment Grade Portfolio Class D Shares--Total Return +7.27(7) +3.09(8)
Intermediate Term Portfolio Class A Shares--Total Return +7.32(9) +3.17(10)
Intermediate Term Portfolio Class B Shares--Total Return +6.76(11) +3.03(12)
Intermediate Term Portfolio Class C Shares--Total Return +6.72(13) +3.02(14)
Intermediate Term Portfolio Class D Shares--Total Return +7.21(15) +3.14(16)
<PAGE>
<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 $0.757 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.188 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.671 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.167 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.665 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.165 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.729 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.181 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.731 per share
ordinary income dividends.
(10)Percent change includes reinvestment of $0.182 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.672 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.168 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.668 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.166 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.720 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.180 per share
ordinary income dividends.
</TABLE>
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 6/30/97 +7.63% +3.33%
Five Years Ended 6/30/97 +7.16 +6.29
Ten Years Ended 6/30/97 +8.55 +8.11
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +6.82% +2.82%
Five Years Ended 6/30/97 +6.35 +6.35
Inception (10/21/88) through 6/30/97 +7.84 +7.84
[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 6/30/97 +6.76% +5.76%
Inception (10/21/94) through 6/30/97 +8.32 +8.32
[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 6/30/97 +7.27% +2.98%
Inception (10/21/94) through 6/30/97 +8.94 +7.30
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
PERFORMANCE DATA (continued)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +7.32% +6.25%
Five Years Ended 6/30/97 +7.11 +6.89
Ten Years Ended 6/30/97 +8.34 +8.23
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +6.76% +5.76%
Inception (11/13/92) through 6/30/97 +6.38 +6.38
[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 6/30/97 +6.72% +5.72%
Inception (10/21/94) through 6/30/97 +8.27 +8.27
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/97 +7.21% +6.14%
Inception (10/21/94) through 6/30/97 +8.73 +8.33
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Investment Intermediate Investment Intermediate Investment Intermediate
Covered Grade Term Grade Term Grade Term
<C> <C> <C> <C> <C> <C> <C>
10/31/80--12/31/80 $10.00/ 9.88 $10.00/ 9.93*** $ 0.25 $ 0.26*** + 1.28% + 1.86%
1981 9.88/ 9.38 9.93/ 9.57 1.46 1.37 +10.52 +11.11
1982 9.38/10.51 9.57/10.59 1.36 1.36 +28.74 +26.74
1983 10.51/10.24 10.59/10.37 1.22 1.20 + 9.42 + 9.63
1984 10.24/10.44 10.37/10.52 1.21 1.18 +15.10 +14.00
1985 10.44/11.45 10.52/11.33 1.18 1.16 +22.23 +19.86
1986 11.45/11.95 11.33/11.87 1.07 1.03 +14.26 +14.34
1987 11.95/11.00 11.87/10.99 0.99 0.94 + 0.45 + 0.65
1988 11.00/10.90 10.99/10.83 0.99 0.97 + 8.30 + 7.51
1989 10.90/11.33 10.83/11.13 1.00 0.98 +13.63 +12.33
1990 11.33/11.13 11.13/11.05 0.94 0.97 + 6.97 + 8.43
1991 11.13/12.03 11.05/11.77 0.91 0.92 +17.08 +15.53
1992 12.03/11.86 11.77/11.60 1.03(a) 0.99(b) + 7.51 + 7.28
1993 11.86/11.97 11.60/11.92 1.35(c) 1.03(d) +12.49 +11.82
1994 11.97/10.60 11.92/10.70 0.77 0.77 - 5.06 - 3.85
1995 10.60/11.84 10.70/11.80 0.80 0.78 +19.82 +18.10
1996 11.84/11.32 11.80/11.39 0.76 0.73 + 2.21 + 2.94
1/1/97--6/30/97 11.32/11.24 11.39/11.35 0.35 0.34 + 2.66 + 2.87
------ ------
Total $17.64 $16.98
Cumulative total return as of 6/30/97: +466.54%** +439.60%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***Adjusted for a 10-for-1 split effected in the form of a dividend
through January 1981.
(a)Distribution for Investment Grade Portfolio includes $0.036 per
share capital gains distributions.
(b)Distribution for Intermediate Term Portfolio includes $0.012 per
share capital gains distributions.
(c)Distribution for Investment Grade Portfolio includes $0.261 per
share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio includes $0.093 per
share capital gains distributions.
