HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Quarterly Report
December 31, 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
Volatility continued to highlight stock and bond markets worldwide
during the quarter ended December 31, 1997. The initial focus of
investor concerns was the widening financial crisis in Asia. In the
wake of a series of currency devaluations, many emerging economies
are facing the challenges of higher interest rates, slowing economic
growth and declining corporate earnings. Although the announcement
of International Monetary Fund (IMF) loan packages to Thailand,
Indonesia and Korea initially reassured investors, the stringent
terms of the loans and their potential negative impact on these
already beleaguered economies are now being called into question. In
Japan, the failure of several major financial institutions has
undermined the prospects for economic recovery.
As developments in Asia continue to unfold, US equity investors are
trying to gauge the impact of poorer Asian economic prospects on
multinational corporations. Although there have been periods of
rising share prices, investor confidence has not been definitively
restored. The US bond market benefited from a "flight to quality" as
investors anticipated slower economic growth, but the release of
stronger-than-expected economic statistics also prompted periods of
declining bond prices.
As 1998 begins, investors are likely to continue to focus on the
prospects for the US economy within the context of international
developments. Although the Federal Reserve Board did not tighten
monetary policy at its November 12 meeting, it remains to be seen
whether US economic growth remains moderate enough and inflationary
pressures sufficiently contained to preclude an increase in short-
term interest rates in early 1998. The ongoing developments in Asia
will undoubtedly also influence the central bank's monetary policy
decisions in the new year.
<PAGE>
The High-Yield Market
During the three-month period ended December 31, 1997, high-yield
bond returns lagged ten-year Treasury bond returns (+1.62% versus
+4.04%, respectively) and finished the year only slightly ahead of a
strong Treasury performance (+12.63% versus +11.10%, respectively)
as measured by the unmanaged CS First Boston Index. Despite the
volatility caused by the Southeast Asian currency crisis, high-yield
spreads have widened on average only 40 basis points--50 basis
points (0.40%--0.50%) from their all-time tightest levels at mid-
year, suggesting that both markets benefited from a flight out of
international emerging market debt into the US domestic market.
Yield spreads stayed at historically narrow levels throughout most
of 1997 driven by favorable economic conditions, a robust stock
market and a steady pace of corporate mergers and debt refinancings.
Low default rates and strengthened credit quality for many high-
yield issuers have supported the technical strength of the high-
yield market.
In 1997, the high-yield market witnessed one of the highest growth
rates since the late 1980s at over 26%, with the new-issue supply
approaching $136 billion. Demand has been broad-based with several
categories of investors ranging from pensions to high-yield funds.
The latter experienced $21 billion in capital inflows, equivalent to
27% of the year-end total assets.
Persistent strength in the high-yield market led investors to assume
more credit risk. This resulted in outperformance by more volatile
sectors such as zero coupon and B-rated securities. A broader
universe of B-rated issuers performed much better than the higher-
quality BB-rated group, both during the fourth quarter of 1997
(+2.26% as compared to +0.76%, respectively) and for the full year
(+14.08% as compared to +10.14%, respectively), as measured by the
CS First Boston Index. The yield spread between these two groups
narrowed during the year to 117 basis points.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
During the December quarter, the best-performing industry groups
were cable television, radio and television broadcasting,
diversified media, and publishing and printing. These industry
groups were all comprised of domestic companies with large and
stable free cash flows and low or declining capital spending needs.
Several basic industries--such as paper, metals and mining, and
forest products--were among the performance laggards because they
were perceived as most adversely affected by the economic problems
in Asia. It is our opinion that investors fear that the Pacific Rim
countries might try to export their way out of severe recessions,
thereby depressing world prices for commodities.
<PAGE>
Portfolio Strategy
Continued equity infusions and merger and acquisition activity in
various industries benefited three of the Portfolio's holdings
during the December quarter. ComputerVision Corp., a Portfolio
holding, was acquired by better-rated Parametric Technology Corp.,
while Harrah's Entertainment Inc. announced its acquisition plans
for Showboat Inc., also a Portfolio holding. Dictaphone Corp.,
another Portfolio holding, recently restructured its bank debt,
which eliminated onerous amortization payments for the next four
years, and received an equity infusion from Stonington Partners. In
January, AT&T Corp. moved to merge with Teleport Communications
Group, Inc., also held in the Portfolio, with resulting credit
enhancement and price appreciation of Teleport bonds.
Recent Asian currency and equity market sell-offs sent emerging
market corporate bonds into a tailspin. On average, Asian and
Brazilian corporate issuers traded down 10 points--25 points from
their highs in October, resulting in punishing spreads that overly
discount the worst credit scenarios.
Our strategy during the December quarter was to buy better-quality
new issues and to add to positions in seasoned issues at times of
temporary market weakness. We selectively sold bond issues trading
at high premiums to par value or with limited call protection
because of the moderate upside potential that these securities
possess. During the second half of 1997, the Portfolio's quality
profile continued to migrate toward the BB-rated or higher-quality
end of the spectrum because of the narrow yield spreads between
rating categories. As spreads widened during the fourth quarter of
1997, we became more aggressive purchasers of B-rated bonds.
At December 31, 1997, cash and cash equivalents totaled 9.4% of net
assets, somewhat below the 10.8% of net assets held at September 30,
1997. Communications and media remains our largest industry
category, totaling nearly 25.8% of net assets. Of more narrowly
classified sectors, the largest industries were: energy, 8.3%;
cable--domestic, 7.5%; and cable--international, 5.9%. The average
maturity of the invested portion of the Portfolio was 6 years, 9
months at December 31, 1997.
In Conclusion
We appreciate your ongoing investment in High Income Portfolio of
Merrill Lynch Corporate Bond Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years
ahead.
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
February 5, 1998
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
PORTFOLIO INFORMATION
<TABLE>
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
TransAmerican Energy TransAmerican is a privately held holding company whose principal subsidiaries are 3.0%
wholly-owned TransAmerican Refining Corp. (TARC) and 69%-owned TransTexas Gas
Corp., a publicly held company which explores for and produces oil and natural gas
primarily in South Texas. TARC is in the midst of a two-phase construction and
expansion program which, when finished, will give it one of the largest and most
complex refineries in the US. Our bonds are secured by some 33 million shares of
TransTexas common, and two intercompany loans secured by mortgages on substantially
all of the assets of TARC and TransTexas.
Nextel Communications Nextel offers digital and analog wireless communication services throughout the 1.5
Inc. United States. The company's digital service currently covers approximately
50% of the total US population and once completed, will enable Nextel to offer
nationwide digital wireless service.
NTL Inc. Through various subsidiaries, NTL Inc. owns and operates television and radio 1.5
broadcasting,cable television and telecommunications systems in the United
Kingdom. Prior to March of 1997, the company was called International Cabletel.
<PAGE>
Century Communications Century owns and operates 70 cable systems in 25 states and Puerto Rico. In 1.3
Corporation addition, the company has a 31.8% common equity interest in Centennial
Cellular, a provider of wireless telephone service in four geographic areas
in the United States and Puerto Rico.
Time Warner Inc. Time Warner is a media and entertainment company with interests in entertainment, 1.3
cable programming and sports franchises, publishing and cable. Our holding, a
preferred stock, can be paid in cash or preferred stock at the company's option.
Lenfest Communications, Through its primary subsidiary, Suburban Cable, Lenfest offers cable service 1.2
Inc. to nearly one million cable customers in Pennsylvania, New Jersey and Delaware.
Trump Atlantic City Trump Atlantic City owns and operates the Trump Taj Mahal, the Trump Plaza, 1.2
Associates/Funding Inc. and the Trump World's Fair hotel-casinos, all located on the boardwalk in
Atlantic City, New Jersey. These bonds are secured by mortgages on the properties.
USAir Inc. USAir is a major domestic air carrier with hubs at Pittsburgh, Philadelphia, 1.1
Charlotte and Indianapolis.
HMC Acquisition HMC, a wholly-owned subsidiary of Host Marriott Corporation, owns 50 full-service 1.1
Properties hotels and has investment stakes in eight others, comprising the majority of
Host Marriott's lodging properties. All but three are operated under Marriott
or Ritz-Carlton brand names. Host Marriott manages most of the properties for
fees based on revenues or operating profit.
Sinclair Broadcasting Sinclair Broadcasting Group Inc. is a diversified broadcasting company that owns 1.0
Group Inc. or provides programming services to television and radio stations across the
United States. Sinclair's radio station group offers a variety of programming
formats including country, urban, news/talk/sports and album/progressive rock.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
PORTFOLIO INFORMATION (concluded)
As of December 31, 1997
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 3.6%
BB/Ba 35.5
B/B 50.5
CCC/Caa 2.7
Not Rated 7.4
US Government Securities 0.3
<PAGE>
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Energy 8.3%
Cable--Domestic 7.5
Cable--International 5.9
Paper & Forest Products 4.6
Gaming 4.6
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Brazil 4.5%
United Kingdom 3.9
Argentina 3.5
Mexico 2.2
Indonesia 2.0
[FN]
*All holdings are denominated in US dollars.
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
Jay C. Harbeck, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, 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., High Income Portfolio
December 31, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
<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 12/31/97 +11.45% + 6.99%
Five Years Ended 12/31/97 +11.13 +10.22
Ten Years Ended 12/31/97 +12.35 +11.90
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class B Shares*
Year Ended 12/31/97 +10.61% + 6.61%
Five Years Ended 12/31/97 +10.29 +10.29
Inception (10/21/88)
through 12/31/97 +11.30 +11.30
[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 Without % Return With
Sales Charge Sales Charge**
Class C Shares*
<PAGE>
Year Ended 12/31/97 +10.55% + 9.55%
Inception (10/21/94)
through 12/31/97 +11.88 +11.88
[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 12/31/97 +11.18% + 6.73%
Inception (10/21/94)
through 12/31/97 +12.47 +11.04
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
PERFORMANCE DATA (continued)
<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
1997 8.01 8.10 0.79(b) +11.45
------
Total $17.93
<PAGE>
Cumulative total return as of 12/31/97: +727.23%**
</TABLE>
<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
1997 8.01 8.10 0.73(b) +10.61
-----
Total $7.26
Cumulative total return as of 12/31/97: +167.65%***
<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.
(b)Distribution includes $0.020 per share capital gains
distributions.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
PERFORMANCE DATA (concluded)
<PAGE>
<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
1997 8.02 8.11 0.73(a) +10.55
-----
Total $2.30
Cumulative total return as of 12/31/97: +43.13%**
<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.
(a)Distribution includes $0.020 per share capital gains
distributions.
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value
Period Covered Beginning Ending Dividends Paid* % Change**
<C> <C> <C> <C> <C>
10/21/94--12/31/94 $7.59 $7.31 $0.19 - 1.17%
1995 7.31 7.83 0.75 +18.09
1996 7.83 8.01 0.73 +12.17
1997 8.01 8.10 0.77(a) +11.18
-----
Total $2.44
Cumulative total return as of 12/31/97: +45.54%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
(a)Distribution includes $0.020 per share capital gains
distributions.
</TABLE>
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
12/31/97 9/30/97 12/31/96 % Change % Change As of 12/31/97
<S> <C> <C> <C> <C> <C> <C>
High Income Portfolio Class A Shares* $8.10 $8.29 $8.01 + 1.37%(1) -2.06%(1) 8.54%
High Income Portfolio Class B Shares* 8.10 8.30 8.01 + 1.37(1) -2.17(1) 8.13
High Income Portfolio Class C Shares* 8.11 8.30 8.02 + 1.37(1) -2.05(1) 8.07
High Income Portfolio Class D Shares* 8.10 8.30 8.01 + 1.37(1) -2.17(1) 8.30
High Income Portfolio Class A Shares--Total Return* +11.45(2) +0.64(3)
High Income Portfolio Class B Shares--Total Return* +10.61(4) +0.32(5)
High Income Portfolio Class C Shares--Total Return* +10.55(6) +0.43(7)
High Income Portfolio Class D Shares--Total Return* +11.18(8) +0.45(9)
Merrill Lynch High Yield Master Index**--Total Return +12.83 +2.58
CS First Boston High Yield Index**--Total Return +12.63 +1.62
Ten-Year US Treasury Securities--Total Return +11.10 +4.04
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**Unmanaged. These market-weighted Indexes mirror the high-yield
debt market of securities rated BBBor below.
