HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 1999
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 High-Yield Market
During the quarter ended March 31, 1999, the high-yield market
produced excellent returns as it rebounded from distressed
conditions that prevailed during the August--October 1998 collapse.
The benchmark unmanaged CS First Boston High Yield Index registered
a total return of +1.64% in contrast to the -3.27% return provided
by ten-year US Treasury securities. In our opinion, the divergence
between the two markets reflects a reversal of the flight to quality
that characterized financial markets during August 1998--November
1998. World economies are normalizing, and the financial markets
reflect the improvement, in our view.
The credit quality outlook within the high-yield universe is
generally good, but with pockets of weakness. The high-yield market
continued to benefit from merger and acquisition activity,
particularly in the communications area, with both equity injections
and acquisitions producing ratings upgrades. Cyclical industries,
such as paper and steel, are improving. On the other hand, the bonds
of issuers in certain industries experiencing negative fundamentals,
such as oil and gas production and nursing home/extended care, have
fallen drastically. We believe the weakness is exacerbated by
dealers' lack of willingness to commit liquidity and by the low
tolerance to risk on the part of investors still smarting from last
year's debacle. This extreme risk aversion has created opportunities
in selected issues, which appear to have declined below reasonable
levels.
In our view, the high-yield market is attractive for the following
reasons.
Valuations are compelling. Yield spreads between high-yield and
Treasury securities narrowed by approximately 3.75% during the first
quarter of 1999 but remain wide at approximately 6%. This means that
an investor receives approximately 6% of additional yield for
assuming the higher credit risk and lesser liquidity of high-yield
bonds. In our opinion, this spread is quite attractive given the
relatively benign credit conditions currently prevailing.
The economic and interest rate outlook is likely to remain
favorable, in our view. We expect an environment of modest economic
growth and stable interest rates to continue. We believe that it is
unlikely that last year's liquidity debacle will recur and that as
memories fade, risk aversion is likely to moderate.
Technical conditions are positive. Last year most asset allocators,
hedge funds and other opportunistic investors abandoned the high-
yield market. The flow of new money into mutual funds was relatively
low in the first quarter, reflecting the modest expectations of
investors. We believe that greater awareness of valuation will
accelerate cash flows and result in improved bond prices.
Portfolio Strategy
Given our positive view on the high-yield market, we are structuring
the Portfolio to seek to take advantage of anticipated rising bond
prices. Our cash position remains low. Market weakness over the past
six months has increased the number of issues selling at discounts
to par value. We have increased exposure to this category of issue
because of the better total return potential. We have also added new
issues that have full five-year call protection and therefore
provide good upside in an environment of falling yields.
The overall quality of issues in the Portfolio remains somewhat
higher than the market (as measured by CS First Boston High Yield
Index), with securities rated at least BB representing 35.7% of the
Portfolio's net assets and issues rated CCC and lower at 4.0% of net
assets. This compares with representations of 27.6% and 4.9%,
respectively, for the Index. The Portfolio's industry exposure
included modestly overweighted positions in energy, health services
and transportation (non-air). Significantly underweighted sectors
included consumer manufacturing, general industrial and retailing.
The Portfolio's largest sector exposure was communications at 15.7%
of net assets. This is a relatively broad category and includes
telephony (both wire-line and wireless), data transmittal and
paging. Communications has been the area of largest new-issue
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
underwritings over the past few years as the result of deregulation
and privatization around the world. We favor this industry because
of its growth, non-sensitivity to the business cycle and takeover
activity. The latter can result in instant quality upgrades as the
high-yield issuer takes on the credit quality characteristics of the
acquirer.
The sector with the largest overweighting relative to the Index is
emerging markets, at 16.9% of the Portfolio compared with 7.1% for
the Index. This sector became extremely distressed last year, and we
believe it has excellent recovery potential because of improving
worldwide financial conditions, particularly in Latin America.
In Conclusion
We appreciate your ongoing investment in High Income Portfolio of
Merrill Lynch Corporate Bond Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years
ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
May 17, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Corporate Bond
Fund, Inc.'s Board of Directors. We are pleased to announce that
Terry K. Glenn has been elected President and Director of the Fund.
Mr. Glenn has held the position of Executive Vice President of MLAM
since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
PORTFOLIO INFORMATION
As of March 31, 1999
<CAPTION>
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
NTL Incorporated Through various subsidiaries, NTL Inc. owns and operates television radio broadcasting, 2.8%
cable television and telecommunications systems in the United Kingdom. The company also
owns Comcast and Diamond cable and telephone operations.
Nextel Nextel offers digital and analog wireless communication services throughout the United 2.6
Communications, States. The Company's digital service currently covers approximately 50% of the total US
Inc. population and, once completed, will enable Nextel to offer nationwide digital wireless
service.
Century Century owns and operates 70 cable systems in 25 states and Puerto Rico. In addition, the 1.6
Communications company has a 31.8% common equity interest in Centennial Cellular, a provider of wireless
Corporation telephone service in four geographic areas in the United States and Puerto Rico.
RSL RSL Communications is a global facilities-based telecommunications company that provides 1.6
Communications international services, including long distance, calling card, private line, value-added and
PLC Internet-based services for businesses, consumers and other carriers. The company operates
on four continents in 19 countries.
United International United International Holdings provides voice, video, data and programming services outside 1.4
Holdings, Inc. of the United States. The company operates in 23 countries throughout the world.
TransAmerican TransAmerican is a privately held holding company whose principal subsidiaries are wholly- 1.3
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 approximately 33 million shares of TransTexas Gas common stock. We
ceased accruing interest on the bonds in March 1999 because of deterioration in the financial
condition of TransTexas Gas.
Fresenius Medical Fresenius Medical Care is the world's largest integrated provider of dialysis products and 1.3
Care AG 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 countries.
USAir Inc. USAir is the sixth-largest US airline, with major hubs in Pittsburgh, Charlotte, 1.2
Philadelphia and Baltimore and routes covering most of the Eastern half of the
United States.
Trump Atlantic City Trump Atlantic City owns and operates the Trump Taj Mahal, the Trump Plaza and the
Associates/ Trump World's Fair hotel-casinos, all located on the boardwalk in Atlantic City, New Jersey. 1.2
Funding Inc.
Sinclair Broadcasting This is a diversified broadcasting company that owns or provides programming to television 1.1
Group Inc. and radio stations across the United States.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
PORTFOLIO INFORMATION (concluded)
As of March 31, 1999
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 5.7%
BB/Ba 30.0
B/B 55.2
CCC/Caa 4.1
NR(Not Rated) 5.0
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Energy 8.4%
Health Services 6.7
Cable--International 5.5
Wireless Communications--Domestic
Paging & Cellular 5.3
Cable--Domestic 5.3
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Brazil 5.0%
United Kingdom 3.7
Argentina 3.5
Mexico 3.0
Canada 2.7
[FN]
*All holdings are denominated in US dollars.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<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 3/31/99
<S> <C> <C> <C> <C>
High Income Portfolio Class A Shares* -3.71% +2.84% +177.33% 10.05%
High Income Portfolio Class B Shares* -4.44 +2.66 +156.84 9.71
High Income Portfolio Class C Shares* -4.47 +2.79 + 41.31 9.64
High Income Portfolio Class D Shares* -4.07 +2.78 + 44.67 9.82
Merrill Lynch High Yield US Corporates, Cash Pay Index** +1.94 +1.08 +183.18/+58.30
CS First Boston High Yield Index** -0.75 +1.64 +177.18/+51.78
Ten-Year US Treasury Securities*** +7.06 -3.27 +141.78/+52.00
<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/since inception periods are Class A & Class B
Shares, for the ten years ended 3/31/99 and Class C & Class D
Shares, from 10/21/94 to 3/31/99.
**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 US Corporates,
Cash Pay Index are for the ten years ended 3/31/99 and from 10/21/94
to 3/31/99, respectively. Ten year/since inception total returns for
CS First Boston High Yield Index are for the ten years ended 3/31/99
and from 10/31/94 to 3/31/99, respectively.