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Investment Intermediate Investment Intermediate Investment Intermediate
Covered Grade Term*** Grade Term Grade Term***
<C> <C> <C> <C> <C> <C> <C>
10/21/88-12/31/88 $11.08/10.90 -- $0.18 -- + 0.05% --
1989 10.90/11.33 -- 0.91 -- +12.77 --
1990 11.33/11.13 -- 0.86 -- + 6.16 --
1991 11.13/12.03 -- 0.83 -- +16.19 --
1992 12.03/11.86 $11.68/11.60 0.94(a) $0.24(b) + 6.69 + 1.34%
1993 11.86/11.97 11.60/11.92 1.25(c) 0.97(d) +11.65 +11.26
1994 11.97/10.60 11.92/10.70 0.69 0.71 - 5.78 - 4.34
1995 10.60/11.84 10.70/11.80 0.71 0.72 +18.92 +17.50
1996 11.84/11.32 11.80/11.39 0.67 0.67 + 1.43 + 2.40
1/1/97--6/30/97 11.32/11.24 11.39/11.35 0.31 0.31 + 2.27 + 2.61
----- -----
Total $7.35 $3.62
Cumulative total return as of 6/30/97: +92.68%** +33.16%**
<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.
***Figures for Intermediate Term Portfolio Class B Shares are since
inception on November 13, 1992.
(a)Distribution for Investment Grade Portfolio includes $0.036 per
share capital gains distributions.
(b)Distribution for Intermediate Term Portfolio includes $0.012 per
share capital gains distributions.
(c)Distribution for Investment Grade Portfolio includes $0.261 per
share capital gains distributions.
(d)Distribution for Intermediate Term Portfolio includes $0.093 per
share capital gains distributions.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Investment Intermediate Investment Intermediate Investment Intermediate
Covered Grade Term Grade Term Grade Term
<C> <C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.67/10.61 $10.81/10.70 $0.14 $0.15 + 0.74% + 0.38%
1995 10.61/11.84 10.70/11.80 0.70 0.72 +18.74 +17.48
1996 11.84/11.32 11.80/11.39 0.66 0.67 + 1.38 + 2.37
1/1/97--6/30/97 11.32/11.24 11.39/11.35 0.31 0.31 + 2.25 + 2.59
----- -----
Total $1.81 $1.85
Cumulative total return as of 6/30/97: +23.99%** +23.84%**
<PAGE>
<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>
Beginning/Ending Net Asset Value Dividends Paid* % Change**
Period Investment Intermediate Investment Intermediate Investment Intermediate
Covered Grade Term Grade Term Grade Term
<C> <C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.67/10.60 $10.81/10.70 $0.15 $0.15 + 0.76% + 0.41%
1995 10.60/11.84 10.70/11.80 0.77 0.77 +19.53 +17.98
1996 11.84/11.32 11.80/11.39 0.73 0.72 + 1.96 + 2.83
1/1/97--6/30/97 11.32/11.24 11.39/11.35 0.34 0.33 + 2.53 + 2.82
----- -----
Total $1.99 $1.97
Cumulative total return as of 6/30/97: +25.91%** +25.26%**
<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.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations-- AAA Aaa $19,300,000 6.375% due 5/15/1999 $ 19,345,234 $ 19,396,500
3.7% AAA Aaa 2,500,000 6.375% due 8/15/2002 2,494,531 2,499,225
AAA Aaa 8,000,000 6.50% due 5/15/2005 8,032,335 7,984,960
AAA Aaa 17,750,000 6.625% due 5/15/2007 17,925,352 17,896,970
-------------- --------------
47,797,452 47,777,655
<PAGE>
Asset-Backed AAA Aaa 4,350,000 Arcadia Energy, 6.10% due 6/15/2000 4,349,153 4,355,438
Securities++-- AAA Aaa 26,905,000 Banc One, Master Trust (Series B),
6.3% 7.55% due 12/15/1999 27,427,315 27,073,156
AAA Aaa 10,000,000 Citibank Credit Card Master Trust I,
5.932% due 12/10/2008 (a) 9,996,100 9,971,800
AAA Aaa 6,000,000 First Bank Corporate Card Master Trust,
6.40% due 2/15/2003 5,992,634 5,938,260
AAA Aaa 19,343,997 GMAC Grantor Trust, 6.50% due 4/15/2002 19,338,604 19,468,573
AAA Aaa 15,000,000 Household Afinity Credit Card, Master
Trust, 5.787% due 8/16/2004 15,000,000 15,002,100
-------------- --------------
82,103,806 81,809,327
Banking--10.3% BBB+ A3 6,250,000 BB&T Corporation, 7.25% due 6/15/2007 6,220,813 6,264,000
AA- Aa3 2,000,000 Banc One, Dayton, 6.625% due 4/15/2003 2,082,060 1,972,080
AA- Aa3 3,000,000 Banc One, Milwaukee, 6.625% due
4/15/2003 3,123,090 2,963,730
BankAmerica Corp.:
A+ A1 3,000,000 6.65% due 5/01/2001 2,997,090 2,996,730
A+ A1 3,000,000 7.125% due 5/12/2005 3,087,560 3,002,550
BBB+ Aa3 5,000,000 Chase Capital II, 6.062% due 2/01/2027 (a) 4,886,400 4,846,760