(1)Percent change includes reinvestment of $0.020 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.773 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.246 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.711 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.228 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.708 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.227 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.753 per share ordinary
income dividends and $0.020 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.240 per share ordinary
income dividends and $0.020 per share capital gains distributions.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds
<S> <S> <S> <C> <S> <C> <C>
Aerospace--0.4% B+ B1 $ 30,000,000 Kitty Hawk, Inc., 9.95% due
11/15/2004 $ 30,033,750 $ 30,300,000
Airlines--1.1% Piedmont Aviation, Inc.:
B+ B1 1,304,000 Series 88J, 10.05% due 5/13/2005 1,181,685 1,433,585
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,252,911
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 4,268,538
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 3,129,047
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,417,647
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 3,001,063
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,916,792
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,251,585
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,229,649
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,694,093
USAir Inc.:
CCC+ B3 25,000,000 9.625% due 2/01/2001 20,109,906 25,812,500
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 23,527,875
B+ B1 4,726,090 Series 89A1, 9.33% due 1/01/2006++ 4,470,742 4,841,265
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,562,312
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,980,165
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,207,737
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,210,646
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,210,646
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,210,646
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,210,646
-------------- --------------
73,778,223 88,369,348
Automotive--1.0% B B3 10,000,000 Collins & Aikman Corp., 11.50%
due 4/15/2006 10,000,000 11,275,000
B+ B1 21,875,000 Exide Corp., 10.75% due 12/15/2002 22,358,281 23,160,156
B+ B2 42,500,000 Venture Holdings Trust, 9.50%
due 7/01/2005 41,021,403 42,925,000
-------------- --------------
73,379,684 77,360,156
Broadcasting-- BB+ Ba2 7,518,000 Argyle Television Inc., 9.75%
Radio & due 11/01/2005 7,246,705 8,438,955
Television--2.1% B- B2 17,500,000 EZ Communications, Inc., 9.75%
due 12/01/2005 17,361,575 19,381,250
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 38,456,250
B- B3 21,000,000 Salem Communications Corp., 9.50%
due 10/01/2007 21,160,625 21,420,000
Sinclair Broadcasting Group Inc.:
B B2 50,000,000 10% due 9/30/2005 50,343,269 53,125,000
B B2 9,700,000 9% due 7/15/2007 9,628,834 9,942,500
B B2 15,000,000 8.75% due 12/15/2007 14,941,200 15,075,000
-------------- --------------
155,600,958 165,838,955
<PAGE>
Building BB+ B1 3,000,000 Cemex S.A., 12.75% due 7/15/2006 3,000,000 3,600,000
Materials--0.8% Nortek Inc.:
B- B3 20,550,000 9.875% due 3/01/2004 20,362,365 21,115,125
B+ B1 9,000,000 9.25% due 3/15/2007 8,947,980 9,225,000
BBB Ba1 29,084,000 US Gypsum Corp., 8.75% due 3/01/2017 25,890,006 30,029,230
-------------- --------------
58,200,351 63,969,355
Cable-- American Telecasting, Inc. (a):
Domestic--7.3% CCC+ Caa 47,190,545 18.89% due 6/15/2004 32,061,398 15,808,833
CCC+ Caa 9,430,000 26.322% due 8/15/2005 3,436,062 2,781,850
NR* NR* 20,000,000 CCA Industries, Inc., 13% due
12/31/1999++++ 16,463,336 20,415,635
CCC+ Caa 10,500,000 CS Wireless Systems Inc., 12.041%
due 3/01/2006 (a) 7,094,356 2,782,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTIN>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable--Domestic Cablevision System Corp.:
(concluded) BB- B1 $ 13,750,000 9.875% due 5/15/2006 $ 13,718,750 $ 15,125,000
BB- B1 5,000,000 10.50% due 5/15/2016 4,900,000 5,843,750
Century Communications Corporation:
BB- Ba3 44,500,000 9.75% due 2/15/2002 44,895,938 46,836,250
BB- Ba3 45,000,000 9.50% due 3/01/2005 44,542,813 47,812,500
BB- Ba3 10,000,000 8.375% due 12/15/2007 9,817,900 9,875,000
Comcast Corporation:
BB+ Ba3 5,000,000 9.125% due 10/15/2006 5,112,500 5,425,000
BB+ Ba3 30,000,000 9.50% due 1/15/2008 29,468,813 31,813,200
B- B2 70,000,000 Echostar Communications Corp.,
11.712% due 6/01/2004 (a) (f) 59,519,214 64,050,000
B- B3 25,000,000 Echostar Satellite Broadcasting,
11.25% due 3/15/2004 (a) 20,761,860 21,375,000
B B2 31,000,000 Intermedia Capital Partners L.P.,
11.25% due 8/01/2006 31,002,500 34,100,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 51,500,000
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 44,600,000
B B1 50,000,000 Olympus Communications L.P., 10.625%
due 11/15/2006 50,282,500 55,625,000
CCC+ Caa 25,000,000 People's Choice T.V. Corporation,
15.21% due 6/01/2004 (a) 16,783,307 8,875,000
BB+ Ba3 40,000,000 TCI Communications Inc., 9.65%
due 3/31/2027 40,258,360 46,952,598
B- B3 40,000,000 TCI Satellite Entertainment, Inc.,
12.15% due 2/15/2007 (a) 24,701,274 26,800,000
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a) (c) 30,487,528 10,319,290
-------------- --------------
573,740,059 568,716,406
<PAGE>
Cable-- Australis Media Ltd.:
International-- NR* NR* 7,616,276 14.391% due 11/01/2002 (a) 5,190,126 5,188,184
5.6% D C 700,819 1.75%/15.75% due 5/15/2003 (i) 476,970 308,360
NR* NR* 79,117,000 1.75%/15.75% due 5/15/2003 (d) (i) 56,318,088 34,512,823
B- B2 10,000,000 Azteca Holdings S.A., 11% due 6/15/2002 9,962,200 10,350,000
BB- Baa3 59,000,000 Bell Cablemedia PLC, 11.86% due
9/15/2005 (a) 43,222,973 52,315,297
B- B2 55,000,000 Comcast UK Cable Partners Ltd., 11.23%
due 11/15/2007 (a) 40,148,918 44,825,000
Diamond Cable Communications PLC (a):
B- B3 15,000,000 11.366% due 12/15/2005 10,961,639 11,700,000
B- B3 25,000,000 10.87% due 2/15/2007 16,104,871 17,125,000
NTL Inc.:
B- B3 25,000,000 10% due 2/15/2007 25,015,625 26,437,500
B- B3 80,000,000 Series B, 11.701% due 2/01/2006 (a) 55,936,063 62,500,000
BB- B2 2,000,000 Rogers Communications, Inc., 9.125%
due 1/15/2006 1,897,500 2,040,000
B+ B1 75,000,000 TeleWest Communications PLC, 11.02%
due 10/01/2007 (a) 55,817,898 58,593,750
B B2 45,000,000 UIH Australia/Pacific Inc., Series B,
14% due 5/15/2006 (a) 28,572,155 31,500,000
United International Holdings,
Inc. (a) (h):
B- B3 19,800,000 13.799% due 11/15/1999 15,429,697 16,038,000
B- B3 55,000,000 15.657% due 11/15/1999 41,364,197 45,375,000
BBB- Ba3 11,250,000 Videotron Groupe L'TEE, 10.25% due
10/15/2002 11,322,500 11,826,169
-------------- --------------
417,741,420 430,635,083
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Capital Goods-- BB- B1 $21,450,000 Essex Group Inc., 10% due 5/01/2003 $ 21,546,500 $ 22,468,875
1.1% International Wire Group, Inc.:
B- B3 25,000,000 11.75% due 6/01/2005 24,986,250 27,500,000
B- B3 15,000,000 11.75% due 6/01/2005 16,312,500 16,500,000
B- B3 20,000,000 Trench Electric & Trench Inc.,
10.25% due 12/15/2007 20,000,000 20,400,000
-------------- --------------
82,845,250 86,868,875
<PAGE>
Chemicals--0.6% BB- Ba3 11,000,000 Agriculture Minerals & Chemicals
Company, L.P., 10.75% due 9/30/2003 11,060,000 11,893,750
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,696,498
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,412,500
-------------- --------------
40,534,100 43,002,748
Childcare--0.2% B- B3 15,000,000 KinderCare Learning Centers, Inc.,
9.50% due 2/15/2009 14,859,375 15,000,000
Computer BB- Ba1 55,000,000 Advanced Micro Devices, Inc.,
Services-- 11% due 8/01/2003 56,951,250 59,125,000
Electronics-- ComputerVision Corp.:
1.9% CCC B3 17,000,000 11.375% due 8/15/1999 16,438,750 17,297,500
B+ B2 12,500,000 8% due 12/01/2009 6,802,473 12,312,500
CCC B3 40,500,000 Dictaphone Corp., 11.75% due
8/01/2005 40,114,375 39,487,500
B+ B3 15,000,000 Jordan Telecom Products, 9.875%
due 8/01/2007 14,882,460 15,412,500
-------------- --------------
135,189,308 143,635,000
Conglomerates-- NR* NR* 15,000,000 Dine, S.A. de C.V., 8.75% due
1.3% 10/15/2007 14,887,200 14,475,000
NR* NR* 7,279,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 6,779,200 7,342,691
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 27,170,000
BB- NR* 55,000,000 Voto-Votorantim S.A., 8.50% due
6/27/2005 54,125,400 50,600,000
-------------- --------------
100,938,363 99,587,691
Consumer B B3 90,000,000 CLN Holdings Inc., 11.621% due
Products--1.7% 5/15/2001 (a) 61,500,127 60,075,000
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 16,012,500
B+ B1 45,880,000 International Semi-Tech Microelectronics,
Inc., 12.51% due 8/15/2003 (a) 32,449,049 16,975,600
Revlon Consumer Products Corp.:
B B2 27,000,000 9.375% due 4/01/2001 25,021,011 27,675,000
B- B3 9,500,000 10.50% due 2/15/2003 8,795,000 10,165,000
B+ B1 2,240,000 Samsonite Corporation, 11.125%
due 7/15/2005 2,144,800 2,525,600
-------------- --------------
144,909,987 133,428,700
Consumer B+ B2 13,650,000 Coinmach Corp., 11.75% due 11/15/2005 15,004,875 15,219,750
Services--0.2%
Convertible NR* B3 6,195,000 Builders Transport, Inc., 8% due
Bonds**--0.1% 8/15/2005 (2) 3,614,250 3,500,175
BBB+ Ba1 6,375,000 Quantum Health Resources Inc., 4.75%
due 10/01/2000 (1) 5,956,562 5,968,594
-------------- --------------
9,570,812 9,468,769
<PAGE>