***Ten year/since inception total returns are for the ten years
ended 3/31/99 and from 10/31/94 to 3/31/99, respectively.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/99 - 3.71% - 7.56%
Five Years Ended 3/31/99 + 7.71 + 6.84
Ten Years Ended 3/31/99 +10.74 +10.29
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 -4.44% -7.83%
Five Years Ended 3/31/99 +6.90 +6.90
Ten Years Ended 3/31/99 +9.89 +9.89
[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 3/31/99 -4.47% -5.32%
Inception (10/21/94)
through 3/31/99 +8.10 +8.10
[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 3/31/99 -4.07% -7.90%
Inception (10/21/94)
through 3/31/99 +8.67 +7.68
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds
Aerospace--0.7% B+ B1 $ 15,000,000 Hexcel Corp., 9.75% due 1/15/2009 (j) $ 15,000,000 $ 15,243,750
B+ B1 25,000,000 Kitty Hawk Inc., 9.95% due 11/15/2004 25,033,750 24,125,000
-------------- --------------
40,033,750 39,368,750
Airlines--1.2% Piedmont Aviation, Inc.:
B+ Ba2 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,190,090
B+ Ba2 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,219,314
BB Ba2 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,680,360
B+ Ba2 1,304,000 Series J, 10.05% due 5/13/2005 1,181,685 1,390,429
BB Ba2 1,116,000 Series J, 10.10% due 5/13/2007 999,021 1,219,554
BB Ba2 3,767,000 Series J, 10.10% due 5/13/2009 3,327,542 4,172,329
BB Ba2 2,710,000 Series J, 10.15% due 5/13/2011 2,366,806 3,045,688
B+ Ba2 2,226,000 Series K, 10% due 5/13/2004 2,026,506 2,365,904
B+ Ba2 2,666,000 Series K, 10.10% due 5/13/2008 2,374,020 2,933,933
B+ Ba2 2,550,000 Series K, 10.15% due 5/13/2010 2,251,293 2,850,084
USAir Inc.:
B B1 16,500,000 9.625% due 2/01/2001 13,309,906 16,934,610
B+ Ba2 1,092,000 Series 88F, 10.70% due 1/01/2003 984,165 1,169,052
B+ Ba2 1,092,000 Series 88G, 10.70% due 1/01/2003 984,165 1,169,052
B+ Ba2 1,092,000 Series 88H, 10.70% due 1/01/2003 984,165 1,169,052
B+ Ba2 1,092,000 Series 88I, 10.70% due 1/01/2003 984,165 1,169,052
BB Ba2 4,332,085 Series 89A1, 9.33% due 1/01/2006++ 4,098,025 4,702,024
BB Ba2 15,000,000 Series 93A3, 10.375% due 3/01/2013 14,768,125 16,144,050
BB Ba2 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,609,052
BB Ba2 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 2,039,407
BB Ba2 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,243,869
-------------- --------------
60,605,506 71,416,905
Automotive--0.8% B B2 10,000,000 Collins & Aikman Products, 11.50% due
4/15/2006 10,000,000 10,625,000
B+ B2 35,000,000 Venture Holdings Trust, 9.50%
due 7/01/2005 33,927,362 34,300,000
-------------- --------------
43,927,362 44,925,000
Broadcasting-- NR* NR* 4,686,000 Acme Intermediate Holdings/Finance,
Radio & 0/12%due 9/30/2005 (a) 3,082,261 3,069,330
Television-- B- B3 3,000,000 Acme Television/Finance, 10.976% due
2.5% 9/30/2004 (a) 2,548,133 2,550,000
B- B3 9,000,000 LIN Holdings Corp., 10% due 3/01/2008 (a) 6,140,292 6,390,000
B- B2 25,000,000 LIN Television Corporation, 8.375% due
3/01/2008 24,941,500 25,093,750
B- B3 23,022,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 22,940,750 25,813,417
B- B3 17,000,000 Salem Communications Corp., 9.50% due
10/01/2007 17,160,625 18,190,000
Sinclair Broadcasting Group Inc.:
B B2 45,000,000 10% due 9/30/2005 45,343,269 47,700,000
B B2 15,000,000 8.75% due 12/15/2007 14,941,200 15,262,500
-------------- --------------
137,098,030 144,068,997
Building Nortek Inc.:
Materials--0.4% B- B3 14,550,000 9.875% due 3/01/2004 14,409,525 15,186,562
B+ B1 9,000,000 9.25% due 3/15/2007 8,947,980 9,427,500
-------------- --------------
23,357,505 24,614,062
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Cable-- American Telecasting Inc. (a):
Domestic-- CCC Ca $ 26,664,305 22.395% due 6/15/2004 $ 18,929,175 $ 8,132,613
5.0% CCC Ca 5,328,724 26.322% due 8/15/2005 2,582,987 1,465,399
BB- B1 8,750,000 CSC Holdings Inc., 9.875% due 5/15/2006 8,857,500 9,515,625
Century Communications Corporation:
BB- Ba3 40,000,000 9.75% due 2/15/2002 40,474,687 42,000,000
BB- Ba3 45,000,000 9.50% due 3/01/2005 44,542,812 48,150,000
B+ B2 15,000,000 Charter Communications Holding LLC,
8.625% due 4/01/2009 (j) 14,954,250 15,412,500
B B2 31,000,000 Intermedia Capital Partners LP,
11.25% due 8/01/2006 31,002,500 35,030,000
Lenfest Communications, Inc.:
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 47,000,000
BB- B2 10,000,000 8.25% due 2/15/2008 9,972,600 10,412,500
B+ B1 50,000,000 Olympus Communications LP/Capital Corp.,
10.625% due 11/15/2006 50,282,500 55,000,000
D Ca 50,338,000 Wireless One Inc., 13.50% due
8/01/2006 (a) 35,762,654 13,339,570
-------------- --------------
297,805,865 285,458,207
Cable-- Australis Media Ltd.(i):
International-- NR* NR* 2,274,493 14.399% due 11/01/2002 (a) 1,834,942 1,307,833
4.8% D NR* 79,117,000 1.75%/15.75% due 5/15/2003 (d)(g)++++ 56,318,088 2,769,095
D NR* 1,353,490 1.75%/15.75% due 5/15/2003 (g)++++ 751,091 20,302
B- B2 50,000,000 Comcast UK Cable Partners Ltd.,
11.231% due 11/15/2007 (a) 41,809,850 43,687,500
Diamond Cable Communications PLC (a):
B- B3 15,000,000 11.366% due 12/15/2005 12,499,218 13,050,000
B- B3 25,000,000 10.87% due 2/15/2007 18,363,325 19,500,000
B- B3 60,000,000 International Cabletel, Inc.,
11.767% due 2/01/2006 (a) 48,089,916 52,500,000
CCC B3 30,000,000 Supercanal Holdings SA, 11.50% due
5/15/2005 (j) 28,050,000 13,650,000
B+ B1 60,000,000 TeleWest Communications PLC, 11.02% due
10/01/2007 (a) 50,997,169 52,800,000
CCC+ Caa1 5,000,000 Tevecap SA, 12.625% due 11/26/2004 5,087,500 1,912,500
B B3 107,500,000 United International Holdings, Inc.,
10.75% due 2/15/2008 (a) 71,616,475 73,503,125
-------------- --------------
335,417,574 274,700,355
Capital Goods-- International Wire Group, Inc.:
1.0% B- B3 15,000,000 11.75% due 6/01/2005 14,986,250 15,937,500
B- B3 15,000,000 Series B, 11.75% due 6/01/2005 16,312,500 15,937,500
NR* B3 25,250,000 Trench Electric & Trench Inc.,
10.25% due 12/15/2007 25,315,625 24,208,437
-------------- --------------
56,614,375 56,083,437
Chemicals-- BB- Ba3 2,000,000 Agricultural, Minerals and Chemicals
0.6% Inc., 10.75% due 9/30/2003 2,060,000 1,960,000
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,184,570
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,250,000
-------------- --------------
31,534,100 32,394,570
Child Care-- B- B3 20,000,000 Kindercare Learning Centers, Inc.,
0.4% 9.50% due 2/15/2009 19,924,375 20,200,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Computer B Ba3 $ 46,000,000 Advanced Micro Devices, Inc.,
Services-- 11% due 8/01/2003 $ 48,330,000 $ 47,380,000
Electronics-- CCC Caa1 40,500,000 Dictaphone Corp., 11.75% due 8/01/2005 40,114,375 30,628,125
2.7% B+ NR* 15,000,000 Jordan Telecom Products, 9.875% due
8/01/2007 14,882,460 14,887,500
B- B3 25,000,000 PSINet, Inc., 10% due 2/15/2005 25,135,000 26,562,500
NR* NR* 9,000,000 Splitrock Services Inc., 11.75% due
7/15/2008 (c) 8,833,000 8,640,000
B- B3 4,000,000 Verio Inc., 10.375% due 4/01/2005 4,000,000 4,300,000
B- B2 30,000,000 Zilog Inc., 9.50% due 3/01/2005 28,266,250 25,050,000
-------------- --------------
169,561,085 157,448,125
Conglomerates-- BBB Baa1 5,000,000 Cendant Corp., 7.75% due 12/01/2003 4,991,400 5,132,100
2.1% BB Ba3 15,000,000 Dine, SA de CV, 8.75% due 10/15/2007 14,887,200 12,487,500
B- B3 25,000,000 Eagle-Picher Industries, 9.375% due
3/01/2008 25,109,540 24,187,500
B+ B1 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 26,390,000
B+ NR* 60,000,000 Voto-Votorantim O/S Trading, 8.50% due
6/27/2005 (j) 58,884,775 51,075,000
-------------- --------------
129,019,478 119,272,100
Consumer B- B3 5,000,000 Albecca Inc., 10.75% due 8/15/2008 5,000,000 4,275,000
Products--0.2% B B3 13,000,000 Corning Consumer Products, 9.625% due
5/01/2008 12,432,431 10,335,000
-------------- --------------
17,432,431 14,610,000
Consumer B- Caa2 8,000,000 AP Holdings Inc., 11.164% due