A- A1 10,300,000 Chase Manhattan Bank Corporation, 8.65%
due 2/13/1999 10,805,215 10,675,229
A- A3 10,000,000 First Bank System, Inc., 6.375%
due 3/15/2001 9,872,483 9,900,700
A A2 3,000,000 First Chicago Corp., 9% due 6/15/1999 3,182,940 3,139,260
A- A1 12,900,000 First Chicago NBD Capital I, 6.409%
due 2/01/2027 (a) 12,765,788 12,593,935
BBB A2 17,800,000 Fleet Capital Trust II, 7.92% due
12/11/2026 17,612,506 17,519,472
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,128,250
BBB+ A3 14,000,000 HSBC Americas Inc., 7.808% due 12/15/2026 13,838,440 13,407,436
BBB A1 2,500,000 Keycorp Institutional Capital (Series A),
7.826% due 12/01/2026 2,359,375 2,428,025
BBB+ A2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 5,790,480
BBB+ A2 4,900,000 Mellon Capital II, 7.995% due 1/15/2027 4,672,003 4,894,120
Norwest Corp.:
AA- Aa3 17,000,000 6.25% due 4/15/1999 16,944,240 16,989,460
AA- Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,521,210
BBB+ A1 5,500,000 Wells Fargo Capital I, 7.96% due
12/15/2026 5,401,385 5,456,275
-------------- --------------
135,024,873 133,489,702
Canadian Province of Quebec (Canada) (1):
Provinces*--1.7% A+ A2 7,035,000 7.50% due 7/15/2002 7,440,311 7,223,608
A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,529,380
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 5,062,095
A+ A2 4,000,000 7.125% due 2/09/2024 3,701,900 3,762,240
-------------- --------------
23,622,856 22,577,323
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Federal AAA Aaa $15,000,000 Federal National Mortgage Association,
Agencies--1.2% 7.85% due 9/10/2004 $ 14,817,438 $ 15,332,850
Finance--5.1% BB Ba2 15,000,000 Advanta Corp., 6.26% due 9/01/1997 14,991,450 14,976,750
A+ A1 1,300,000 American General Finance Corp., 7.70%
due 11/15/1997 1,322,074 1,307,644
Associates Corp. of North America:
AA- Aa3 6,000,000 8.375% due 1/15/1998 6,019,320 6,074,400
AA- Aa3 2,000,000 5.25% due 9/01/1998 1,939,180 1,978,920
AA- Aa3 1,500,000 7.25% due 9/01/1999 1,481,430 1,524,360
A A2 9,250,000 Beneficial Corporation, 6.42% due
1/15/2002 9,093,583 9,109,493
A Aa3 1,250,000 CIT Capital Trust I, 7.70% due 2/15/2027 1,244,300 1,217,200
CIT Group Holdings, Inc.:
A+ Aa3 13,000,000 7% due 9/30/1997 13,118,040 13,037,440
A+ Aa3 9,515,000 6.50% due 7/13/1998 9,549,254 9,542,023
A- Baa1 7,000,000 Finova Capital Corp., 6.375% due
10/15/2000 6,972,850 6,925,520
-------------- --------------
65,731,481 65,693,750
Finance-- Bear Stearns Companies, Inc.:
Other--10.0% A A2 10,000,000 6.50% due 7/05/2000 9,981,800 9,981,800
A A2 2,000,000 6.75% due 5/01/2001 1,993,680 1,998,500
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,463,600
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,267,990
A+ A1 3,500,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 3,486,805 3,509,100
A A2 10,000,000 Equitable Cos. Inc., 9% due 12/15/2004 11,040,500 11,063,700
A A2 7,500,000 Equitable Life Assurance Society of
the US, 7.70% due 12/01/2015 7,448,310 7,490,250
A Baa1 5,000,000 Lehman Brothers Inc., 7.375% due 8/15/1997 4,993,500 5,008,600
BBB+ A3 5,000,000 MBNA Corporation, 6.131% due 6/17/2002 (a) 5,000,000 4,997,120
A+ A1 9,200,000 Morgan Stanley Group Inc., 6.875%
due 3/01/2007 9,166,972 9,032,836
BBB+ Baa1 7,500,000 PaineWebber Group Inc., 7.99% due
6/09/2017 7,500,000 7,550,250
Salomon Inc.:
BBB Baal 20,000,000 6.50% due 10/15/2002 20,000,000 19,899,200
BBB Baal 10,000,000 7.20% due 2/01/2004 9,991,700 9,946,700
Smith Barney Holdings, Inc.:
A A2 7,000,000 6.50% due 10/15/2002 6,961,080 6,883,940
A A2 2,850,000 7.375% due 5/15/2007 2,847,464 2,873,228
The Travelers Corp.:
A+ A1 3,000,000 9.50% due 3/01/2002 3,163,980 3,311,640
A+ A1 10,800,000 7.875% due 5/15/2025 10,845,324 11,073,456
-------------- --------------
128,312,975 129,351,910
<PAGE>
Industrial-- A+ A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer due 12/01/1999 3,367,590 3,150,300
Goods--1.7% BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 8,884,080
A A2 9,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 9,698,815 10,108,570
