HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
The quarter ended March 31, 1998 was positive for most capital
markets worldwide, despite periods of volatility. Investors
continued to focus on the impact that the financial crisis in Asia
would have on economic growth worldwide. In the United States,
sentiment fluctuated between a variety of outlooks. At times, US
stock and bond prices reflected expectations that the slowdown in
Asian economic growth would lead to a sharp decline in US business
activity and, ultimately, a deflationary environment. The
deterioration of economic conditions in Japan is of particular
concern. During other periods, US investors appeared to expect that
the positive trends of a moderately expanding economy, declining un-
employment, enhanced productivity and corporate profits growth would
continue, unimpeded by the developments in Asia. To date, there have
been only a few signs that Asia's troubles are influencing US
economic activity.
The Federal Open Market Committee did not change monetary policy at
its meeting in early February. Subsequently, in his Humphrey-Hawkins
testimony before Congress, Federal Reserve Board Chairman Alan
Greenspan indicated that monetary policy might remain steady for
some time. This raised concerns among those US bond investors who
had expected imminent monetary policy easing. However, subsequent
data releases suggested that US economic growth would remain
moderate, which stabilized the bond market.
As 1998 progresses, it is likely that investor focus will remain on
developments in Asia, their potential impact on the US economy, and
the Federal Reserve Board's response to them.
The High-Yield Market
The quarter ended March 31, 1998 was a good one for the high-yield
market, despite the fallout from the Asian financial crisis. For the
three months ended March 31, 1998, the unmanaged CS First Boston
High Yield Index registered a total return of +3.01%, easily
surpassing the ten-year US Treasury return of +1.42%. Yield spreads
between the Index and US Government securities of similar maturity
narrowed from 386 basis points (3.86%) at year-end 1997 to 378 basis
points at March 31, 1998.
A record dollar volume of new issues came to market during the March
quarter ($44 billion/229 issues), an astounding 76% increase from
the first quarter of 1997. Companies in the media/communications
sector were by far the most active at raising capital in the high-
yield market. Strong cash flows into mutual funds helped absorb the
flood of new issues. According to AMG Data Services, approximately
$5.3 billion flowed into high-yield funds during the March quarter
(a 20% increase from one year ago). Crossover buyers (those buyers
who generally buy investment-grade issues but who have chosen to buy
below investment-grade issues), insurance companies and pension
funds were also active investors during the March quarter. As a
result, new issues tended to trade quite well in the secondary
market. In that regard, the unmanaged Bear Stearns New Issues Index,
which consists of a rolling basket of the most recent 25 issues,
recorded a total return of over +7% for the March quarter. In
addition to the robust funds flows, the high-yield market has
continued to benefit from declining Treasury interest rates, strong
economic growth with low inflation, buoyant equity markets, tenders
and low default rates.
During the March quarter, the best-performing industry group was
consumer durables, which benefited from the acquisition of CLN
Holdings Inc. and its subsidiary Coleman Co. by non-rated Sunbeam
Corp. The CLN senior secured second priority discount notes were one
of the top total return securities in the entire high-yield
universe. Other strong performing groups were gaming, where returns
were boosted by speculation of further real estate investment trust
activity after Station Casinos announced that it would merge with
Crescent Real Estate Industries, and media/entertainment, which
benefited from several mergers/acquisitions and strategic
investments. The laggards were consumer non-durables, where a number
of bonds were hurt by poor credit-specific results, and energy,
which suffered from the sharp decline in oil prices.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
According to data compiled by Donaldson, Lufkin & Jenrette, a
leading underwriter in the high-yield market, 28 high-yield
companies took advantage of the vibrant equity markets and raised
almost $6 billion of new equity during the first quarter of 1998.
With this heavy level of activity in both initial public offerings
and secondary offerings, high-yield companies are on a pace to match
the record amount of equity issuance of $23.5 billion in 1997. The
willingness of high-yield bond issuers to sell new equity to finance
capital spending and acquisitions and to retire debt has contributed
to the healthy credit quality of the high-yield market.
Merger and acquisition activity has also continued to benefit the
portfolio. In addition to previously mentioned Coleman Co., Brooks
Fiber Properties Inc. (acquired by ATT) and Ralph's Grocery Co.
(acquired by Fred Meyer) tendered for their bonds at very attractive
investment-grade levels.
The latest available data from the Moody's Investors Service Inc.'s
trailing 12-month default rate, which includes worldwide defaults,
equaled 2.26% (on an issuer basis) through February 28, 1998. This
figure is well below the 1971-1997 annual average of 3.36%.
Another measure of the healthy credit quality in the high-yield
market is the ratio of credit upgrades versus downgrades as compiled
by KDP Investment Advisors, an independent bond rating agency. For
the March quarter, upgrades numbered 28 and downgrades numbered 24.
Portfolio Strategy
During the March quarter, we focused most of our purchasing activity
in the new-issue market because we felt there was better relative
value there. In addition to providing good relative value, the heavy
new-issue supply allowed us to reduce the portfolio's cash position
and to dispose of some long-held issues with mediocre total return
characteristics. We selectively sold bond issues trading at premiums
to par or with limited call protection because of the moderate
yields and capital appreciation potential that these securities have
compared to the issues that replaced them. We also continued to add
to various US dollar-denominated corporate bonds of issuers
domiciled in countries negatively impacted by currency turbulence in
Asia. This segment of the market offers compelling value. The
industry exposure with the largest growth over the past six months
is health services, which now makes up 5.5% of portfolio assets
compared to 2.0% at September 30, 1997. Our healthcare holdings
included acute care, long-term (nursing) care, a medical instruments
company, and one of our ten largest holdings, Fresenius Medical Care
AG, a provider of dialysis services. The fundamentals are strong,
and we have added several very attractive issues, including
Fresenius Medical. At March 31, 1998, cash and cash equivalents
equaled 6% of net assets, down from 9.4% at year-end 1997.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
May 12, 1998
Effective March 24, 1998, shares of High Income Portfolio will no
longer be available for purchase or exchange. Therefore, on or after
March 24, 1998, the Fund will no longer sell Class A, Class B, Class
C or Class D Shares of the Portfolio, but will continue to be
available for purchase under the following circumstances.
Shareholders of the Portfolio may continue to elect to have
dividends and distributions paid on shares of the Portfolio
reinvested in additional shares of the Portfolio; certain
participants in employer-sponsored retirement or savings plans,
including eligible 401(k) plans, will continue to be permitted to
purchase shares of the Portfolio through such plans; and shares of
the Portfolio will continue to be available for purchase by
participants in certain fee-based programs, such as the Mutual Fund
Adviser program administered by Merrill Lynch, Pierce, Fenner &
Smith Inc., a subsidiary of Merrill Lynch & Co. In addition, shares
of the Portfolio will continue to be available for purchase in
single transactions of more than $1,000,000.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
PORTFOLIO INFORMATION
<TABLE>
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
TransAmerican TransAmerican is a privately held holding company whose principal subsidiaries are wholly- 3.0%
Energy owned TransAmerican Refining Corp. (TARC) and 69%-owned TransTexas Gas Corp., a
Corp. publicly held company which explores for and produces oil and natural gas primarily in
South Texas. TARC is in the midst of a two-phase construction and expansion program
which, when finished, will give it one of the largest and most complex refineries in the
United States. Our bonds are secured by some 33 million shares of TransTexas common,
and two intercompany loans secured by mortgages on substantially all of the assets of
TARC and TransTexas.
Nextel Nextel offers digital and analog wireless communication services throughout the United 2.0
Communications States. The company's digital service currently covers approximately 80% of the total US
Inc. population and once completed, will enable Nextel to offer nationwide digital wireless
service.
HMC HMC, a wholly-owned subsidiary of Host Marriott Corporation, owns 50 full-service hotels 1.7
Acquisition and has investment stakes in eight others, comprising the majority of Host Marriott's
Properties 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.
The company recently announced its intent to seek REIT status and to tender for the bonds.
NTL Inc. Through various subsidiaries, NTL Inc. owns and operates television and radio broadcasting, 1.4
cable television and radio broadcasting, cable television and telecommunications systems
in the United Kingdom. Prior to March of 1997, the company was called Cabletel.
Lenfest Through its primary subsidiary, Suburban Cable, Lenfest offers cable service to nearly 1.3
Communications, one million cable customers in Pennsylvania, New Jersey and Delaware.
Inc.
Century Century owns and operates 70 cable systems in 25 states and Puerto Rico. In addition, 1.3
Communications the company has a 31.8% common equity interest in Centennial Cellular, a provider of
Corporation 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, 1.2
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.
Fresenius Fresenius Medical Care is the world's largest integrated provider of dialysis products 1.2
Medical Care and services. Its 910 dialysis centers treat 68,000 patients worldwide, including
approximately 23% of the US dialysis patients. The company also is the world's second-
largest manufacturer and distributor of dialysis equipment and related supplies, selling
products in more than 110 companies.
Trump Atlantic Trump Atlantic City owns and operates the TrumpTaj Mahal, the Trump Plaza and the 1.2
City Associates/ Trump World's Fair hotel-casinos, all located on the boardwalk in Atlantic City, New Jersey.
Funding Inc. These bonds are secured by mortgages on the properties.
EchoStar EchoStar Communications provides Direct Broadcast Satellite ("DBS") television, 1.1
Communications delivering digital television signals directly to dishes on subscribers' homes. EchoStar
Corp. began service in 1996 as the third US DBS provider and has rapidly grown to 1.2 million
subscribers. The company also manufactures and sells set-top boxes, antennae and other
digital equipment.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
PORTFOLIO INFORMATION (concluded)
As of March 31, 1998
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 5.3%
BB/Ba 31.7
B/B 54.8
CCC/Caa 5.0
Not Rated 3.2
[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 8.5%
Cable--Domestic 7.2
Health Services 5.3
Wireless Communications--Domestic Paging
& Cellular 4.8
Cable--International 4.8
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Brazil 4.6%
Argentina 3.5
United Kingdom 3.3
Mexico 2.5
Canada 2.0
[FN]
*All holdings are denominated in US dollars.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 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:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
Ten Year/ Standardized
12 Month 3 Month Since Inception 30-day Yield
Total Return Total Return Total Return As of 3/31/98
<S> <C> <C> <C> <C>
High Income Portfolio Class A Shares* +14.68% +3.55% +215.85% 8.40%
High Income Portfolio Class B Shares* +13.82 +3.36 +176.65 7.98
High Income Portfolio Class C Shares* +13.76 +3.35 + 47.92 7.92
High Income Portfolio Class D Shares* +14.54 +3.62 + 50.81 8.15
Merrill Lynch High Yield Master Index** +14.77 +2.79 +205.45/+187.29/+55.28
CS First Boston High Yield Index** +14.33 +3.01 +205.55/+186.57/+52.93
Ten-Year US Treasury Securities*** +15.29 +1.42 +133.87/+124.08/+41.98
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten year/inception dates are: Class A Shares, ten years ended
3/31/98; Class B Shares, 10/21/88; and Class C and Class D Shares,
10/21/94.
**Unmanaged. These market-weighted Indexes mirror the high-yield
debt market of securities rated BBB or lower. Ten year/since
inception total returns for Merrill Lynch High Yield Master Index
are for the ten years ended 3/31/98; from 10/21/88 to 3/31/98; and
from 10/21/94 to 3/31/98, respectively. Ten year/since inception
total returns for CS First Boston High Yield Index are for the ten
years ended 3/31/98; from 10/31/88 to 3/31/98; and from 10/31/94 to
10/31/98, respectively.
***Ten year/since inception total returns are for the ten years
ended 3/31/98; from 10/31/88 to 3/31/98; and from 10/31/94 to
3/31/98, respectively.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/98 +14.68% +10.10%
Five Years Ended 3/31/98 +10.58 + 9.68
Ten Years Ended 3/31/98 +12.19 +11.73
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +13.82% + 9.82%
Five Years Ended 3/31/98 + 9.75 + 9.75
Inception (10/21/88)
through 3/31/98 +11.38 +11.38
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/98 +13.76% +12.76%
Inception (10/21/94)
through 3/31/98 +12.05 +12.05
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/98 +14.54% + 9.96%
Inception (10/21/94)
through 3/31/98 +12.68 +11.35
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds
<S> <S> <S> <C> <S> <C> <C>
Aerospace--0.4% B+ B1 $ 30,000,000 Kitty Hawk, Inc., 9.95%
due 11/15/2004 (j) $ 30,033,750 $ 31,050,000
Airlines--1.1% Piedmont Aviation, Inc.:
B+ B1 1,304,000 Series 88J, 10.05% due 5/13/2005 1,181,685 1,436,180
B+ B1 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,256,471
B+ B1 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 4,274,076
B+ B1 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 3,143,370
B+ B1 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,418,649
B+ B1 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 3,004,049
B+ B1 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,921,280
B+ B1 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,257,789
B+ B1 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,240,238
B+ B1 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,692,953
USAir Inc.:
B B1 25,000,000 9.625% due 2/01/2001 20,109,906 26,125,000
B+ B1 21,000,000 10.375% due 3/01/2013 20,768,125 23,558,850
B+ B1 4,634,836 Series 89A1, 9.33% due 1/01/2006++ 4,384,418 4,952,855