Services--0.3% 3/15/2008 (a) 5,218,603 4,600,000
B- Caa1 15,000,000 Apcoa Inc., 9.25% due 3/15/2008 15,012,500 14,175,000
-------------- --------------
20,231,103 18,775,000
Convertible NR* Caa3 6,195,000 Builders Transport, 8% due
Bonds**--0.1% 8/15/2005 (2)(i) 3,614,250 46,462
BB+ Ba3 6,375,000 Quantum Health Resources, Inc.,
4.75% due 10/01/2000 (1) 5,956,562 5,426,719
-------------- --------------
9,570,812 5,473,181
Energy--8.2% B B3 20,000,000 Benton Oil & Gas Co., 9.375%
due 11/01/2007 20,097,687 11,100,000
Chesapeake Energy Corp.:
B B3 1,000,000 7.875% due 3/15/2004 983,750 780,000
B B3 25,000,000 9.625% due 5/01/2005 25,056,250 20,937,500
B B3 4,400,000 9.125% due 4/15/2006 4,388,100 3,388,000
B+ B2 15,000,000 Clark R & M, Inc., 8.875% due
11/15/2007 14,892,150 12,675,000
B+ B3 25,000,000 Clark USA Inc., 10.875% due 12/01/2005 26,515,000 20,531,250
BBB- Ba3 40,000,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due 1/30/2004 (j) 41,372,500 39,100,000
B B2 10,000,000 Cross Timbers Oil Company, 8.75% due
11/01/2009 10,000,000 9,500,000
B B2 15,000,000 Energy Corp. of America, 9.50% due
5/15/2007 15,000,000 14,100,000
KCS Energy Inc.:
CCC+ Caa1 22,000,000 11% due 1/15/2003 22,723,750 16,830,000
CCC Caa3 20,000,000 8.875% due 1/15/2008 19,900,000 6,400,000
BB- B1 25,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 24,788,350 24,250,000
B- B3 27,000,000 Ocean Rig Norway AS, 10.25% due
6/01/2008 26,990,000 19,035,000
BBB- Baa3 25,781,250 Oleoducto Centrale SA, 9.35%
due 9/01/2005 (j)++ 25,772,656 24,041,016
B+ B1 39,500,000 Parker Drilling Co., 9.75% due
11/15/2006 39,884,035 32,982,500
Petroleo Brasileiro SA:
NR* B2 15,000,000 10% due 10/17/2006 15,097,500 14,025,000
BB- B1 15,000,000 10% due 10/17/2006 (j) 14,869,812 13,387,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Energy BB- Ba3 $ 20,000,000 RBF Finance Co., 11% due
(concluded) 3/15/2006 (j) $ 20,000,000 $ 20,950,000
CCC Caa2 17,000,000 Southwest Royalties Inc., 10.50%
due 10/15/2004 16,137,500 6,885,000
BB- B1 30,000,000 Tesoro Petroleum Corp., 9% due
7/01/2008 29,828,700 29,925,000
C Caa2 289,840,000 TransAmerican Energy Corp.,
13.176% due 6/15/2002 (a)(i) 280,205,539 72,822,300
NR* NR* 36,000,000 TransAmerican Refining Corporation,
13% due 12/15/2002 (k) 35,640,000 36,180,000
Triton Energy Ltd./Corp.:
B+ B1 1,000,000 8.75% due 4/15/2002 922,500 950,000
B+ B1 14,000,000 9.25% due 4/15/2005 13,940,780 12,839,260
B- B3 14,500,000 United Refining Co., 10.75% due
6/15/2007 14,355,000 10,222,500
-------------- --------------
759,361,559 473,836,826
Entertainment-- CCC+ B3 27,495,000 AMF Bowling Worldwide Inc.,
1.1% 12.581% due 3/15/2006 (a) 21,398,778 15,534,675
B+ B1 1,500,000 Intrawest Corp., 9.75% due 8/15/2008 1,476,615 1,556,250
B- B3 16,250,000 Premier Parks Inc., 10% due
4/01/2008 (a) 10,995,645 11,415,625
B B3 20,000,000 Regal Cinemas Inc., 9.50% due
6/01/2008 19,966,200 20,550,000
B- B3 15,000,000 Six Flags Entertainment, 8.875%
due 4/01/2006 15,000,000 15,412,500
-------------- --------------
68,837,238 64,469,050
Financial CCC+ Caa3 20,000,000 Amresco Inc., 9.875% due 3/15/2005 20,087,500 15,250,000
Services--2.3% NR* ba1 40,000,000 Fuji JGB Investment LLC (Preferred),
9.87% (h)(j) 39,980,000 35,861,800
NR* ba1 30,000,000 IBJ Capital Co. LLC (Preferred),
8.79% (h)(j) 29,655,000 25,545,330
CCC- Caa3 9,000,000 PennCorp Financial Group, 9.25%
due 12/15/2003 9,090,000 6,615,000
BB+ baa2 25,000,000 SB Treasury Company LLC, 9.40% (h)(j) 25,000,000 24,544,500
BB+ ba3 10,000,000 SIG Capital Trust I, 9.50% due
8/15/2027 (j) 10,000,000 7,825,000
BB- NR* 17,000,000 Veritas Capital Trust, 10%
due 1/01/2028 17,290,000 15,682,500
-------------- --------------
151,102,500 131,324,130
Food & Beverage-- Chiquita Brands International Inc.:
1.0% B+ B1 25,000,000 9.125% due 3/01/2004 24,585,625 25,406,250
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 20,675,000
CCC Caa1 20,000,000 DGS International Finance Company
BV, 10% due 6/01/2007 (j) 20,068,200 12,950,000
-------------- --------------
64,535,225 59,031,250
Foreign B+ B2 12,500,000 Republic of Brazil, 10.125%
Government due 5/15/2027 10,406,250 9,093,750
Obligations--
0.2%
Gaming--4.2% D Caa1 42,126,000 GB Property Funding Corp.,
10.875% due 1/15/2004 (i) 38,250,620 30,120,090
BB+ Ba2 15,000,000 Harrah's Operating Co. Inc.,
7.875% due 12/15/2005 15,000,000 15,075,000
B+ B2 20,000,000 Hollywood Casino Corp., 12.75%
due 11/01/2003 19,366,715 21,700,000
Jazz Casino Co. LLC:
NR* NR* 40,930,565 5.867% due 11/15/2009++++ 20,662,327 22,921,116
NR* NR* 2,524,830 Contingent Notes, due 11/15/2009 (f) 0 0
BB+ Ba2 25,000,000 Park Place Entertainment, 7.875% due
12/15/2005 25,000,000 24,625,000
B+ B2 4,000,000 Station Casinos Inc., 9.75% due 4/15/2007 3,743,814 4,240,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Gaming Trump Atlantic City
(concluded) Associates/Funding Inc.:
B B2 $ 48,100,000 11.25% due 5/01/2006 $ 46,838,438 $ 42,809,000
B B2 32,900,000 11.25% due 5/01/2006 32,314,685 29,281,000
Venetian Casino/LV Sands:
B- B3 35,000,000 12.25% due 11/15/2004 34,775,000 36,225,000
CCC+ Caa1 17,500,000 10% due 11/15/2005 16,983,193 16,887,500
-------------- --------------
252,934,792 243,883,706
Health Services-- B- B3 16,800,000 ALARIS Medical Systems, Inc.,
6.7% 9.75% due 12/01/2006 16,994,312 17,388,000
B+ Ba3 47,725,000 Beverly Enterprises Inc., 9%
due 2/15/2006 46,845,487 47,009,125
Columbia/HCA Healthcare Corp.:
BB+ Ba2 1,000,000 6.91% due 6/15/2005 940,800 911,990
BB+ Ba2 8,460,000 8.85% due 1/01/2007 8,980,882 8,444,857
BB+ Ba2 10,000,000 7.25% due 5/20/2008 9,393,300 9,131,000
BB+ Ba2 14,150,000 8.70% due 2/10/2010 14,502,652 13,768,233
BB+ Ba2 17,640,000 9% due 12/15/2014 18,400,090 17,655,523
BB+ Ba2 2,500,000 7.50% due 12/15/2023 2,258,750 2,020,650
BB+ Ba2 15,000,000 8.36% due 4/15/2024 14,614,910 13,734,900
B- B2 37,250,000 Extendicare Health Services,
9.35% due 12/15/2007 37,180,000 27,378,750
B+ ba3 36,091,000 Fresenius Medical Capital Trust I,
9% due 12/01/2006 36,993,597 37,534,640
B+ ba3 40,000,000 Fresenius Medical Capital Trust II,
7.875% due 2/01/2008 40,060,000 39,250,000
B- B3 25,000,000 Kinetic Concepts, Inc., 9.625%
due 11/01/2007 25,153,750 24,250,000
B- Caa1 50,000,000 Magellan Health Services, 9%
due 2/15/2008 49,996,875 43,250,000
Mariner Post--Acute Network:
CCC B3 49,000,000 9.50% due 11/01/2007 48,781,460 14,455,000
CCC B3 9,000,000 12.85% due 11/01/2007 (a) 5,274,526 1,710,000
B B2 5,700,000 Pharmerica Inc., 8.375% due 4/01/2008 5,747,250 6,070,500
CCC B2 20,000,000 Sun Healthcare Group Inc., 9.50%
due 7/01/2007 19,775,337 4,100,000
Tenet Healthcare Corp.:
BB- Ba3 30,000,000 8.625% due 1/15/2007 29,968,200 30,150,000
BB- Ba3 30,000,000 8.125% due 12/01/2008 (j) 29,883,600 28,950,000
-------------- --------------
461,745,778 387,163,168
Home Builders-- BB- B1 32,000,000 US Home Corp., 8.88% due 8/15/2007 32,017,500 31,800,000
0.5%
Hotels--1.1% HMH Properties, Inc.:
BB Ba2 3,000,000 7.875% due 8/01/2005 2,999,160 2,947,500
BB Ba2 40,000,000 7.875% due 8/01/2008 39,740,800 38,700,000
BB Ba2 9,000,000 8.45% due 12/01/2008 8,969,760 9,000,000
Signature Resorts, Inc.:
BB- B2 10,000,000 9.25% due 5/15/2006 10,000,000 9,750,000
B B3 5,000,000 9.75% due 10/01/2007 5,000,000 4,618,750
-------------- --------------
66,709,720 65,016,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Independent The AES Corporation:
Power B+ Ba1 $ 30,000,000 10.25% due 7/15/2006 $ 30,000,000 $ 31,725,000
Producers--3.0% B+ Ba1 15,000,000 8.375% due 8/15/2007 14,929,500 14,775,000
BB+ Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 26,775,000
BB Ba2 45,000,000 Calpine Corporation, 8.75% due
7/15/2007 45,209,972 47,025,000
BB Ba1 10,000,000 ESI Tractebel Acquisition Corp.,
7.99% due 12/30/2011 10,000,000 9,707,040
Midland Funding II:
BB B2 11,250,000 11.75% due 7/23/2005 11,310,000 12,751,875