-------------- --------------
22,048,365 22,142,950
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- BBB Baa3 $ 5,500,000 Arkla Inc., 8.875% due 7/15/1999 $ 5,819,675 $ 5,750,635
Energy--2.6% BP America Inc.:
AA Aa3 4,075,000 9.375% due 11/01/2000 4,488,287 4,414,896
AA Aa3 11,000,000 10% due 7/01/2018 11,869,080 11,839,740
BBB Baa3 5,000,000 Noram Energy Corp., 7.50% due 8/01/2000 5,113,400 5,100,500
A+ A1 5,500,000 Texaco Capital Inc., 9% due 12/15/1999 6,215,190 5,810,585
-------------- --------------
33,505,632 32,916,356
Industrial-- Chrysler Corp.:
Manufacturing-- A- A3 14,000,000 10.95% due 8/01/2017 16,298,000 14,812,980
10.6% A- A3 7,000,000 7.45% due 3/01/2027 6,965,980 6,909,280
AA- Aa3 4,500,000 du Pont (E.I.) de Nemours & Co., 8.25%
due 1/15/2022 4,676,445 4,641,255
Ford Motor Credit Co.:
A+ A1 5,000,000 7% due 9/25/2001 4,980,100 5,042,200
A+ A1 5,000,000 8% due 6/15/2002 5,286,350 5,242,350
A+ A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,142,450
A+ A1 1,000,000 7.75% due 3/15/2005 999,090 1,037,530
General Motors Acceptance Corp.:
A- A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,064,160
A- A3 6,100,000 7.125% due 5/11/1998 6,168,808 6,150,386
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 3,951,920
A- A3 7,000,000 7.125% due 5/01/2003 6,964,230 7,076,160
Lockheed Martin Corp.:
BBB+ A3 10,000,000 6.625% due 6/15/1998 9,998,700 10,049,300
BBB+ A3 8,750,000 6.55% due 5/15/1999 8,745,800 8,763,912
BBB+ A3 5,000,000 6.85% due 5/15/2001 4,995,950 5,020,250
BBB+ A3 11,000,000 Loral Corporation, 8.375% due 6/15/2024 11,056,040 11,980,430
BBB+ A3 4,000,000 Martin Marietta Corp., 7.375% due
4/15/2013 3,846,440 3,979,520
McDonnell Douglas Financial Corp.:
A- Baa1 7,500,000 6.13% due 12/23/1998 7,484,550 7,353,225
A- Baa1 5,000,000 6.30% due 10/20/1999 5,029,550 4,886,250
BBB Baa3 17,000,000 Seagate Technology, Inc., 7.125% due
3/01/2004 16,970,250 16,973,990
-------------- --------------
137,351,163 137,077,548
<PAGE>
Industrial-- BBB+ Baa2 10,000,000 American Stores Co., 7.90% due 5/01/2017 9,996,100 10,221,700
Services--16.0% A+ A1 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 10,557,500
A A2 8,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 8,076,380 8,242,480
BBB+ Baa2 10,000,000 Circus Circus Enterprises, Inc., 6.70%
due 11/15/2096 9,977,700 9,672,100
Columbia/HCA Healthcare Corp.:
A- A2 9,000,000 6.87% due 9/15/2003 9,101,160 8,987,400
A- A2 5,500,000 7.05% due 12/01/2027 5,158,380 5,111,975
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,072,000
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 5,810,800
A+ A1 2,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 1,998,420 2,015,680
A A2 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,958,850
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 7,669,130
BBB- Baa3 7,200,000 Kroger Company, 7.65% due 4/15/2007 7,188,264 7,369,560
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- News American Holdings, Inc.:
Services BBB Baa3 $ 4,000,000 9.125% due 10/15/1999 $ 4,298,640 $ 4,216,960
(concluded) BBB Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,317,768
BBB Baa3 10,000,000 8% due 10/17/2016 9,699,900 9,901,100
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 4,933,650
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 3,910,200
Sears, Roebuck & Co.:
A- A2 5,000,000 9.25% due 4/15/1998 5,712,125 5,120,800
A- A2 8,785,000 8.45% due 11/01/1998 9,709,797 9,022,722
A- A2 8,000,000 6.82% due 10/17/2002 8,016,320 7,966,320
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 6,992,580
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,235,900 9,538,475
Time Warner Entertainment Co.:
BBB- Baa3 6,000,000 8.875% due 10/01/2012 6,624,540 6,620,040
BBB- Baa3 5,000,000 8.375% due 3/15/2023 5,281,450 5,134,950
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024 14,488,240 15,111,597
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,458,970
A A2 15,191,414 6.85% due 1/10/2007++ 15,181,235 15,056,210
-------------- --------------