B+ B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,566,873
B+ B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,985,946
B+ B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,211,263
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,208,620
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,208,620
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,208,620
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,208,620
-------------- --------------
73,691,899 88,880,322
Automotive-- B B3 10,000,000 Collins & Aikman Corp., 11.50%
0.7% due 4/15/2006 10,000,000 11,275,000
B+ B2 42,500,000 Venture Holdings Trust, 9.50%
due 7/01/2005 41,054,453 44,093,750
-------------- --------------
51,054,453 55,368,750
Broadcasting-- NR* NR* 4,686,000 ACME Intermediate Holdings/Finance,
Radio & 0/12% due 9/30/2005 (a) 2,739,683 2,975,610
Television-- B- B3 3,000,000 ACME Television/Finance, 10.976% due
2.6% 9/30/2004 (a)(j) 2,290,887 2,475,000
B- B2 17,500,000 EZ Communications, Inc., 9.75% due
12/01/2005 17,361,575 19,326,563
B- B3 29,000,000 LIN Holdings Corp., 10% due
3/01/2008 (a)(j) 17,945,993 18,342,500
B- B2 35,000,000 LIN Television Corp., 8.375%
due 3/01/2008 (j) 34,918,100 35,350,000
B- B3 35,000,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 34,918,750 38,762,500
B- B3 21,000,000 Salem Communications Corp., 9.50% due
10/01/2007 21,160,625 22,102,500
Sinclair Broadcasting Group Inc.:
B B2 50,000,000 10% due 9/30/2005 50,343,269 54,250,000
B B2 9,700,000 9% due 7/15/2007 9,629,991 10,172,875
B B2 15,000,000 8.75% due 12/15/2007 14,941,200 15,525,000
-------------- --------------
206,250,073 219,282,548
Building Nortek Inc.:
Materials--0.4% B- B3 20,550,000 9.875% due 3/01/2004 20,362,365 21,423,375
B+ B1 9,000,000 9.25% due 3/15/2007 8,947,980 9,382,500
-------------- --------------
29,310,345 30,805,875
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- American Telecasting, Inc. (a):
Domestic-- CCC+ Caa $ 47,190,545 18.89% due 6/15/2004 $ 33,251,865 $ 10,145,967
6.9% CCC+ Caa 9,430,000 26.322% due 8/15/2005 3,662,876 1,555,950
NR* NR* 20,000,000 CCA Industries, Inc., 13%
due 12/31/1999++++ 16,463,336 21,526,409
CCC+ Caa 10,500,000 CS Wireless Systems Inc., 12.041%
due 3/01/2006 (a) 7,300,248 2,467,500
CSC Holdings Inc.:
BB- B1 13,750,000 9.875% due 5/15/2006 13,718,750 15,090,625
BB- B1 5,000,000 10.50% due 5/15/2016 4,900,000 5,862,500
Century Communications Corporation:
BB- Ba3 44,500,000 9.75% due 2/15/2002 44,895,938 47,503,750
BB- Ba3 45,000,000 9.50% due 3/01/2005 44,542,813 48,487,500
BB- Ba3 10,000,000 8.375% due 12/15/2007 9,817,900 10,087,500
Comcast Corporation:
BB+ Ba3 5,000,000 9.125% due 10/15/2006 5,112,500 5,325,000
BB+ Ba3 30,000,000 9.50% due 1/15/2008 29,468,813 31,853,399
B- B2 70,000,000 Echostar Communications Corp.,
11.712% due 6/01/2004 (a)(f) 61,127,991 67,478,156
CCC+ B3 25,000,000 Echostar Satellite Broadcasting,
11.25% due 3/15/2004 (a) 21,177,229 23,000,000
B B2 31,000,000 Intermedia Capital Partners L.P.,
11.25% due 8/01/2006 31,002,500 35,030,000
Lenfest Communications, Inc.:
BB+ Ba3 50,000,000 8.375% due 11/01/2005 47,987,450 51,875,000
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 45,800,000
BB- B2 10,000,000 8.25% due 2/15/2008 (j) 9,972,600 10,150,000
B B1 50,000,000 Olympus Communications L.P.,
10.625% due 11/15/2006 50,282,500 55,750,000
CCC+ Caa 25,000,000 People's Choice T.V. Corporation,
15.21% due 6/01/2004 (a) 17,397,204 5,875,000
BB+ Ba3 40,000,000 TCI Communications Inc., 9.65%
due 3/31/2027 40,258,360 47,135,198
B- B3 40,000,000 TCI Satellite Entertainment, Inc.,
12.15% due 2/15/2007 (a)(j) 25,396,311 28,400,000
B- B3 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a)(c) 31,544,410 5,285,490
-------------- --------------
589,725,794 575,684,944
Cable-- Australis Media Ltd.:
International-- NR* NR* 8,699,997 14.391% due 11/01/2002 (a)(k) 6,129,731 5,926,412
4.4% D C 700,819 1.75%/15.75% due 5/15/2003 (i) 476,970 213,750
NR* NR* 79,117,000 1.75%/15.75% due 5/15/2003
(d)(i)++++ 56,318,088 22,645,273
B- B2 10,000,000 Azteca Holdings S.A., 11% due
6/15/2002 (j) 9,962,200 10,475,000
B- B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 41,241,284 45,787,500
Diamond Cable Communications PLC (a):
B- B3 15,000,000 11.366% due 12/15/2005 11,246,731 11,962,500
B- B3 25,000,000 10.87% due 2/15/2007 16,524,731 17,875,000
NTL Inc.:
B- B3 25,000,000 10% due 2/15/2007 25,015,625 27,125,000
B- B3 80,000,000 Series B, 11.701% due
2/01/2006 (a) 57,502,097 64,400,000
B+ B1 75,000,000 TeleWest Communications PLC,
11.02% due 10/01/2007 (a) 57,297,294 60,750,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- B B2 $ 45,000,000 UIH Australia/Pacific Inc.,
International Series B, 14% due 5/15/2006 (a) $ 29,534,457 $ 31,275,000
(concluded) B B3 111,500,000 United International Holdings,
Inc., 10.75% due 2/15/2008 (a)(h) 66,895,738 70,523,750
-------------- --------------
378,144,946 368,959,185
Capital Goods-- BB- B1 21,450,000 Essex Group Inc., 10% due 5/01/2003 21,546,500 22,415,250
1.1% International Wire Group, Inc.:
B- B3 15,000,000 11.75% due 6/01/2005 16,312,500 16,725,000
B- B3 25,000,000 11.75% due 6/01/2005 24,986,250 27,875,000
B- B3 25,250,000 Trench Electric & Trench Inc.,
10.25% due 12/15/2007 (j) 25,315,625 25,723,438
-------------- --------------
88,160,875 92,738,688
Chemicals-- BB- Ba3 10,000,000 Agriculture Minerals & Chemicals
0.5% Company, L.P., 10.75% due 9/30/2003 10,060,000 10,725,000
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,769,630
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,525,000
-------------- --------------
39,534,100 42,019,630
Child Care-- B- B3 15,000,000 KinderCare Learning Centers, Inc.,
0.2% 9.50% due 2/15/2009 14,859,375 15,412,500
Computer NR* NR* 4,000,000 Verio Inc., 10.375% due 4/01/2005 4,000,000 4,180,000
Services--0.1%
Computer BB- Ba1 59,500,000 Advanced Micro Devices, Inc., 11%
Services-- due 8/01/2003 61,781,250 63,888,125
Electronics-- CCC Caa1 40,500,000 Dictaphone Corp., 11.75% due
1.5% 8/01/2005 40,114,375 41,917,500
B+ B3 15,000,000 Jordan Telecom Products, Series B,
9.875% due 8/01/2007 14,882,460 16,012,500
-------------- --------------
116,778,085 121,818,125
Conglomerates-- NR* Ba3 15,000,000 Dine, S.A. de C.V., 8.75% due
1.5% 10/15/2007 (j) 14,887,200 14,700,000
B- B3 22,000,000 Eagle-Picher Industries, 9.375%
due 3/01/2008 22,117,040 22,495,000
NR* NR* 3,639,000 MacAndrews & Forbes Holdings, Inc.,
13% due 3/01/1999 3,409,270 3,670,841
B+ B3 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,562 27,430,000
BB- NR* 60,000,000 Voto-Votorantim S.A., 8.50% due
6/27/2005 (j) 58,884,775 57,000,000
-------------- --------------
124,444,847 125,295,841
Consumer B B3 93,000,000 CLN Holdings Inc., 11.662% due
Products--1.7% 5/15/2001 (a) 65,214,918 74,400,000
B+ Ba3 15,000,000 Coty Inc., 10.25% due 5/01/2005 15,000,000 16,125,000
B+ B1 45,880,000 International Semi-Tech
Microelectronics, Inc.,
12.51% due 8/15/2003 (a) 33,392,170 16,287,400
B- B3 30,000,000 Revlon Consumer Products Corp.,
8.625% due 2/01/2008 (j) 29,989,800 30,450,000
B+ B1 2,240,000 Samsonite Corporation, 11.125%
due 7/15/2005 2,144,800 2,542,400
-------------- --------------
145,741,688 139,804,800
Consumer B- Caa2 7,000,000 AP Holdings Inc., 11.25% due
Services--0.4% 3/15/2008 (a)(j) 4,069,470 4,217,500
B- Caa1 12,500,000 Apcoa Inc., 9.25% due 3/15/2008 (j) 12,500,000 12,593,750
B+ B2 13,650,000 Coinmach Corp., 11.75% due
11/15/2005 15,004,875 15,288,000
-------------- --------------
31,574,345 32,099,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Convertible NR* Caa2 $ 6,195,000 Builders Transport, Inc., 8%
Bonds**--0.1% due 8/15/2005 (2) $ 3,614,250 $ 1,548,750
BBB+ Ba1 6,375,000 Quantum Health Resources Inc.,
4.75% due 10/01/2000 (1) 5,956,562 6,008,438
-------------- --------------
9,570,812 7,557,188
Diversified B- B3 25,000,000 Foamex Capital Corp., 9.875% due
- --0.3% 6/15/2007 25,468,750 26,250,000
Energy--8.3% B+ B2 20,000,000 Benton Oil & Gas Co., 9.375% due
11/01/2007 20,097,687 20,125,000
Chesapeake Energy Corporation:
BB- Ba3 17,010,000 10.50% due 6/01/2002 18,117,544 18,158,175
BB- Ba3 4,400,000 9.125% due 4/15/2006 4,388,100 4,466,000
BB- Ba3 1,000,000 Series B, 7.875% due 3/15/2004 983,750 970,000
B+ B2 15,000,000 Clark R & M Holdings, Inc., 8.875%
due 11/15/2007 14,892,150 15,262,500
B+ B3 25,000,000 Clark USA Inc., Series B, 10.875%
due 12/01/2005 26,515,000 27,500,000
BBB- Ba3 42,500,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A.,
9% due 1/30/2004 (j) 43,872,500 43,881,250
B B2 10,000,000 Cross Timbers Oil Company, 8.75%
due 11/01/2009 10,000,000 10,287,500
B B2 15,000,000 Energy Corp. of America, 9.50%
due 5/15/2007 15,000,000 15,000,000
B B2 20,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 19,740,050 19,750,000
KCS Energy Inc.:
B- B3 20,000,000 8.875% due 1/15/2008 19,900,000 19,825,000
B B1 22,000,000 Series B, 11% due 1/15/2003 22,723,750 24,035,000
BBB- Baa3 28,593,750 Oleoducto Centrale S.A., 9.35%
due 9/01/2005 (j)++ 28,584,219 29,666,016
Parker Drilling Co.:
B+ B1 25,500,000 9.75% due 11/15/2006 25,510,725 27,285,000
B+ B1 7,000,000 9.75% due 11/15/2006 7,268,310 7,472,500
Petroleo Brasileiro S.A.--
Petrobras (j):
B+ B1 15,000,000 10% due 10/17/2006 15,097,500 15,806,250
BB- B1 15,000,000 10% due 10/17/2006 14,869,812 15,750,000
BB+ Ba3 25,000,000 Seagull Energy Corp., 8.625%
due 8/01/2005 24,990,000 25,750,000
B B3 18,000,000 Southwest Royalties Inc., 10.50% due
10/15/2004 17,491,250 16,110,000
B+ B3 293,840,000 TransAmerican Energy Corp., Series B,
13.174% due 6/15/2002 (a) 250,690,865 246,825,600
NR* NR* 36,000,000 TransAmerican Refining Corporation,
13% due 12/15/2002 (k) 35,640,000 36,900,000
Trico Marine Services, Inc. (j):
BB- Ba3 5,000,000 8.50% due 8/01/2005 5,012,500 5,050,000
BB- NR* 10,000,000 Series C, 8.50% due 8/01/2005 10,100,000 10,100,000
BB Ba2 15,000,000 Triton Energy Corp., 9.25% due
4/15/2005 14,936,550 16,336,199
B- B2 20,000,000 United Refining Co., 10.75% due
6/15/2007 20,000,000 21,100,000
-------------- --------------
686,422,262 693,411,990
Entertainment-- B- B2 24,495,000 AMF Group Inc., Series B, 12.578%
1.5% due 3/15/2006 (a) 16,890,886 20,085,900
B B1 15,000,000 Fox/Liberty Networks LLC, 8.875%
due 8/15/2007 14,930,000 15,656,250
B- B3 16,250,000 Premier Parks Inc., 10% due
4/01/2008 (a) 9,976,037 9,976,037
Six Flags Theme Parks Inc.:
B B3 60,000,000 11.566% due 6/15/2005 (a) 60,191,337 66,900,000
B- B3 15,000,000 8.875% due 4/01/2006 15,000,000 15,000,000
-------------- --------------
116,988,260 127,618,187
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Financial B B2 $13,000,000 Amresco Inc., Series 98-A, $ 13,000,000 $ 13,325,000
Services--2.7% 9.875% due 3/15/2005
First Nationwide Holdings Inc.:
B Ba3 12,000,000 10.625% due 10/01/2003 12,000,000 13,560,000
B B3 17,000,000 12.50% due 4/15/2003 16,806,710 19,507,500
BB+ Baa2 40,000,000 Fuji JGB Investment LLC (Preferred),
9.87% due 12/31/2049 (j) 39,980,000 39,825,760
BBB- A3 30,000,000 IBJ Preferred Capital Co. LLC,
8.79% due 12/29/2049 (j) 29,655,000 28,932,090
BB+ B1 9,000,000 Penncorp Financial Group Inc.,
9.25% due 12/15/2003 9,090,000 9,472,500
BB- Ba2 30,575,000 Reliance Group Holdings Inc.,
9.75% due 11/15/2003 29,792,500 31,965,245
BBB- A2 32,000,000 SB Treasury Company LLC, 9.40% due
12/29/2049 (j) 32,000,000 33,265,568
BB+ Ba3 10,000,000 SIG Capital Trust I, 9.50% due
8/15/2027 10,000,000 10,225,000
BB- NR* 17,000,000 Veritas Capital Trust, 10% due
1/01/2028 (j) 17,290,000 17,722,500
BB NR* 8,449,000 Veritas Holdings GMBH, 9.625% due
12/15/2003 8,449,000 9,082,675
-------------- --------------
218,063,210 226,883,838
Food & Chiquita Brands International Inc.:
Beverage-- B+ B1 30,000,000 9.125% due 3/01/2004 29,585,625 31,500,000
1.8% B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,900,000
B B3 23,450,000 Curtice Burns Food, Inc., 12.25%
due 2/01/2005 23,562,125 25,912,250
B- B2 20,000,000 DGS International Finance Co.,
10% due 6/01/2007 (j) 20,068,200 17,150,000
BB- Ba3 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 26,820,000
B B2 12,000,000 Southern Foods SFG, 9.875% due
9/01/2007 (j) 12,000,000 12,840,000
-------------- --------------
143,320,850 150,972,745
Foreign BB- NR* 10,000,000 City of Saint Petersburgh, 9.50%
Government due 6/18/2002 9,751,270 9,450,000
Obligations-- Republic of Argentina:
1.6% BB Ba3 35,000,000 11% due 10/09/2006 35,133,680 39,200,000
BB Ba3 30,750,000 Global Bonds, 11.375% due 1/30/2017 31,692,220 34,901,250
BB- B1 17,500,000 Republic of Brazil, Global Bonds,
10.125% due 5/15/2027 15,035,530 17,438,750
AA+ Aa1 9,523,809 Republic of Venezuela, 6.812% due
12/18/2007 8,315,476 8,672,667
NR* Ba2 20,000,000 United Mexican States, Government
Bonds, 11.50% due 5/15/2026 21,056,250 24,400,000
-------------- --------------
120,984,426 134,062,667
Gaming--4.1% BB- B1 15,000,000 Boyd Gaming Corporation, 9.50%
due 7/15/2007 14,848,500 16,112,809
B+ B2 37,000,000 GB Property Funding Corp.,
10.875% due 1/15/2004 35,072,500 32,560,000
Grand Casinos Inc.:
BB- Ba3 20,000,000 10.125% due 12/01/2003 19,837,500 21,625,000
B+ B2 5,000,000 9% due 10/15/2004 5,000,000 5,162,500
D Caa 60,115,000 Harrah's Jazz Co., 14.25% due
11/15/2001 (l) 49,536,050 18,034,500
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,272,855 22,150,000
CCC+ B2 15,000,000 Planet Hollywood International,
12% due 4/01/2005 (j) 15,000,000 15,375,000
BB- Ba3 25,000,000 Showboat Inc., 9.25% due 5/01/2008 25,264,625 26,750,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Gaming B+ Ba3 $ 15,000,000 Sun International Hotels Ltd.,
(concluded) 8.625% due 12/15/2007 $ 15,000,000 $ 15,525,000
Trump Atlantic City
Associates/Funding Inc.:
BB- B1 59,100,000 11.25% due 5/01/2006 57,838,437 60,873,000
B B1 35,900,000 11.25% due 5/01/2006 (j) 35,132,771 37,066,750
NR* Caa 20,000,000 Trump's Castle Funding, Inc.,
11.75% due 11/15/2003 17,551,979 19,300,000
Venetian Casino Resort LLC (j):
CCC+ Caa1 17,500,000 10% due 11/15/1999 16,367,103 16,537,500
B- B3 36,000,000 12.25% due 11/15/2004 36,000,000 37,530,000
-------------- --------------
361,722,320 344,602,059
Health B B3 16,800,000 ALARIS Medical Systems, Inc.,
Services-- 9.75% due 12/01/2006 16,994,313 17,850,000
5.3% B+ B1 45,200,000 Beverly Enterprises, Inc., 9% due
2/15/2006 44,200,550 47,121,000
Columbia/HCA Healthcare Corp.:
BBB Ba2 1,000,000 6.91% due 6/15/2005 940,800 933,795
BBB Ba2 8,460,000 8.85% due 1/01/2007 8,980,882 8,669,385
BBB Ba2 10,000,000 7.25% due 5/20/2008 9,393,300 9,409,800
BBB Ba2 14,150,000 8.70% due 2/10/2010 14,502,652 14,270,275
BBB Ba2 17,640,000 9% due 12/15/2014 18,400,090 17,938,645
BBB Ba2 2,500,000 7.50% due 12/15/2023 2,258,750 2,229,937
BBB Ba2 15,000,000 8.36% due 4/15/2024 14,614,910 14,297,925
B- B2 33,250,000 Extendicare Health Services,
9.35% due 12/15/2007 (j) 33,254,375 34,663,125
B+ Ba3 56,400,000 Fresenius Medical Capital Trust I,
7.875% due 2/01/2008 (j) 56,590,250 56,259,000
B+ Ba3 41,091,000 Fresensius Medical Care AG, 9%
due 12/01/2006 41,993,597 43,042,822
B- B3 25,000,000 Kinetic Concepts, Inc., 9.625%
due 11/01/2007 (j) 25,153,750 25,875,000
B- B3 40,000,000 Magellan Health Services Inc.,
9% due 2/15/2008 (j) 40,087,500 40,400,000
B- B3 52,000,000 Paragon Health Networks Inc.,
9.50% due 11/01/2007 51,768,080 53,560,000