Diversified--0.2% B- B3 10,000,000 Foamex Capital Corp., 9.875% due
6/15/2007 10,000,000 10,075,000
B- B2 8,000,000 Koppers Industries, Inc., 9.875%
due 12/01/2007 8,000,000 8,280,000
-------------- --------------
18,000,000 18,355,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Energy--8.1% B+ B2 $ 13,000,000 Benton Oil & Gas Co., 9.375%
due 11/01/2007 $ 13,000,000 $ 13,357,500
Chesapeake Energy Corporation:
BB- Ba3 17,010,000 10.50% due 6/01/2002 18,117,544 18,285,750
BB- Ba3 4,400,000 9.125% due 4/15/2006 4,388,100 4,565,000
BB- Ba3 1,000,000 Series B, 7.875% due 3/15/2004 983,750 987,500
B+ B2 15,000,000 Clark R & M Holdings, Inc., 8.875% due
11/15/2007 14,892,150 15,225,000
B+ B3 19,000,000 Clark USA Inc., Series B, 10.875% due
12/01/2005 19,892,500 20,733,750
BBB- Ba3 42,500,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due 1/30/2004 43,872,500 43,775,000
B B2 10,000,000 Cross Timbers Oil Company, 8.75% due
11/01/2009 10,000,000 10,212,500
B B2 10,000,000 Energy Corp. of America, 9.50% due
5/15/2007 9,975,000 10,025,000
B B2 20,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 19,740,050 20,350,000
B B1 22,000,000 KCS Energy Inc., 11% due 1/15/2003 22,723,750 24,310,000
BBB- Baa3 28,000,000 Oleoducto Centrale S.A., 9.35% due
9/01/2005 27,967,500 30,329,880
B+ B1 25,500,000 Parker Drilling Co., 9.75% due
11/15/2006 25,510,725 27,348,750
Petroleo Brasileiro S.A.--Petrobras:
BB- B1 15,000,000 10% due 10/17/2006 14,869,812 15,187,500
B+ B1 15,000,000 10% due 10/17/2006 15,097,500 15,300,000
BB+ Ba3 25,000,000 Seagull Energy Corp., 8.625% due
8/01/2005 24,990,000 26,312,500
B B3 6,000,000 Southwest Royalties Inc., 10.50%
due 10/15/2004 5,944,160 6,000,000
<PAGE> TransAmerican Energy:
B+ B3 11,350,000 11.50% due 6/15/2002 11,272,000 11,179,750
B+ B3 278,200,000 13.162% due 6/15/2002 (a) 230,238,268 223,951,000
NR* NR* 36,000,000 TransAmerican Refining Corporation,
13% due 12/15/2002 36,000,000 36,180,000
Trico Marine Services, Inc.:
BB- Ba3 5,000,000 8.50% due 8/01/2005 5,012,500 5,093,750
BB- NR* 10,000,000 Series C, 8.50% due 8/01/2005 10,100,000 10,187,500
BB Ba2 15,000,000 Triton Energy Corp., 9.25% due
4/15/2005 14,936,550 16,344,375
B- B2 20,000,000 United Refining Co., 10.75% due
6/15/2007 20,000,000 21,100,000
-------------- --------------
619,524,359 626,342,005
Entertainment-- B- B2 24,495,000 AMF Group Inc., Series B, 12.578%
1.3% due 3/15/2006 (a) 16,395,825 19,228,575
B B1 15,000,000 Fox/Liberty Networks LLC, 8.875%
due 8/15/2007 14,930,000 15,075,000
B B2 60,000,000 Six Flags Theme Parks Inc., 11.566% due
6/15/2005 (a) 59,086,164 64,200,000
-------------- --------------
90,411,989 98,503,575
Financial First Nationwide Holdings Inc.:
Services--1.4% B B3 17,000,000 12.50% due 4/15/2003 16,806,710 19,337,500
B Ba3 12,000,000 10.625% due 10/01/2003 12,000,000 13,500,000
BB+ B1 9,000,000 Penncorp Financial Group Inc., 9.25%
due 12/15/2003 9,090,000 9,472,500
Reliance Group Holdings Inc.:
BB+ Ba3 7,425,000 9% due 11/15/2000 6,798,125 7,788,825
BB- B1 22,575,000 9.75% due 11/15/2003 21,362,500 23,993,499
BB+ Ba3 10,000,000 SIG Capital Trust I, 9.50% due
8/15/2027 10,000,000 10,200,000
BB- NR* 13,000,000 Veritas Capital Trust, 10% due
1/01/2028 13,040,000 13,178,750
BB- NR* 13,000,000 Veritas Holdings GMBH, 9.625% due
12/15/2003 13,000,000 13,910,000
-------------- --------------
102,097,335 111,381,074
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Food & Beverage-- Chiquita Brands International Inc.:
2.5% B+ B1 $30,000,000 9.125% due 3/01/2004 $ 29,585,625 $ 31,275,000
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,950,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25%
due 2/01/2005 23,562,125 25,795,000
BB+ NR* 20,000,000 DGS International Finance Co., 10%
due 6/01/2007 20,068,200 17,100,000
B- B3 22,963,000 Envirodyne Industries, Inc., 10.25%
due 12/01/2001 22,310,671 23,020,408
BB- B2 14,211,000 Fresh Del Monte Corp., 10% due
5/01/2003 14,223,500 14,850,495
B- B2 24,000,000 International Home Foods, Inc.,
10.375% due 11/01/2006 24,000,000 26,460,000
B B2 12,000,000 Southern Foods SFG, 9.875% due
9/01/2007 12,000,000 12,570,000
B+ B1 18,000,000 Texas Bottling Group, Inc., 9% due
11/15/2003 18,002,500 18,630,000
-------------- --------------
183,634,021 191,650,903
Foreign BB- NR* 10,000,000 City of Saint Petersburgh, 9.50%
Government due 6/18/2002 9,751,270 9,050,000
Obligations-- Republic of Argentina:
1.5% BB Ba3 35,000,000 11% due 10/09/2006 35,133,680 37,450,000
BB Ba3 30,750,000 Global Bonds, 11.375% due 1/30/2017 31,692,220 33,717,375
BB- B1 17,500,000 Republic of Brazil, Global Bonds,
10.125% due 5/15/2027 15,035,530 16,373,438
BB Ba2 20,000,000 United Mexican States, Government Bonds,
11.50% due 5/15/2026 21,056,250 23,750,000
-------------- --------------
112,668,950 120,340,813
<PAGE>
Gaming--4.6% BB- B1 15,000,000 Boyd Gaming Corporation, 9.50% due
7/15/2007 14,848,500 15,811,909
B+ B2 37,000,000 GB Property Funding Corp., 10.875%
due 1/15/2004 35,072,500 31,265,000
Grand Casinos Inc.:
BB Ba3 20,000,000 10.125% due 12/01/2003 19,837,500 21,650,000
B+ B2 5,000,000 9% due 10/15/2004 5,000,000 5,025,000
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001 49,536,050 18,936,225
B+ B2 20,000,000 Hollywood Casino Corp., 12.75% due
11/01/2003 19,251,629 21,550,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 26,875,000
B+ B2 25,000,000 Station Casinos Inc., 9.75% due
4/15/2007 24,280,186 26,000,000
B+ Ba3 15,000,000 Sun International Hotels Ltd., 8.625%
due 12/15/2007 15,000,000 15,262,500
Trump Atlantic City Associates/Funding Inc:
BB- B1 70,000,000 11.25% due 5/01/2006 68,738,437 69,387,500
B B1 25,000,000 11.25% due 5/01/2006 24,022,455 24,250,000
NR* Caa 30,000,000 Trump's Castle Funding, Inc., 11.75%
due 11/15/2003 26,874,714 27,750,000
Venetian Casino Resort LLC:
CCC+ Caa1 15,000,000 10% due 11/15/1999 13,908,719 13,762,500
B- B3 36,000,000 12.25% due 11/15/2004 36,000,000 36,225,000
-------------- --------------
377,635,315 353,750,634
Health Services-- B B3 16,800,000 ALARIS Medical Systems, Inc., 9.75%
3.7% due 12/01/2006 16,994,312 17,724,000
B+ B1 45,200,000 Beverly Enterprises, Inc., 9% due
2/15/2006 44,200,550 46,838,500
B- B2 33,250,000 Extendicare Health Services, 9.35%
due 12/15/2007 33,254,375 34,247,500
B+ Ba3 63,491,000 Fresensius Medical Care AG, 9% due
12/01/2006 64,393,597 66,824,278
B- B3 20,000,000 Kinetic Concepts, Inc., 9.625% due
11/01/2007 20,035,000 20,425,000
B- B3 52,000,000 Paragon Health Networks, Inc., 9.50%
due 11/01/2007 51,768,080 52,130,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Health Services B- B2 $20,000,000 Sun Healthcare Group, Inc., 9.50%
(concluded) due 7/01/2007 $ 19,754,566 $ 20,600,000
B+ Ba3 30,000,000 Tenet Healthcare Corp., 8.625%
due 1/15/2007 29,968,200 31,050,000
-------------- --------------
280,368,680 289,839,278
Home Builders-- B- B2 4,000,000 Del E. Webb Corp., 9% due 2/15/2006 3,140,000 4,120,000
0.9% BB+ Ba3 20,000,000 Greystone Homes Inc., 10.75% due
3/01/2004 19,115,000 21,900,000
NR* Ba2 7,100,000 Ryland Group, Inc. (The), 10.50%
due 7/01/2006 6,992,577 7,987,500
BB- B1 32,000,000 U.S. Home Corp., 8.88% due 8/15/2007 32,017,500 32,640,000
-------------- --------------
61,265,077 66,647,500
Hotels--1.8% BB- Ba3 80,000,000 HMC Acquisition Properties, 9% due
12/15/2007 79,272,500 83,800,000
HMH Properties Inc.:
BB- Ba3 40,000,000 9.50% due 5/15/2005 39,159,306 42,700,000
BB- Ba3 15,500,000 8.875% due 7/15/2007 15,519,375 16,391,250
-------------- --------------
133,951,181 142,891,250
Independent AES Corporation (The):
Power B+ Ba1 30,000,000 10.25% due 7/15/2006 30,000,000 32,775,000
Producers--2.5% B+ Ba1 21,000,000 8.375% due 8/15/2007 20,901,300 21,052,500
BB Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 30,300,000
BB+ Ba2 20,000,000 California Energy Company, Inc.,
9.875% due 6/30/2003 20,122,500 21,714,500
BB- Ba3 46,000,000 Calpine Corporation, 8.75% due
7/15/2007 46,206,325 47,150,000
Midland Cogeneration Venture
Limited Partnership:
BB Ba3 18,150,093 10.33% due 7/23/2002++ 18,802,604 19,522,331
BB Ba3 3,582,145 10.33% due 7/23/2002++ 3,834,394 3,852,973
B B2 11,250,000 11.75% due 7/23/2005 11,310,000 13,531,668
B B2 5,500,000 13.25% due 7/23/2006 6,002,565 7,076,328
-------------- --------------
187,179,688 196,975,300
<PAGE>
Industrial CCC B3 7,912,000 Thermadyne Industries, Inc., 10.75%
Services--0.1% due 11/01/2003 7,914,802 8,386,720
Media & B Ba2 8,000,000 CANTV Finance Ltd., 9.25% due
Communications-- 2/01/2004 7,915,500 8,000,000
International-- Comtel Brasileira Ltd.:
2.9% BB- B1 40,500,000 10.75% due 9/26/2004 39,786,250 39,791,250
NR* NR* 3,000,000 10.75% due 9/26/2004 2,867,500 2,925,000
BB- B1 39,000,000 Globo Communicacoes e Participacoes,
Ltd., 10.50% due 12/20/2006 39,179,450 37,147,500
Grupo Televisa, S.A. de C.V.:
BB Ba2 2,500,000 11.375% due 5/15/2003 2,637,500 2,737,500
BB Ba2 39,000,000 11.875% due 5/15/2006 42,079,687 44,313,750
BB Ba2 15,000,000 11.363% due 5/15/2008 (a) 11,099,844 11,287,500
B B2 15,000,000 Orion Network Systems, Inc., 11.25%
due 1/15/2007 (e) 14,825,550 17,025,000
Philippine Long Distance Telephone
Company:
BB+ Ba2 7,600,000 10.625% due 6/02/2004 7,923,000 7,847,000
BB Ba2 6,500,000 9.875% due 8/01/2005 6,532,500 6,443,450
BBB- Ba3 40,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004 38,763,075 46,500,000
-------------- --------------
213,609,856 224,017,950
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Metals & Mining-- NR* B1 $90,000,000 CSN Iron S.A., 9.125% due 6/01/2007 $ 85,086,250 $ 76,950,000