207,417,407 206,991,517
<PAGE>
Industrial-- BBB Baa2 14,500,000 CSX Corporation, 7.95% due 5/01/2027 14,424,890 14,863,805
Transportation-- BBB Baa2 9,000,000 Federal Express Corporation, 9.65%
4.1% due 6/15/2012 10,137,590 10,600,560
Norfolk Southern Corporation:
BBB+ Baa1 1,000,000 6.95% due 5/01/2002 998,480 1,005,830
BBB+ Baa1 4,000,000 7.35% due 5/15/2007 3,997,240 4,059,360
BBB+ Baa1 5,500,000 7.80% due 5/15/2027 5,493,070 5,649,050
Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,874,100
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,103,620
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,152,850
-------------- --------------
51,350,480 52,309,175
Utilities-- A+ A2 8,700,000 ALLTEL Corporation, 6.75% due 9/15/2005 8,566,020 8,565,585
Communications-- GTE Corp.:
3.4% A A3 3,000,000 8.85% due 3/01/1998 3,081,000 3,052,830
A A3 7,500,000 9.375% due 12/01/2000 8,235,170 8,107,875
A A3 4,000,000 9.10% due 6/01/2003 4,242,720 4,424,440
A A3 3,000,000 10.30% due 11/15/2017 3,285,270 3,188,880
AA Aa3 2,000,000 Southwestern Bell Telecommunications
Corp., 6.125% due 3/01/2000 2,011,250 1,982,320
US West Capital Funding, Inc.:
BBB+ Baa1 5,000,000 6.85% due 1/15/2002 4,998,050 4,994,650
BBB+ Baa1 6,000,000 7.90% due 2/01/2027 6,000,000 6,061,200
BBB+ Baa1 3,000,000 7.95% due 2/01/2097 2,970,000 3,022,410
-------------- --------------
43,389,480 43,400,190
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- BBB+ Baa1 $13,500,000 Arizona Public Service Co., 7.625%
Electric--5.6% due 3/15/1998 $ 13,708,305 $ 13,650,795
A+ NR* 6,675,000 Duke Power Co., 8% due 11/01/1999 6,666,714 6,894,340
A+ A1 2,000,000 Georgia Power Co., 6.125% due 9/01/1999 1,961,420 1,988,040
AA- A1 5,000,000 Northern States Power Company, 7.125%
due 7/01/2025 5,305,900 4,877,200
Pennsylvania Power & Light Co.:
A- A3 6,000,000 5.50% due 4/01/1998 5,972,220 5,976,600
A- A3 3,000,000 6.875% due 2/01/2003 3,048,870 2,999,220
Public Service Electric & Gas Co.:
A- A3 7,000,000 7.125% due 11/01/1997 7,058,870 7,025,900
A- A3 10,000,000 6.50% due 6/01/2000 9,995,705 9,997,500
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,000,000 5,347,600
BBB Baa2 5,000,000 Texas Utilities Electric Company, 8.175%
due 1/30/2037 5,000,000 5,031,800
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 9,071,285
-------------- --------------
72,095,164 72,860,280
<PAGE>
Yankee AA- Aa2 6,000,000 ABN AMRO Bank, 7.125% due 6/18/2007 (2) 5,997,060 6,013,620
Corporates*-- A+ A1 6,000,000 Australia & New Zealand Banking Group
11.7% Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,152,160
A- A3 8,200,000 British Aerospace PLC, 7.50% due
7/01/2027 (6) 8,139,074 8,101,682
BBB Baa1 5,075,000 China International Trust, 9%
due 10/15/2006 (2) 5,544,336 5,609,245
A+ NR* 4,000,000 China Light & Power Company Ltd., 7.50%
due 4/15/2006 (6) 3,974,520 4,067,000
Enersis S.A. (6):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,428,200
A- Baa1 7,000,000 7.40% due 12/01/2016 6,963,040 6,782,510
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,901,720
Ford Capital B.V. (2):
A+ A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,251,000
A+ A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,698,160
A+ A2 4,000,000 Grand Metropolitan Investment Corp.,
6.50% due 9/15/1999 (2) 4,000,000 4,008,920
A- Baa1 6,000,000 HSBC Americas Inc., 7% due 11/01/2006 (2) 5,949,600 5,892,180
Husky Oil Ltd. (6):
BBB Baa3 6,000,000 6.875% due 11/15/2003 5,984,040 5,915,160
BBB Baa3 3,000,000 7.125% due 11/15/2006 2,986,590 2,965,170
BBB Baa3 6,000,000 7.55% due 11/15/2016 5,975,940 5,903,340
A- A3 5,000,000 Israel Electric Corp. Ltd., 7.25%
due 12/15/2006 (6) 4,990,500 4,946,025
AA- A1 11,000,000 Korea Electric Power Corporation, 8%
due 7/01/2002 (6) 11,572,110 11,520,960
A+ A3 5,500,000 Mass Transit Railway Corp., 7.25%
due 10/01/2005 (7) 5,663,700 5,516,500
A A2 6,250,000 Maybank New York, 7.125% due 9/15/2005 (2) 6,217,937 6,220,937
A A1 2,000,000 Midland Bank PLC, 7.625% due 6/15/2006 (2) 1,995,240 2,059,700