B B2 5,000,000 Pharmerica Inc., 8.375% due
4/01/2008 (j) 5,000,000 5,025,000
B- B2 20,000,000 Sun Healthcare Group, Inc.,
9.50% due 7/01/2007 (j) 19,758,468 20,900,000
BB- Ba3 30,000,000 Tenet Healthcare Corp., 8.625%
due 1/15/2007 29,968,200 31,200,000
-------------- --------------
433,860,467 443,645,709
Home BB+ Ba3 20,000,000 Greystone Homes Inc., 10.75%
Builders-- due 3/01/2004 19,115,000 21,950,000
0.8% BB Ba2 7,100,000 Ryland Group, Inc. (The),
10.50% due 7/01/2006 6,992,577 7,952,000
BB- B1 32,000,000 U.S. Home Corp., 8.88% due
8/15/2007 32,017,500 32,960,000
-------------- --------------
58,125,077 62,862,000
Hotels--1.7% BB- Ba3 80,000,000 HMC Acquisition Properties,
9% due 12/15/2007 79,272,500 84,400,000
HMH Properties Inc.:
BB- Ba3 40,000,000 9.50% due 5/15/2005 39,178,628 42,600,000
BB- Ba3 15,500,000 8.875% due 7/15/2007 15,519,375 16,352,500
-------------- --------------
133,970,503 143,352,500
Independent AES Corporation (The):
Power B+ Ba1 30,000,000 10.25% due 7/15/2006 30,000,000 33,150,000
Producers--2.5% B+ Ba1 21,000,000 8.375% due 8/15/2007 20,901,300 21,472,500
BB Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 31,425,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Independent BB+ Ba2 $20,000,000 California Energy Company, Inc.,
Power 9.875% due 6/30/2003 $ 20,122,500 $ 21,406,699
Producers BB- Ba2 46,000,000 Calpine Corporation, 8.75% due
(concluded) 7/15/2007 46,206,325 47,840,000
BB Ba1 10,000,000 ESI Tractebel Acquisition Corp.,
7.99% due 12/30/2011 (j) 10,000,000 10,000,230
Midland Cogeneration Venture Limited
Partnership:
BB Ba3 3,247,574 10.33% due 7/23/2002++ 3,476,263 3,510,108
BB Ba3 16,454,880 10.33% due 7/23/2002++ 17,046,447 17,787,560
B B2 11,250,000 11.75% due 7/23/2005 11,310,000 13,508,831
B B2 5,500,000 13.25% due 7/23/2006 6,002,565 7,073,137
-------------- --------------
195,065,400 207,174,065
Industrial CCC B3 7,912,000 Thermadyne Industries, Inc.,
Services--0.1% 10.75% due 11/01/2003 7,914,802 8,327,380
Media & Comtel Brasileira Ltd.:
Communications-- BB- B1 42,500,000 10.75% due 9/26/2004 (j) 41,815,050 44,200,000
International-- NR* NR* 3,000,000 10.75% due 9/26/2004 (k) 2,867,500 3,112,500
2.9% Globo Communicacoes e
Participacoes, Ltd. (j):
BB- B1 40,000,000 10.50% due 12/20/2006 40,144,450 41,000,000
BB- B1 10,000,000 10.625% due 12/05/2008 9,992,000 10,237,500
Grupo Televisa, S.A. de C.V.:
BB Ba2 2,500,000 11.375% due 5/15/2003 2,637,500 2,765,625
BB Ba2 39,000,000 11.875% due 5/15/2006 42,079,687 45,142,500
BB Ba2 15,000,000 11.363% due 5/15/2008 (a) 11,330,895 11,737,500
B+ B2 15,000,000 Orion Network Systems, Inc.,
11.25% due 1/15/2007 (e) 14,825,550 17,325,000
Philippine Long Distance
Telephone Company:
BB+ Ba2 9,600,000 10.625% due 6/02/2004 9,988,000 10,200,000
BB Ba2 8,500,000 9.875% due 8/01/2005 8,512,500 8,733,750
BBB- Ba3 40,000,000 Telefonica de Argentina S.A.,
11.875% due 11/01/2004 38,763,075 46,000,000
-------------- --------------
222,956,207 240,454,375
Metals & NR* B1 93,000,000 CSN Iron Panama, 9.125% due
Mining--2.8% 6/01/2007 (j) 87,883,750 87,536,250
CCC+ B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 51,088,125 53,343,750
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) 39,408,092 42,183,875
B B2 15,000,000 Metals USA Inc., 8.625% due
2/15/2008 (j) 15,000,000 14,962,500
BB- Ba3 25,000,000 Murrin Murrin Holdings, Inc.,
9.375% due 8/31/2007 (j) 24,845,000 24,937,500
-------------- --------------
230,041,217 235,448,250
Packaging--0.5% B B2 15,000,000 AEP Industries Inc., 9.875%
due 11/15/2007 (j) 14,883,600 15,806,250
B- B3 5,000,000 Graham Packaging Capital, 8.75% due
1/15/2008 (j) 5,000,000 5,012,500
B B1 12,000,000 Silgan Corp., 9% due 6/01/2009 (j) 12,000,000 12,600,000
B+ Ba3 10,000,000 Vicap S.A., 11.375% due 5/15/2007 (j) 9,947,000 11,075,000
-------------- --------------
41,830,600 44,493,750
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Paper & Forest B- B2 $ 42,000,000 APP International Finance Co.,
Products--3.9% 11.75% due 10/01/2005 $ 41,716,250 $ 39,900,000
B B3 60,000,000 Ainsworth Lumber Company, 12.50%
due 7/15/2007++++ 58,570,310 60,675,414
Container Corporation of America:
B+ B1 15,420,000 9.75% due 4/01/2003 15,433,400 16,605,412
B+ B1 13,000,000 11.25% due 5/01/2004 13,000,000 14,161,875
Doman Industries Ltd.:
BB- B1 60,000,000 8.75% due 3/15/2004 57,006,250 59,925,000
BB- B1 5,000,000 9.25% due 11/15/2007 5,000,000 5,062,500
NR* Caa 4,750,000 Indah Kiat Finance Mauritius, 10%
due 7/01/2007 4,500,000 3,978,125
B- Caa 14,500,000 P.T. Indah Kiat International
Finance, 12.50% due 6/15/2006 14,572,500 13,485,000
B B3 27,220,000 Pacific Lumber Co., 10.50% due
3/01/2003 26,868,237 28,172,700
B- Caa1 12,500,000 Pindo Deli Finance Mauritius,
10.75% due 10/01/2007 (j) 12,462,087 10,281,250
Riverwood International Corp.:
B- B3 15,000,000 10.25% due 4/01/2006 14,396,250 15,618,750
CCC+ Caa 30,000,000 10.875% due 4/01/2008 29,248,750 30,337,500
B- Caa1 27,750,000 Tjiwi Kimia Finance Mauritius,
10% due 8/01/2004 (j) 26,963,250 22,824,375
-------------- --------------
319,737,284 321,027,901
Product AmeriServ Food Company:
Distribution-- B+ B1 14,000,000 8.875% due 10/15/2006 14,000,000 14,490,000
0.9% B- B3 42,000,000 10.125% due 7/15/2007 42,000,000 45,360,000
B+ B3 12,000,000 Fleming Companies Inc., 10.50%
due 12/01/2004 11,930,280 12,780,000
-------------- --------------
67,930,280 72,630,000
Publishing & B B1 9,000,000 American Lawyer Media Inc., 9.75%
Printing--1.1% due 12/15/2007 (j) 9,000,000 9,495,000
Hollinger International, Inc.:
BB+ Ba3 5,000,000 8.625% due 3/15/2005 4,975,000 5,262,500
BB- B1 21,500,000 9.25% due 2/01/2006 20,925,312 22,736,250
BB- B1 3,000,000 9.25% due 3/15/2007 2,980,740 3,195,000
CCC+ B3 10,000,000 Liberty Group Publishing Inc.,
9.375% due 2/01/2008 (j) 10,000,000 10,250,000
BB- Ba3 22,250,000 Primedia Inc., 7.625% due
4/01/2008 (j) 22,122,062 21,916,250
BB- B1 20,000,000 World Color Press, Inc., 9.125%
due 3/15/2003 20,019,375 20,600,000
-------------- --------------
90,022,489 93,455,000
Real Estate-- BB- Ba3 20,500,000 Forest City Enterprises Inc.,
0.2% 8.50% due 3/15/2008 20,628,750 20,602,500
Restaurants-- B+ Ba3 27,000,000 Foodmaker, Inc., 9.75% due
0.3% 11/01/2003 26,216,200 28,822,500
Specialty NR* NR* 24,702,000 Cumberland Farms, Inc. DE,
Retailing--0.3% 10.50% due 10/01/2003 23,545,832 24,454,980
Steel--2.8% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125%
due 12/15/2006 25,056,250 26,875,000
BB Ba3 20,000,000 Hysla, S.A. de C.V., 9.25% due
9/15/2007 (j) 19,872,930 20,150,000
B+ B1 10,000,000 Ivaco Inc., 11.50% due 9/15/2005 9,800,000 11,075,000
NR* NR* 15,000,000 Renco Steel Holdings, 10.875%
due 2/01/2005 (j) 14,945,700 15,600,000
B B3 25,000,000 Republic Engineered Steel Inc.,
9.875% due 12/15/2001 24,117,500 25,312,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Steel B+ B2 $ 25,000,000 WCI Steel Inc., 10% due
(concluded) 12/01/2004 $ 25,000,000 $ 26,500,000
B B3 25,000,000 WHX Corporation, 10.50% due
4/15/2005 25,000,000 25,000,000
B B2 23,000,000 Weirton Steel Inc., 10.75% due
6/01/2005 22,413,750 24,581,250
BB- B2 55,000,000 Wheeling-Pittsburgh Steel Corp.,
9.25% due 11/15/2007 (j) 54,776,725 56,306,250
-------------- --------------
220,982,855 231,400,000
Supermarkets-- Pueblo Xtra International Inc.:
0.3% B- B3 21,075,000 9.50% due 8/01/2003 19,460,250 20,653,500
B- B3 3,000,000 9.50% due 8/01/2003 (j) 2,738,546 2,940,000
-------------- --------------
22,198,796 23,593,500
Telephone CCC+ Caa1 33,000,000 Nextel International Inc.,
Communications-- 12.125% due 4/15/2008 (a)(j) 18,233,607 19,882,500
0.2%
Telephone-- Nextlink Communications Inc.:
Competitive B B3 43,000,000 9% due 3/15/2008 (j) 42,913,140 44,505,000
Local B+ Ba1 23,500,000 9.45% due 4/15/2008 (a) 14,757,295 14,757,295
Exchange RSL Communications PLC (j):
Carriers--2.4% B- B3 49,000,000 9.125% due 3/01/2008 49,000,000 49,857,500
B- B3 72,000,000 10.125% due 3/01/2008 (a) 44,270,614 45,720,000
B+ Baa3 40,000,000 Teleport Communications Group Inc.,
9.875% due 7/01/2006 40,943,500 45,800,000
-------------- --------------
191,884,549 200,639,795
Textiles--1.2% B B3 10,000,000 Galey & Lord Inc., 9.125% due
3/01/2008 (j) 9,950,000 10,175,000
B B2 20,000,000 Polymer Group Inc., 8.75% due
3/01/2008 20,000,000 20,450,000
Polysindo International Finance Co.:
CCC- Caa 48,600,000 11.375% due 6/15/2006 47,947,750 31,833,000
CCC- Caa2 21,750,000 9.375% due 7/30/2007 17,430,000 13,593,750
B+ B2 25,000,000 Westpoint Stevens Inc., 9.375%
due 12/15/2005 25,100,000 26,468,750
-------------- --------------
120,427,750 102,520,500
Transportation-- BB- NR* 45,000,000 Autopistas del Sol S.A., 10.25%
4.1% due 8/01/2009 (j) 44,935,000 43,762,500
BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 24,472,500 25,944,062
GS Superhighway Holdings:
BB Ba2 43,000,000 9.875% due 8/15/2004 37,956,250 36,657,500
BB Ba3 45,000,000 10.25% due 8/15/2007 44,663,550 38,137,500
BB Ba2 20,000,000 Gearbulk Holdings, Ltd., 11.25%
due 12/01/2004 20,518,750 21,900,000
BB B1 40,000,000 Hvide Marine Inc., 8.375% due
2/15/2008 (j) 39,872,500 39,200,000
BB- Ba2 10,000,000 Stena AB, 8.75% due 6/15/2007 10,000,000 10,337,500
TFM, S.A. de C.V.:
B+ B2 2,000,000 10.25% due 6/15/2007 2,000,000 2,100,000
B+ B2 21,500,000 11.767% due 6/15/2009 (a) 13,278,826 14,458,750
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba3 20,000,000 9.25% due 5/15/2003 17,092,750 20,100,000
BB- Ba3 31,800,000 (Class A), 10% due 11/15/2006 31,387,250 31,998,750
B- B3 60,606,000 Transtar Holdings L.P., Series B,
11.892% due 12/15/2003 (a) 50,853,507 55,302,975
-------------- --------------
337,030,883 339,899,537
US Government AAA NR* 15,000,000 US Treasury Bonds, 6.25% due
Obligations 8/15/2023 13,735,800 15,466,388
- --0.2%
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Utilities--4.0% BB- B1 $ 17,519,000 Beaver Valley Funding Corp.,
9% due 6/01/2017 $ 15,115,550 $ 19,748,380
BB Ba2 5,250,000 Cleveland Electric Illuminating
Co., 9.50% due 5/15/2005 5,239,920 5,754,656
NR* NR* 20,000,000 Companhia de Saneamento Basico do
Estado de Sao-Paulo, 10% due
7/28/2005 (j) 20,000,000 19,841,440
BB- B1 70,000,000 Espirito Santo-Escelsa, 10% due
7/15/2007 (j) 69,476,250 68,425,000
BB+ NR* 37,000,000 Inversora de Electrica, 9% due
9/16/2004 (j) 36,895,000 37,185,000
BBB- Ba3 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 42,700,000
NR* NR* 15,366,842 Sunflower Electric Power Corp.,
8% due 12/31/2016 (k)++ 10,080,213 11,044,917
BB- Ba3 20,000,000 Texas-New Mexico Power Corp., 10.75%
due 9/15/2003 20,065,000 21,618,199
BBB- Baa3 41,647,941 Trans Gas de Occidente, 9.79% due
11/01/2010 (j)++ 41,722,312 44,840,380
Tucson Electric & Power Co.++:
NR* NR* 33,847,781 10.21% due 1/01/2009 32,005,359 35,410,872
NR* NR* 21,526,207 10.732% due 1/01/2013 (k) 20,326,836 22,755,138
-------------- --------------
310,958,315 329,323,982
Utilities-- BB+ Baa3 10,000,000 Empresa Elec Del Norte, 10.50% due
Electric--0.1% 6/15/2005 (j) 10,000,000 10,050,000
Waste B+ B2 20,000,000 Allied Waste North America, 10.25%
Management-- due 12/01/2006 20,000,000 22,350,000
0.4% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 (l) 14,749,406 6,399,000
-------------- --------------
34,749,406 28,749,000
Wireless CCC+ B2 13,000,000 Cencall Communications Corporation,
Communications-- 9.037% due 1/15/2004 12,552,765 12,618,125
Domestic Paging BB+ Ba3 42,100,000 Comcast Cellular Communications,
& Cellular--4.2% Inc., 9.50% due 5/01/2007 42,717,875 44,415,500
CCC+ NR* 26,000,000 McCaw International Ltd., 12.265%
due 4/15/2007 (a) 16,437,134 17,485,000
CCC B3 10,000,000 Metrocall, Inc., 9.75% due
11/01/2007 10,000,000 10,350,000
D C 50,500,000 Mobilemedia Communication, Inc.,
11.58% due 12/01/2003 (a)(l) 20,630,116 4,797,500
Nextel Communications Inc. (a):
CCC+ B2 85,000,000 11.877% due 8/15/2004 70,159,356 81,918,750
CCC+ B2 30,000,000 10.147% due 10/31/2007 18,793,339 19,537,500
CCC+ B2 25,000,000 9.987% due 2/15/2008 (j) 15,524,501 16,031,250
NR* Caa2 29,000,000 PageMart Inc., 11.25% due
2/01/2008 (a)(j) 17,078,975 17,835,000
B B2 75,000,000 Paging Network, Inc., 10% due
10/15/2008 74,756,250 78,375,000
NR* NR* 3,250,000 Pinnacle Holdings Inc., 10% due
3/15/2008 (a)(j) 2,003,741 2,031,250
B+ B1 25,000,000 Vanguard Cellular Systems, Inc.,
9.375% due 4/15/2006 24,975,250 26,406,250
B- B3 15,000,000 Western Wireless Corp., 10.50%
due 2/01/2007 15,062,500 16,425,000
-------------- --------------
340,691,802 348,226,125
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds (concluded)
<S> <S> <S> <C> <S> <C> <C>
Wireless B+ B3 $ 56,472,000 Comunicacion Celular S.A.,
Communications-- 12.68% due 11/15/2003 (a)(g) $ 41,045,957 $ 44,330,520
International B- B3 90,000,000 Millicom International Cellular
Paging & S.A., 13.39% due 6/01/2006 (a) 59,803,887 70,650,000
Cellular--1.5% CCC+ Caa1 9,000,000 Telesystems International Wireless
Inc., 11.207% due 6/30/2007 (a)(j) 6,076,197 6,300,000
-------------- --------------
106,926,041 121,280,520
Total Investments in Bonds--88.6% 7,205,510,377 7,372,541,889
Shares
Held
Preferred Stocks
Cable--Domestic--0.2% 187,273 CSC Holdings Inc.++++ 14,634,820 21,442,758
Cable--International--0.3% 22,184 NTL Inc.++++ 22,402,860 26,648,530
Conglomerates--0.1% 1,700 Eagle-Picher Holdings (j) 9,584,090 9,732,500
Entertainment--1.2% 89,328 Time Warner Inc. (Series M)++++ 90,197,931 99,935,700
Financial Services--0.4% 1,230,000 California Federal Bank (Series A) 30,815,000 33,286,875
Paper & Forest Products--0.3% 435,000 S.D. Warren Co. (Series B) 13,847,190 21,641,250
Product Distribution--0.3% 245,000 Nebco Evans Holding Co. 24,575,000 25,541,250
Publishing & Printing--0.4% 125,000 Primedia Inc. 12,500,000 13,343,750
192,500 Primedia Inc. (j) 19,134,500 19,009,375
-------------- --------------
31,634,500 32,353,125
Steel--0.2% 550,000 USX Capital LLC (Series A) 13,750,000 13,818,750
Telephone--Competitive 11,522 Intermedia Communications Inc.
Local Exchange Carriers--0.2% (Series B) (Convertible)(j) 11,734,661 14,172,060
Wireless Communications-- 20,000 Nextel Communications Inc. (j)++++ 20,000,000 21,150,000
Domestic Paging & Cellular--0.5% 21,275 Nextel Communications Inc.
(Series D) 21,462,688 24,838,563
-------------- --------------
41,462,688 45,988,563
Total Investments in
Preferred Stocks--4.1% 304,638,740 344,561,361
Common Stocks
Cable--Domestic--0.1% 2,887 CS Wireless Systems Inc. (l) 20,336 58
195,096 Echostar Communications Corp.
(Series A)(l) 1,385,894 4,279,918
-------------- --------------
1,406,230 4,279,976
Energy--0.1% 914,710 Chi Energy Inc. (Series B)(l) 14,284,292 12,348,585
8,176 Pioneer Natural Resources Co. 199,648 203,378
-------------- --------------
14,483,940 12,551,963
Entertainment--0.2% 1,166,381 On Command Corporation (l)(m) 51,395,186 15,527,447
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
Common Stocks (concluded)
<S> <C> <S> <C> <C>
Industrial Services--0.0% 11,400 Thermadyne Industries, Inc. (l) $ 165,300 $ 387,244
Wireless Communications-- 170,421 Nextel Communications Inc. (l) 2,749,981 5,746,383
Domestic Paging & Cellular--0.1%
Total Investments in
Common Stocks--0.5% 70,200,637 38,493,013
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) 1,063,138 2,517
-------------- --------------
1,617,214 95,017
Cable-- 45,000 UIH Australia/Pacific (Warrants)(b) 540,000 540,000
International--0.0% 50,000 United International Holdings, Inc.