BB B2 5,500,000 13.25% due 7/23/2006 6,002,565 6,781,665
BB Ba2 25,000,000 Monterrey Power SA de CV, 9.625% due
11/15/2009 (j) 24,977,680 20,687,500
-------------- --------------
172,429,717 170,228,080
Industrial CCC+ Caa1 9,500,000 Thermadyne Holdings Corp., 12.426%
Services--0.3% due 6/01/2008 (a) 5,761,262 4,702,500
CCC+ B3 12,000,000 Thermadyne Manufacturing, 9.875%
due 6/01/2008 11,905,680 11,190,000
-------------- --------------
17,666,942 15,892,500
Industrials--0.4% CCC+ B3 3,100,000 American Skiing Co., 12% due 7/15/2006 3,235,625 2,836,500
BB+ Ba3 15,000,000 Protection One Alarm Monitoring,
8.125% due 1/15/2009 (j) 15,000,000 15,375,000
-------------- --------------
18,235,625 18,211,500
Media & NR* NR* 45,500,000 Comtel Brasileira Ltd., 10.75%
Communications-- due 9/26/2004 (j) 44,682,550 38,220,000
International-- Globo Comunicacoes e Participacoes,
4.1% Ltd. (j):
B+ B2 35,000,000 10.50% due 12/20/2006 35,172,400 22,662,500
B+ B2 10,000,000 10.625% due 12/05/2008 9,992,000 6,475,000
Grupo Televisa SA:
BB Ba2 2,500,000 11.375% due 5/15/2003 2,637,500 2,537,500
BB Ba2 40,000,000 11.875% due 5/15/2006 43,002,187 41,200,000
BB Ba2 14,000,000 11.369% due 5/15/2008(a) 11,522,830 11,690,000
B+ B2 31,750,000 Impsat Corp., 12.375% due 6/15/2008 30,953,750 28,416,250
Orion Network Systems, Inc.:
B+ B1 4,000,000 11.25% due 1/15/2007 3,960,000 3,700,000
B+ B1 28,000,000 15.857% due 1/15/2007 (a) 16,251,212 17,675,000
Philippine Long Distance Telephone
Company:
BB+ Ba2 9,600,000 10.625% due 6/02/2004 9,988,000 9,558,000
BB+ Ba2 8,500,000 9.875% due 8/01/2005 8,512,500 8,200,018
BBB- Ba3 40,000,000 Telefonica de Argentina SA,
11.875% due 11/01/2004 38,763,075 43,100,000
-------------- --------------
255,438,004 233,434,268
Metals & B- Caa1 20,000,000 AEI Resources Inc., 11.50%
Mining--3.0% due 12/15/2006 (j) 20,000,000 20,050,000
BB Ba2 15,000,000 Great Central Mines Ltd.,
8.875% due 4/01/2008 15,000,000 14,662,500
CCC+ B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 51,088,125 48,375,000
B B2 20,000,000 Metals USA Inc., 8.625% due 2/15/2008 19,900,000 18,700,000
BB- Ba3 25,000,000 Murrin Murrin Holdings Property,
9.375% due 8/31/2007 24,845,000 22,875,000
B B3 20,000,000 Ormet Corporation, 11% due 8/15/2008 (j) 19,996,250 18,900,000
B B2 30,000,000 P & L Coal Holdings Corp., 9.625% due
5/15/2008 29,914,200 31,462,500
-------------- --------------
180,743,575 175,025,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Packaging--0.2% B+ Ba3 $ 10,000,000 Vicap SA, 11.375% due 5/15/2007 $ 9,947,000 $ 9,250,000
Paper & Forest CCC+ caa 21,000,000 APP Financial II Mauritius
Products--3.4% Ltd., 12% (h) 18,425,000 9,922,500
CCC+ Caa1 40,000,000 APP International Finance, 11.75%
due 10/01/2005 39,716,250 28,713,972
B B3 50,000,000 Ainsworth Lumber Company, 12.50%
due 7/15/2007++++ 48,849,449 53,250,000
Container Corporation of America:
B- B2 15,420,000 9.75% due 4/01/2003 15,433,400 16,229,550
B- B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,715,000
B+ B1 60,000,000 Doman Industries Limited, 8.75%
due 3/15/2004 57,006,250 39,000,000
CCC+ Caa1 14,500,000 Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 9,570,000
CCC+ Caa1 10,000,000 Pindo Deli Financial Mauritius,
10.75% due 10/01/2007 9,969,638 5,525,000
CCC+ Caa1 32,500,000 Tjiwa Kimia Finance Mauritius,
10% due 8/01/2004 30,977,000 17,468,750
-------------- --------------
247,949,487 193,394,772
Product AmeriServe Food Distributors:
Distribution-- B+ B1 14,000,000 8.875% due 10/15/2006 14,000,000 12,250,000
1.2% B- B3 42,000,000 10.125% due 7/15/2007 42,000,000 30,240,000
B+ B3 10,000,000 Fleming Companies Inc., 10.50%
due 12/01/2004 9,941,900 9,400,000
CCC Caa1 25,000,000 US Office Products Co., 9.75%
due 6/15/2008 24,920,100 14,625,000
-------------- --------------
90,862,000 66,515,000
Publishing & Hollinger International
Printing--0.9% Publishing, Inc.:
BB+ Ba2 5,000,000 8.625% due 3/15/2005 4,975,000 5,212,500
BB- Ba3 20,000,000 9.25% due 2/01/2006 19,455,312 20,900,000
BB- Ba3 7,250,000 Primedia, Inc., 7.625% due 4/01/2008 7,208,313 7,213,750
BB- B1 20,000,000 World Color Press Inc., 7.75%
due 2/15/2009 (j) 19,660,200 19,700,000
-------------- --------------
51,298,825 53,026,250
Real Estate-- BB- Ba3 30,000,000 Forest City Enterprises Inc.,
0.5% 8.50% due 3/15/2008 30,213,750 30,187,500
Restaurants-- BB- NR* 27,000,000 FM 1993A Corp., 9.75% due 11/01/2003 26,216,200 27,945,000
0.6% D Ca 15,000,000 Planet Hollywood International,
12% due 4/01/2005 15,000,000 3,975,000
-------------- --------------
41,216,200 31,920,000
Specialty NR* NR* 3,633,000 Cumberland Farms, Inc., 10.50%
Retailing--0.1% due 10/01/2003 3,497,015 3,614,835
Steel--4.4% BB- Ba2 25,000,000 AK Steel Corp., 9.125% due 12/15/2006 25,056,250 26,500,000
NR* B2 95,000,000 CSN Iron SA, 9.125% due 6/01/2007 (j) 89,758,750 71,012,500
BB B1 20,000,000 Hylsa, SA de CV, 9.25% due 9/15/2007 (j) 19,872,930 15,400,000
B- Caa2 20,000,000 Renco Steel Holdings, 10.875% due
2/01/2005 20,045,700 17,700,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 25,843,750
B B3 25,000,000 WHX Corp., 10.50% due 4/15/2005 25,000,000 24,125,000
Weirton Steel Corp.:
B B2 3,000,000 11.375% due 7/01/2004 3,247,500 2,880,000
B B2 23,000,000 10.75% due 6/01/2005 22,413,750 21,390,000
BB- B2 50,000,000 Wheeling Pittsburgh Corp., 9.25% due
11/15/2007 49,795,675 49,500,000
-------------- --------------
280,190,555 254,351,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (continued)
Supermarkets-- Pueblo Xtra International Inc.:
0.4% B- B3 $ 21,075,000 9.50% due 8/01/2003 $ 19,460,250 $ 20,152,969
B- B3 3,000,000 Series C, 9.50% due 8/01/2003 2,776,205 2,917,500
-------------- --------------
22,236,455 23,070,469
Telephony-- B- Caa1 5,500,000 Esprit Telecom Group PLC, 10.875%
Competitive Local due 6/15/2008 5,385,000 5,802,500
Exchange B B2 25,000,000 Intermedia Communications Inc.,
Carriers--3.4% 8.60% due 6/01/2008 24,781,875 25,125,000
B B3 29,000,000 Level 3 Communications, 9.125%
due 5/01/2008 28,693,300 29,362,500
B B3 3,000,000 Metronet Communications, 12.042% due
6/15/2008 (a) 1,693,116 2,332,500
B B3 43,000,000 Nextlink Communications, 9% due
3/15/2008 42,913,140 43,107,500
RSL Communications PLC:
B- B2 37,000,000 9.125% due 3/01/2008 37,000,000 36,815,000
B- B2 85,000,000 10.533% due 3/01/2008(a) 56,101,538 55,675,000
-------------- --------------
196,567,969 198,220,000
Textiles--0.9% B B3 25,000,000 Galey & Lord, Inc., 9.125% due
3/01/2008 24,718,750 19,750,000
B B2 18,750,000 Polymer Group Inc., 8.75%
due 3/01/2008 18,750,000 19,265,625
Polysindo International Finance
Company BV (i):
D Caa3 45,600,000 11.375% due 6/15/2006 44,674,000 11,514,000
D Caa3 14,250,000 9.375% due 7/30/2007 9,930,000 3,598,125
-------------- --------------
98,072,750 54,127,750
Transportation-- BB- NR* 40,000,000 Autopistas del Sol SA, 10.25%
4.8% due 8/01/2009 (j) 39,935,000 32,200,000
CCC Caa1 20,000,000 Cathay International Ltd., 13%
due 4/15/2008 (j) 20,000,000 5,100,000
BB- Ba3 25,000,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 24,472,500 24,250,000
GS Superhighway Holdings:
BB Ba3 43,000,000 9.875% due 8/15/2004 37,956,250 21,607,500
BB Ba3 49,000,000 10.25% due 8/15/2007 47,933,550 23,642,500
B+ Ba2 20,000,000 Gearbulk Holding Ltd., 11.25%
due 12/01/2004 20,518,750 20,950,000
CCC+ B1 40,000,000 Hvide Marine, Inc., 8.375%
due 2/15/2008 39,872,500 28,200,000
B+ B2 25,000,000 TFM, SA de CV, 11.786% due 6/15/2009(a) 17,291,730 14,875,000
Transportacion Maritima Mexicana,
SA de CV:
BB- Ba3 23,000,000 9.25% due 5/15/2003 19,642,750 19,090,000
BB- Ba3 28,800,000 10% due 11/15/2006 28,398,500 23,976,000
B- B2 60,606,000 Transtar Holdings LP, 11.892% due
12/15/2003 (a) 56,297,028 59,848,425
-------------- --------------
352,318,558 273,739,425
Utilities--4.2% NR* NR* 20,000,000 CIA Saneamento Basico, 10% due