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee A+ A1 $12,000,000 Petroliam Nasional BHD, 6.875% due
Corporates* 7/01/2003 (6) $ 11,929,530 $ 11,973,792
(concluded) BBB+ A3 9,500,000 State Development Bank of China,
7.375% due 2/01/2007 (2) 9,496,865 9,504,750
A+ A1 6,500,000 Telekom Malaysia BHD, 7.125% due
8/01/2005 (6) 6,668,405 6,513,279
A A2 9,000,000 WMC (Western Mining Corp.) Finance Ltd.,
7.25% due 11/15/2013 (4) 9,089,100 8,830,080
-------------- --------------
150,575,832 150,776,090
<PAGE>
Yankee AAA Aaa 4,000,000 Export-Import Bank of Japan, 8.35%
Sovereign*-- due 12/01/1999 (3) 4,226,640 4,168,520
1.8% AA- A1 9,000,000 Korea Development Bank, 6.625% due
11/21/2003 (2) 9,045,790 8,755,830
BBB- Baa3 10,000,000 Poland Government Bonds, 7.125% due
7/01/2004 (5) 9,980,500 9,980,500
-------------- --------------
23,252,930 22,904,850
Total Investments in
Bonds & Notes--95.8% 1,238,397,334 1,237,411,473
Short-Term Securities
Repurchase 60,756,000 Morgan (J.P.) & Company, Inc.,
Agreements**--4.7% purchased on 6/30/1997 to
yield 6% to 7/01/1997 60,756,000 60,756,000
Total Investments in
Short-Term Securities--4.7% 60,756,000 60,756,000
Total Investments--100.5% $1,299,153,334 1,298,167,473
==============
Liabilities in Excess of Other Assets--(0.5%) (6,591,094)
--------------
Net Assets--100.0% $1,291,576,379
==============
Net Asset Class A--Based on net assets of $566,607,115 and 50,418,616 shares outstanding $ 11.24
Value: ==============
Class B--Based on net assets of $602,082,436 and 53,575,558 shares outstanding $ 11.24
==============
Class C--Based on net assets of $51,421,168 and 4,574,057 shares outstanding $ 11.24
==============
Class D--Based on net assets of $71,465,660 and 6,355,435 shares outstanding $ 11.24
==============
<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 Mining.
(5)Government Entity.
(6)Industrial.
(7)Transportation.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Subject to principal paydowns.
(a)Floating Rate Note.
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations--4.8% AAA Aaa $ 3,000,000 7.75% due 12/31/1999 $ 3,122,344 $ 3,107,340
AAA Aaa 1,000,000 5.875% due 2/15/2000 989,375 992,030
AAA Aaa 2,000,000 5.75% due 10/31/2000 1,963,750 1,968,120
AAA Aaa 4,500,000 5.625% due 2/28/2001 4,383,281 4,399,470
AAA Aaa 1,000,000 8% due 5/15/2001 1,070,000 1,056,250
AAA Aaa 1,000,000 6.50% due 5/15/2005 1,003,420 998,120
AAA Aaa 7,800,000 6.625% due 5/15/2007 7,887,094 7,864,584
-------------- --------------
20,419,264 20,385,914
Asset-Backed AAA Aaa 2,000,000 First Bank Corporate Card Master
Securities++ Trust, 6.40% due 2/15/2003 1,997,545 1,979,420
- --0.5%
Banking-- BBB+ A3 4,000,000 BB&T Corporation, 7.25% due 6/15/2007 3,981,320 4,008,960
14.9% A A2 3,500,000 Bank of New York Company, Inc. (The),
7.875% due 11/15/2002 3,873,450 3,659,320
BankAmerica Corp.:
A A2 4,000,000 7.50% due 10/15/2002 4,268,880 4,111,880
A+ A1 3,000,000 7.125% due 5/12/2005 2,956,500 3,002,550
A A2 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,417,780
A- A3 6,000,000 Mellon Financial, 6.875% due 3/01/2003 5,483,220 5,973,180
A+ A1 11,500,000 NationsBank Corporation, 6.65% due
4/09/2002 11,423,540 11,391,900
Norwest Corp.:
AA- Aa3 7,000,000 6.25% due 4/15/1999 6,977,040 6,995,660
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 986,210
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 4,987,000
BBB A3 9,000,000 Washington Mutual Inc., 7.25% due
8/15/2005 8,930,520 9,027,000
-------------- --------------
63,337,300 63,561,440
<PAGE>
Canadian Province of Quebec (Canada) (3):
Provinces*-- A+ A2 5,000,000 7.50% due 7/15/2002 5,296,190 5,134,050
2.5% A+ A2 5,000,000 8.80% due 4/15/2003 5,538,670 5,441,150
-------------- --------------
10,834,860 10,575,200
Federal AAA Aaa 2,500,000 Federal National Mortgage Association,
Agencies-- 7.85% due 9/10/2004 2,496,484 2,555,475
0.6%
Finance--5.6% BB Ba2 10,000,000 Advanta Corp., 6.26% due 9/01/1997 9,994,300 9,984,500
Beneficial Corporation:
A A2 3,000,000 6.42% due 1/15/2002 2,949,270 2,954,430