(Warrants)(b) 1,418,645 600,000
-------------- --------------
1,958,645 1,140,000
Energy--0.0% 74,562 Chi Energy Inc. (Series B)
(Warrants)(b) 74,562 111,843
48,400 Chi Energy Inc. (Series C)
(Warrants)(b) 48,400 72,600
-------------- --------------
122,962 184,443
Entertainment--0.1% 379,186 On Command Corporation
(Warrants)(b)(m) 3,033,504 2,097,372
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.
Liquidating Trust (k)(l) 192,320 0
113,386 Trump Castle Funding, Inc.
(Warrants)(b) 0 0
-------------- --------------
192,320 0
Media & Communications-- 15,000 Orion Network Systems, Inc.
International--0.0% (Warrants)(b) 174,450 217,500
Wireless Communications-- 57,040 Page Mart Inc. (Warrants)(b) 236,127 313,720
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular S.A.
International Paging (Warrants)(b)(j) 109,680 367,620
& Cellular--0.0%
Total Investments in
Trusts & Warrants--0.1% 7,444,902 4,415,672
Face
Amount
Short-Term Securities
Commercial $ 20,000,000 Atlantic Asset Securitization Corp.,
Paper***--4.3% 5.55% due 4/14/1998 19,959,917 19,959,917
20,000,000 Clipper Receivables Corp., 5.55%
due 4/21/1998 19,938,333 19,938,333
Countrywide Home Loans Inc.:
20,000,000 5.55% due 4/07/1998 19,981,500 19,981,500
25,000,000 5.55% due 4/20/1998 24,926,771 24,926,771
Eureka Securitization Inc.:
20,000,000 5.54% due 4/15/1998 19,956,911 19,956,911
25,000,000 5.55% due 4/28/1998 24,895,938 24,895,938
20,000,000 Finova Capital Corp., 5.56% due
4/30/1998 19,910,422 19,910,422
26,007,000 General Motors Acceptance Corp.,
6.13% due 4/01/1998 26,007,000 26,007,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Value
Amount Issue Cost (Note 1a)
Short-Term Securities (concluded)
<S> <C> <S> <C> <C>
Commercial $ 60,000,000 Navistar Financial Corp.,
Paper 5.95% due 4/23/1998 $ 59,781,833 $ 59,781,833
(concluded) Park Avenue Receivables Corp.:
10,000,000 5.60% due 4/02/1998 9,998,444 9,998,444
25,305,000 5.55% due 4/16/1998 25,246,482 25,246,482
17,198,000 5.56% due 4/17/1998 17,155,502 17,155,502
30,000,000 Republic Industries, Inc., 5.53%
due 5/11/1998 29,815,667 29,815,667
20,000,000 Riverwoods Funding Corp., 5.55%
due 4/08/1998 19,978,417 19,978,417
25,000,000 Three Rivers Funding Corp., 5.55%
due 4/21/1998 24,922,917 24,922,917
-------------- --------------
362,476,054 362,476,054
US Government Federal Home Loan Mortgage Corp.:
Agency 30,000,000 5.45% due 4/03/1998 29,990,917 29,990,917
Obligations***-- 34,000,000 5.46% due 4/03/1998 33,989,686 33,989,686
1.4% 50,000,000 5.45% due 4/06/1998 49,962,153 49,962,153
-------------- --------------
113,942,756 113,942,756
Total Investments in
Short-Term Securities--5.7% 476,418,810 476,418,810
Total Investments--99.0% $8,064,213,466 8,236,430,745
==============
Other Assets Less Liabilities--1.0% 86,595,968
--------------
Net Assets--100.0% $8,323,026,713
==============
++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.
(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.
See Notes to Financial Statements.
(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.
(j)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(k)Restricted securities as to resale. The value of the Portfolio's
investments in restricted securities was approximately $79,739,000,
representing 1.0% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <C> <C> <C>
Australis Media Ltd., 14.399% due 12/30/1997-
11/01/2002 2/10/1998 $ 6,129,731 $ 5,926,412
Comtel Brasileira Ltd., 10.75% 11/21/1996-
due 9/26/2004 11/26/1997 2,867,500 3,112,500
Goldriver Hotel & Casino Corp. 8/31/1992-
Liquidating Trust 11/17/1992 192,320 0
Sunflower Electric Power Corp., 11/29/1991-
8% due 12/31/2016 8/23/1995 10,080,213 11,044,917
TransAmerica Refining
Corporation, 13% due 12/15/2002 12/9/97 35,640,000 36,900,000
Tucson Electric & Power Co., 3/1/1993-
10.732% due 1/01/2013 10/11/1996 20,326,836 22,755,138
------------- -------------
Total $ 75,236,600 $ 79,738,967
============= =============
(l)Non-income producing security.
(m)Investments in companies 5% or more of whose outstanding
securities are held by the Portfolio (such companies are defined as
"Affiliated Companies" in section 2 (a) (3) of the Investment
Company Act of 1940) are as follows:
<CAPTION>
Net Share Dividend
Industry Affiliate Activity Net Cost Income
<S> <S> <C> <C> <C>
Entertainment On Command Corporation (25,000) $(726,728) +++
Entertainment On Command Corporation
(Warrants) 8,300 66,400 +++
+++Non-income producing security.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of March 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$8,064,213,466)
(Note 1a) $8,236,430,745
Cash 3,207,523
Receivables:
Interest $ 152,879,676
Securities sold 78,192,823
Capital shares sold 2,707,582
Dividends 449,508
Paydowns 90,895 234,320,484
--------------
Prepaid registration fees and other assets (Note 1e) 1,177,930
--------------
Total assets 8,475,136,682
--------------
Liabilities: Payables:
Securities purchased 106,612,602
Dividends to shareholders (Note 1f) 22,264,205
Capital shares redeemed 14,389,402
Distributor (Note 2) 4,208,926
Investment adviser (Note 2) 2,768,158 150,243,293
--------------
Accrued expenses and other liabilities 1,866,676
--------------
Total liabilities 152,109,969
--------------
Net Assets: Net assets $8,323,026,713
==============
Net Assets Class A Common Stock, $0.10 par value, 500,000,000
Consist of: shares authorized $ 13,680,079
Class B Common Stock, $0.10 par value, 1,500,000,000
shares authorized 71,668,500
Class C Common Stock, $0.10 par value, 200,000,000
shares authorized 9,219,483
Class D Common Stock, $0.10 par value, 500,000,000
shares authorized 6,876,131
Paid-in capital in excess of par 7,983,404,423
Accumulated distributions in excess of investment
income--net (Note 1f) (3,127,933)
Undistributed realized capital gains on investments--net 69,088,751
Unrealized appreciation on investments--net 172,217,279
--------------
Net assets $8,323,026,713
==============
Net Asset Class A--Based on $1,122,001,819 and 136,800,790
Value: shares outstanding $ 8.20
==============
Class B--Based on $5,879,789,392 and 716,684,997
shares outstanding $ 8.20
==============
Class C--Based on $756,885,838 and 92,194,830
shares outstanding $ 8.21
==============
Class D--Based on $564,349,664 and 68,761,313
shares outstanding $ 8.21
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended March 31, 1998
<S> <S> <C> <C>
Investment Interest and discount earned $ 368,210,849
Income Dividends 13,755,019
(Note 1d): Other 5,363,852
--------------
Total income 387,329,720
--------------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 21,076,686
Investment advisory fees (Note 2) 16,094,637
Account maintenance and distribution fees--Class C (Note 2) 2,758,995
Transfer agent fees--Class B (Note 2) 2,106,008
Account maintenance fees--Class D (Note 2) 655,182
Registration fees (Note 1e) 408,140
Transfer agent fees--Class A (Note 2) 334,578
Accounting services (Note 2) 291,438
Transfer agent fees--Class C (Note 2) 267,736
Printing and shareholder reports 214,037
Transfer agent fees--Class D (Note 2) 165,086
Custodian fees 94,749
Directors' fees and expenses 16,357
Pricing fees (Note 2) 10,816
Other 21,225
--------------
Total expenses 44,515,670
--------------
Investment income--net 342,814,050
--------------
Realized & Realized gain on investments--net 99,818,568
Unrealized Gain Change in unrealized appreciation on investments--net (136,351,915)
(Loss) on --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 306,280,703
(Notes 1b, 1d & 3): ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 342,814,050 $ 575,009,241
Realized gain on investments--net 99,818,568 20,040,352
Change in unrealized appreciation on investments--net (136,351,915) 292,161,549
-------------- --------------
Net increase in net assets resulting from operations 306,280,703 887,211,142
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (49,297,571) (91,922,975)
Shareholders Class B (240,431,232) (407,172,006)
(Note 1f): Class C (29,324,363) (41,118,497)
Class D (23,760,884) (34,795,763)
Realized gains on investments--net:
Class A (6,089,227) --
Class B (32,962,441) --
Class C (4,011,905) --
Class D (3,027,610) --
-------------- --------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (388,905,233) (575,009,241)
-------------- --------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 729,901,846 1,535,324,290
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 647,277,316 1,847,526,191
Beginning of period 7,675,749,397 5,828,223,206
-------------- --------------
End of period $8,323,026,713 $7,675,749,397
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 8.29 $ 7.93 $ 7.80 $ 7.66 $ 8.13
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .38 .74 .75 .81 .75
Realized and unrealized gain
(loss) on investments--net (.04) .36 .14 .14 (.47)
---------- ---------- ---------- ---------- ----------
Total from investment operations .34 1.10 .89 .95 .28
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.74) (.76) (.81) (.75)
In excess of investment income--net -- -- --+++++ -- --
Realized gain on investments--net (.05) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.43) (.74) (.76) (.81) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.20 $ 8.29 $ 7.93 $ 7.80 $ 7.66
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 4.21%+++ 14.58% 11.95% 13.27% 3.42%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .50%* .51% .51% .55% .53%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 9.32%* 9.23% 9.57% 10.70% 9.27%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $1,122,002 $1,044,799 $ 947,479 $ 902,321 $ 876,573
========== ========== ========== ========== ==========
Portfolio turnover 19.67% 38.58% 32.44% 24.58% 32.52%
========== ========== ========== ========== ==========
<FN>
++Based on average shares outstanding.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 8.30 $ 7.93 $ 7.80 $ 7.66 $ 8.13
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .35 .68 .69 .75 .69
Realized and unrealized gain
(loss) on investments--net (.05) .37 .15 .14 (.47)
---------- ---------- ---------- ---------- ----------
Total from investment operations .30 1.05 .84 .89 .22
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.68) (.71) (.75) (.69)
In excess of investment income--net -- -- --+++++ -- --
Realized gain on investments--net (.05) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.40) (.68) (.71) (.75) (.69)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 8.20 $ 8.30 $ 7.93 $ 7.80 $ 7.66
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 3.70%+++ 13.86% 11.11% 12.41% 2.66%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.26%* 1.27% 1.28% 1.32% 1.29%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 8.56%* 8.46% 8.80% 9.81% 8.53%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $5,879,789 $5,495,488 $4,250,539 $3,220,767 $2,347,223
========== ========== ========== ========== ==========
Portfolio turnover 19.67% 38.58% 32.44% 24.58% 32.52%
========== ========== ========== ========== ==========
<FN>
++Based on average shares outstanding.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the
For the Period
The following per share data and ratios have been derived Six Months For the Oct. 21,
from information provided in the financial statements. Ended Year Ended 1994++++ to
March 31, September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.30 $ 7.94 $ 7.81 $ 7.59
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .35 .68 .68 .71
Realized and unrealized gain (loss)
on investments--net (.04) .36 .15 .22
---------- ---------- ---------- ----------
Total from investment operations .31 1.04 .83 .93
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.68) (.70) (.71)
In excess of investment income--net -- -- --+++++ --
Realized gain on investments--net (.05) -- -- --
---------- ---------- ---------- ----------
Total dividends and distributions (.40) (.68) (.70) (.71)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.21 $ 8.30 $ 7.94 $ 7.81
========== ========== ========== ==========
Total Investment Based on net asset value per share 3.79%+++ 13.66% 11.05% 12.92%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.31%* 1.32% 1.33% 1.38%*
Net Assets: ========== ========== ========== ==========
Investment income--net 8.50%* 8.39% 8.73% 9.06%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 756,886 $ 638,626 $ 362,518 $ 135,019
Data: ========== ========== ========== ==========
Portfolio turnover 19.67% 38.58% 32.44% 24.58%
========== ========== ========== ==========
<FN>
++Based on average shares outstanding.
++++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
For the Period
The following per share data and ratios have been derived Six Months For the Oct. 21,
from information provided in the financial statements. Ended Year Ended 1994++++ to
March 31, September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.30 $ 7.94 $ 7.80 $ 7.59
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .37 .72 .72 .75
Realized and unrealized gain (loss)
on investments--net (.04) .36 .16 .21
---------- ---------- ---------- ----------
Total from investment operations .33 1.08 .88 .96
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.37) (.72) (.74) (.75)
Realized gain on investments--net (.05) -- --+++++ --
---------- ---------- ---------- ----------
Total dividends and distributions (.42) (.72) (.74) (.75)
---------- ---------- ---------- ----------
Net asset value, end of period $ 8.21 $ 8.30 $ 7.94 $ 7.80
========== ========== ========== ==========
Total Investment Based on net asset value per share 4.09%+++ 14.29% 11.82% 13.37%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses .75%* .76% .76% .81%*
Net Assets: ========== ========== ========== ==========
Investment income--net 9.07%* 8.95% 9.30% 9.70%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 564,350 $ 496,836 $ 267,687 $ 102,676
Data: ========== ========== ========== ==========
Portfolio turnover 19.67% 38.58% 32.44% 24.58%
========== ========== ========== ==========
<FN>
++Based on average shares outstanding.
++++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of three portfolios
in Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. The Portfolio offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Effective March
24, 1998, shares of the Portfolio will no longer be available for
purchase (or exchange). Therefore, on or after March 24, 1998, the
Fund will no longer sell Class A, Class B, Class C or Class D Shares
of the Portfolio, but will continue to be available for purchase
under the following circumstances: shareholders of the Portfolio may
continue to elect to have dividends and distributions paid on shares
of the Portfolio reinvested in additional shares of the Portfolio;
certain participants in employer-sponsored retirement or savings
plans, including eligible 401(k) plans, will continue to be
permitted to purchase shares of the Portfolio through such plans;
and shares of the Portfolio will continue to be available for
purchase by participants in certain fee-based programs, such as the
Mutual Fund Adviser program administered by Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), a subsidiary of Merrill Lynch & Co.
("ML & Co."). In addition, shares of the Portfolio will continue to
be available for purchase in single transactions over $1,000,000.
Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of
significant accounting policies followed by the Portfolio.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
mean of the most recent bid and ask prices as obtained from one or
more dealers that make markets in the securities. Portfolio
securities which are traded both in the over-the-counter market and
on a stock exchange are valued according to the broadest and most
representative market, and it is expected that for debt securities
this ordinarily will be the over-the-counter market. Short-term
securities are valued at amortized cost, which approximates market
value.
Options on debt securities, which are traded on exchanges, are
valued at the last asked price for options written and last bid
price for options purchased. Financial futures contracts and options
thereon, which are traded on exchanges, are valued at their closing
price at the close of such exchanges. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund which may use a matrix system
for valuations.
(b) Derivative financial instruments--The Portfolio may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Portfolio enters into a closing transaction), the
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of net investment income are due primarily to differing tax
treatments for various security transactions.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co., which is the limited partner. The Fund has
also entered into a Distribution Agreement and Distribution Plans
with Merrill Lynch Funds Distributor, Inc. ("MLFD" or
"Distributor"), a wholly-owned subsidiary of Merrill Lynch Group,
Inc.
FAM is responsible for the management of the Fund's Portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee with respect to the Portfolio
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: 0.55% of the Fund's average
daily net assets not exceeding $250 million; 0.50% of average daily
net assets in excess of $250 million but not exceeding $500 million;
0.45% of average daily net assets in excess of $500 million but not
exceeding $750 million; and 0.40% of average daily net assets in
excess of $750 million. For the six months ended March 31, 1998, the
aggregate average daily net assets of the Fund's three Portfolio's
was approximately $9,563,455,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of the
Portfolio as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, MLPF&S, a
subsidiary of ML & Co., also provides account maintenance and
distribution services to the Fund. The ongoing account maintenance
fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders.
The ongoing distribution fee compensates the Distributor and MLPF&S
for providing shareholder and distribution-related services to Class
B and Class C shareholders.
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
For the six months ended March 31, 1998, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Class A $17,680 $162,779
Class D $90,545 $820,331
For the six months ended March 31, 1998, MLPF&S received contingent
deferred sales charges of $3,711,735 and $154,540 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively, and front-end sales charge waivers of $212 and
$110,928 relating to transactions in Class A and Class D Shares,
respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1998, the Portfolio paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$9,157 for security price quotations to compute the net asset value
of the Portfolio.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLFD, MLFDS and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1998 were $2,262,340,876 and
$1,384,714,842, respectively.