7/28/2005 (j) 20,000,000 12,800,000
BB- Ba2 10,000,000 Empresa Electric del Norte, 10.50%
due 6/15/2005 (j) 10,000,000 6,550,000
B+ B2 70,000,000 Espirito Santo-Escelsa, 10% due
7/15/2007 69,476,250 45,675,000
BB NR* 37,000,000 Inversora de Electrica, 9% due
9/16/2004 (j) 36,895,000 30,895,000
BBB- Ba3 35,000,000 Metrogas SA, 12% due 8/15/2000 35,031,875 36,137,500
NR* NR* 14,984,717 Sunflower Electric Power Corp.,
8% due 12/31/2016++ 9,829,550 9,814,990
BBB- Baa3 41,210,400 TransGas de Occidente SA, 9.79% due
11/01/2010 (j)++ 41,283,990 35,516,071
Tucson Electric & Power Co.(k)++:
NR* NR* 34,947,781 10.21% due 1/01/2009 33,168,609 39,764,285
NR* NR* 21,759,590 10.732% due 1/01/2013 20,606,895 25,548,152
-------------- --------------
276,292,169 242,700,998
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
<S> <S> <S> <C> <S> <C> <C>
Bonds (concluded)
Waste BB Ba2 $ 25,000,000 Allied Waste North America,
Management-- 7.625% due 1/01/2006 $ 25,000,000 $ 24,375,000
1.0% NR* Ca 23,700,000 Mid-American Waste Systems,
Inc., 12.25% due 2/15/2003 (i) 7,321,905 829,500
B+ B2 29,000,000 Safety-Kleen Services, 9.25%
due 6/01/2008 29,000,000 30,450,000
-------------- --------------
61,321,905 55,654,500
Wireless CCC+ B2 13,000,000 Cencall Communications Corporation,
Communications-- 9.037% due 1/15/2004 (a) 13,000,000 13,390,000
Domestic Paging & BB+ A2 43,050,000 Comcast Cellular Holdings, 9.50%
Cellular--4.7% due 5/01/2007 43,854,525 49,077,000
CCC+ B3 10,000,000 Metrocall Inc., 9.75% due 11/01/2007 10,000,000 8,700,000
D C 50,500,000 MobileMedia Communications, 11.58% due
12/01/2003 (a)(i) 20,630,116 4,292,500
Nextel Communications, Inc. (a):
B- B2 40,000,000 11.619% due 8/15/2004 33,189,564 41,400,000
B- B2 30,000,000 10.147% due 10/31/2007 20,729,715 21,150,000
B- B2 25,000,000 9.987% due 2/15/2008(j) 17,112,008 17,656,250
CCC+ B3 40,000,000 Nextel Partners Inc., 14% due
2/01/2009 (a)(j) 20,786,804 23,200,000
NR* NR* 29,000,000 Pagemart Wireless Inc., 11.25% due
2/01/2008 (a) 19,053,355 10,875,000
B B2 70,000,000 Paging Network, Inc., 10% due
10/15/2008 69,756,250 61,600,000
NR* NR* 3,250,000 Pinnacle Holdings Inc., 10%
due 3/15/2008 (a) 2,209,115 1,966,250
NR* NR* 5,000,000 SBA Communications Corp., 12.308% due
3/01/2008 (a) 3,099,087 3,175,000
B- B3 15,000,000 Western Wireless Corp., 10.50%
due 2/01/2007 15,062,500 16,612,500
-------------- --------------
288,483,039 273,094,500
Wireless BB Ba2 11,000,000 CTI Holdings SA, 11.50% due
Communications-- 4/15/2008 (a) 7,000,674 6,050,000
International B+ B3 56,472,000 Comunicacion Celular SA, 12.68% due
Paging & 3/01/2005 (a)(e)(j) 44,801,242 37,200,930
Cellular--2.6% B- Caa1 26,000,000 McCaw International Ltd., 12.265% due
4/15/2007 (a) 18,312,415 15,470,000
B- Caa1 90,000,000 Millicom International Cellular,
13.39% due 6/01/2006 (a) 67,939,467 66,937,500
B- Caa1 33,000,000 Nextel International Inc.,
12.125% due 4/15/2008 (a) 20,510,660 15,675,000
CCC+ Caa1 18,000,000 Telesystem International Wireless
Inc., 13.151% due 6/30/2007(a) 12,174,562 9,810,000
-------------- --------------
170,739,020 151,143,430
Total Investments in Bonds--92.2% 6,125,504,473 5,301,228,846
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
<S> <C> <S> <C> <C>
Preferred Stocks
Cable--Domestic--0.3% 147,905 CSC Holdings Inc. (Series A)++++ $ 11,149,159 $ 16,935,122
Cable--International--0.5% 25,209 NTL Incorporated (Series B)++++ 25,679,607 27,950,479
Conglomerates--0.3% 3,100 Eagle-Picher Industries (Series B) 17,686,590 16,197,500
Energy--0.0% 465,596 TCR Holdings (Class B) (Convertible)(k) 27,936 27,936
256,078 TCR Holdings (Class C) (Convertible)(k) 14,340 14,340
675,114 TCR Holdings (Class D) (Convertible)(k) 35,781 35,781
1,396,787 TCR Holdings (Class E) (Convertible)(k) 87,998 87,998
-------------- --------------
166,055 166,055
Financial Services--0.6% 1,230,000 California Federal Bank (Series A) 30,815,000 32,595,000
Product Distribution--0.2% 273,323 Nebco Evans Holding Co.++++ 26,493,029 10,591,266
Publishing & Printing--0.7% 125,000 Primedia, Inc. (Series D) 12,500,000 12,968,750
292,500 Primedia, Inc. (Series H) 29,109,500 27,860,625
-------------- --------------
41,609,500 40,829,375
Telephone--Competitive 13,155 Intermedia Communications Inc.
Local Exchange Carriers-- (Convertible)++++ 13,489,114 14,141,625
0.2%
Utilities--0.1% 5,159 Crown Castle International Corp.++++ 5,174,900 5,623,310
Wireless Communications-- 6,775 Nextel Communications, Inc.
Domestic Paging & Cellular--0.5% (Series D)++++ 7,121,510 7,621,875
17,344 Nextel Communications, Inc.
(Series E)++++ 17,282,145 17,734,240
6,466 Rural Cellular Corp. (Series B)++++ 6,363,675 6,401,340
-------------- --------------
30,767,330 31,757,455
Total Investments in Preferred
Stocks--3.4% 203,030,284 196,787,187
Common Stocks
Cable--Domestic--0.0% 2,887 CS Wireless Systems, Inc. 20,336 1,444
Cable--International--0.2% 200,000 United International Holdings,
Inc. (Class A)(i) 4,249,931 8,675,000
Energy--0.2% 914,710 Chi Energy Inc. (Series B) 14,284,292 12,348,585
8,176 Pioneer Natural Resources Co. 199,648 63,364
-------------- --------------
14,483,940 12,411,949
Entertainment--0.2% 1,184,150 On Command Corporation(i) 51,280,002 10,916,383
Gaming--0.0% 732,105 JCC Holding Company (Class A) 2,928,420 2,470,854
Wireless Communications-- 170,421 Nextel Communications, Inc. (Class A)(i) 2,749,981 6,252,320
Domestic Paging & Cellular--0.1%
Total Investments in Common Stocks--0.7% 75,712,610 40,727,950
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value
Industries Held Issue Cost (Note 1a)
<S> <C> <S> <C> <C>
Trusts & Warrants
Cable--Domestic--0.0% 177,500 American Telecasting Inc.
(Warrants)(b) $ 413,723 $ 2,219
25,000 People's Choice TV Corp.
(Warrants)(b) 140,353 12,625
50,338 Wireless One Inc. (Warrants)(b) 1,063,139 503
-------------- --------------
1,617,215 15,347
Cable--International--0.0% 45,000 UIH Australia/Pacific (Warrants)(b) 540,000 45,000
Computer Services-- 7,000 Splitrock Services Inc. (Warrants)(b) 77,000 420,000
Electronics--0.0%
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--0.0% 385,661 On Command Corporation (Warrants)(b) 3,033,504 1,156,983
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.,
Liquidating Trust (k) 192,320 0
113,386 Trump Castle Funding, Inc. (Warrants)(b) 0 1
-------------- --------------
192,320 1
Media & Communications-- 15,000 Orion Network Systems, Inc.
International--0.0% (Warrants)(b) 174,450 151,875
Wireless Communications-- 57,040 Page Mart Inc. (Warrants)(b) 236,127 178,250
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular SA (Warrants)(b)(j) 109,680 23,394
International Paging &
Cellular--0.0%
Total Investments in
Trusts & Warrants--0.0% 6,103,258 2,175,293
Face
Amount
Short-Term Securities
Commercial Paper***-- $ 59,482,000 General Electric Capital Corp., 5.08%
1.6% due 4/01/1999 59,482,000 59,482,000
25,000,000 Metropolitan Life Insurance Company,
4.84% due 4/30/1999 24,902,528 24,902,528
10,000,000 Xerox Credit Corp., 4.88% due 4/09/1999 9,989,156 9,989,156
-------------- --------------
94,373,684 94,373,684
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Value
Industries Amount Issue Cost (Note 1a)
<S> <C> <S> <C> <C>
Short-Term Securities
US Government Agency $25,000,000 Federal Home Loan Mortgage
Obligations***--0.5% Corporation, 4.79% due 4/14/1999 $ 24,956,757 $ 24,956,757
Total Investments in
Short-Term Securities--2.1% 119,330,441 119,330,441
Total Investments--98.4% $6,529,681,066 5,660,249,717
==============
Other Assets Less Liabilities--1.6% 89,884,215
--------------
Net Assets--100.0% $5,750,133,932
==============
<FN>
(a)Represents a zero coupon or step bond; the interest rate shown
reflects 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 and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(c)Each $1,000 face amount contains one warrant of Splitrock
Services Inc.