A A2 5,800,000 7.75% due 11/08/2002 6,080,604 6,021,908
A- Baa1 5,000,000 Finova Capital Corp., 6.375% due
10/15/2000 4,980,700 4,946,800
-------------- --------------
24,004,874 23,907,638
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- BBB Baa2 $11,580,000 Alex Brown Inc., 7.625% due 8/15/2005 $ 11,797,083 $ 11,835,455
Other--9.5% Bear Stearns Companies, Inc.:
A A2 2,000,000 6.50% due 7/05/2000 1,996,360 1,996,360
A A2 2,000,000 6.75% due 5/01/2001 1,993,680 1,998,500
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,267,990
A+ A1 6,250,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 6,226,438 6,266,250
Salomon Inc.:
BBB Baa1 8,000,000 6.50% due 3/01/2000 8,000,000 7,959,680
BBB Baa1 4,000,000 7.20% due 2/01/2004 3,996,680 3,978,680
A A2 1,000,000 Smith Barney Holdings Inc., 7.375%
due 5/15/2007 999,110 1,008,150
A+ A1 2,000,000 The Travelers Corp., 9.50% due
3/01/2002 2,168,400 2,207,760
-------------- --------------
40,402,181 40,518,825
<PAGE>
Industrial-- Anheuser-Busch Cos., Inc.:
Consumer--6.0% A+ A1 5,481,000 8.75% due 12/01/1999 6,189,909 5,755,598
A+ A1 8,000,000 7.10% due 6/15/2007 7,993,680 8,024,000
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 4,932,900
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 2,935,590
A A2 3,500,000 Philip Morris Cos., Inc., 9% due 1/01/2001 3,576,195 3,724,210
-------------- --------------
25,751,134 25,372,298
Industrial-- Texaco Capital Inc.:
Energy--1.0% A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,021,340
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,112,940
-------------- --------------
4,338,580 4,134,280
Industrial-- BBB Baa2 4,000,000 Applied Materials Inc., 6.65%
Manufacturing-- due 9/05/2000 4,000,000 3,986,960
9.5% A+ A1 5,000,000 Ford Motor Credit Co., 7.75% due
3/15/2005 4,995,450 5,187,650
General Motors Acceptance Corp.:
A- A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,016,040
A- A3 5,000,000 6.625% due 10/01/2002 4,991,000 4,955,500
A- A3 2,000,000 7.125% due 5/01/2003 1,989,780 2,021,760
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,004,930
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,503,975
BBB+ A3 8,000,000 6.85% due 5/15/2001 8,018,810 8,032,400
A- Baa1 5,000,000 McDonnell Douglas Corporation,
6.30% due 10/20/1999 5,029,550 4,886,250
BBB Baa3 6,000,000 Seagate Technology, 7.125% due 3/01/2004 5,989,500 5,990,820
-------------- --------------
40,470,160 40,586,285
Industrial-- A+ A1 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 2,825,520 2,970,000
Services-- A A2 6,000,000 Carnival Cruise Lines, Inc., 7.70%
21.3% due 7/15/2004 5,952,060 6,181,860
A- A2 7,000,000 Columbia/HCA Healthcare Corp., 6.87%
due 9/15/2003 7,043,300 6,990,200
BBB- Ba1 4,000,000 Comcast Corporation, 8.375%
due 5/01/2007 4,060,680 4,254,912
A+ A1 3,500,000 Electronic Data Systems Corp., 6.85%
due 5/15/2000 3,497,235 3,527,440
A A2 5,000,000 JC Penney & Co., 6.375% due 9/15/2000 4,991,900 4,958,850
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- BBB- Ba1 $10,000,000 La Quinta Inns, Inc., 7.25% due
Services 3/15/2004 $ 9,949,000 $ 9,739,900
(concluded) News American Holdings, Inc.:
BBB Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,280,520
BBB Baa3 4,500,000 8.50% due 2/15/2005 4,677,305 4,792,140
BBB+ Baa2 1,000,000 Oracle Corporation, 6.91% due 2/15/2007 1,000,000 977,550
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,560,400
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,189,420
A- A2 5,550,000 Sears Roebuck Acceptance Corp.,
6.22% due 3/25/1999 5,478,183 5,543,118
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 998,940
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,506,075
TCI Communications Inc.:
BBB- Ba1 3,000,000 8.65% due 9/15/2004 3,099,270 3,165,960
BBB- Ba1 5,500,000 8% due 8/01/2005 5,561,380 5,587,890
Time Warner Entertainment:
BBB- Baa3 5,000,000 7.95% due 2/01/2000 5,172,300 5,140,450
BBB- Ba1 5,000,000 9.625% due 5/01/2002 5,586,000 5,525,900
A A2 4,980,791 Walt Disney Co., 6.85% due 1/10/2007 4,977,454 4,936,462