Net realized gains (losses) for the six months ended March 31, 1998
and net unrealized gains as of March 31, 1998 were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $99,819,883 $ 172,217,279
Short-term investments (1,315) --
----------- --------------
Total $99,818,568 $ 172,217,279
=========== ==============
As of March 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $172,217,279, of which $447,355,055 related
to appreciated securities and $275,137,776 related to depreciated
securities. The aggregate cost of investments at March 31, 1998 for
Federal income tax purposes was $8,064,213,466.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $729,901,846 and $1,535,324,290 for the six months ended March
31, 1998 and for the year ended September 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
March 31, 1998 Shares Amount
Shares sold 22,760,214 $ 185,778,893
Shares issued to shareholders
in reinvestment of dividends
anddistributions 2,513,049 20,535,964
----------- --------------
Total issued 25,273,263 206,314,857
Shares redeemed (14,433,415) (118,050,468)
----------- --------------
Net increase 10,839,848 $ 88,264,389
=========== ==============
Class A Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 31,134,080 $ 250,373,771
Shares issued to share-
holders in reinvestment
of dividends 5,178,555 41,693,780
----------- --------------
Total issued 36,312,635 292,067,551
Shares redeemed (29,808,906) (240,009,423)
----------- --------------
Net increase 6,503,729 $ 52,058,128
=========== ==============
Class B Shares for the
Six Months Ended Dollar
March 31, 1998 Shares Amount
Shares sold 100,612,241 $ 822,152,209
Shares issued to shareholders
in reinvestment of dividends
and distributions 13,228,127 108,132,346
----------- --------------
Total issued 113,840,368 930,284,555
Automatic conversion of
shares (883,223) (7,204,068)
Shares redeemed (58,611,328) (479,155,390)
----------- --------------
Net increase 54,345,817 $ 443,925,097
=========== ==============
Class B Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 201,694,285 $1,624,806,467
Shares issued to shareholders
in reinvestment of dividends 22,790,352 183,793,349
----------- --------------
Total issued 224,484,637 1,808,599,816
Automatic conversion of
shares (2,850,390) (22,812,891)
Shares redeemed (95,044,774) (764,885,115)
----------- --------------
Net increase 126,589,473 $1,020,901,810
=========== ==============
Class C Shares for the
Six Months Ended Dollar
March 31, 1998 Shares Amount
Shares sold 23,591,549 $ 192,930,533
Shares issued to shareholders
in reinvestment of dividends
anddistributions 1,982,594 16,215,332
----------- --------------
Total issued 25,574,143 209,145,865
Shares redeemed (10,298,763) (84,269,230)
----------- --------------
Net increase 15,275,380 $ 124,876,635
=========== ==============
Class C Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 44,892,704 $ 362,128,191
Shares issued to shareholders
in reinvestment of dividends 2,808,746 22,682,139
----------- --------------
Total issued 47,701,450 384,810,330
Shares redeemed (16,444,400) (132,540,144)
----------- --------------
Net increase 31,257,050 $ 252,270,186
=========== ==============
Class D Shares for the
Six Months Ended Dollar
March 31, 1998 Shares Amount
Shares sold 15,244,355 $ 124,590,463
Automatic conversion of
shares 882,819 7,204,068
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,562,499 12,775,493
----------- --------------
Total issued 17,689,673 144,570,024
Shares redeemed (8,785,125) (71,734,299)
----------- --------------
Net increase 8,904,548 $ 72,835,725
=========== ==============
Class D Shares for the
Year Ended Dollar
September 30, 1997 Shares Amount
Shares sold 35,702,960 $ 287,604,383
Automatic conversion of
shares 2,846,330 22,812,891
Shares issued to shareholders
in reinvestment of dividends 2,248,145 18,168,882
----------- --------------
Total issued 40,797,435 328,586,156
Shares redeemed (14,668,105) (118,491,990)
----------- --------------
Net increase 26,129,330 $ 210,094,166
=========== ==============
Merrill Lynch Corporate Bond Fund, Inc.,
High Income Portfolio
March 31, 1998
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
Christopher G. Ayoub, Senior 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
INVESTMENT GRADE PORTFOLIO & INTERMEDIATE TERM PORTFOLIO
MERRILL LYNCH CORPORATE BOND FUND
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
The quarter ended March 31, 1998 was positive for most capital
markets worldwide, despite periods of volatility. Investors
continued to focus on the impact that the financial crisis in Asia
would have on economic growth worldwide. In the United States,
sentiment fluctuated between a variety of outlooks. At times, US
stock and bond prices reflected expectations that the slowdown in
Asian economic growth would lead to a sharp decline in US business
activity and, ultimately, a deflationary environment. The
deterioration of economic conditions in Japan was of particular
concern. During other periods, US investors appeared to expect that
the positive trends of a moderately expanding economy, declining
unemployment, enhanced productivity and corporate profit growth
would continue, unimpeded by the developments in Asia. To date,
there have been only a few signs that Asia's troubles are
influencing US economic activity.
The Federal Open Market Committee did not change monetary policy at
its meeting in early February. Subsequently, in his Humphrey-Hawkins
testimony before Congress, Federal Reserve Board Chairman Alan
Greenspan indicated that monetary policy might remain steady for
some time. This raised concerns among those US bond investors who
had expected imminent monetary policy easing. However, subsequent
data releases suggested that US economic growth would remain
moderate, which stabilized the bond market.
As 1998 progresses, it is likely that investor focus will remain on
developments in Asia, their potential impact on the US economy, and
the Federal Reserve Board's response to them.
Portfolio Strategy
During January, the bond market traded within a very narrow range as
investors sought to assess the impact of the Asian financial crisis
on US economic growth. The yield curve steepened from 24 basis
points (0.24%) to 52 basis points as the yield on long-term bonds
dropped from 5.92% to 5.80%. In February, the bond market backed up
to 6.00% on long-term bonds, despite some favorable news. Most
significantly, the Federal Government ran a $17 billion budget
surplus for the 12 months ended January 1998. Commodity prices
trended down, and there was no change in the growth of the Consumer
Price Index. However, investors were concerned with rapid money
supply growth fueling a continuing record-high stock market against
a background of full employment. These pressures led investors to
conclude that the Federal Reserve Board would not lower short-term
interest rates in the near future. The long-term bond ended February
at 5.92%, exactly where it had started the year but higher than the
low of 5.69% which it had hit in mid-January. In March, long-term
bonds traded within a very narrow range, starting at a yield of
6.01% and finishing the month at 5.93%. This was the result of
mounting evidence of a continuing strong domestic economy. Consumer
spending, employment and production data remained in a growth trend.
The Federal Reserve Board reported in its March "beige book" that
many US firms were desperate to find workers and were being forced
to offer large wage increases. Nevertheless, the stock market, as
measured by the Dow Jones Industrial Average, soared over 400 points
during March, and the bond market's reaction to these concerns was
clearly muted.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
The Federal Reserve Board elected not to change monetary policy at
its most recent meeting, although the gross domestic product (GDP)
report for the fourth quarter of 1997 showed an increase of 4.3%,
which was higher than expected. We expect that the Asian financial
situation will have the effect of slowing US growth during the
remainder of the year. We believe that current bond levels fully
reflect the problems of Asian economies. Barring a major conflict in
the Middle East, which would have a negative affect on energy costs,
we do not expect the bond market to move substantially from where it
is now. We expect the yield curve to stay generally around the
current 40 basis point spread and yields to trade in a fairly narrow
range. By March 31, 1998, long-term bonds yielded 5.93%. We
anticipate a relatively narrow trading range for long-term interest
rates in the months ahead.
Investment Grade Portfolio
In early December, we aggressively extended the Portfolio's duration
in order to take advantage of the improvement in capital
appreciation potential resulting from lowered economic expectations
brought about by the Asian currency crisis and the continued low
rate of US inflation. We extended the portfolio's duration from 4.57
years to 5.88 years through the sale of several Asian issues and the
reinvestment of the proceeds into Treasury issues, until we could
effect subsequent trades into other corporate bonds. We sold most of
these Asian issues prior to a steep drop in their prices, which
occurred as concern about Asia widened. We believe this action was
warranted by the uncertainty that we expect to hang over the Asian
markets for some time.
During the first three months of 1998, we reduced the Portfolio's
Treasury holdings from 18% of net assets to 5% and reinvested the
proceeds in US industrial and asset-backed bonds. The average
quality of the Portfolio was A+, as rated by Standard & Poor's
Corp., which was slightly higher than the Merrill Lynch Corporate
Master Index average of A. We were underweighted in utilities and
Canadian issues as well as Yankee holdings because we believed that
the yield spreads were too tight relative to the Treasury market.
Although we intend to keep the Portfolio's duration at around its
current level of 5.9 years, we expect to add value by trading into
higher coupons, spread products and more callable issues. We also
plan to add floating rate securities when yield spreads warrant.
This strategy would provide us with income and some asset protection
in the event that interest rates rise, and at the same time give us
the potential for greater total return over noncallable bullet
issues (issues that have single maturation dates).
Intermediate Term Portfolio
In early December, we extended the Portolio's duration from 4.00
years to 4.08 years, swapping into Treasury issues until we could
effect subsequent trades into corporate bonds. This raised our
position in Treasury issues to 9% of net assets. During the first
three months of 1998, we reduced our Treasury holdings from 9% of
net assets to 3% and reinvested the proceeds in US industrial and
finance bonds. The average quality of the Portfolio was A, as rated
by Standard & Poor's Corp., which matched the average quality rating
of the Merrill Lynch Corporate Master Index. We were underweighted
in utilities and Canadian issues as well as Yankee holdings because
we believed that the yield spreads were too tight relative to the
Treasury market.
Although we intend to keep the Portfolio's duration at around its
current level of 4 years, we expect to add value by trading into
higher coupons, spread products and more callable issues. We also
plan to add floating rate securities when yield spreads warrant.
This strategy would provide us with income and some asset protection
in the event that interest rates rise, and at the same time give us
the potential for greater total return over noncallable bullet
issues.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
In Conclusion
We appreciate your ongoing investment in Investment Grade and
Intermediate Term Portfolios of Merrill Lynch Corporate Bond Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and Co-Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Senior Vice President and Co-Portfolio Manager
May 6, 1998
Effective January 2, 1998, Christopher G. Ayoub became co-portfolio
manager of Merrill Lynch Corporate Bond Fund, Inc., Investment Grade
Portfolio & Intermediate Term Portfolio. Mr. Ayoub has been First
Vice President of Merrill Lynch Asset Management, L.P. (MLAM) (an
affiliate of the Investment Adviser) since 1998. Prior thereto, he
was Vice President of MLAM from 1985 to 1998.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 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:
* 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 assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date.
Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
Ten Years/ Standardized
12 Month 3 Month Since Inception 30-day Yield
Total Return Total Return Total Return As of 3/31/98
<S> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares* +10.45% +1.46% +128.83% 5.80%
Investment Grade Portfolio Class B Shares* + 9.61 +1.27 +105.13 5.27
Investment Grade Portfolio Class C Shares* + 9.55 +1.17 + 31.95 5.22
Investment Grade Portfolio Class D Shares* +10.18 +1.31 + 34.56 5.56
Intermediate Term Portfolio Class A Shares** +10.07 +1.46 +124.07 5.68
Intermediate Term Portfolio Class B Shares** + 9.60 +1.42 + 41.64 5.21
Intermediate Term Portfolio Class C Shares** + 9.48 +1.33 + 31.60 5.20
Intermediate Term Portfolio Class D Shares** +10.06 +1.52 + 33.66 5.57
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/inception dates are: Class A Shares, ten years ended
3/31/98; Class B Shares, 10/21/88; and Class C and Class D Shares,
10/21/94.
**Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/inception dates are: Class A Shares, ten years ended
3/31/98; Class B Shares, 11/13/92; and Class C and Class D Shares,
10/21/94.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/98 +10.45% +6.03%
Five Years Ended 3/31/98 + 6.36 +5.49
Ten Years Ended 3/31/98 + 8.63 +8.19
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +9.61% +5.61%
Five Years Ended 3/31/98 +5.55 +5.55
Inception (10/21/88)
through 3/31/98 +7.91 +7.91
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/98 +9.55% +8.55%
Inception (10/21/94)
through 3/31/98 +8.39 +8.39
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/98 +10.18% +5.77%
Inception (10/21/94)
through 3/31/98 + 9.01 +7.72
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/98 +10.07% +8.97%
Five Years Ended 3/31/98 + 6.36 +6.15
Ten Years Ended 3/31/98 + 8.40 +8.29
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +9.60% +8.60%
Five Years Ended 3/31/98 +5.84 +5.84
Inception (11/13/92)
through 3/31/98 +6.69 +6.69
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/98 +9.48% +8.48%
Inception (10/21/94)
through 3/31/98 +8.31 +8.31
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/98 +10.06% +8.96%
Inception (10/21/94)
through 3/31/98 + 8.80 +8.48
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds
Obligations & Notes:
- --4.8% AAA Aaa $ 4,500,000 7.50% due 11/15/2001 $ 4,775,273 $ 4,766,490
AAA Aaa 2,000,000 6.25% due 1/31/2002 2,064,375 2,039,060
AAA Aaa 1,500,000 5.50% due 3/31/2003 1,489,219 1,491,795
AAA Aaa 2,500,000 5.75% due 8/15/2003 2,532,031 2,508,975
AAA Aaa 1,500,000 5.875% due 2/15/2004 1,533,281 1,515,000
AAA Aaa 18,000,000 7.50% due 2/15/2005 19,743,906 19,791,540
AAA Aaa 21,000,000 6.50% due 5/15/2005 21,739,375 21,931,770
AAA Aaa 3,090,000 6.125% due 8/15/2007 3,196,219 3,177,880
AAA Aaa 1,000,000 5.50% due 2/15/2008 986,641 987,810
AAA Aaa 750,000 6.375% due 8/15/2027 794,063 792,187