2.6% CCC+ B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 51,088,125 53,250,000
Maxxam Group, Inc.:
CCC+ B3 11,750,000 11.25% due 8/01/2003 11,816,250 12,484,375
CCC+ B3 41,155,000 12.37% due 8/01/2003 (a) 38,267,416 37,862,600
BB- Ba3 21,000,000 Murrin Murrin Holdings, Inc., 9.375%
due 8/31/2007 21,000,000 20,895,000
-------------- --------------
207,258,041 201,441,975
Packaging-- B B2 15,000,000 AEP Industries Inc., 9.875%
0.7% due 11/15/2007 14,883,600 15,450,000
B+ B3 15,000,000 Printpack Inc., 10.625% due 8/15/2006 15,000,000 16,087,500
B B1 12,000,000 Silgan Corp., 9% due 6/01/2009 12,000,000 12,330,000
B+ Ba3 10,000,000 Vicap S.A., 11.375% due 5/15/2007 9,947,000 10,800,000
-------------- --------------
51,830,600 54,667,500
<PAGE>
Paper & Forest BB Ba3 39,000,000 APP International Finance Co., 11.75%
Products-- due 10/01/2005 39,071,250 36,855,000
4.3% B B3 60,000,000 Ainsworth Lumber Company, 12.50%
due 7/15/2007++++ 58,569,644 57,010,978
Container Corporation of America:
B+ B2 15,420,000 9.75% due 4/01/2003 15,433,400 16,615,050
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,235,000
Doman Industries Ltd.:
BB- B1 60,000,000 8.75% due 3/15/2004 57,006,250 57,600,000
BB- B1 5,000,000 9.25% due 11/15/2007 5,000,000 4,900,000
BB- Ba3 7,500,000 Indah Kiat Finance Mauritius, 10%
due 7/01/2007 7,181,250 6,318,750
BB Ba2 14,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 14,246,250
B B3 27,220,000 Pacific Lumber Co., 10.50% due 3/01/2003 26,868,237 28,308,800
BB Ba3 12,500,000 Pindo Deli Finance Mauritius, 10.75%
due 10/01/2007 12,462,087 10,812,500
CC Caa 25,500,000 Repap New Brunswick, Inc., 10.625%
due 4/15/2005 25,597,500 24,352,500
Riverwood International Corp.:
B- B3 15,000,000 10.25% due 4/01/2006 14,396,250 14,925,000
CCC+ Caa 30,000,000 10.875% due 4/01/2008 29,248,750 28,500,000
BB Ba3 25,000,000 Tjiwi Kimia Finance Mauritius, 10%
due 8/01/2004 24,680,750 21,000,000
-------------- --------------
343,087,868 335,679,828
Product AmeriServ Food Company:
Distribution-- B+ B1 14,000,000 8.875% due 10/15/2006 14,000,000 14,140,000
0.9% B- B3 42,000,000 10.125% due 7/15/2007 42,000,000 44,310,000
B+ B3 12,000,000 Fleming Companies, Inc., 10.50% due
12/01/2004 11,930,280 12,630,000
-------------- --------------
67,930,280 71,080,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Publishing & B B1 $ 9,000,000 American Lawyer Media Inc., 9.75%
Printing-- due 12/15/2007 $ 9,000,000 $ 9,180,000
0.8% Hollinger International, Inc.:
BB+ Ba3 5,000,000 8.625% due 3/15/2005 4,975,000 5,187,500
BB- B1 21,500,000 9.25% due 2/01/2006 20,925,312 22,628,750
BB- B1 3,000,000 9.25% due 3/15/2007 2,980,740 3,165,000
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,950,000
-------------- --------------
57,900,427 61,111,250
Restaurants-- B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 26,216,200 27,945,000
0.4%
Specialty NR* NR* 25,087,000 Cumberland Farms, Inc. DE, 10.50%
Retailing--0.3% due 10/01/2003 23,922,651 24,836,130
Steel--2.4% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125% due
12/15/2006 25,056,250 25,750,000
BB Ba3 20,000,000 Hysla, S.A. de C.V., 9.25% due 9/15/2007 19,872,930 20,050,000
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 10,850,000
B B3 25,000,000 Republic Engineered Steel Inc., 9.875%
due 12/15/2001 24,117,500 23,875,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 25,625,000
B B2 23,000,000 Weirton Steel Inc., 10.75% due 6/01/2005 22,413,750 23,690,000
BB- B2 55,000,000 Wheeling-Pittsburgh Steel Corp., 9.25%
due 11/15/2007 54,776,725 53,350,000
-------------- --------------
181,037,155 183,190,000
Supermarkets-- Pueblo Xtra International Inc.:
0.7% B- B3 21,075,000 9.50% due 8/01/2003 19,460,250 20,179,313
B- B3 3,000,000 9.50% due 8/01/2003 2,729,975 2,865,000
Ralph's Grocery Co.:
B B1 20,000,000 10.45% due 6/15/2004 19,067,149 22,500,000
B B1 10,000,000 10.45% due 6/15/2004 9,702,500 11,325,000
-------------- --------------
50,959,874 56,869,313
Telephone-- Brooks Fiber Properties Inc. (a):
Competitive NR* NR* 42,000,000 11.399% due 3/01/2006 29,105,424 35,070,000
Local Exchange NR* NR* 39,000,000 11.568% due 11/01/2006 25,606,648 31,395,000
Carriers--1.5% B+ B1 40,000,000 Teleport Communications Group Inc.,
9.875% due 7/01/2006 40,943,500 45,300,000
-------------- --------------
95,655,572 111,765,000
Textiles--0.8% Polysindo International Finance Co.:
BB+ Ba3 35,300,000 11.375% due 6/15/2006 38,240,750 29,475,500
BB+ Ba3 11,750,000 9.375% due 7/30/2007 11,580,000 8,489,375
B+ B2 25,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 25,100,000 26,312,500
-------------- --------------
74,920,750 64,277,375
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Transportation-- BB- NR* $45,000,000 Autopistas del Sol S.A., 10.25%
3.5% due 8/01/2009 $ 44,935,000 $ 40,725,000
BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 24,472,500 25,312,500
GS Superhighway Holdings:
BB Ba3 10,000,000 9.875% due 8/15/2004 9,975,000 9,050,000
BB Ba3 45,000,000 10.25% due 8/15/2007 44,663,550 39,600,000
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25%
due 12/01/2004 20,518,750 22,350,000
BB- Ba2 10,000,000 Stena AB, 8.75% due 6/15/2007 10,000,000 10,100,000
TFM, S.A. de C.V.:
B+ B2 2,000,000 10.25% due 6/15/2007 2,000,000 2,060,000
B+ B2 21,500,000 11.767% due 6/15/2009(a) 12,912,247 13,706,250
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba3 20,000,000 9.25% due 5/15/2003 17,092,750 19,625,000
BB- Ba3 31,800,000 (Class A), 10% due 11/15/2006 31,387,250 31,800,000
NR* B3 54,606,000 Transtar Holdings L.P., 12.04%
due 12/15/2003 (a) 44,202,555 48,053,280
BB Ba2 9,841,000 Viking Star Shipping Co., Inc.,
9.625% due 7/15/2003 9,864,410 10,037,820
-------------- --------------
272,024,012 272,419,850
US Government AAA Aaa 25,000,000 US Treasury Bonds, 6.25% due 8/15/2023 22,893,000 25,753,906
Obligations--0.3%
Utilities--4.3% BB- B1 34,469,000 Beaver Valley Funding Corp., 9%
due 6/01/2017 31,081,506 38,506,699
BB Ba2 7,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 6,986,560 7,773,570
NR* NR* 20,000,000 Companhia de Saneamento Basico do Estado
de Sao-Paulo, 10% due 7/28/2005 20,000,000 17,850,000
BB- B1 65,000,000 Espirito Santo-Escelsa S.A., 10% due
7/15/2007 64,918,750 58,337,500
BB+ NR* 37,000,000 Inversora de Electrica, 9% due 9/16/2004 36,895,000 35,242,500
<PAGE> BBB- Ba3 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 42,800,000
NR* NR* 15,457,736 Sunflower Electric Power Corp.,
8% due 12/31/2016++ 10,139,837 11,110,248
BB- Ba3 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 21,733,400
BBB- Baa3 41,647,941 Trans Gas de Occidente, 9.79% due
11/01/2010++ 41,722,312 44,803,147
Tucson Electric & Power Co.++:
NR* NR* 33,847,782 10.21% due 1/01/2009 32,005,359 35,558,110
NR* NR* 21,526,207 10.732% due 1/01/2013 20,326,836 22,856,957
-------------- --------------
324,173,035 336,572,131
Waste B+ B2 20,000,000 Allied Waste North America, 10.25%
Management-- due 12/01/2006 20,000,000 22,050,000
0.4% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 14,688,719 6,754,500
-------------- --------------
34,688,719 28,804,500
Wireless BB+ Ba3 42,100,000 Comcast Cellular Communications, Inc.,
Communications-- 9.50% due 5/01/2007 42,717,875 44,099,750
Domestic Paging & CCC NR* 20,000,000 McCaw International Ltd., 12.47%
Cellular--4.1% due 4/15/2007 (a) 12,107,423 11,900,000
CCC B3 10,000,000 Metrocall, Inc., 9.75% due 11/01/2007 10,000,000 9,925,000
D C 50,500,000 Mobilemedia Communication, Inc., 11.58%
due 12/01/2003 (a) 20,630,116 4,671,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded)
<S> <S> <S> <C> <S> <C> <C>
Wireless Nextel Communications Inc. (a):
Communications-- CCC B3 $80,000,000 12.08% due 8/15/2004 $ 63,640,146 $ 71,300,000
Domestic Paging CCC B3 30,000,000 10.147% due 10/31/2007 18,344,826 18,450,000
& Cellular NR* NR* 21,000,000 Page Mart Inc., 12.74% due
(concluded) 11/01/2003 (a) 18,691,071 19,425,000
B B2 75,000,000 Paging Network, Inc., 10% due
10/15/2008 74,756,250 78,000,000
B- B2 19,730,000 USA Mobile Communications Holdings,
Inc., 9.50% due 2/01/2004 18,997,875 19,335,400
B+ B1 25,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006 24,975,250 26,125,000
B- B3 15,000,000 Western Wireless Corp., 10.50% due
2/01/2007 15,062,500 16,275,000
-------------- --------------
319,923,332 319,506,400
<PAGE>
Wireless B+ B3 53,472,000 Comunicacion Celular S.A., 12.76%
Communications-- due 11/15/2003 (a) (g) 37,580,162 40,772,400
International B- B3 90,000,000 Millicom International Cellular S.A.,
Paging & 13.39% due 6/01/2006 (a) 57,971,224 66,600,000
Cellular--1.4% -------------- --------------
95,551,386 107,372,400
Total Investments in Bonds--86.3% 6,564,560,670 6,703,775,396
Shares
Held
Preferred Stocks
Cable--Domestic--0.2% 182,206 Cablevision Systems Corp. (Series M) 14,634,820 21,090,344
Cable--International--0.3% 21,486 NTL Inc.++++ 21,577,475 24,762,615
Entertainment--1.3% 89,329 Time Warner Inc. (Series M)++++ 90,197,931 100,495,125
Financial Services--0.4% 1,230,000 California Federal Bank (Series A) 30,815,000 32,287,500
Paper & Forest 435,000 S.D. Warren Co. (Series B) 13,847,190 21,423,750
Products--0.3%
Publishing & 125,000 Primedia Inc. 12,500,000 13,187,500
Printing--0.4% 152,870 Primedia Inc.++++ 15,398,238 16,509,951
-------------- --------------
27,898,238 29,697,451
Steel--0.2% 550,000 USX Capital LLC (Series A) 13,750,000 13,956,250
Telephone--Competitive 11,147 Intermedia Communications Inc.