-------------- --------------
91,250,077 90,827,987
Industrial BB+ Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,452,015
Transportation-- AA A1 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 3,915,520
5.3% Norfolk Southern Corporation:
BBB+ Baa1 5,000,000 6.95% due 5/01/2002 4,992,400 5,029,150
BBB+ Baa1 1,000,000 7.35% due 5/15/2007 999,310 1,014,840
Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,068,165
A- A3 1,000,000 8% due 3/01/2005 994,610 1,051,810
-------------- --------------
22,756,988 22,531,500
Utilities-- A+ A2 4,000,000 Alltel Corporation, 6.75% due 9/15/2005 3,938,400 3,938,200
Communications-- GTE Corporation:
4.1% A A3 1,000,000 9.375% due 12/01/2000 1,090,310 1,081,050
A A3 2,000,000 9.10% due 6/01/2003 2,194,920 2,212,220
A A2 6,000,000 MCI Communications Corporation,
6.95% due 8/15/2006 5,980,200 6,000,780
AA Aa3 2,200,000 Southwestern Bell Capital Corp.,
6.625% due 4/01/2005 2,108,590 2,160,752
BBB+ Baa1 2,000,000 US West Capital Funding, Inc.,
6.85% due 1/15/2002 1,979,920 1,997,860
-------------- --------------
17,292,340 17,390,862
<PAGE>
Utilities-- BBB+ Baa1 4,000,000 Arizona Public Service Company,
Electric-- 6.75% due 11/15/2006 3,905,840 3,903,240
3.0% NR* NR* 2,000,000 Centerior Energy Corporation, 7.13%
due 7/01/2007 2,000,000 2,013,500
A- A3 2,000,000 PSE&G Capital Corp., 6.50% due 6/01/2000 1,999,120 1,999,500
Pennsylvania Power & Light Co.:
A- A3 4,000,000 5.50% due 4/01/1998 3,991,280 3,984,400
A- A3 1,000,000 6.875% due 2/01/2003 1,016,290 999,740
-------------- --------------
12,912,530 12,900,380
</TABLE>
Merrill Lynch Corporate Bond Fund Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee A- Baa1 $ 1,500,000 Enersis S.A., 6.90% due 12/01/2006 (3) $ 1,496,130 $ 1,456,920
Corporates*-- A+ A1 2,000,000 Ford Capital B.V., 9.875% due
7.3% 5/15/2002 (4) 2,300,380 2,250,200
A+ A2 3,000,000 Grand Metropolitan Investment Corp.,
6.50% due 9/15/1999 (4) 3,040,120 3,006,690
A- Baa1 1,000,000 HSBC Americas Inc., 7% due 11/01/2006 (4) 991,600 982,030
BBB Baa3 1,500,000 Husky Oil Ltd., 7.125% due 11/15/2006 (3) 1,493,295 1,482,585
A- A3 2,000,000 Israel Electric Corp. Ltd., 7.25% due
12/15/2006 (3) 1,996,200 1,978,410
A+ A1 2,000,000 Petroliam Nasional BHD, 6.875% due
7/01/2003 (3) 1,972,960 1,995,632
BBB+ A3 5,000,000 Philips Electronics N.V., 7.75% due
4/15/2004 (3) 5,430,750 5,145,100
A+ A1 7,500,000 Telekom Malaysia BHD, 7.125% due
8/01/2005 (3) 7,712,135 7,515,322
A A2 5,000,000 Tenaga Nasional BHD, 7.625% due
4/29/2007 (3) 4,992,200 5,139,955
-------------- --------------
31,425,770 30,952,844
Yankee AA- A1 2,000,000 Korea Development Bank, 6.625% due
Sovereign*-- 11/21/2003 (2) 2,003,170 1,945,740
1.3% People's Republic of China (1):
BBB+ NR* 1,000,000 6.625% due 1/15/2003 995,160 978,880
BBB A3 1,500,000 7.75% due 7/05/2006 1,475,865 1,549,755
BBB- Baa3 1,000,000 Poland Government Bonds, 7.125%
due 7/01/2004 (1) 998,050 998,050
-------------- --------------
5,472,245 5,472,425
Total Investments in
Bonds & Notes--97.2% 415,162,332 413,652,773
<PAGE>
Short-Term Securities
Repurchase 9,106,000 Morgan (J.P.) & Company, Inc.,
Agreements**--2.1% purchased on 6/30/1997 to
yield 6% to 7/01/1997 9,106,000 9,106,000
Total Investments in
Short-Term Securities--2.1% 9,106,000 9,106,000
Total Investments--99.3% $ 424,268,332 422,758,773
==============
Other Assets Less Liabilities--0.7% 2,768,347
--------------
Net Assets--100.0% $ 425,527,120
==============
Net Asset Class A--Based on net assets of $195,481,053 and 17,221,777 shares outstanding $ 11.35
Value: ==============
Class B--Based on net assets of $163,981,699 and 14,445,892 shares outstanding $ 11.35
==============
Class C--Based on net assets of $3,986,711 and 351,338 shares outstanding $ 11.35
==============
Class D--Based on net assets of $62,077,657 and 5,468,537 shares outstanding $ 11.35
==============
<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.
**Repurchase Agreements are fully collateralized by US Government
Obligations.
++Subject to principal paydowns.
</TABLE>