-------------- --------------
58,854,383 59,002,507
Asset-Backed AAA Aaa 15,000,000 Aames Financial Corp., 6.46%
Securities++-- due 5/15/2028 14,995,313 15,014,063
6.1% AAA Aaa 3,066,502 Arcadia Automobile Receivables
Trust, 6.10% due 6/15/2000 3,065,905 3,070,795
Citibank, Credit Card Master
Trust I:
AAA Aaa 8,000,000 5.75% due 1/15/2003 7,991,440 7,956,562
AAA Aaa 10,000,000 5.807% due 12/10/2008 (a) 9,996,100 9,959,300
AAA Aaa 9,000,000 6.05% due 1/15/2010 8,992,710 8,817,188
AAA Aaa 6,000,000 First Bank, Corporate Card Master
Trust, 6.40% due 2/15/2003 5,992,634 6,074,340
AAA Aaa 12,659,169 GMAC Grantor Trust, 6.50% due
4/15/2002 12,655,639 12,723,478
AAA Aaa 11,000,000 Money Store Home Equity Trust
(The), 6.13% due 12/15/2000 11,000,000 11,000,000
-------------- --------------
74,689,741 74,615,726
Banking--8.9% BBB+ A3 6,250,000 BB&T Corporation, 7.25% due
6/15/2007 6,220,812 6,562,813
BankAmerica Corp.:
A+ Aa3 3,000,000 6.65% due 5/01/2001 2,997,090 3,047,520
A+ Aa3 3,000,000 7.125% due 5/12/2005 3,087,560 3,119,970
A+ A1 10,000,000 First Bank System, Inc., 6.375%
due 3/15/2001 9,895,457 10,045,700
A- a1 12,900,000 First Chicago NBD Capital I, 6.30%
due 2/01/2027 (a) 12,765,788 12,490,580
A A2 11,000,000 First Union Corporation, 6.40% due
4/01/2008 10,961,960 10,963,040
BBB a2 4,750,000 Fleet Capital Trust II, 7.92% due
12/11/2026 4,690,720 4,970,400
A- A3 5,000,000 Golden West Financial Corp., 9.15%
due 5/23/1998 5,678,700 5,020,950
HSBC Americas Inc.:
A- A3 6,000,000 7% due 11/01/2006 5,949,600 6,133,620
BBB+ a2 14,000,000 7.808% due 12/15/2026 (b) 13,838,440 13,820,772
BBB+ a2 6,000,000 Mellon Capital I, 7.72% due
12/01/2026 6,000,000 6,246,900
A- A3 5,250,000 Mellon Financial Co., 6.375% due
2/15/2010 5,258,138 5,176,080
NationsBank Corp.:
A+ Aa3 6,000,000 5.75% due 3/15/2001 5,979,480 5,961,780
A A1 1,300,000 6.50% due 8/15/2003 1,336,075 1,310,374
Norwest Corp.:
AA- Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,552,465
A+ A1 5,000,000 6.625% due 3/15/2003 5,104,650 5,075,900
BBB+ a1 5,500,000 Wells Fargo Capital I, 7.96% due
12/15/2026 5,401,385 5,821,420
-------------- --------------
108,660,640 109,320,284
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Canadian Province of Quebec (Canada)(1):
Provinces*-- A+ A2 $ 6,000,000 8.80% due 4/15/2003 $ 6,774,360 $ 6,644,700
1.1% A+ A2 4,500,000 13% due 10/01/2013 5,706,285 4,858,515
A+ A2 1,500,000 7.125% due 2/09/2024 1,562,415 1,554,510
-------------- --------------
14,043,060 13,057,725
Finance--4.8% A A2 9,500,000 Beneficial Corporation, 6.80%
due 9/16/2003 9,500,000 9,674,316
A aa3 1,250,000 CIT Capital Trust I, 7.70% due
2/15/2027 1,244,300 1,268,779
A+ Aa3 8,000,000 CIT Group Holdings, Inc., 6.625%
due 6/15/2005 8,027,120 8,108,000
BBB- Baa3 8,000,000 Capital One Bank, 6.375% due
2/15/2003 7,975,200 7,889,680
Commercial Credit Co.:
A+ A1 5,000,000 6.45% due 7/01/2002 5,009,800 5,038,250
A+ A1 8,850,000 6.75% due 7/01/2007 9,104,349 9,052,488
A- Baa1 4,500,000 Finova Capital Corp., 6.45%
due 6/01/2000 4,524,435 4,528,800
BBB Baa2 13,750,000 MBNA Corporation, 6.287% due
5/23/2003 (a) 13,750,000 13,715,625
-------------- --------------
59,135,204 59,275,938
Finance-- Bear Stearns Companies, Inc.:
Other-- A A2 2,000,000 6.50% due 7/05/2000 1,996,360 2,016,240
10.1% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,029,960
A A2 11,650,000 6.70% due 8/01/2003 10,667,430 11,825,216
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,348,720
BBB- Baa2 6,400,000 Commercial Net Lease Realty,
7.125% due 3/15/2008 6,382,656 6,341,312
A+ A1 3,500,000 Dean Witter, Discover & Co., 6.75%
due 8/15/2000 3,486,805 3,555,125
A- A3 11,000,000 Donaldson, Lufkin & Jenrette Inc.,
6.875% due 11/01/2005 10,952,615 11,166,870
A A2 7,500,000 Equitable Life Assurance Society
of the US, 7.70% due 12/01/2015 7,448,310 7,940,055
BBB- Baa3 4,600,000 Hospitality Properties Trust, 7%
due 3/01/2008 4,591,720 4,545,904
Lehman Brothers Holdings, Inc.:
A Baa1 7,000,000 6.50% due 10/01/2002 6,993,350 7,007,700
A Baa1 3,000,000 6.625% due 12/27/2002 2,999,070 3,029,280
A Baa1 3,000,000 7.375% due 5/15/2004 3,107,100 3,124,560
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,940,323 4,112,819
A+ A1 8,000,000 Morgan Stanley, Dean Witter,
Discover & Co., 6.09% due
3/09/2011 7,998,720 7,987,120
A+ A1 9,200,000 Morgan Stanley Group Inc., 6.875%
due 3/01/2007 9,166,972 9,463,672
BBB+ Baa1 7,500,000 PaineWebber Group Inc., 7.99%
due 6/09/2017 7,500,000 7,973,078
A A2 10,000,000 Salomon Inc., 6.25% due 1/15/2005 9,938,500 9,911,000
A A2 2,850,000 Salomon Smith Barney Holdings,
Inc., 7.375% due 5/15/2007 2,847,464 3,013,875
The Travelers Corp.:
AA- Aa3 3,000,000 9.50% due 3/01/2002 3,163,980 3,342,330
AA- Aa3 10,800,000 7.875% due 5/15/2025 10,845,324 12,123,000
-------------- --------------
119,244,809 123,857,836
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A+ A1 $ 3,000,000 Anheuser-Busch Cos., Inc.,
Consumer-- 8.75% due 12/01/1999 $ 3,367,590 $ 3,127,650
6.6% Archer-Daniels-Midland Company:
AA- Aa3 13,780,000 8.375% due 4/15/2017 16,623,054 16,340,462
AA- Aa3 5,600,000 7.50% due 3/15/2027 6,184,359 6,175,456
A+ A1 5,000,000 Hershey Foods Corporation, 7.20%
due 8/15/2027 5,269,550 5,345,200
AA Aa2 7,550,000 Kimberly-Clark Corp., 6.375%
due 1/01/2028 7,480,389 7,386,165
Nabisco, Inc.:
BBB Baa2 9,000,000 6% due 2/15/2011 8,997,750 8,913,150
BBB Baa2 9,000,000 7.55% due 6/15/2015 8,981,960 9,395,550
A A1 9,170,000 PepsiCo, Inc., 5.75% due
1/02/2003 9,123,600 9,071,881
Philip Morris Companies, Inc.:
A A2 9,500,000 9% due 1/01/2001 9,698,815 10,125,860
A A2 5,000,000 Series A, 6.15% due 3/15/2010 4,997,400 4,990,600
-------------- --------------
80,724,467 80,871,974
Industrial-- BBB Baa3 5,500,000 Arkla Inc., 8.875% due 7/15/1999 5,819,675 5,693,545
Energy--2.5% BP America Inc.:
AA Aa2 4,075,000 9.375% due 11/01/2000 4,488,287 4,393,706
AA Aa2 11,000,000 10% due 7/01/2018 11,869,080 11,605,110
AA- A1 4,500,000 Consolidated Natural Gas Company,
6.80% due 12/15/2027 4,619,970 4,580,100
BBB Baa1 5,000,000 Noram Energy Corp., 7.50% due
8/01/2000 5,113,400 5,130,500
-------------- --------------
31,910,412 31,402,961
Industrial-- A A2 5,550,000 AlliedSignal Inc., 6.20% due
Manufacturing-- 2/01/2008 5,542,563 5,492,446
11.4% Applied Materials Inc.:
BBB+ A3 5,000,000 6.75% due 10/15/2007 4,996,750 5,029,100
BBB+ A3 13,000,000 7.125% due 10/15/2017 12,911,080 13,046,280
duPont (E.I.) de Nemours & Co.:
AA- Aa3 5,150,000 6.75% due 9/01/2007 5,293,943 5,350,747
AA- Aa3 4,500,000 8.25% due 1/15/2022 4,676,445 4,849,110
A A1 7,000,000 Ford Motor Company, 8.875% due
1/15/2022 8,650,180 8,564,570
Ford Motor Credit Co.:
A A1 5,000,000 7% due 9/25/2001 4,980,100 5,134,850
A A1 5,000,000 8% due 6/15/2002 5,286,350 5,318,850
A A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,306,400
A A1 1,000,000 7.75% due 3/15/2005 999,090 1,081,480
AAA Aaa 2,500,000 General Electric Capital Corp.,
8.30% due 9/20/2009 2,889,675 2,906,400
General Motors Acceptance Corp.:
A- A3 4,000,000 6.625% due 9/19/2002 3,915,080 4,060,960
A A3 10,000,000 7.70% due 4/15/2016 10,911,500 10,860,500
BBB+ A3 5,000,000 Lockheed Martin Corp., 6.85%
due 5/15/2001 4,995,950 5,096,800
BBB+ A3 11,000,000 Loral Corporation, 8.375% due
6/15/2024 11,056,040 12,979,450
Martin Marietta Corp.:
BBB+ A3 6,500,000 6.50% due 4/15/2003 6,539,845 6,534,970
BBB+ A3 4,000,000 7.375% due 4/15/2013 3,846,440 4,236,880
McDonnell Douglas Financial Corp.:
AA+ Baa2 7,500,000 6.13% due 12/23/1998 7,484,550 7,435,725
AA+ A2 6,500,000 6.875% due 11/01/2006 6,743,425 6,772,285
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- Raytheon Co.:
Manufacturing BBB Baa1 $ 2,750,000 6.30% due 3/15/2005 $ 2,743,812 $ 2,731,382
(concluded) BBB Baa1 3,000,000 7.20% due 8/15/2027 2,995,560 3,119,790
BBB Baa3 14,000,000 Seagate Technology, Inc.,
7.125% due 3/01/2004 13,975,500 13,677,160
-------------- --------------
136,574,078 139,586,135
Industrial-- A A1 10,000,000 Bass America, Inc., 8.125%
Services-- due 3/31/2002 10,250,610 10,658,900
17.8% A A2 8,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 8,076,380 8,555,440
BBB Baa2 10,000,000 Circus Circus Enterprises, Inc.,
6.70% due 11/15/2096 9,977,700 9,992,200
Dillard Department Stores, Inc.:
A+ A2 4,000,000 7.375% due 6/15/1999 4,254,860 4,067,680
A+ A2 5,000,000 9.125% due 8/01/2011 6,054,000 6,112,950
A+ A1 2,000,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (b) 1,998,420 2,034,284
First Data Corporation:
A A2 11,500,000 6.75% due 7/15/2005 11,911,930 11,752,655
A A2 10,000,000 6.375% due 12/15/2007 9,974,300 10,022,900
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due
11/01/2024 7,057,420 8,047,200
AAA Aaa 8,750,000 Merck & Co., Inc., 6.40% due
3/01/2028 8,731,362 8,646,575
News American Holdings, Inc.:
BBB- Baa3 12,445,000 8.625% due 2/01/2003 13,585,486 13,533,315
BBB- Baa3 10,000,000 8% due 10/17/2016 9,699,900 10,776,000
A+ A2 5,900,000 Nordstrom, Inc., 6.95% due
3/15/2028 5,898,525 5,906,726
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 5,061,000
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 4,064,080
BBB- Baa2 12,700,000 Royal Caribbean Cruises Ltd.,
6.75% due 3/15/2008 12,620,404 12,594,463
A- A2 8,000,000 Sears, Roebuck & Co., 6.82%
due 10/17/2002 8,016,320 8,171,760
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 7,087,150
BBB+ Baa1 9,500,000 7.20% due 6/01/2006 9,235,900 9,888,075
BBB+ Baa1 7,000,000 6.30% due 3/15/2020 6,992,300 6,970,460
Time Warner Entertainment Co.:
BBB- Baa3 6,000,000 10.15% due 5/01/2012 7,356,180 7,727,640
BBB- Baa3 9,900,000 8.375% due 3/15/2023 10,525,871 11,279,565
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50%
due 9/15/2024 14,488,240 15,822,965
Walt Disney Co.:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,566,715
A A2 14,151,130 6.85% due 1/10/2007++ (b) 14,141,649 14,432,879
-------------- --------------
212,326,337 218,773,577
Industrial-- BBB Baa2 11,500,000 CSX Corporation, 7.95% due
Transportation-- 5/01/2027 11,440,430 12,893,823
4.2% BBB Baa2 9,000,000 Federal Express Corporation,
9.65% due 6/15/2012 10,137,590 11,246,220
Norfolk Southern Corporation:
BBB+ Baa1 1,000,000 6.95% due 5/01/2002 998,480 1,024,470
BBB+ Baa1 5,500,000 7.80% due 5/15/2027 5,493,070 6,153,455
Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,900,700
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,157,360
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,307,620
BBB Baa3 4,000,000 Union Pacific Corp., 6.625%
due 2/01/2008 3,964,880 3,942,640
-------------- --------------
48,333,660 51,626,288
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Mortgage-- Federal Home Loan Mortgage
0.3% Corp.:
AAA Aaa $ 2,000,000 6% due 6/15/2023 $ 1,989,375 $ 1,970,620
AAA Aaa 2,000,000 6.35% due 9/15/2023 2,022,734 2,001,860
-------------- --------------
4,012,109 3,972,480
Mortgage- Nomura Asset Securities Corp.,
Backed Series 1998-D6:
Securities++ AAA Aaa 8,500,000 Class A1A, 6.28% due 3/15/2030 8,545,156 8,545,156
- --1.5% AAA Aaa 10,000,000 Class A1B, 6.59% due 3/15/2030 10,153,125 10,153,125
-------------- --------------
18,698,281 18,698,281
Utilities-- A+ A2 8,700,000 ALLTEL Corporation, 6.75% due
Communications-- 9/15/2005 8,566,020 8,878,176
4.2% AAA Aaa 11,000,000 BellSouth Telecommunications Inc.,
7% due 10/01/2025 11,581,740 11,624,580
AA- A1 9,500,000 GTE California, Inc., 8.07% due
4/15/2024 10,152,935 10,127,285
A Baa1 7,500,000 GTE Corp., 9.375% due 12/01/2000 8,235,170 8,065,275
Southwestern Bell Telecommuni-
cations Corp.:
AA Aa3 2,000,000 6.125% due 3/01/2000 2,011,250 2,008,620
AA Aa3 10,910,000 6.375% due 11/15/2007 10,916,412 10,965,968
-------------- --------------
51,463,527 51,669,904
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison
Electric-- (Class B), 7.13% due 7/01/2007 6,137,176 6,209,131
6.1% A+ A1 9,115,000 Consolidated Edison, Inc., 6.25%
due 2/01/2008 9,115,000 9,027,223
BBB+ Baa3 5,000,000 Consumers Energy Company, 6.375%
due 2/01/2008 (b) 4,951,650 4,916,690
AA- A1 8,000,000 Pacific Gas and Electric Company,
6.25% due 8/01/2003 8,149,200 8,042,800
Pennsylvania Power & Light Co.:
A- A3 6,000,000 5.50% due 4/01/1998 5,972,220 6,000,000
A- A3 3,000,000 6.875% due 2/01/2003 3,048,870 3,091,530
A- A3 10,000,000 Public Service Electric & Gas Co.,
6.50% due 6/01/2000 9,995,705 10,078,100
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due
6/12/2000 5,000,000 5,334,850
Texas Utilities Electric Company:
AAA Aaa 6,971,000 6.375% due 10/01/2004 (b) 6,995,198 7,032,993
BBB baa2 5,000,000 8.175% due 1/30/2037 5,000,000 5,138,800
A A2 8,500,000 Virginia Electric & Power Co.,
8.625% due 10/01/2024 8,377,160 9,496,115
-------------- --------------
72,742,179 74,368,232
Yankee AA- Aa2 6,000,000 ABN AMRO Holding N.V., 7.125%
Corporates*-- due 6/18/2007 (2) 5,997,060 6,292,440
7.8% A+ A1 6,000,000 Australia & New Zealand Banking
Group Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,338,940
BBB+ A3 7,500,000 Banco Central Hispanoamercano S.A.
(Cayman Islands), 7.70% due
7/15/2006 (2) 7,973,775 7,997,250
Enersis S.A. (3):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,449,425
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,914,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee BBB+ Baa3 $ 9,800,000 Fairfax Financial Holdings Ltd.,
Corporates* 7.75% due 7/15/2037 (2)(b) $ 9,751,098 $ 10,018,736
(concluded) Ford Capital B.V. (2):
A A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,283,400
A A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,938,219
AAA Aaa 10,000,000 International Bank for
Reconstruction & Development,
5.625% due 3/17/2003 (2) 9,966,500 9,926,000
A Aa3 2,000,000 Midland Bank PLC, 7.625% due
6/15/2006 (2) 1,995,240 2,115,760
A A2 6,500,000 Norsk Hydro A/S, 6.70% due
1/15/2018 (3) 6,466,720 6,348,745
BBB+ A3 1,500,000 Philips Electronics N.V., 7.75%
due 4/15/2004 (3) 1,602,615 1,595,070
BBB+ Baa2 2,000,000 Saga Petroleum ASA, 7.25% due
9/23/2027 (3) 1,979,980 1,992,540
A Aa3 4,000,000 Sony Corp., 6.125% due
3/04/2003 (3) 3,991,520 3,990,760
AA+ Aa1 15,500,000 Swiss Bank Corp. NY, 7.375%
due 6/15/2017 (2) 16,581,680 16,528,580
-------------- --------------
93,744,433 95,729,865
Total Investments in
Bonds & Notes--98.2% 1,185,157,320 1,205,829,713
Short-Term Securities
Repurchase 4,232,000 UBS Securities Funding, Inc.,
Agreements** purchased on 3/31/1998 to
- --0.4% yield 5.69% to 4/01/1998 4,232,000 4,232,000
Total Investments in
Short-Term Securities--0.4% 4,232,000 4,232,000
Total Investments--98.6% $1,189,389,320 1,210,061,713
==============
Other Assets Less Liabilities--1.4% 17,316,642
--------------
Net Assets--100.0% $1,227,378,355
==============
<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.
See Notes to Financial Statements.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
(a)Floating Rate Note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds
Obligations-- & Notes:
2.7% AAA Aaa $ 1,000,000 5.875% due 2/15/2000 $ 989,375 $ 1,004,690
AAA Aaa 3,000,000 5.75% due 8/15/2003 3,034,453 3,010,770
AAA Aaa 500,000 7.25% due 8/15/2004 538,750 540,860
AAA Aaa 3,000,000 7.50% due 2/15/2005 3,287,344 3,298,590
AAA Aaa 3,750,000 6.125% due 8/15/2007 3,885,469 3,856,650
-------------- --------------
11,735,391 11,711,560
Asset-Backed AAA Aaa 2,000,000 First Bank, Corporate Card Master
Securities++-- Trust, 6.40% due 2/15/2003 1,997,545 2,024,780
0.5%
Banking--15.8% BBB+ A3 4,000,000 BB&T Corporation, 7.25% due
6/15/2007 3,981,320 4,200,200
A A2 3,500,000 Bank of New York Company, Inc.