Local Exchange Carriers--0.2% (Series B) (Convertible) 11,284,871 13,487,870
Utilities--0.0% 6,629 El Paso Electric Company++++ 721,715 734,162
Wireless Communications-- 20,606 Nextel Communications Inc. 20,715,080 23,593,870
Domestic Paging & Cellular--0.3%
Total Investments in
Preferred Stocks--3.6% 245,442,320 281,528,937
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Common Stocks
<S> <C> <S> <C> <C>
Cable--Domestic--0.0% 2,887 CS Wireless Systems Inc. $ 20,336 $ 58
195,096 Echostar Communications Corp.
(Series A) 1,385,894 3,292,245
-------------- --------------
1,406,230 3,292,303
Consumer Products--0.1% 200,369 Culligan Water Technologies Inc. 1,686,248 10,068,542
Energy--0.2% 914,710 Chi Energy Inc., Series B 14,284,292 12,348,585
8,176 Pioneer Natural Resources Co. 199,648 236,593
-------------- --------------
14,483,940 12,585,178
Entertainment--0.2% 1,166,381 On Command Corporation 51,395,186 14,725,560
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. 165,300 329,175
Wireless Communications-- 170,421 Nextel Communications Inc. 2,749,981 4,409,643
Domestic Paging & Cellular--0.1%
Total Investments in Common Stocks--0.6% 71,886,885 45,410,401
Trusts & Warrants
Cable--Domestic--0.0% 177,500 American Telecasting Inc.
(Warrants) (b) 413,723 79,875
25,000 People's Choice T.V. Corp.
(Warrants) (b) 140,353 12,625
50,338 Wireless One Inc. (Warrants) (b) 1,063,139 5,034
-------------- --------------
1,617,215 97,534
Cable--International--0.0% 45,000 UIH Australia/Pacific Inc. (Warrants) (b) 540,000 540,000
50,000 United International Holdings, Inc.
(Warrants) (b) 1,418,645 600,000
-------------- --------------
1,958,645 1,140,000
Energy--0.0% 74,687 Chi Energy Inc. (Series B)
(Warrants) (b) 74,687 112,030
48,481 Chi Energy Inc. (Series C)
(Warrants) (b) 48,481 72,721
-------------- --------------
123,168 184,751
<PAGE>
Entertainment--0.1% 379,186 On Command Corporation (Warrants) (b) 3,033,504 2,192,169
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust 192,320 0
113,386 Trump Castle Funding, Inc.
(Warrants) (b) 0 0
-------------- --------------
192,320 0
Independent Power 18,000 Consolidated Hydro, Inc. (Warrants) (b) 390,123 2,565
Producers--0.0%
Media & Communications-- 15,000 Orion Network Systems, Inc.
International--0.0% (Warrants) (b) 174,450 176,250
Wireless Communications-- 57,040 Page Mart Inc. (Warrants) (b) 236,127 324,415
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular S.A.
International Paging (Warrants) (b) 109,680 374,304
& Cellular--0.0%
Total Investments in
Trusts & Warrants--0.1% 7,835,232 4,491,988
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares
Industries Held Issue Cost Value
Short-Term Securities
<S> <C> <S> <C> <C>
Commercial 22,114,000 Atlantic Asset Securitization Corp.,
Paper***--7.0% 5.91% due 1/15/1998 $ 22,066,805 $ 22,066,805
30,000,000 Corporate Receivables Corp., 5.83%
due 2/02/1998 29,849,392 29,849,392
Countrywide Home Loans Inc.:
25,000,000 6.10% due 1/20/1998 24,923,750 24,923,750
50,000,000 5.85% due 1/22/1998 49,837,500 49,837,500
35,000,000 Delaware Funding Corp., 5.88% due
1/16/1998 34,919,967 34,919,967
<PAGE> Finova Capital Corp.:
25,000,000 5.73% due 1/13/1998 24,956,229 24,956,229
20,000,000 5.73% due 1/16/1998 19,955,433 19,955,433
76,923,000 General Motors Acceptance Corp.,
6.75% due 1/02/1998 76,923,000 76,923,000
Lexington Parker Capital LLC:
50,000,000 5.89% due 1/07/1998 49,959,097 49,959,097
21,537,000 5.94% due 1/22/1998 21,465,928 21,465,928
50,000,000 Morgan Stanley Group Inc., 5.80%
due 1/12/1998 49,919,444 49,919,444
60,000,000 Navistar Financial Corp., 6.23% due
1/22/1998 59,792,333 59,792,333
40,000,000 Onyx Corp., 6.33% due 1/16/1998 39,901,222 39,901,222
40,000,000 WCP Funding Inc., 5.85% due 1/15/1998 39,915,500 39,915,500
-------------- --------------
544,385,600 544,385,600
US Government Agency 50,000,000 Federal Farm Credit Banks, 5.60%
Obligations***--2.3% due 1/05/1998 49,976,667 49,976,667
20,000,000 Federal Home Loan Mortgage Corp., 5.53%
due 1/14/1998 19,963,133 19,963,133
Federal National Mortgage Association:
65,000,000 5.68% due 1/14/1998 64,876,933 64,876,933
45,000,000 5.76% due 1/23/1998 44,848,800 44,848,800
-------------- --------------
179,665,533 179,665,533
Total Investments in
Short-Term Securities--9.3% 724,051,133 724,051,133
Total Investments--99.9% $7,613,776,240 7,759,257,855
==============
Other Assets Less Liabilities--0.1% 7,244,314
--------------
Net Assets--100.0% $7,766,502,169
==============
Net Asset Class A--Based on net assets of $1,023,603,565 and 126,401,164 shares outstanding $ 8.10
Value: ==============
Class B--Based on net assets of $5,552,440,605 and 685,445,400 shares outstanding $ 8.10
==============
Class C--Based on net assets of $678,363,741 and 83,688,358 shares outstanding $ 8.11
==============
Class D--Based on net assets of $512,094,258 and 63,192,915 shares outstanding $ 8.10
==============
<PAGE>
<FN>
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(b)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock/face amount of bonds. The purchase price
and number of shares/face amount are subject to adjustment under
certain conditions until the expiration date.
(c)Each $1,000 face amount contains one warrant of Wireless One Inc.
(d)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(e)Each $1,000 face amount contains one warrant of Orion Network
Systems, Inc.
(f)Each $1,000 face amount contains six warrants of Echostar
Communications Corp.
(g)Each $1,000 face amount contains one warrant of Comunicacion
Celular S.A.
(h)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(i)Represents a step bond. Coupon payments are paid-in-kind, in
which the Portfolio receives additional face amount at an annual
rate of 1.75% until May 15, 2000. Subsequently, the Portfolio will
receive cash coupon payments at an annual rate of 15.75% until
maturity.
++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) Health
Services; (2) 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.
INVESTMENT GRADE PORTFOLIO & INTERMEDIATE TERM PORTFOLIO
MERRILL LYNCH CORPORATE BOND FUND, INC.
QUARTERLY REPORT DECEMBER 31, 1997
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
<PAGE>
FUND LOGO
Quarterly Report
December 31, 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
Jay C. Harbeck, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
Volatility continued to highlight stock and bond markets worldwide
during the quarter ended December 31, 1997. The initial focus of
investor concerns was the widening financial crisis in Asia. In the
wake of a series of currency devaluations, many emerging economies
are facing the challenges of higher interest rates, slowing economic
growth and declining corporate earnings. Although the announcement
of International Monetary Fund (IMF) loan packages to Thailand,
Indonesia and Korea initially reassured investors, the stringent
terms of the loans and their potential negative impact on these
already beleaguered economies are now being called into question.
In Japan, the failure of several major financial institutions has
undermined the prospects for economic recovery.
As developments in Asia continue to unfold, US equity investors are
trying to gauge the impact of poorer Asian economic prospects on
multinational corporations. Although there have been periods of
rising share prices, investor confidence has not been definitively
restored. The US bond market benefited from a "flight to quality" as
investors anticipated slower economic growth, but the release of
stronger-than-expected economic statistics also prompted periods of
declining bond prices.
As 1998 begins, investors are likely to continue to focus on the
prospects for the US economy within the context of international
developments. Although the Federal Reserve Board did not tighten
monetary policy at its November 12, 1997 meeting, it remains to be
seen whether US economic growth remains moderate enough and
inflationary pressures sufficiently contained to preclude an
increase in short-term interest rates in early 1998. The ongoing
developments in Asia will undoubtedly also influence the central
bank's monetary policy decisions in the new year.
<PAGE>
Portfolio Strategy
A strong rally in bond prices in September, which was encouraged by
low inflation data, brought the yield on the 30-year Treasury bond
to 6.23% by the beginning of October. This rally lasted from the
middle of September through the first week of October, and was
mirrored by the gains of the stock market, which soared from 7660 to
8178 as measured by the Dow Jones Industrial Average (DJIA). On
October 8, 1997, Federal Reserve Board Chairman Alan Greenspan
expressed concern before the House Budget Committee that the demand
for labor was outpacing the supply, with the resulting pressure
likely to push up wages and prices. He suggested that the Federal
Reserve Board would tighten monetary policy before it would allow
this to happen. Bond prices slumped, and the yield on the long-term
Treasury bond jumped from 6.23% to 6.43% in three days. Then, on
October 23, 1997, the Thai baht collapsed and the Asian currency
markets declined rapidly. On the following Monday, the New York
Stock Exchange saw the DJIA fall 554 points on a record volume of
1.2 billion shares. A worldwide flight to quality caused both
foreign and domestic investors to seek shelter in the US Treasury
market.
The yield on the long-term bond fell from 6.43% to 6.15%. Gross
domestic product (GDP) figures for the third calendar quarter of
1997 were released indicating a slightly larger-than-expected
increase of 3.5% as compared to 3.3% in the second calendar quarter.
The GDP price deflator rose only 1.4% for the third calendar quarter
against a 1.8% increase in the second calendar quarter. This was the
lowest quarterly increase since the second quarter of 1964. The long-
term bond finished the month with a 6.16% yield. November and
December witnessed a continuation of the flight to quality into US
bonds. The Treasury yield curve flattened from 53 basis points
(0.53%) to 28 basis points between 2-year--30-year issues. This
suggested some foreign central bank selling of issues with short-
term maturities to shore up weak currencies and private sector
purchasing of the long-term issues to increase dollar-denominated
investments. By the end of the year, the yield on the long-term
Treasury bond was 5.92%.
Investment Grade Portfolio
We extended the duration of the Investment Grade Portfolio during
the December quarter in order to seek to take advantage of rising
prices. We extended the duration from 4.55 years at the beginning of
October to 5.83 years at the end of December. This extended the
average maturity of the Portfolio from 10.5 years to 12.5 years. As
of December 31, 1997, the average quality of the Portfolio was Aa3,
slightly higher than the general market quality of A2. We were
underweighted in Canadian and Yankee bond issues because we believed
that spreads were too tight to compensate for our holding many of
these issues. We are also underweighted in the electric utility
sector because of our continued concerns that this sector will be
exposed to event risk as mergers and acquisitions occur that may
affect the collateral of the bond issues. Toward the end of the
December quarter, we reduced our holdings of foreign issues. We
positioned the Portfolio to seek to take advantage of a period of
several months of lower interest rates.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<PAGE>
Intermediate Term Portfolio
The Portfolio does not invest in maturities greater than ten years.
As a consequence, we have less flexibility to extend duration during
periods when interest rates are falling. We extended the Portfolio's
duration from 3.99 years at the beginning of October to 4.11 years
at the end of December. We sold most of our foreign holdings and
reinvested the proceeds in Treasury bonds until we could identify
attractive investment opportunities in US corporate issues. The
average quality of the Portfolio was A1 as of December month-end,
slightly higher than the general market quality of A2. We were
underweighted in Canadian and Yankee bond issues because we believed
that spreads were too tight to compensate our holding many of these
issues. We were also underweighted in the financial sector. We
positioned the Portfolio to seek to take advantage of a period of
several months of lower interest rates.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Jay C. Harbeck)
Jay C. Harbeck
Senior Vice President and Portfolio Manager
February 6, 1998
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:
<PAGE>
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Investment Grade
Portfolio. Intermediate Term Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Investment Grade Portfolio is subject to a
distribution fee of 0.50% and an account maintenance fee of 0.25%.