(d)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(e)Each $1,000 face amount contains one warrant of Comunicacion
Celular SA.
(f)Represents an obligation by Jazz Casino Co. LLC to pay a semi-
annual amount to the Fund through 11/15/2009. The payments are based
upon varying interest rates and the amounts, which may be paid-in-
kind, are contingent upon the earnings before income taxes,
depreciation and amortization of Jazz Casino Co. LLC on a fiscal
year basis.
(g)Represents a step bond. Coupon payments are paid-in-kind, in
which the Portfolio receives additional face 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.
(h)The security is a perpetual bond and has no definite maturity
date.
(i)Non-income producing security.
(j)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(k)Restricted securities as to resale. The value of the Portfolio's
investments in restricted securities was approximately $101,658,000,
representing 1.8% of net assets.
Acquisition Value
Issue Date(s) Cost (Note 1a)
Goldriver Hotel & Casino Corp., 8/31/1992-
Liquidating Trust 11/17/1992 $ 192,320 $ 0
TCR Holdings (Class B)
(Convertible Preferred) 12/10/1998 27,936 27,936
TCR Holdings (Class C)
(Convertible Preferred) 12/10/1998 14,340 14,340
TCR Holdings (Class D)
(Convertible Preferred) 12/10/1998 35,781 35,781
TCR Holdings (Class E)
(Convertible Preferred) 12/10/1998 87,998 87,998
TransAmerican Refining
Corporation, 13% due 12/15/2002 12/09/1997 35,640,000 36,180,000
Tucson Electric & Power Co.:
10.21% due 1/01/2009 7/27/1993-
4/15/1998 33,168,609 39,764,285
10.732% due 1/01/2013 7/16/1993-
10/06/1998 20,606,895 25,548,152
------------- ------------
Total $ 89,773,879 $101,658,492
============= ============
*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 reflect the
discount rates paid at the time of purchase by the Portfolio.
++Subject to principal paydowns.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of March 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$6,529,681,066) (Note 1a) $5,660,249,717
Receivables:
Interest $ 127,126,807
Securities sold 18,829,481
Capital shares sold 3,837,573
Dividends 3,671,280
Paydowns 98,387 153,563,528
--------------
Prepaid registration fees and other assets (Note 1e) 871,973
--------------
Total assets 5,814,685,218
--------------
Liabilities: Payables:
Capital shares redeemed 27,113,758
Dividends to shareholders (Note 1f) 19,864,972
Securities purchased 10,463,249
Distributor (Note 2) 2,943,064
Investment adviser (Note 2) 2,001,944 62,386,987
--------------
Accrued expenses and other liabilities 2,164,299
--------------
Total liabilities 64,551,286
--------------
Net Assets: Net assets $5,750,133,932
==============
Net Assets Class A Common Stock, $0.10 par value, 500,000,000
Consist of: shares authorized $ 12,906,758
Class B Common Stock, $0.10 par value, 1,500,000,000
shares authorized 57,097,586
Class C Common Stock, $0.10 par value, 200,000,000
shares authorized 6,549,556
Class D Common Stock, $0.10 par value, 500,000,000
shares authorized 5,799,036
Paid-in capital in excess of par 6,603,231,934
Accumulated distributions in excess of investment
income--net (Note 1f) (1,727,238)
Accumulated realized capital losses on investments--net (64,292,351)
Unrealized depreciation on investments--net (869,431,349)
--------------
Net assets $5,750,133,932
==============
Net Asset Class A--Based on $900,933,101 and 129,067,583
Value: shares outstanding $ 6.98
==============
Class B--Based on $3,986,564,156 and 570,975,858
shares outstanding $ 6.98
==============
Class C--Based on $457,588,051 and 65,495,555
shares outstanding $ 6.99
==============
Class D--Based on $405,048,624 and 57,990,361
shares outstanding $ 6.98
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended March 31, 1999
<S> <S> <C> <C>
Investment Interest and discount earned $ 329,425,860
Income Dividends 9,982,175
(Note 1d): Other 3,055,258
--------------
Total income 342,463,293
--------------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 15,734,736
Investment advisory fees (Note 2) 12,326,210
Account maintenance and distribution fees--Class C (Note 2) 2,005,682
Transfer agent fees--Class B (Note 2) 2,005,002
Account maintenance fees--Class D (Note 2) 516,806
Transfer agent fees--Class A (Note 2) 373,110
Transfer agent fees--Class C (Note 2) 249,207
Accounting services (Note 2) 219,425
Printing and shareholder reports 180,319
Transfer agent fees--Class D (Note 2) 168,662
Custodian fees 87,643
Registration fees (Note 1e) 80,271
Professional fees 57,937
Directors' fees and expenses 14,542
Pricing fees 13,218
Other 40,250
--------------
Total expenses 34,073,020
--------------
Investment income--net 308,390,273
--------------
Realized & Realized loss on investments--net (60,509,428)
Unrealized Gain Change in unrealized depreciation on investments--net 124,773,619
(Loss) on --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 372,654,464
(Notes 1b, 1d & 3): ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
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: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 308,390,273 $ 684,885,587
Realized gain (loss) on investments--net (60,509,428) 157,220,808
Change in unrealized appreciation/depreciation
on investments--net 124,773,619 (1,302,774,162)
-------------- --------------
Net increase (decrease) in net assets resulting
from operations 372,654,464 (460,667,767)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (49,520,863) (100,823,273)
Shareholders Class B (211,771,335) (477,061,317)
(Note 1f): Class C (25,182,259) (58,977,217)
Class D (21,915,816) (48,023,780)
Realized gains on investments--net:
Class A (19,594,207) (6,089,227)
Class B (89,768,675) (32,962,441)
Class C (10,754,947) (4,011,904)
Class D (8,755,391) (3,027,610)
-------------- --------------
Net decrease in net assets resulting from
dividends and distributions to
shareholders (437,263,493) (730,976,769)
-------------- --------------
Capital Share Net decrease in net assets derived from capital
Transactions share transactions (558,175,350) (111,186,550)
(Note 4): -------------- --------------
Net Assets: Total decrease in net assets (622,784,379) (1,302,831,086)
Beginning of period 6,372,918,311 7,675,749,397
-------------- --------------
End of period $5,750,133,932 $6,372,918,311
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<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: 1999 1998 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.05 $ 8.29 $ 7.93 $ 7.80 $ 7.66
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .38 .75 .74 .75 .81
Realized and unrealized gain
(loss) on investments--net .08 (1.19) .36 .14 .14
---------- ---------- ---------- ---------- ----------
Total from investment operations .46 (.44) 1.10 .89 .95
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.38) (.75) (.74) (.76) (.81)
In excess of investment income--net -- -- -- --++++ --
Realized gain on investments--net (.15) (.05) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.53) (.80) (.74) (.76) (.81)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.98 $ 7.05 $ 8.29 $ 7.93 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.72%+++ (5.98%) 14.58% 11.95% 13.27%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .51%* .49% .51% .51% .55%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.85%* 9.40% 9.23% 9.57% 10.70%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 900,933 $ 922,820 $1,044,799 $ 947,479 $ 902,321
========== ========== ========== ========== ==========
Portfolio turnover 7.14% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<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: 1999 1998 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.05 $ 8.30 $ 7.93 $ 7.80 $ 7.66
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .35 .69 .68 .69 .75
Realized and unrealized gain
(loss) on investments--net .08 (1.20) .37 .15 .14
---------- ---------- ---------- ---------- ----------
Total from investment operations .43 (.51) 1.05 .84 .89
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.35) (.69) (.68) (.71) (.75)
In excess of investment income--net -- -- -- --++++ --
Realized gain on investments--net (.15) (.05) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.50) (.74) (.68) (.71) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.98 $ 7.05 $ 8.30 $ 7.93 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.32%+++ (6.80%) 13.86% 11.11% 12.41%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.28%* 1.25% 1.27% 1.28% 1.32%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.09%* 8.63% 8.46% 8.80% 9.81%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $3,986,564 $4,469,452 $5,495,488 $4,250,539 $3,220,767
========== ========== ========== ========== ==========
Portfolio turnover 7.14% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Amount is less than $.01 per share.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
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: 1999 1998 1997++ 1996++ 1995
<S> <S. <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.06 $ 8.30 $ 7.94 $ 7.81 $ 7.59
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .35 .69 .68 .68 .71
Realized and unrealized gain
(loss) on investments--net .08 (1.19) .36 .15 .22
---------- ---------- ---------- ---------- ----------
Total from investment operations .43 (.50) 1.04 .83 .93
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net ( .35) (.69) (.68) (.70) (.71)
In excess of investment income--net -- -- -- --+++++ --
Realized gain on investments--net (.15) (.05) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.50) (.74) (.68) (.70) (.71)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.99 $ 7.06 $ 8.30 $ 7.94 $ 7.81
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.30%+++ (6.72%) 13.66% 11.05% 12.92%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.33%* 1.31% 1.32% 1.33% 1.38%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.04%* 8.58% 8.39% 8.73% 9.06%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 457,588 $ 550,482 $ 638,626 $ 362,518 $ 135,019
========== ========== ========== ========== ==========
Portfolio turnover 7.14% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
+++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, 1999
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: 1999 1998 1997++ 1996++ 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of period $ 7.05 $ 8.30 $ 7.94 $ 7.80 $ 7.59
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .37 .73 .72 .72 .75
Realized and unrealized gain
(loss) on investments--net .08 (1.20) .36 .16 .21
---------- ---------- ---------- ---------- ----------
Total from investment operations .45 (.47) 1.08 .88 .96
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.37) (.73) (.72) (.74) (.75)
In excess of investment income--net -- -- -- --+++++ --
Realized gain on investments--net (.15) (.05) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.52) (.78) (.72) (.74) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.98 $ 7.05 $ 8.30 $ 7.94 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.59%+++ (6.32%) 14.29% 11.82% 13.37%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .76%* .74% .76% .76% .81%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.60%* 9.14% 8.95% 9.30% 9.70%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 405,049 $ 430,164 $ 496,836 $ 267,687 $ 102,676
========== ========== ========== ========== ==========
Portfolio turnover 7.14% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
+++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, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of three portfolios
in Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Portfolio's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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 has offered four classes of shares
under the Merrill Lynch Select Pricing SM System. Since March 24,
1998, shares of the Portfolio have no longer been available for
purchase (or exchange), except 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
Advisor program administered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
Options written or purchased are valued at the last sale price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price at the close of such
exchanges. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund, including valuations furnished by a pricing service retained
by the Fund which may use a matrix system for valuations.