(The), 7.875% due 11/15/2002 3,873,450 3,736,215
BankAmerica Corp.:
A A1 4,000,000 7.50% due 10/15/2002 4,268,880 4,197,400
A+ Aa3 3,000,000 7.125% due 5/12/2005 2,956,500 3,119,970
A A2 9,000,000 First Chicago Corp., 9% due
6/15/1999 9,548,820 9,301,140
A- A3 1,000,000 HSBC Americas Inc., 7% due
11/01/2006 991,600 1,022,270
A- A3 6,000,000 Mellon Financial Co., 6.875%
due 3/01/2003 5,483,220 6,145,260
NationsBank Corp.:
A+ Aa3 2,000,000 5.75% due 3/15/2001 1,993,160 1,987,260
A+ Aa3 11,500,000 6.65% due 4/09/2002 11,423,540 11,707,345
Norwest Corp.:
AA- Aa3 5,000,000 6.25% due 4/15/1999 4,983,600 5,034,800
AA- Aa3 2,000,000 6.125% due 10/15/2000 1,996,440 2,004,820
A+ A1 1,000,000 6.625% due 3/15/2003 1,003,060 1,015,180
AA+ Aa2 5,000,000 Wachovia Corporation, 6% due
3/15/1999 4,890,950 5,010,750
BBB+ A3 9,000,000 Washington Mutual Inc., 7.25%
due 8/15/2005 8,930,520 9,435,330
-------------- --------------
66,325,060 67,917,940
Canadian A+ A2 5,000,000 Province of Quebec (Canada),
Provinces*--1.3% 8.80% due 4/15/2003 (1) 5,538,670 5,537,250
Federal AAA Aaa 2,500,000 Federal National Mortgage
Agencies--0.6% Association, 7.85% due
9/10/2004 2,496,484 2,564,850
Finance--4.5% A A2 9,250,000 Beneficial Corporation, 6.80%
due 9/16/2003 9,250,000 9,419,728
A+ Aa3 1,000,000 CIT Group Holdings, Inc.,
6.625% due 6/15/2005 1,003,390 1,013,500
BBB- Baa3 2,000,000 Capital One Bank, 6.375% due
2/15/2003 1,993,800 1,972,420
A+ A1 3,000,000 Commercial Credit Co., 6.45%
due 7/01/2002 3,005,880 3,022,950
BBB Baa2 4,000,000 MBNA Corporation, 6.287% due
5/23/2003 4,000,000 3,990,000
-------------- --------------
19,253,070 19,418,598
Finance-- Bear Stearns Companies, Inc.:
Other--7.7% A A2 2,000,000 6.50% due 7/05/2000 1,996,360 2,016,240
A A2 3,000,000 8.75% due 3/15/2004 3,224,430 3,348,720
BBB- Baa2 5,000,000 Commercial Net Lease Realty,
7.125% due 3/15/2008 4,986,450 4,954,150
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- A+ A1 $ 6,250,000 Dean Witter, Discover & Co.,
Other 6.75% due 8/15/2000 $ 6,226,437 $ 6,348,438
(concluded) BBB- Baa3 4,250,000 Hospitality Properties Trust,
7% due 3/01/2008 4,242,350 4,200,020
A Baa1 3,000,000 Lehman Brothers Holdings, Inc.,
7.375% due 5/15/2004 3,107,100 3,124,560
A A2 4,000,000 Salomon Inc., 6.25% due 1/15/2005 3,975,400 3,964,400
Salomon Smith Barney Holdings,
Inc.:
A A2 2,000,000 6.50% due 3/01/2000 2,000,000 2,014,980
A A2 1,000,000 7.375% due 5/15/2007 999,110 1,057,500
AA- Aa3 2,000,000 The Travelers Corp., 9.50% due
3/01/2002 2,168,400 2,228,220
-------------- --------------
32,926,037 33,257,228
Industrial-- A+ A1 5,481,000 Anheuser-Busch Cos., Inc., 8.75%
Consumer--6.6% due 12/01/1999 6,189,909 5,714,217
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 5,043,100
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 3,034,170
BBB Baa2 6,000,000 6% due 2/15/2011 5,998,500 5,942,100
Philip Morris Companies, Inc.:
A A2 3,500,000 9% due 1/01/2001 3,576,195 3,730,580
A A2 5,000,000 6.15% due 3/15/2010 4,997,400 4,990,600
-------------- --------------
28,753,354 28,454,767
Industrial-- BBB Baa2 4,000,000 Ashland Inc., 6.625% due 2/15/2008 3,995,200 3,977,404
Energy--3.4% Texaco Capital Inc.:
A+ A1 2,000,000 6.875% due 7/15/1999 1,996,120 2,022,460
A+ A1 2,000,000 9% due 12/15/1999 2,342,460 2,096,920
BBB Baa2 6,000,000 Ultramar Credit Corp., 8.625%
due 7/01/2002 6,521,940 6,505,440
-------------- --------------
14,855,720 14,602,224
Industrial-- A A2 3,000,000 AlliedSignal, Inc., 6.20% due
Manufacturing-- 2/01/2008 2,995,980 2,968,890
11.5% Applied Materials Inc.:
BBB+ A3 4,000,000 6.65% due 9/05/2000 4,000,000 4,050,880
BBB+ A3 4,300,000 6.75% due 10/15/2007 4,297,205 4,325,026
AA+ Aa3 4,000,000 Boeing Co., 6.35% due 6/15/2003 3,599,960 4,059,400
A A1 5,000,000 Ford Motor Credit Co., 7.75% due
3/15/2005 4,995,450 5,407,400
A A3 5,000,000 General Motors Acceptance Corp.,
6.625% due 10/01/2002 4,991,000 5,078,550
Lockheed Martin Corp.:
BBB+ A3 1,000,000 6.625% due 6/15/1998 999,870 1,001,430
BBB+ A3 2,500,000 6.55% due 5/15/1999 2,498,800 2,512,175
BBB+ A3 8,000,000 6.85% due 5/15/2001 8,018,810 8,154,880
Raytheon Co.:
BBB Baa1 2,750,000 5.95% due 3/15/2001 2,746,618 2,740,457
BBB Baa1 5,000,000 6.75% due 8/15/2007 4,987,750 5,087,550
BBB Baa3 4,000,000 Seagate Technology, Inc., 7.125%
due 3/01/2004 3,993,000 3,907,760
-------------- --------------
48,124,443 49,294,398
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- A A1 $ 3,000,000 Bass America, Inc., 6.625%
Services--17.7% due 3/01/2003 $ 2,825,520 $ 3,044,250
A A2 6,000,000 Carnival Cruise Lines, Inc.,
7.70% due 7/15/2004 5,952,060 6,416,580
BBB- Baa3 4,000,000 Comcast Cable Communications
Company, 8.375% due 5/01/2007 4,060,680 4,450,000
A+ A1 3,500,000 Electronic Data Systems Corp.,
6.85% due 5/15/2000 (a) 3,497,235 3,559,997
News America Holdings, Inc.:
BBB- Baa3 4,000,000 8.625% due 2/01/2003 4,286,440 4,349,800
BBB- Baa3 4,500,000 8.50% due 2/15/2005 4,677,305 4,956,030
BBB+ Baa2 1,000,000 Oracle Corporation, 6.91% due
2/15/2007 1,000,000 1,016,020
BBB- Baa2 3,000,000 Royal Caribbean Cruises Ltd.,
6.75% due 3/15/2008 2,982,840 2,975,070
Sears, Roebuck & Co.:
A- A2 2,500,000 9.25% due 4/15/1998 2,837,275 2,502,275
A- A2 7,000,000 8.45% due 11/01/1998 7,762,380 7,094,430
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 1,012,450
BBB+ Baa1 1,500,000 7.20% due 6/01/2006 1,495,455 1,561,275
BBB+ Baa1 2,000,000 6.30% due 3/15/2020 1,997,800 1,991,560
TCI Communications Inc.:
BBB- Ba1 3,000,000 8.65% due 9/15/2004 3,099,270 3,290,640
BBB- Ba1 5,500,000 8% due 8/01/2005 5,561,380 5,912,500
BBB- Baa3 5,000,000 Time Warner Entertainment, 9.625%
due 5/01/2002 5,586,000 5,593,750
BBB- Ba1 5,000,000 Turner Broadcasting System, Inc.
(Class B), 7.40% due 2/01/2004 5,108,150 5,186,700
Walt Disney Co.:
A A2 6,000,000 6.75% due 3/30/2006 6,145,320 6,219,240
A A2 4,639,715 6.85% due 1/10/2007 (a)++ 4,636,606 4,732,091
-------------- --------------
74,508,656 75,864,658
Industrial-- BBB- Baa3 4,310,000 AMR Corporation, 9.50% due
Transportation-- 7/15/1998 4,606,528 4,354,005
4.3% BBB+ Baa1 5,000,000 Norfolk Southern Corporation,
6.95% due 5/01/2002 4,992,400 5,122,350
Southwest Airlines, Inc.:
A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,085,455
A- A3 1,000,000 8% due 3/01/2005 994,610 1,078,680
BBB Baa3 1,000,000 Union Pacific Corp., 6.625% due
2/01/2008 991,220 985,660
-------------- --------------
19,148,938 18,626,150
Utilities-- BBB- Ba1 5,000,000 360 Communications Co., 7.50% due
Communications-- 3/01/2006 5,170,100 5,300,600
6.9% A+ A2 4,000,000 ALLTEL Corporation, 6.75% due
9/15/2005 3,938,400 4,081,920
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,090,310 1,075,370
Southwestern Bell Telecommuni-
cations Corp.:
AA Aa3 1,000,000 6.50% due 3/12/2003 1,009,780 1,019,090
AA Aa3 2,200,000 6.625% due 4/01/2005 2,108,590 2,252,228
AA Aa3 4,000,000 6.375% due 11/15/2007 3,973,520 4,020,520
BBB- Ba1 11,000,000 WorldCom, Inc., 7.75% due 4/01/2007 11,756,720 11,858,550
-------------- --------------
29,047,420 29,608,278
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A- Baa1 $4,000,000 Arizona Public Service Company,
Electric-- 6.75% due 11/15/2006 $ 3,905,840 $ 4,073,760
5.7% AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison
(Class B), 7.13% due 7/01/2007 3,147,270 3,184,170
BBB+ Baa3 9,000,000 Consumers Energy Company, 6.375%
due 2/01/2008 (a) 8,912,970 8,850,042
AA- A1 1,500,000 Pacific Gas and Electric Company,
6.25% due 8/01/2003 1,527,975 1,508,025
Pennsylvania Power & Light Co.:
A- A3 4,000,000 5.50% due 4/01/1998 3,991,280 4,000,000
A- A3 1,000,000 6.875% due 2/01/2003 1,016,290 1,030,510
A- A3 2,000,000 Public Service Electric & Gas
Co., 6.50% due 6/01/2000 1,999,120 2,015,620
-------------- --------------
24,500,745 24,662,127
Yankee BBB+ A3 5,000,000 Banco Central Hispanoamercano S.A.
Corporates*-- (Cayman Islands), 7.70% due
7.7% 7/15/2006 (2) 5,315,850 5,331,500
A- Baa1 1,500,000 Enersis S.A., 6.90% due
12/01/2006 (3) 1,496,130 1,469,655
A A1 2,000,000 Ford Capital B.V., 9.875% due
5/15/2002 (2) 2,300,380 2,256,680
A+ A1 3,000,000 Grand Metropolitan Investment
PLC, 6.50% due 9/15/1999 (3) 3,040,120 3,017,880
BBB- Ba2 3,000,000 Gruma S.A de C.V., 7.625% due
10/15/2007 (3) 2,994,960 2,965,008
AAA Aaa 6,000,000 International Bank for
Reconstruction & Development,
5.625% due 3/17/2003 (2) 5,979,900 5,955,600
BBB+ A3 2,650,000 Philips Electronics N.V., 7.75%
due 4/15/2004 (3) 2,831,286 2,817,957
A+ A1 4,000,000 Santander Financial Issuances Ltd.,
7% due 4/01/2006 (2) 4,106,280 4,107,120
A- A2 5,000,000 Trans-Canada Pipelines, 6.43% due
3/15/2029 (3) 5,000,000 5,029,100
-------------- --------------
33,064,906 32,950,500
Total Investments in Bonds
& Notes--96.9% 412,276,439 416,495,308
Short-Term Securities
Repurchase 6,314,000 UBS Securities, Inc., purchased
Agreements**--1.5% on 3/31/1998 to yield 5.96%
to 4/01/1998 6,314,000 6,314,000
Total Investments in
Short-Term Securities--1.5% 6,314,000 6,314,000
Total Investments--98.4% $ 418,590,439 422,809,308
==============
Other Assets Less Liabilities--1.6% 6,947,218
--------------
Net Assets--100.0% $ 429,756,526
==============
<FN>
*Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
See Notes to Financial Statements.
**Repurchase Agreements are fully collateralized by US Government
and Agency Obligations.
++Subject to principal paydowns.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of March 31, 1998
<CAPTION>
Investment Intermediate
Grade Portfolio Term Portfolio
<S> <S> <C> <C>
Assets: Investments, at value* (Note 1a) $1,210,061,713 $ 422,809,308
Cash -- 1,214,166
Receivables:
Securities sold 29,867,325 --
Interest 19,919,029 7,196,916
Capital shares sold 3,862,147 1,996,283
Loaned securities 84 --
Prepaid registration fees and other assets (Note 1f) 29,886 28,272
-------------- --------------
Total assets 1,263,740,184 433,244,945
-------------- --------------
Liabilities: Payables:
Capital shares redeemed 17,470,110 2,267,377
Securities purchased 14,142,914 --
Dividends to shareholders (Note 1g) 2,400,311 854,483
Investment adviser (Note 2) 364,633 126,326
Distributor (Note 2) 401,334 71,597
Accrued expenses and other liabilities 1,582,527 168,636
-------------- --------------
Total liabilities 36,361,829 3,488,419
-------------- --------------
Net Assets: Net assets $1,227,378,355 $ 429,756,526
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 4,575,433 $ 1,614,186
Consist of: Class B Common Stock, $.10 par value++++ 4,914,378 1,336,580
Class C Common Stock, $.10 par value++++++ 459,484 14,149
Class D Common Stock, $.10 par value++++++++ 754,149 754,321
Paid-in capital in excess of par 1,231,253,142 431,858,492
Accumulated realized capital losses on investments--net (3,485,917) (4,519,432)
Accumulated distributions in excess of realized capital
gains on investments--net (Note 1g) (31,764,707) (5,520,639)
Unrealized appreciation on investments--net 20,672,393 4,218,869
-------------- --------------
Net assets $1,227,378,355 $ 429,756,526
============== ==============
Net Asset Class A: Net assets $ 524,636,468 $ 186,512,196
Value: ============== ==============
Shares outstanding 45,754,329 16,141,863
============== ==============
Net asset value and redemption price per share $ 11.47 $ 11.55
============== ==============
Class B: Net assets $ 563,511,993 $ 154,444,208
============== ==============
Shares outstanding 49,143,778 13,365,804
============== ==============
Net asset value and redemption price per share $ 11.47 $ 11.56
============== ==============
Class C: Net assets $ 52,706,439 $ 1,634,514
============== ==============
Shares outstanding 4,594,836 141,494
============== ==============
Net asset value and redemption price per share $ 11.47 $ 11.55
============== ==============
Class D: Net assets $ 86,523,455 $ 87,165,608
============== ==============
Shares outstanding 7,541,488 7,543,205
============== ==============
Net asset value and redemption price per share $ 11.47 $ 11.56
============== ==============
<FN>
*Identified cost $1,189,389,320 $ 418,590,439
============== ==============
++Authorized shares--Class A 250,000,000 100,000,000
============== ==============
++++Authorized shares--Class B 250,000,000 50,000,000
============== ==============
++++++Authorized shares--Class C 100,000,000 50,000,000
============== ==============
++++++++Authorized shares--Class D 100,000,000 50,000,000
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Six Months Ended March 31, 1998
<CAPTION>
Investment Intermediate
Grade Term
Portfolio Portfolio
<S> <S> <C> <C>
Investment Interest and discount earned $ 42,878,911 $ 14,359,887
Income Loaned securities 142,773 79,935
(Note 1e): Other -- 15,000
-------------- --------------
Total income 43,021,684 14,454,822
-------------- --------------
Expenses: Investment advisory fees (Note 2) 2,204,475 738,212
Account maintenance and distribution fees--Class B (Note 2) 2,149,271 378,055
Transfer agent fees--Class B (Note 2) 632,920 198,338
Transfer agent fees--Class A (Note 2) 537,305 224,480
Account maintenance and distribution fees--Class C (Note 2) 203,067 4,195
Transfer agent fees--Class D (Note 2) 80,655 95,809
Account maintenance fees--Class D (Note 2) 99,270 38,918
Printing and shareholder reports 66,620 20,303
Registration fees (Note 1f) 46,360 32,587
Transfer agent fees--Class C (Note 2) 57,227 2,292
Custodian fees 38,148 20,477
Accounting services (Note 2) 35,674 15,966
Professional fees 11,912 4,130
Pricing fees (Note 2) 6,490 3,762
Directors' fees and expenses 2,785 981
Other 7,627 3,112
-------------- --------------
Total expenses 6,179,806 1,781,617
-------------- --------------
Investment income--net 36,841,878 12,673,205
-------------- --------------
Realized & Realized gain on investments--net 3,354,564 1,351,015
Unrealized Change in unrealized appreciation on investments--net 3,588,365 571,899
Gain on -------------- --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 43,784,807 $ 14,596,119
(Notes 1c, 1e & 3): ============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets Investment Grade Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 36,841,878 $ 87,930,710
Realized gain (loss) on investments--net 3,354,564 (160,363)
Change in unrealized appreciation/depreciation on
investments--net 3,588,365 28,265,493
-------------- --------------
Net increase in net assets resulting from operations 43,784,807 116,035,840
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (16,885,895) (40,601,509)
(Note 1g): Class B (16,107,056) (39,286,289)
Class C (1,412,415) (3,483,463)
Class D (2,436,512) (4,559,449)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (36,841,878) (87,930,710)
-------------- --------------
Capital Share Net decrease in net assets derived from capital
Transactions share transactions (4,578,000) (264,834,589)
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets 2,364,929 (236,729,459)
Beginning of period 1,225,013,426 1,461,742,885
-------------- --------------
End of period $1,227,378,355 $1,225,013,426
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 12,673,205 $ 28,391,875
Realized gain (loss) on investments--net 1,351,015 (507,524)
Change in unrealized appreciation/depreciation on
investments--net 571,899 8,329,252
-------------- --------------
Net increase in net assets resulting from operations 14,596,119 36,213,603
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (5,777,427) (13,458,213)
(Note 1g): Class B (4,414,328) (11,241,646)
Class C (48,879) (414,942)
Class D (2,432,571) (3,277,074)
-------------- --------------
Net decrease in net assets resulting from dividends
to shareholders (12,673,205) (28,391,875)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions 34,664,535 (91,252,583)
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets 36,587,449 (83,430,855)
Beginning of period 393,169,077 476,599,932
-------------- --------------
End of period $ 429,756,526 $ 393,169,077
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Investment Grade Portfolio
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.40 $ 11.16 $ 11.51 $ 10.77 $ 12.81
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .37 .76 .76 .80 .75
Realized and unrealized gain (loss) on
investments--net .07 .24 (.35) .74 (1.49)
--------- --------- --------- --------- ---------
Total from investment operations .44 1.00 .41 1.54 (.74)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.37) (.76) (.76) (.80) (.75)
Realized gain on investments--net -- -- -- -- (.10)
In excess of realized gain on
investments--net -- -- -- -- (.45)
--------- --------- --------- --------- ---------
Total dividends and distributions (.37) (.76) (.76) (.80) (1.30)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.47 $ 11.40 $ 11.16 $ 11.51 $ 10.77
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.86%+++ 9.22% 3.60% 14.93% (6.03%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .60%* .57% .56% .58% .53%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.39%* 6.73% 6.64% 7.30% 6.61%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 524,637 $ 519,708 $ 608,901 $ 472,388 $ 366,792
Data: ========= ========= ========= ========= =========
Portfolio turnover 88.21% 113.46% 88.53% 108.07% 159.05%
========= ========= ========= ========= =========
<FN>
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.40 $ 11.16 $ 11.51 $ 10.77 $ 12.81
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .32 .67 .67 .72 .66
Realized and unrealized gain (loss) on
investments--net .07 .24 (.35) .74 (1.49)
--------- --------- --------- --------- ---------
Total from investment operations .39 .91 .32 1.46 (.83)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.32) (.67) (.67) (.72) (.66)
Realized gain on investments--net -- -- -- -- (.10)
In excess of realized gain on
investments--net -- -- -- -- (.45)
--------- --------- --------- --------- ---------
Total dividends and distributions (.32) (.67) (.67) (.72) (1.21)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.47 $ 11.40 $ 11.16 $ 11.51 $ 10.77
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.46%+++ 8.39% 2.81% 14.04% (6.73%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.36%* 1.34% 1.32% 1.35% 1.29%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.62%* 5.96% 5.88% 6.52% 5.85%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 563,512 $ 577,989 $ 724,089 $ 631,517 $ 483,053
Data: ========= ========= ========= ========= =========
Portfolio turnover 88.21% 113.46% 88.53% 108.07% 159.05%
========= ========= ========= ========= =========
<FN>
+++Aggregate total investment return.