Intermediate Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. These shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Investment Grade Portfolio.
Intermediate Term Portfolio is subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for
Investment Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<PAGE>
PERFORMANCE DATA (continued)
</TABLE>
<TABLE>
Recent Performance Results*
<CAPTION>
Standardized
12 Month 3 Month 30-day Yield
12/31/97 9/30/97 12/31/96 % Change % Change As of 12/31/97
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares $11.48 $11.40 $11.32 +1.41% +0.70% 5.83%
Investment Grade Portfolio Class B Shares 11.48 11.40 11.32 +1.41 +0.70 5.30
Investment Grade Portfolio Class C Shares 11.49 11.40 11.32 +1.50 +0.79 5.24
Investment Grade Portfolio Class D Shares 11.49 11.41 11.32 +1.50 +0.70 5.58
Intermediate Term Portfolio Class A Shares 11.56 11.49 11.39 +1.49 +0.61 5.82
Intermediate Term Portfolio Class B Shares 11.56 11.50 11.39 +1.49 +0.52 5.36
Intermediate Term Portfolio Class C Shares 11.56 11.49 11.39 +1.49 +0.61 5.36
Intermediate Term Portfolio Class D Shares 11.56 11.50 11.39 +1.49 +0.52 5.72
Investment Grade Portfolio Class A Shares--Total Return +8.34(1) +2.36(2)
Investment Grade Portfolio Class B Shares--Total Return +7.51(3) +2.16(4)
Investment Grade Portfolio Class C Shares--Total Return +7.55(5) +2.24(6)
Investment Grade Portfolio Class D Shares--Total Return +8.16(7) +2.30(8)
Intermediate Term Portfolio Class A Shares--Total Return +8.18(9) +2.25(10)
Intermediate Term Portfolio Class B Shares--Total Return +7.62(11) +2.03(12)
Intermediate Term Portfolio Class C Shares--Total Return +7.58(13) +2.12(14)
Intermediate Term Portfolio Class D Shares--Total Return +8.07(15) +2.14(16)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.749 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.212 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.663 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.187 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.657 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.185 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $0.722 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.204 per share
ordinary income dividends.
(9)Percent change includes reinvestment of $0.730 per share
ordinary income dividends.
<PAGE>
(10)Percent change includes reinvestment of $0.211 per share
ordinary income dividends.
(11)Percent change includes reinvestment of $0.671 per share
ordinary income dividends.
(12)Percent change includes reinvestment of $0.194 per share
ordinary income dividends.
(13)Percent change includes reinvestment of $0.667 per share
ordinary income dividends.
(14)Percent change includes reinvestment of $0.193 per share
ordinary income dividends.
(15)Percent change includes reinvestment of $0.719 per share
ordinary income dividends.
(16)Percent change includes reinvestment of $0.208 per share
ordinary income dividends.
</TABLE>
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +8.34% +4.00%
Five Years Ended 12/31/97 +7.22 +6.35
Ten Years Ended 12/31/97 +8.91 +8.47
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +7.51% +3.51%
Five Years Ended 12/31/97 +6.41 +6.41
Inception (10/21/88) through 12/31/97 +7.98 +7.98
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/97 +7.55% +6.55%
Inception (10/21/94)
through 12/31/97 +8.67 +8.67
[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 12/31/97 +8.16% +3.84%
Inception (10/21/94)
through 12/31/97 +9.29 +7.90
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
PERFORMANCE DATA (continued)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +8.18% +7.10%
Five Years Ended 12/31/97 +7.17 +6.96
Ten Years Ended 12/31/97 +8.66 +8.55
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +7.62% +6.62%
Five Years Ended 12/31/97 +6.63 +6.63
Inception (11/13/92)
through 12/31/97 +6.73 +6.73
[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 12/31/97 +7.58% +6.58%
Inception (10/21/94)
through 12/31/97 +8.52 +8.52
[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 12/31/97 +8.07% +6.99%
Inception (10/21/94)
through 12/31/97 +8.99 +8.65
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<PAGE>
<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
1997 11.32/11.48 11.39/11.56 0.75 0.73 + 8.34 + 8.18
------ ------
Total $18.04 $17.37
Cumulative total return as of 12/31/97: +497.87%** +467.43%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***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
December 31, 1997
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
1997 11.32/11.48 11.39/11.56 0.66 0.67 + 7.51 + 7.62
----- -----
Total $7.70 $3.98
Cumulative total return as of 12/31/97: +102.55%** +39.66%**
<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>
<PAGE>
<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
1997 11.32/11.49 11.39/11.56 0.66 0.67 + 7.55 + 7.58
----- -----
Total $2.16 $2.21
Cumulative total return as of 12/31/97: +30.42%** +29.87%**
<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
1997 11.32/11.49 11.39/11.56 0.72 0.72 + 8.16 + 8.07
----- -----
Total $2.37 $2.36
Cumulative total return as of 12/31/97: +32.82%** +31.66%**
<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
December 31, 1997
<PAGE>
<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
Obligations-- Bonds & Notes:
18.2% AAA Aaa $ 9,000,000 5.75% due 11/15/2000 $ 9,012,187 $ 9,016,830
AAA Aaa 10,000,000 6.25% due 10/31/2001 10,149,219 10,170,300
AAA Aaa 10,000,000 7.50% due 11/15/2001 10,611,719 10,601,600
AAA Aaa 2,500,000 6.375% due 8/15/2002 2,494,531 2,564,450
AAA Aaa 2,000,000 6.25% due 8/31/2002 2,000,420 2,040,940
AAA Aaa 2,500,000 5.75% due 10/31/2002 2,491,895 2,502,350
AAA Aaa 17,000,000 5.75% due 11/30/2002 16,926,016 17,013,260
AAA Aaa 30,000,000 5.75% due 8/15/2003 29,663,359 30,018,600
AAA Aaa 5,000,000 7.25% due 8/15/2004 5,387,500 5,403,900
AAA Aaa 23,500,000 7.50% due 2/15/2005 25,837,148 25,827,910
AAA Aaa 34,500,000 6.50% due 5/15/2005 35,647,335 35,966,250
AAA Aaa 3,000,000 6.50% due 10/15/2006 3,115,313 3,141,090
AAA Aaa 59,590,000 6.125% due 8/15/2007 60,809,650 61,238,259
AAA Aaa 8,500,000 6.375% due 8/15/2027 8,861,406 8,964,865
-------------- --------------
223,007,698 224,470,604
Asset-Backed AAA Aaa 4,230,078 Arcadia Automobile Receivables Trust,
Securities++-- 6.10% due 6/15/2000 4,229,254 4,233,420
3.5% Citibank Credit Card Master Trust I:
AAA Aaa 8,000,000 6.35% due 8/15/2002 7,993,600 8,048,750
AAA Aaa 10,000,000 6.057% due 12/10/2008 (a) 9,996,100 9,950,000
AAA Aaa 6,000,000 First Bank Corporate Card Master Trust,
6.40% due 2/15/2003 5,992,634 6,048,720
AAA Aaa 14,745,971 GMAC Grantor Trust, 6.50% due 4/15/2002 14,741,859 14,810,706
-------------- --------------
42,953,447 43,091,596
Banking--7.0% BBB+ A3 6,250,000 BB&T Corporation, 7.25% due 6/15/2007 6,220,813 6,570,438
BankAmerica Corp.:
A+ Aa3 3,000,000 6.65% due 5/01/2001 2,997,090 3,034,140
A+ Aa3 3,000,000 7.125% due 5/12/2005 3,087,560 3,112,530
BBB+ Aa3 5,000,000 Chase Capital II, 6.25% due 2/01/2027 (a) 4,886,400 4,751,160
A+ A1 10,000,000 First Bank System, Inc., 6.375% due
3/15/2001 9,887,848 10,027,700
A- A1 12,900,000 First Chicago NBD Capital I, 6.30%
due 2/01/2027(a) 12,765,788 12,413,773
BBB A2 4,750,000 Fleet Capital Trust II, 7.92% due
12/11/2026 4,690,720 5,009,635
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,057,950
HSBC Americas Inc.:
A- A3 6,000,000 7% due 11/01/2006 5,949,600 6,104,220
BBB+ A2 14,000,000 7.808% due 12/15/2026 13,838,440 14,288,162
BBB+ A2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 6,222,600
AA- Aa3 3,500,000 Norwest Corp., 6.75% due 5/12/2000 3,494,785 3,545,920
BBB+ A1 5,500,000 Wells Fargo Capital I, 7.96% due
12/15/2026 5,401,385 5,782,755
-------------- --------------
84,899,129 85,920,983
<PAGE>
Canadian Province of Quebec (Canada)(1):
Provinces*-- A+ A2 7,035,000 7.50% due 7/15/2002 7,440,311 7,359,525
1.9% A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,652,560
A+ A2 4,500,000 13% due 10/01/2013 5,706,285 4,925,475
A+ A2 4,000,000 7.125% due 2/09/2024 3,701,900 4,119,640
-------------- --------------
23,622,856 23,057,200
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<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>
Finance--3.9% Associates Corp. of North America:
AA- Aa3 $ 6,000,000 8.375% due 1/15/1998 $ 6,019,320 $ 6,003,240
AA- Aa3 5,000,000 6.375% due 6/15/2000 5,008,300 5,026,600
A A2 9,500,000 Beneficial Corporation, 6.80% due
9/16/2003 9,500,000 9,638,995
A Aa3 1,250,000 CIT Capital Trust I, 7.70% due
2/15/2027 1,244,300 1,282,279
CIT Group Holdings, Inc.:
A+ Aa3 4,000,000 6.25% due 10/25/1999 4,009,120 4,009,120
A+ Aa3 8,000,000 6.625% due 6/15/2005 8,027,120 8,060,880
Commercial Credit Co.:
A+ A1 5,000,000 6.45% due 7/01/2002 5,009,800 5,036,150
A+ A1 8,850,000 6.75% due 7/01/2007 8,976,821 8,990,007
-------------- --------------
47,794,781 48,047,271
<PAGE>
Finance-- Bear Stearns Companies, Inc.:
Other--9.9% A A2 10,000,000 6.50% due 7/05/2000 9,981,800 10,060,400
A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,025,680
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,771,859
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,337,290
A+ A1 3,500,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 3,486,805 3,548,160
A- A3 11,000,000 Donaldson, Lufkin & Jenrette Inc.,
6.875% due 11/01/2005 10,952,615 11,185,350
A A2 7,500,000 Equitable Life Assurance Society of
the US, 7.70% due 12/01/2015 7,448,310 8,030,392
AA Aa1 8,000,000 GE Global Insurance Holding Corp., 7%
due 2/15/2026 8,218,880 8,305,280
Lehman Brothers Holdings, Inc.:
A Baa1 7,000,000 6.50% due 10/01/2002 6,993,350 6,990,900
A Baa1 3,000,000 6.625% due 12/27/2002 2,999,070 3,021,150
A Baa1 3,000,000 7.375% due 5/15/2004 3,107,100 3,105,690
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,940,323 4,189,962