(b) Derivative financial instruments--The 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.
* 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 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 ML & Co., which is the limited partner. The Fund has
also entered into a Distribution Agreement and Distribution Plans
with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"),
a division of Princeton Funds Distributor, Inc. ("PFD"), which is a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee 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, 1999, the
aggregate average daily net assets of the Fund's three Portfolio's
was approximately $8,110,592,000.
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, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended March 31, 1999, 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 $8,144 $74,300
Class D $5,867 $57,334
For the six months ended March 31, 1999, MLPF&S received contingent
deferred sales charges of $4,542,078 and $66,582 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively, and front-end sales charge waivers of $33,000 relating
to transactions in Class A Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1999, the Portfolio paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$12,644 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, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1999 were $413,744,448 and
$1,071,287,121, respectively.
Net realized gains (losses) for the six months ended March 31, 1999
and net unrealized losses as of March 31, 1999 were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $(60,511,097) $ (869,431,349)
Short-term investments 1,669 --
------------ --------------
Total $(60,509,428) $ (869,431,349)
============ ==============
As of March 31, 1999, net unrealized depreciation for Federal income
tax purposes aggregated $869,431,349, of which $158,901,283 related
to appreciated securities and $1,028,332,632 related to depreciated
securities. The aggregate cost of investments at March 31, 1999 for
Federal income tax purposes was $6,529,681,066.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $558,175,350 and $111,186,550 for the six months ended March 31,
1999 and for the year ended September 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 25,212,697 $ 177,479,062
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,827,336 26,576,265
------------- --------------
Total issued 29,040,033 204,055,327
Shares redeemed (30,894,177) (216,672,285)
------------- --------------
Net decrease (1,854,144) $ (12,616,958)
============= ==============
Class A Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 37,248,132 $ 300,632,499
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,991,792 39,932,897
------------- --------------
Total issued 42,239,924 340,565,396
Shares redeemed (37,279,139) (293,764,069)
------------- --------------
Net increase 4,960,785 $ 46,801,327
============= ==============
Class B Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 24,003,444 $ 167,852,952
Shares issued to shareholders
in reinvestment of dividends
and distributions 20,491,933 142,304,786
------------- --------------
Total issued 44,495,377 310,157,738
Automatic conversion of
shares (1,627,498) (11,342,659)
Shares redeemed (105,803,592) (736,369,667)
------------- --------------
Net decrease (62,935,713) $ (437,554,588)
============= ==============
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 105,658,317 $ 861,469,852
Shares issued to shareholders
in reinvestment of dividends
and distributions 26,492,259 212,040,844
------------- --------------
Total issued 132,150,576 1,073,510,696
Automatic conversion of
shares (2,243,101) (18,085,780)
Shares redeemed (158,335,084) (1,243,554,133)
------------- --------------
Net decrease (28,427,609) $ (188,129,217)
============= ==============
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
Class C Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 3,258,097 $ 22,903,805
Shares issued to shareholders
in reinvestment of dividends
anddistributions 2,958,720 20,553,123
------------- --------------
Total issued 6,216,817 43,456,928
Shares redeemed (18,745,365) (130,698,690)
------------- --------------
Net decrease (12,528,548) $ (87,241,762)
============= ==============
Class C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 24,007,667 $ 196,182,886
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,036,571 32,326,933
------------- --------------
Total issued 28,044,238 228,509,819
Shares redeemed (26,939,585) (212,824,675)
------------- --------------
Net increase 1,104,653 $ 15,685,144
============= ==============
Class D Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 5,167,385 $ 36,078,104
Automatic conversion of
shares 1,626,113 11,342,659
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,313,064 16,079,741
------------- --------------
Total issued 9,106,562 63,500,504
Shares redeemed (12,103,570) (84,262,546)
------------- --------------
Net decrease (2,997,008) $ (20,762,042)
============= ==============
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 17,388,402 $ 141,752,082
Automatic conversion of
shares 2,241,712 18,085,780
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,165,204 25,339,375
------------- --------------
Total issued 22,795,318 185,177,237
Shares redeemed (21,664,714) (170,721,041)
------------- --------------
Net increase 1,130,604 $ 14,456,196
============= ==============
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
March 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Christopher G. Ayoub, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Gerald M. Richard, Treasurer and Philip M. Mandel, Secretary of
Merrill Lynch Corporate Bond Fund, Inc. have recently retired. Their
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's
Board of Directors in wishing Mr. Richard and Mr. Mandel well in
their retirements.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
MERRILL LYNCH CORPORATE BOND FUND, INC.
INVESTMENT GRADE PORTFOLIO & INTERMEDIATE TERM PORTFOLIO
STARTS HERE
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
During the three-month period ended March 31, 1999, the US fixed-
income markets continued to exhibit a considerable degree of price
volatility. Early in the March quarter, the forward momentum of the
domestic economy, led by the strength in the consumer sector and the
impressive rebound of the stock market from the October sell-off,
dampened investor enthusiasm. The release of November's Federal Open
Market Committee meeting minutes heightened concerns, since the
Committee shifted monetary policy from an easing bias to a neutral
posture. Investors interpreted this as a sign that the Federal
Reserve Board may now be more worried about the strength of the
domestic economy and its long-term inflationary impact. As expected,
the front end of the yield curve reacted immediately, with the
greatest initial impact in the one-year-five-year sector. Although
Federal Reserve Board Chairman Alan Greenspan, as usual, gave little
indication of future monetary policy in his February Humphrey-
Hawkins testimony, investors chose to focus on the more cautious
portions of his presentation. Additionally, the Treasury market was
negatively impacted by the recent spike in long-term Japanese bond
yields and the concern that some Japanese investors would seek to
reduce their US dollar exposure.
By early March, investor sentiment became more positive as economic
releases indicated that the US economy was not growing at a pace
that would create resource shortages or inflationary pressures.
Accordingly, interest rates retraced a portion of their February
increase as investors sought to reinvest at the higher prevailing
yields. However, the rally was short-lived as investors once again
pushed interest rates higher in reaction to evidence that the
domestic economy was re-accelerating. Furthermore, inflationary
concerns heightened following the recent run-up in the price of oil
as the Organization of Petroleum Exporting Countries appeared to
reach a preliminary agreement on production levels. By the end of
March, the yield curve had steepened dramatically, with yields on
the two-year, five-year, ten-year and 30-year Treasury issues rising
by approximately 40 basis points (0.40%), 60 basis points, 60 basis
points and 55 basis points, respectively.
Portfolio Strategy
Throughout the quarter ended March 31, 1999, we maintained the
duration of the Investment Grade Portfolio and Intermediate Term
Portfolio in the range of 5.8 years--6.0 years and 4.0 years--4.3
years, respectively. This was within reasonable proximity to the
duration of each Portfolio's benchmark index, the unmanaged Merrill
Lynch Corporate Master Index and the unmanaged Merrill Lynch
Corporate BBB 5-10 Year Index, respectively. We believe this
strategy was appropriate given the amount of interest rate
volatility. Furthermore, factors such as a strong economy and
employment pressures greatly influenced interest rate expectations.
We tracked the benchmarks' duration closely in an effort to enhance
total returns.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
We also sought to benefit total returns through sector allocations
as we concentrated on increasing our holdings of issues with a
spread to US Treasury securities while simultaneously reducing the
Portfolios' positions in Treasury and agency securities. It was our
belief that corporate bond yields would continue to compress toward
Treasury yields, since the economy's strength should sustain
corporate profitability. We believed that investors would continue
to build the income component of their portfolio, and that issues
with a spread to US Treasury securities would remain in demand. We
earmarked the higher-quality corporate bonds, securities backed by
home equity loans, and commercial mortgage-backed securities as well
as mortgage-backed securities. As part of our strategy, we
emphasized higher-coupon issues in the corporate arena to build a
yield advantage that would help offset some price erosion should
interest rates begin to trend higher. Additionally, we limited our
corporate bond investments to only the larger, more liquid issues
and continued to avoid those industries where we believed bid/offer
relationships were too wide.
Relative to the benchmark unmanaged Merrill Lynch Corporate Master
Index, the Investment Grade Portfolio was overweighted in
cable/media companies, the gaming/lodging/leisure area, service
providers, information technology companies and Yankee corporate
bonds. With respect to the benchmark unmanaged Merrill Lynch
Corporate BBB5-10 Year Index, Intermediate Term Portfolio was
overweighted in electric utilities, real estate investment trusts,
beverage/bottling companies, food processors, cable/media companies,
airlines, the gaming/lodging/leisure area, information technology
companies and Yankee corporate bonds. On the other hand,
underweighted positions within Investment Grade Portfolio included
securities firms, chemical producers, metals/mining companies, the
paper/forest product area and Canadian sovereign bonds and corporate
bonds. Underweighted positions within Intermediate Term Portfolio
included supranationals, life insurers, the securities firms, the
gas and pipeline area, chemical producers, metals/mining companies,
the paper/forest product area and Canadian and Yankee sovereign
bonds and corporate bonds.