*Annualized.
**Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class C
For the
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended Year Ended Oct. 21, 1994++
March 31, September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.40 $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- --------- ---------
Performance: Investment income--net .32 .67 .66 .67
Realized and unrealized gain (loss) on
investments--net .07 .23 (.34) .84
--------- --------- --------- ---------
Total from investment operations .39 .90 .32 1.51
--------- --------- --------- ---------
Less dividends from investment income--net (.32) (.67) (.66) (.67)
--------- --------- --------- ---------
Net asset value, end of period $ 11.47 $ 11.40 $ 11.17 $ 11.51
========= ========= ========= =========
Total Investment Based on net asset value per share 3.44%+++ 8.23% 2.85% 14.60%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses 1.42%* 1.39% 1.38% 1.40%*
Net Assets: ========= ========= ========= =========
Investment income--net 5.56%* 5.91% 5.83% 6.27%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 52,706 $ 49,918 $ 64,931 $ 25,778
Data: ========= ========= ========= =========
Portfolio turnover 88.21% 113.46% 88.53% 108.07%
========= ========= ========= =========
<CAPTION>
Class D
For the
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended Year Ended Oct. 21, 1994++
March 31, September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.41 $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- --------- ---------
Performance: Investment income--net .35 .73 .73 .73
Realized and unrealized gain (loss) on
investments--net .06 .24 (.34) .84
--------- --------- --------- ---------
Total from investment operations .41 .97 .39 1.57
--------- --------- --------- ---------
Less dividends from investment income--net (.35) (.73) (.73) (.73)
--------- --------- --------- ---------
Net asset value, end of period $ 11.47 $ 11.41 $ 11.17 $ 11.51
========= ========= ========= =========
Total Investment Based on net asset value per share 3.64%+++ 8.95% 3.43% 15.22%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses .85%* .82% .81% .83%*
Net Assets: ========= ========= ========= =========
Investment income--net 6.14%* 6.47% 6.40% 6.91%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 86,523 $ 77,398 $ 63,822 $ 25,153
Data: ========= ========= ========= =========
Portfolio turnover 88.21% 113.46% 88.53% 108.07%
========= ========= ========= =========
<FN>
++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.49 $ 11.28 $ 11.50 $ 10.90 $ 12.44
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .37 .73 .73 .79 .75
Realized and unrealized gain (loss) on
investments--net .06 .21 (.22) .60 (1.26)
--------- --------- --------- --------- ---------
Total from investment operations .43 .94 .51 1.39 (.51)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.37) (.73) (.73) (.79) (.75)
In excess of realized gain on
investments--net -- -- -- -- (.28)
--------- --------- --------- --------- ---------
Total dividends and distributions (.37) (.73) (.73) (.79) (1.03)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.55 $ 11.49 $ 11.28 $ 11.50 $ 10.90
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.75%+++ 8.59% 4.56% 13.33% (4.25%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .65%* .65% .59% .59% .53%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.35%* 6.43% 6.41% 7.14% 6.48%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 186,512 $ 179,115 $ 216,545 $ 217,714 $ 170,222
Data: ========= ========= ========= ========= =========
Portfolio turnover 50.33% 76.99% 96.40% 142.84% 155.42%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.50 $ 11.28 $ 11.50 $ 10.90 $ 12.44
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .34 .67 .67 .74 .69
Realized and unrealized gain (loss) on
investments--net .06 .22 (.22) .60 (1.26)
--------- --------- --------- --------- ---------
Total from investment operations .40 .89 .45 1.34 (.57)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.34) (.67) (.67) (.74) (.69)
In excess of realized gain on
investments--net -- -- -- -- (.28)
--------- --------- --------- --------- ---------
Total dividends and distributions (.34) (.67) (.67) (.74) (.97)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.56 $ 11.50 $ 11.28 $ 11.50 $ 10.90
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 3.48%+++ 8.13% 4.02% 12.73% (4.72%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.17%* 1.17% 1.11% 1.11% 1.04%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.84%* 5.91% 5.89% 6.61% 5.98%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 154,444 $ 148,148 $ 216,641 $ 212,146 $ 141,212
Data: ========= ========= ========= ========= =========
Portfolio turnover 50.33% 76.99% 96.40% 142.84% 155.42%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
Class C
For the
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended Year Ended Oct. 21, 1994++
March 31, September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.49 $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- --------- ---------
Performance: Investment income--net .34 .67 .67 .70
Realized and unrealized gain (loss) on
investments--net .06 .21 (.22) .69
--------- --------- --------- ---------
Total from investment operations .40 .88 .45 1.39
--------- --------- --------- ---------
Less dividends from investment income--net (.34) (.67) (.67) (.70)
--------- --------- --------- ---------
Net asset value, end of period $ 11.55 $ 11.49 $ 11.28 $ 11.50
========= ========= ========= =========
Total Investment Based on net asset value per share 3.48%+++ 7.99% 3.99% 13.25%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses 1.18%* 1.20% 1.15% 1.14%*
Net Assets: ========= ========= ========= =========
Investment income--net 5.82%* 5.89% 5.86% 6.24%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 1,635 $ 1,571 $ 10,144 $ 6,806
Data: ========= ========= ========= =========
Portfolio turnover 50.33% 76.99% 96.40% 142.84%
========= ========= ========= =========
<CAPTION>
Class D
For the
The following per share data and ratios have been derived For the Six For the Period
from information provided in the financial statements. Months Ended Year Ended Oct. 21, 1994++
March 31, September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.50 $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- --------- ---------
Performance: Investment income--net .36 .72 .72 .74
Realized and unrealized gain (loss) on
investments--net .06 .22 (.22) .69
--------- --------- --------- ---------
Total from investment operations .42 .94 .50 1.43
--------- --------- --------- ---------
Less dividends from investment income--net (.36) (.72) (.72) (.74)
--------- --------- --------- ---------
Net asset value, end of period $ 11.56 $ 11.50 $ 11.28 $ 11.50
========= ========= ========= =========
Total Investment Based on net asset value per share 3.69%+++ 8.58% 4.46% 13.65%+++
Return:** ========= ========= ========= =========
Ratios to Average Expenses .75%* .77% .71% .70%*
Net Assets: ========= ========= ========= =========
Investment income--net 6.25%* 6.32% 6.32% 6.81%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 87,166 $ 64,335 $ 33,270 $ 16,349
Data: ========= ========= ========= =========
Portfolio turnover 50.33% 76.99% 96.40% 142.84%
========= ========= ========= =========
<FN>
++Commencement of operations.
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
The Investment Grade Portfolio and the Intermediate Term Portfolio
("Portfolio" or "Portfolios") are two of the three portfolios in
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. These unaudited
financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results
for the interim period presented. All such adjustments are of a
normal recurring nature. Each Portfolio offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Portfolios.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more dealers that
make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange
are valued according to the broadest and most representative market,
and it is expected that for debt securities this ordinarily will be
the over-the-counter market. Short-term securities are valued at
amortized cost, which approximates market value.
Options on debt securities, which are traded on exchanges, are
valued at the last asked price for options written and last bid
price for options purchased. Financial futures contracts and options
thereon, which are traded on exchanges, are valued at their closing
price at the close of such exchanges. Securities and assets for
which market quotations are not readily available are valued at fair
value as determined in good faith by or under the direction of the
Board of Directors of the Fund, including valuations furnished by a
pricing service retained by the Fund which may use a matrix system
for valuations.
(b) Repurchase agreements--The Fund invests in securities pursuant
to repurchase agreements with a member bank of the Federal Reserve
System or a primary dealer in US Government securities. Under such
agreements, the bank or primary dealer agrees to repurchase the
security at a mutually agreed upon time and price. The Fund takes
possession of the underlying securities, marks to market such
securities and, if necessary, receives additions to such securities
daily to ensure that the contract is fully collateralized.
(c) Derivative financial instruments--The Portfolios may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Portfolios may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, each
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, each Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by each Portfolio as unrealized
gains or losses. When the contract is closed, each Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Portfolios are authorized to purchase and write call
and put options. When each Portfolio writes an option, an amount
equal to the premium received by each Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or each Portfolio enters into a closing transaction), each
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Portfolios' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribu-tion Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: 0.50% of the Fund's average
daily net assets not exceeding $250 million; 0.45% of the average
daily net assets in excess of $250 million but not exceeding $500
million; 0.40% of average daily net assets in excess of $500 million
but not exceeding $750 million; and 0.35% of average daily net
assets in excess of $750 million. For the six months ended March 31,
1998, the aggregate average daily net assets of the Fund, including
the Fund's High Income Portfolio, was approximately $9,563,455,496.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of each
Portfolio as follows:
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Investment Grade 0.25% 0.25% 0.25% 0.50% 0.55%
Intermediate Term 0.25% 0.25% 0.10% 0.25% 0.25%
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended March 31, 1998, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of each Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
Investment Grade $1,535 $3,819 $15,874 $37,812
Intermediate Term $ 92 $1,222 $ 1,077 $10,644
For the six months ended March 31, 1998, MLPF&S received contingent
deferred sales charges of $574,279 relating to transactions in Class
B Shares, amounting to $546,231 and $28,048 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively, $13,824
relating to transactions in Class C Shares, amounting to $13,626 and
$198 in the Investment Grade Portfolio and Intermediate Term
Portfolio, respectively. Furthermore, MLPF&S received contingent
deferred sales charges of $2,499 relating to transactions subject to
front-end sales charge waivers in Class A Shares in the Intermediate
Term Portfolio.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1998, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$12,461 for security price quotations to compute the net asset
values of the Portfolios.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1998 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $1,087,813,034 $ 233,388,997
-------------- --------------
Sales $1,049,671,061 $ 199,379,211
============== ==============
Net realized gains for the six months ended March 31, 1998 and net
unrealized gains as of March 31, 1998 were as follows:
Realized Unrealized
Investment Grade Portfolio Gains Gains
Long-term investments $ 3,354,564 $ 20,672,393
------------- --------------
Total $ 3,354,564 $ 20,672,393
============= ==============
Realized Unrealized
Intermediate Term Portfolio Gains Gains
Long-term investments $ 1,351,015 $ 4,218,869
------------- --------------
Total $ 1,351,015 $ 4,218,869
============= ==============
As of March 31, 1998, net unrealized appreciation (depreciation) for
Federal income tax purposes was as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Gross unrealized appreciation $ 27,036,076 $ 7,800,897
Gross unrealized depreciation (6,363,683) (3,582,028)
------------- --------------
Net unrealized appreciation $ 20,672,393 $ 4,218,869
============= ==============
The aggregate cost of investments at March 31, 1998 for Federal
income tax purposes was $1,189,389,320 for the Investment Grade
Portfolio and $418,590,439 for the Intermediate Term Portfolio.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions for the six months ended March 31, 1998 was
$(4,578,000) for the Investment Grade Portfolio and $34,664,535 for
the Intermediate Term Portfolio. Net decrease in net assets derived
from capital share transactions for the year ended September 30,
1997 was $264,834,589 for the Investment Grade Portfolio and
$91,252,583 for the Intermediate Term Portfolio.
Transactions in capital shares for each class were as follows:
Investment Grade Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 6,885,621 $ 79,063,100
Shares issued to shareholders
in reinvestment of dividends 384,254 4,412,701
------------- --------------
Total issued 7,269,875 83,475,801
Shares redeemed (7,102,324) (81,521,447)
------------- --------------
Net increase 167,551 $ 1,954,354
============= ==============
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 28,203,393 $ 318,761,187
Shares issued to shareholders
in reinvestment of dividends 1,509,176 17,026,213
------------- --------------
Total issued 29,712,569 335,787,400
Shares redeemed (38,665,524) (437,385,917)
------------- --------------
Net decrease (8,952,955) $ (101,598,517)
============= ==============
Investment Grade Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 7,261,194 $ 83,420,438
Shares issued to shareholders
in reinvestment of dividends 870,784 10,000,691
------------- --------------
Total issued 8,131,978 93,421,129
Automatic conversion of shares (476,275) (5,472,318)
Shares redeemed (9,210,313) (105,725,428)
------------- --------------
Net decrease (1,554,610) $ (17,776,617)
============= ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 12,089,795 136,401,227
Shares issued to shareholders
in reinvestment of dividends 2,232,218 25,197,726
------------- --------------
Total issued 14,322,013 161,598,953
Automatic conversion of shares (922,371) (10,376,812)
Shares redeemed (27,559,852) (310,463,146)
------------- --------------
Net decrease (14,160,210) $ (159,241,005)
============= ==============
Investment Grade Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 1,094,621 $ 12,578,140
Shares issued to shareholders
in reinvestment of dividends 83,568 960,131
------------- --------------
Total issued 1,178,189 13,538,271
Shares redeemed (960,314) (11,029,864)
------------- --------------
Net increase 217,875 $ 2,508,407
============= ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 1,929,404 $ 21,778,762
Shares issued to shareholders
in reinvestment of dividends 217,626 2,457,064
------------- --------------
Total issued 2,147,030 24,235,826
Shares redeemed (3,583,955) (40,346,764)
------------- --------------
Net decrease (1,436,925) $ (16,110,938)
============= ==============
Investment Grade Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 2,418,049 $ 27,841,177
Automatic conversion of shares 476,016 5,472,318
Shares issued to shareholders
in reinvestment of dividends 115,861 1,331,732
------------- --------------
Total issued 3,009,926 34,645,227
Shares redeemed (2,253,366) (25,909,371)
------------- --------------
Net increase 756,560 $ 8,735,856
============= ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 2,634,267 $ 29,755,828
Automatic conversion of shares 921,766 10,376,812
Shares issued to shareholders
in reinvestment of dividends 244,941 2,766,560
------------- --------------
Total issued 3,800,974 42,899,200
Shares redeemed (2,729,223) (30,783,329)
------------- --------------
Net increase 1,071,751 $ 12,115,871
============= ==============
Intermediate Term Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 2,853,943 $ 33,049,963
Shares issued to shareholders
in reinvestment of dividends 161,687 1,870,888
------------- --------------
Total issued 3,015,630 34,920,851
Shares redeemed (2,456,339) (28,433,583)
------------- --------------
Net increase 559,291 $ 6,487,268
============= ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 8,879,479 $ 101,009,465
Shares issued to shareholders
in reinvestment of dividends 536,407 6,105,063
------------- --------------
Total issued 9,415,886 107,114,528
Shares redeemed (13,031,273) (148,126,147)
------------- --------------
Net decrease (3,615,387) $ (41,011,619)
============= ==============
Intermediate Term Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 2,561,282 $ 29,667,040
Shares issued to shareholders
in reinvestment of dividends 235,319 2,723,130
------------- --------------
Total issued 2,796,601 32,390,170
Automatic conversion of shares (14,559) (168,478)
Shares redeemed (2,304,105) (26,650,425)
------------- --------------
Net increase 477,937 $ 5,571,267
============= ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 4,113,147 $ 46,806,563
Shares issued to shareholders
in reinvestment of dividends 648,555 7,381,806
------------- --------------
Total issued 4,761,702 54,188,369
Automatic conversion of shares (121,230) (1,377,088)
Shares redeemed (10,958,440) (124,411,387)
------------- --------------
Net decrease (6,317,968) $ (71,600,106)
============= ==============
Intermediate Term Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 258,939 $ 3,009,018
Shares issued to shareholders
in reinvestment of dividends 2,512 29,057
------------- --------------
Total issued 261,451 3,038,075
Shares redeemed (256,633) (2,981,858)
------------- --------------
Net increase 4,818 $ 56,217
============= ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 217,464 $ 2,473,168
Shares issued to shareholders
in reinvestment of dividends 26,883 305,857
------------- --------------
Total issued 244,347 2,779,025
Shares redeemed (1,006,967) (11,417,394)
------------- --------------
Net decrease (762,620) $ (8,638,369)
============= ==============
Intermediate Term Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1998 Shares Amount
Shares sold 3,071,716 $ 35,559,084
Automatic conversion of shares 14,559 168,478
Shares issued to shareholders
in reinvestment of dividends 99,162 1,147,939
------------- --------------
Total issued 3,185,437 36,875,501
Shares redeemed (1,238,654) (14,325,718)
------------- --------------
Net increase 1,946,783 $ 22,549,783
============= ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1997 Shares Amount
Shares sold 4,009,184 $ 45,468,396
Automatic conversion of shares 121,231 1,377,088
Shares issued to shareholders
in reinvestment of dividends 167,855 1,910,367
------------- --------------
Total issued 4,298,270 48,755,851
Shares redeemed (1,651,097) (18,758,340)
------------- --------------
Net increase 2,647,173 $ 29,997,511
============= ==============
5. Loaned Securities:
At March 31, 1998, the Investment Grade Portfolio held US Treasury
Bonds/Notes having an aggregate value of approximately $4,833,000 as
collateral for Portfolio securities loaned, having a market value of
approximately $4,730,000.
6. Capital Loss Carryforward:
At September 30, 1997, the Fund had a capital loss carryforward of
approximately $36,992,000 in the Investment Grade Portfolio, of
which $34,388,000 expires in 2003 and $2,604,000 expires in 2005 and
approximately $10,983,000 in the Intermediate Term Portfolio, of
which $10,707,000 expires in 2003 and $276,000 expires in 2005.
These amounts will be available to offset like amounts of any future
taxable gains.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1998
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
Christopher G. Ayoub, Senior 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