A+ A1 9,200,000 Morgan Stanley Group Inc., 6.875%
due 3/01/2007 9,166,972 9,400,100
BBB+ Baa1 7,500,000 PaineWebber Group Inc., 7.99% due
6/09/2017 7,500,000 7,999,611
A A2 10,000,000 Salomon Inc., 7.20% due 2/01/2004 9,991,700 10,375,500
A A2 2,850,000 Smith Barney Holdings, Inc., 7.375%
due 5/15/2007 2,847,464 2,985,973
The Travelers Corp.:
AA- Aa3 3,000,000 9.50% due 3/01/2002 3,163,980 3,340,680
AA- Aa3 10,800,000 7.875% due 5/15/2025 10,845,324 12,077,316
-------------- --------------
116,529,233 121,751,293
Financial A- Baa1 4,500,000 Finova Capital Corp., 6.45% due
Services-- 6/01/2000 4,524,435 4,516,020
Commercial--0.4%
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A+ A1 $ 3,000,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--3.1% due 12/01/1999 $ 3,367,590 $ 3,138,900
AA- Aa3 10,000,000 Archer-Daniels-Midland Company,
6.75% due 12/15/2027 9,887,200 10,015,330
A+ A1 5,000,000 Hershey Foods Corporation, 7.20%
due 8/15/2027 5,269,550 5,315,500
BBB Baa2 9,000,000 Nabisco, Inc., 7.55% due 6/15/2015 8,981,960 9,572,310
A A2 9,500,000 Philip Morris Companies, Inc., 9%
due 1/01/2001 9,698,815 10,150,180
-------------- --------------
37,205,115 38,192,220
Industrial-- BBB Baa3 5,500,000 Arkla Inc., 8.875% due 7/15/1999 5,819,675 5,723,520
Energy--2.2% BP America Inc.:
AA Aa2 4,075,000 9.375% due 11/01/2000 4,488,287 4,414,855
AA Aa2 11,000,000 10% due 7/01/2018 11,869,080 11,693,330
BBB Baa3 5,000,000 Noram Energy Corp., 7.50% due 8/01/2000 5,113,400 5,129,600
-------------- --------------
27,290,442 26,961,305
Industrial-- Applied Materials Inc.:
Manufacturing-- BBB+ A3 5,000,000 6.75% due 10/15/2007 4,996,750 5,019,300
12.9% BBB+ A3 13,000,000 7.125% due 10/15/2017 12,911,080 13,204,100
duPont (E.I.) de Nemours & Co.:
AA- Aa3 5,150,000 6.75% due 9/01/2007 5,293,943 5,328,859
AA- Aa3 4,500,000 8.25% due 1/15/2022 4,676,445 4,854,060
A A1 7,000,000 Ford Motor Company, 8.875% due
1/15/2022 8,650,180 8,633,660
Ford Motor Credit Co.:
A A1 5,000,000 7% due 9/25/2001 4,980,100 5,124,250
A A1 5,000,000 8% due 6/15/2002 5,286,350 5,326,150
A A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,304,950
A A1 1,000,000 7.75% due 3/15/2005 999,090 1,072,910
General Motors Acceptance Corp.:
A- A3 8,000,000 7.60% due 1/20/1998 7,829,600 8,005,280
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 4,038,400
A- A3 7,000,000 7.125% due 5/01/2003 6,964,230 7,250,880
A- A3 10,000,000 7.70% due 4/15/2016 10,911,500 10,958,500
BBB+ A3 5,000,000 Lockheed Martin Corp., 6.85% due
5/15/2001 4,995,950 5,090,050
BBB+ A3 11,000,000 Loral Corporation, 8.375% due 6/15/2024 11,056,040 12,920,160
Martin Marietta Corp.:
BBB+ A3 6,500,000 6.50% due 4/15/2003 6,539,845 6,537,050
BBB+ A3 4,000,000 7.375% due 4/15/2013 3,846,440 4,240,880
McDonnell Douglas Financial Corp.:
AA+ Baa2 7,500,000 6.13% due 12/23/1998 7,484,550 7,412,400
AA+ Baa2 5,000,000 6.30% due 10/20/1999 5,029,550 4,984,200
AA+ A2 6,500,000 6.875% due 11/01/2006 6,743,425 6,738,680
A A2 6,500,000 Phelps Dodge Corporation, 7.75% due
1/01/2002 6,832,020 6,807,515
BBB Baa1 3,000,000 Raytheon Co., 7.20% due 8/15/2027 2,995,560 3,129,720
BBB Baa3 17,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 16,970,250 17,135,150
-------------- --------------
155,048,178 159,117,104
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<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-- A+ A1 $10,000,000 Bass America, Inc., 8.125%
Services--14.6% due 3/31/2002 $ 10,250,610 $ 10,699,400
A A2 8,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 8,076,380 8,519,840
BBB Baa2 10,000,000 Circus Circus Enterprises, Inc., 6.70%
due 11/15/2096 9,977,700 9,988,700
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,073,400
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 6,087,650
A+ A1 2,000,000 Electronic Data Systems Corp., 6.85%
due 5/15/2000 1,998,420 2,034,316
A A2 10,000,000 First Data Corporation, 6.375%
due 12/15/2007 9,974,300 9,949,800
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 8,045,800
News America Holdings, Inc.:
BBB- Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,493,616
BBB- Baa3 10,000,000 8% due 10/17/2016 9,699,900 10,733,200
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 4,989,350
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 4,004,000
BBB Baa2 7,200,000 Safeway, Inc., 7% due 9/15/2007 7,196,760 7,406,064
A- A2 8,000,000 Sears, Roebuck & Co., 6.82% due
10/17/2002 8,016,320 8,183,920
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 7,081,550
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,235,900 9,878,670
Time Warner Entertainment Co.:
BBB- Baa3 6,000,000 10.15% due 5/01/2012 7,356,180 7,674,060
BBB- Baa3 9,900,000 8.375% due 3/15/2023 10,525,871 11,297,682
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due
9/15/2024 14,488,240 15,940,307
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,557,035
A A2 14,678,505 6.85% due 1/10/2007++ 14,668,671 14,925,398
-------------- --------------
173,895,598 180,563,758
<PAGE>
Industrial-- BBB Baa2 11,500,000 CSX Corporation, 7.95% due 5/01/2027 11,440,430 12,945,446
Transportation-- BBB Baa2 9,000,000 Federal Express Corporation, 9.65%
4.2% due 6/15/2012 10,137,590 11,245,680
Norfolk Southern Corporation:
BBB+ Baa1 1,000,000 6.95% due 5/01/2002 998,480 1,025,560
BBB+ Baa1 4,000,000 7.35% due 5/15/2007 3,997,240 4,251,400
BBB+ Baa1 5,500,000 7.80% due 5/15/2027 5,493,070 6,182,220
Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,981,900
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,164,020
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,304,710
-------------- --------------
48,366,020 52,100,936
Utilities-- A+ A2 8,700,000 ALLTEL Corporation, 6.75%
Communications-- due 9/15/2005 8,566,020 8,898,534
4.6% AAA Aaa 5,000,000 BellSouth Telecommunications Inc., 7%
due 10/01/2025 5,203,500 5,248,300
GTE Corp.:
A Baa1 3,000,000 8.85% due 3/01/1998 3,081,000 3,011,040
A Baa1 7,500,000 9.375% due 12/01/2000 8,235,170 8,123,925
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
<PAGE>
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- Southwestern Bell
Communications Telecommunications Corp.:
(concluded) AA Aa3 $ 2,000,000 6.125% due 3/01/2000 $ 2,011,250 $ 2,003,560
AA Aa3 10,910,000 6.375% due 11/15/2007 10,916,412 10,957,786
US West Capital Funding, Inc.:
BBB+ Baa1 5,000,000 6.85% due 1/15/2002 4,998,050 5,056,300
BBB+ Baa1 3,500,000 7.30% due 1/15/2007 3,608,640 3,622,815
BBB+ Baa1 6,000,000 7.90% due 2/01/2027 6,000,000 6,566,040
BBB+ Baa1 3,000,000 7.95% due 2/01/2097 2,970,000 3,304,590
-------------- --------------
55,590,042 56,792,890
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison
Electric--4.7% (Class B), 7.13% due 7/01/2007 6,137,176 6,229,840
AA Aa3 5,000,000 Northern States Power Company, 7.125%
due 7/01/2025 5,305,900 5,293,950
Pennsylvania Power & Light Co.:
A- A3 6,000,000 5.50% due 4/01/1998 5,972,220 5,994,840
A- A3 3,000,000 6.875% due 2/01/2003 3,048,870 3,086,970
A- A3 10,000,000 Public Service Electric & Gas Co., 6.50%
due 6/01/2000 9,995,705 10,068,600
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,000,000 5,360,950
Texas Utilities Electric Company:
AAA Aaa 6,971,000 6.375% due 10/01/2004 6,995,198 7,043,080
BBB Baa2 5,000,000 8.175% due 1/30/2037 5,000,000 5,243,000
A A2 8,500,000 Virginia Electric & Power Co., 8.625%
due 10/01/2024 8,377,160 9,567,260
-------------- --------------
55,832,229 57,888,490
Yankee AA- Aa2 6,000,000 ABN AMRO Holding N.V., 7.125% due
Corporates*-- 6/18/2007 (2) 5,997,060 6,272,820
7.4% A+ A1 6,000,000 Australia & New Zealand Banking
Group Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,333,660
Enersis S.A. (3):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,468,225
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,930,680
BBB+ Baa3 9,800,000 Fairfax Financial Holdings Ltd., 7.75%
due 7/15/2037 (2) 9,751,098 10,083,220
Ford Capital B.V. (2):
A A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,315,700
A A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,948,527
Hutchison Whampoa Finance (2):
A+ A3 9,000,000 6.95% due 8/01/2007 8,534,100 8,480,340
A+ A3 6,500,000 7.45% due 8/01/2017 6,563,055 5,752,500
A- A3 5,000,000 Israel Electric Corp. Ltd., 7.25%
due 12/15/2006 (3) 4,990,500 5,175,660
A Aa3 2,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (2) 1,995,240 2,125,160
A A2 6,000,000 Petroliam Nasional BHD, 6.875% due
7/01/2003 (3) 5,921,240 5,697,198
BBB+ Baa2 2,000,000 Saga Petroleum ASA, 7.25% due
9/23/2027 (3) 1,979,980 2,040,120
AA Aa2 15,500,000 Swiss Bank Corp. NY, 7.375%
due 6/15/2017 (2) 16,581,680 16,581,280
-------------- --------------
89,752,198 91,205,090
<PAGE>
Total Investments in
Bonds & Notes--98.5% 1,186,311,401 1,213,676,760
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities Investment Grade Portfolio
<S> <C> <S> <C> <C>
Repurchase $7,257,000 HSBC Holdings PLC, purchased on
Agreements**--0.6% 12/31/1997 to yield 6.57% to
1/02/1998 $ 7,257,000 $ 7,257,000
Total Investments in
Short-Term Securities--0.6% 7,257,000 7,257,000
Total Investments--99.1% $1,193,568,401 1,220,933,760
==============
Other Assets Less Liabilities--0.9% 10,894,011
--------------
Net Assets--100.0% $1,231,827,771
==============
Net Asset Class A--Based on net assets of $528,756,922 and 46,053,251 shares outstanding $ 11.48
Value: ==============
Class B--Based on net assets of $574,182,802 and 50,009,165 shares outstanding $ 11.48
==============
Class C--Based on net assets of $50,408,785 and 4,388,809 shares outstanding $ 11.49
==============
Class D--Based on net assets of $78,479,262 and 6,831,327 shares outstanding $ 11.49
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity; Guaranteed by the Province.
(2)Financial Institution.
(3)Industrial.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
(a)Floating Rate Note.
</TABLE>
<PAGE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<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
Obligations-- Bonds & Notes:
9.0% AAA Aaa $ 1,000,000 5.875% due 2/15/2000 $ 989,375 $ 1,003,910
AAA Aaa 2,000,000 5.75% due 10/31/2000 1,963,750 2,002,500
AAA Aaa 4,500,000 5.625% due 2/28/2001 4,383,281 4,488,030
AAA Aaa 1,000,000 8% due 5/15/2001 1,070,000 1,068,280
AAA Aaa 2,000,000 5.75% due 8/15/2003 1,982,344 2,001,240
AAA Aaa 4,550,000 7.25% due 5/15/2004 4,894,805 4,910,451
AAA Aaa 1,000,000 7.25% due 8/15/2004 1,077,500 1,080,780
AAA Aaa 3,000,000 5.625% due 2/15/2006 2,954,062 2,966,250
AAA Aaa 16,500,000 6.125% due 8/15/2007 16,702,656 16,956,390
-------------- --------------
36,017,773 36,477,831
Asset-Backed AAA Aaa 2,000,000 First Bank Corporate Card Master
Securities++ Trust, 6.40% due 2/15/2003 1,997,545 2,016,240
- --0.5%
Banking-- BBB+ A3 4,000,000 BB&T Corporation, 7.25% due 6/15/2007 3,981,320 4,205,080
16.2% A A2 3,500,000 Bank of New York Company, Inc. (The),
7.875% due 11/15/2002 3,873,450 3,737,440
BankAmerica Corp.:
A A1 4,000,000 7.50% due 10/15/2002 4,268,880 4,201,240
A+ Aa3 3,000,000 7.125% due 5/12/2005 2,956,500 3,112,530
A A2 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,345,240
A- A3 1,000,000 HSBC Americas Inc., 7% due 11/01/2006 991,600 1,017,370
A- A3 6,000,000 Mellon Financial Co., 6.875% due
3/01/2003 5,483,220 6,133,740
A+ A1 11,500,000 NationsBank Corporation, 6.65% due
4/09/2002 11,423,540 11,691,245
Norwest Corp.:
AA- Aa3 5,000,000 6.25% due 4/15/1999 4,983,600 5,019,650
AA- Aa3 2,000,000 6.125% due 10/15/2000 1,996,440 1,998,140
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 1,013,280
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due 3/15/1999 4,890,950 5,016,000
BBB+ A3 9,000,000 Washington Mutual Inc., 7.25% due
8/15/2005 8,930,520 9,402,750
-------------- --------------
64,331,900 65,893,705
<PAGE>
Canadian Province of Quebec (Canada)(1):
Provinces*-- A+ A2 5,000,000 7.50% due 7/15/2002 5,296,190 5,230,650
2.6% A+ A2 5,000,000 8.80% due 4/15/2003 5,538,670 5,543,800
-------------- --------------
10,834,860 10,774,450
Federal AAA Aaa 2,500,000 Federal National Mortgage Association,
Agencies--0.6% 7.85% due 9/10/2004 2,496,484 2,575,400
Finance--3.3% A A2 9,250,000 Beneficial Corporation, 6.80% due
9/16/2003 9,250,000 9,385,337
A+ Aa3 1,000,000 CIT Group Holdings, Inc., 6.625%
due 6/15/2005 1,003,390 1,007,610
A+ A1 3,000,000 Commercial Credit Co., 6.45% due
7/01/2002 3,005,880 3,021,690
-------------- --------------
13,259,270 13,414,637
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<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-- Bear Stearns Companies, Inc.:
Other--5.9% A A2 $2,000,000 6.50% due 7/05/2000 $ 1,996,360 $ 2,012,080
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,337,290
A+ A1 6,250,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 6,226,438 6,336,000
A Baa1 3,000,000 Lehman Brothers Holdings Inc.,
7.375% due 5/15/2004 3,107,100 3,105,690
Salomon Inc.:
A A2 2,000,000 6.50% due 3/01/2000 2,000,000 2,010,480
A A2 4,000,000 7.20% due 2/01/2004 3,996,680 4,150,200
A A2 1,000,000 Smith Barney Holdings, Inc., 7.375%
due 5/15/2007 999,110 1,047,710
AA- Aa3 2,000,000 The Travelers Corp., 9.50% due
3/01/2002 2,168,400 2,227,120
-------------- --------------
23,718,518 24,226,570
<PAGE>
Industrial-- A+ A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--4.3% due 12/01/1999 6,189,909 5,734,770
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 5,064,200
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 3,062,160
A A2 3,500,000 Philip Morris Cos., Inc., 9% due
1/01/2001 3,576,195 3,739,540
-------------- --------------
17,757,454 17,600,670
Industrial-- Texaco Capital Inc.:
Energy--2.6% A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,020,660
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,101,600
BBB Baa2 6,000,000 Ultramar Credit Corp., 8.625%
due 7/01/2002 6,521,940 6,548,400
-------------- --------------
10,860,520 10,670,660
Industrial-- Applied Materials Inc.:
Manufacturing-- BBB+ A3 4,000,000 6.65% due 9/05/2000 4,000,000 4,048,080
12.4% BBB+ A3 4,300,000 6.75% due 10/15/2007 4,297,205 4,316,598
A A1 5,000,000 Ford Motor Credit Co., 7.75%
due 3/15/2005 4,995,450 5,364,550
General Motors Acceptance Corp.:
A- A3 2,000,000 7.60% due 1/20/1998 1,957,400 2,001,320
A- A3 5,000,000 6.625% due 10/01/2002 4,991,000 5,068,650
A- A3 2,000,000 7.125% due 5/01/2003 1,989,780 2,071,680
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,003,300
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,512,900
BBB+ A3 8,000,000 6.85% due 5/15/2001 8,018,810 8,144,080
AA+ Baa2 5,000,000 McDonnell Douglas Corporation, 6.30%
due 10/20/1999 5,029,550 4,984,200
BBB Baa1 5,000,000 Raytheon Company, 6.75% due 8/15/2007 4,987,750 5,100,850
BBB Baa3 6,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 5,989,500 6,047,700
-------------- --------------
49,755,115 50,663,908
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<PAGE>
<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>
Industrial-- A+ A1 $3,000,000 Bass America, Inc., 6.625%
Services--17.4% due 3/01/2003 $ 2,825,520 $ 3,046,290
A A2 6,000,000 Carnival Cruise Lines, Inc., 7.70%
due 7/15/2004 5,952,060 6,389,880
BBB- Baa3 4,000,000 Comcast Corporation, 8.375% due
5/01/2007 4,060,680 4,454,804
A+ A1 3,500,000 Electronic Data Systems Corp., 6.85%
due 5/15/2000 3,497,235 3,560,053
News America Holdings, Inc.:
BBB- Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,337,040
BBB- Baa3 4,500,000 8.50% due 2/15/2005 4,677,305 4,934,745
BBB+ Baa2 1,000,000 Oracle Corporation, 6.91% due 2/15/2007 1,000,000 1,001,000
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,520,950
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,126,700
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 1,011,650
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,559,790
TCI Communications Inc.:
BBB- Ba1 3,000,000 8.65% due 9/15/2004 3,099,270 3,286,650
BBB- Ba1 5,500,000 8% due 8/01/2005 5,561,380 5,893,965
BBB- Baa3 5,000,000 Time Warner Inc., 9.625% due 5/01/2002 5,586,000 5,586,150
BBB- Ba1 5,000,000 Turner Broadcasting System, Inc.
(Class B), 7.40% due 2/01/2004 5,108,150 5,206,850
Walt Disney Co.:
A A2 4,812,625 6.85% due 1/10/2007++ 4,809,400 4,893,573
A A2 6,000,000 (Class B), 6.75% due 3/30/2006 6,145,320 6,192,540
-------------- --------------
69,700,810 71,002,630
Industrial-- BBB- Baa3 4,310,000 AMR Corporation, 9.50% due 7/15/1998 4,606,528 4,389,606
Transportation-- AA+ Aa3 4,000,000 Boeing Co. (The), 6.35% due 6/15/2003 3,599,960 4,023,160
5.6% Norfolk Southern Corporation:
BBB+ Baa1 5,000,000 6.95% due 5/01/2002 4,992,400 5,127,800
BBB+ Baa1 1,000,000 7.35% due 5/15/2007 999,310 1,062,850
Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,138,235
A- A3 1,000,000 8% due 3/01/2005 994,610 1,082,010
-------------- --------------
22,756,988 22,823,661
<PAGE>
Utilities-- BBB- Ba1 5,000,000 360 Communications Co., 7.50%
Communications-- due 3/01/2006 5,170,100 5,224,050
7.6% A+ A2 4,000,000 ALLTEL Corporation, 6.75% due 9/15/2005 3,938,400 4,091,280
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,090,310 1,083,190
A A2 6,000,000 MCI Communications Corporation,
6.95% due 8/15/2006 5,980,200 6,118,500
Southwestern Bell Telecommunications Co.:
AA Aa3 1,000,000 6.50% due 3/12/2003 1,009,780 1,016,720
AA Aa3 2,200,000 6.625% due 4/01/2005 2,108,590 2,239,578
AA Aa3 4,000,000 6.375% due 11/15/2007 3,973,520 4,017,520
US West Capital Funding, Inc.:
BBB+ Baa1 2,000,000 6.85% due 1/15/2002 1,979,920 2,022,520
BBB+ Baa1 2,000,000 7.30% due 1/15/2007 2,062,080 2,070,180
BBB- Ba1 3,000,000 WorldCom, Inc., 7.75% due 4/01/2007 3,095,220 3,221,670
-------------- --------------
30,408,120 31,105,208
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1997
<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>
Utilities-- A- Baa1 $4,000,000 Arizona Public Service Company,
Electric--3.5% 6.75% due 11/15/2006 $ 3,905,840 $ 4,067,840
AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison
(Class B), 7.13% due 7/01/2007 3,147,270 3,194,790
Pennsylvania Power & Light Co.:
A- A3 4,000,000 5.50% due 4/01/1998 3,991,280 3,996,560
A- A3 1,000,000 6.875% due 2/01/2003 1,016,290 1,028,990
A- A3 2,000,000 Public Service Electric & Gas Co.,
6.50% due 6/01/2000 1,999,120 2,013,720
-------------- --------------
14,059,800 14,301,900
<PAGE>
Yankee A- Baa1 1,500,000 Enersis S.A., 6.90% due 12/01/2006 (2) 1,496,130 1,480,935
Corporates*-- A A1 2,000,000 Ford Capital B.V., 9.875% due
4.4% 5/15/2002 (3) 2,300,380 2,263,140
A+ A2 3,000,000 Grand Metropolitan Investment Corp.,
6.50% due 9/15/1999 (3) 3,040,120 3,018,300
BBB- Ba2 3,000,000 Gruma, S.A. de C.V., 7.625% due
10/15/2007 (2) 2,994,960 2,947,980
A+ A3 4,500,000 Hutchison Whampoa Finance Ltd., 6.95%
due 8/01/2007 (3) 4,273,430 4,240,170
A- A3 2,000,000 Israel Electric Corp. Ltd., 7.25% due
12/15/2006 (2) 1,996,200 2,070,264
A A2 2,000,000 Petroliam Nasional BHD, 6.875% due
7/01/2003 (2) 1,972,960 1,899,066
-------------- --------------
18,074,180 17,919,855
Yankee BBB+ A3 1,000,000 People's Republic of China, 6.625%
Sovereign*-- due 1/15/2003 (1) 995,160 984,800
0.3%
Total Investments in
Bonds & Notes--96.2% 387,024,497 392,452,125
Short-Term Securities
Repurchase 11,409,000 HSBC Holdings PLC, purchased on
Agreements**--2.8% 12/31/1997to yield 6.57% to
1/02/1998 11,409,000 11,409,000
Total Investments in
Short-Term Securities--2.8% 11,409,000 11,409,000
Total Investments--99.0% $ 398,433,497 403,861,125
==============
Other Assets Less Liabilities--1.0% 4,086,100
--------------
Net Assets--100.0% $ 407,947,225
==============
Net Asset Class A--Based on net assets of $181,600,358 and 15,710,141 shares outstanding $ 11.56
Value: ==============
Class B--Based on net assets of $148,980,945 and 12,887,547 shares outstanding $ 11.56
==============
Class C--Based on net assets of $1,691,647 and 146,350 shares outstanding $ 11.56
==============
Class D--Based on net assets of $75,674,275 and 6,545,898 shares outstanding $ 11.56
==============
<PAGE>
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity.
(2)Industrial.
(3)Financial Insitution.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
</TABLE>