We expect to maintain these investment strategies in the upcoming
quarter. We do not believe that the Federal Reserve Board will
tighten monetary policy. In response to the recent spike in interest
rates, we extended each Portfolio's duration, since we believe
interest rates may trend downward during the next several months. We
would continue this strategy if interest rates were to reverse
course and temporarily resume their upward trend. With respect to
sector allocation, we are currently looking at cyclical industries
for good relative value and mortgage-backed, collateralized mortgage-
backed and asset-backed securities for continued diversification and
attractive levels of income.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and Portfolio Manager
May 13, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Corporate Bond
Fund, Inc.'s Board of Directors. We are pleased to announce that
Terry K. Glenn has been elected President and Director of the Fund.
Mr. Glenn has held the position of Executive Vice President of MLAM
since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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 "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<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 3/31/99
<S> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares** +5.78% -0.71% +130.37% 5.85%
Investment Grade Portfolio Class B Shares** +4.98 -0.89 +113.49 5.33
Investment Grade Portfolio Class C Shares** +4.92 -0.99 + 38.45 5.28
Investment Grade Portfolio Class D Shares** +5.52 -0.86 + 41.98 5.61
Intermediate Term Portfolio Class A Shares*** +5.71 -0.13 +127.14 5.69
Intermediate Term Portfolio Class B Shares*** +5.07 -0.25 + 48.83 5.23
Intermediate Term Portfolio Class C Shares*** +5.16 -0.16 + 38.39 5.23
Intermediate Term Portfolio Class D Shares*** +5.51 -0.15 + 41.02 5.59
<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 Portfolio's ten-year/since inception periods are Class A &
Class B Shares, ten years ended 3/31/99 and Class C & Class D
Shares, from 10/21/94 to 3/31/99.
***The Portfolio's ten-year/since inception periods are: Class A
Shares, for the ten years ended 3/31/99; Class B Shares, from
11/13/92 to 3/31/99; and Class C & Class D Shares, from 10/21/94 to
3/31/99.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/99 +5.78% +1.55%
Five Years Ended 3/31/99 +7.14 +6.26
Ten Years Ended 3/31/99 +8.70 +8.26
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 +4.98% +1.00%
Five Years Ended 3/31/99 +6.32 +6.32
Ten Years Ended 3/31/99 +7.88 +7.88
[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 3/31/99 +4.92% +3.93%
Inception (10/21/94)
through 3/31/99 +7.60 +7.60
[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 3/31/99 +5.52% +1.30%
Inception (10/21/94)
through 3/31/99 +8.21 +7.22
[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 3/31/99 +5.71% +4.65%
Five Years Ended 3/31/99 +7.06 +6.85
Ten Years Ended 3/31/99 +8.55 +8.44
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 +5.07% +4.08%
Five Years Ended 3/31/99 +6.51 +6.51
Inception (11/13/92)
through 3/31/99 +6.43 +6.43
[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 3/31/99 +5.16% +4.17%
Inception (10/21/94)
through 3/31/99 +7.59 +7.59
[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 3/31/99 +5.51% +4.45%
Inception (10/21/94)
through 3/31/99 +8.05 +7.80
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
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 US Treasury Bonds & Notes:
Obligations--1.2% AAA Aaa $ 3,000,000 5.50% due 3/31/2000 $ 2,998,242 $ 3,017,820
AAA Aaa 10,000,000 5.50% due 5/31/2000 10,065,625 10,062,500
AAA Aaa 1,250,000 5.25% due 8/15/2003 1,298,535 1,252,150
AAA Aaa 4,000,000 4.25% due 11/15/2003 3,961,563 3,850,640
AAA Aaa 1,750,000 4.75% due 11/15/2008 1,694,492 1,685,740
-------------- --------------
20,018,457 19,868,850
Asset-Backed Aames Mortgage Trust:
Securities**-- AAA Aaa 15,000,000 6.46% due 5/15/2028 14,995,313 15,075,000
7.4% AAA Aaa 4,000,000 5.912% due 9/15/2028 4,000,000 4,004,240
NR* Baa2 2,000,000 Bistro Trust 1998-1000,
6.58% due 3/26/2001 (a) 1,999,920 1,958,600
AAA Aaa 10,000,000 Citibank Credit Card Master Trust
I, 5.12% due 12/10/2008 (b) 9,996,100 9,949,500
AAA Aaa 5,000,000 Contimortgage Home Equity Loan Trust,
5.84% due 5/15/2016 4,998,955 5,006,800
NR* Aaa 5,000,000 DLJ Commercial Mortgage Corp.,
6.46% due 1/10/2009 5,074,219 5,049,650
AAA Aaa 760,000 EQCC Home Equity Loan Trust, 6.229% due
3/15/2013 766,086 764,834
A A3 9,000,000 First Dominion Funding I, 5.71% due
7/10/2013 (a)(b) 8,966,133 8,502,188
AAA Aaa 12,000,000 IMC Home Equity Loan Trust, 6.36% due
8/20/2022 11,997,673 12,094,320
The Money Store Home Equity Trust:
AAA Aaa 11,000,000 6.13% due 12/15/2000 11,000,000 11,033,990
AAA Aaa 7,645,000 6.04% due 8/15/2017 7,658,140 7,663,042
AAA Aaa 8,850,000 6.225% due 9/15/2023 8,848,685 8,903,366
Nationslink Funding Corporation:
AAA Aaa 7,300,000 6.476% due 7/20/2008 7,413,965 7,392,783
AAA Aaa 8,000,000 6.316% due 11/20/2008 8,120,000 7,990,480
NR* Aaa 12,000,000 Saxon Asset Securities Trust, 6.265%
due 7/25/2023 12,000,000 12,056,760
-------------- --------------
117,835,189 117,445,553
Banking--11.2% BBB+ A3 12,000,000 BB&T Corporation, 6.375% due
6/30/2005 (b) 12,050,880 12,087,840
BankAmerica Corp.:
A+ Aa2 3,000,000 6.65% due 5/01/2001 2,997,090 3,060,900
A+ Aa2 7,000,000 5.875% due 2/15/2009 6,952,330 6,689,620
A+ Aa2 3,645,000 Continental Bank NA, 7.875% due 2/01/2003 3,868,621 3,880,358
A+ Aa3 10,000,000 First Bank Minnesota, 6.375% due 3/15/2001 9,927,812 10,119,200
A- A2 11,000,000 First Union Corporation, 6.30% due
4/15/2028 (b) 10,958,420 10,938,576
BBB+ a1 5,500,000 First Union Institution Capital I,
8.04% due 12/01/2026 5,835,280 5,792,545
BBB+ a2 4,750,000 Fleet Capital Trust II, 7.92% due
12/11/2026 4,690,720 4,914,540
BBB+ A3 11,200,000 Great Western Bank, 9.875% due
6/15/2001 12,414,640 12,133,296
BBB+ a2 14,000,000 HSBC Americas Capital Trust, 7.808%
due 12/15/2026 (a) 13,838,440 13,514,382
A- A3 6,000,000 HSBC Americas Inc., 7% due 11/01/2006 5,949,600 6,132,300
A- A2 2,000,000 Key Bank NA, 7.55% due 9/15/2006 2,170,940 2,137,240
BBB+ A2 5,000,000 KeyCorp, 7.50% due 6/15/2006 5,401,050 5,349,050
BBB a1 16,400,000 KeyCorp Capital I, 5.74% due 7/01/2028 (b) 16,235,016 16,078,560
BBB+ Baa1 13,750,000 MBNA America Bank NA, 5.30% due
6/10/2004 (b) 13,537,837 13,204,400
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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>
Banking A- a2 $ 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 $ 6,000,000 $ 6,130,860
(concluded) A+ A2 3,500,000 Mellon Financial Co., 5.75% due
11/15/2003 3,493,525 3,471,615
A- A3 4,250,000 Merita Bank, 6.50% due 4/01/2009 4,248,257 4,222,247
NationsBank Corp.:
A Aa3 1,300,000 6.50% due 8/15/2003 1,336,075 1,326,572
A+ Aa2 2,000,000 6.125% due 7/15/2004 2,045,760 2,007,540
A Aa3 1,000,000 7.75% due 8/15/2004 1,077,770 1,078,690
A+ Aa2 7,750,000 6.375% due 5/15/2005 7,876,222 7,807,117
Norwest Corporation:
A+ Aa3 3,500,000 6.75% due 5/12/2000 3,494,785 3,555,580
A A1 5,000,000 6.625% due 3/15/2003 5,104,650 5,127,700
Providian National Bank:
BBB- Baa3 5,000,000 6.75% due 3/15/2002 4,996,700 5,025,300
BBB- Baa3 12,000,000 6.65% due 2/01/2004 11,983,920 11,753,640
-------------- --------------
178,486,340 177,539,668
Canadian AA+ Aa2 2,000,000 Province of Alberta, 4.875% due
Provinces++-- 10/29/2003 (1) 1,993,080 1,938,600
1.7% AA Aa2 6,000,000 Province of British Columbia, 5.375%
due 10/29/2008 (1) 5,968,860 5,732,220
AA- Aa3 2,500,000 Province of Manitoba, 5.50% due
10/01/2008 (1) 2,484,050 2,425,625
AA- Aa3 8,200,000 Province of Ontario, 5.50% due
10/01/2008 (1) 8,151,456 7,900,208
Province of Quebec (1):
A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,618,360
A+ A2 1,500,000 7.125% due 2/09/2024 1,562,415 1,566,450
-------------- --------------
26,934,221 26,181,463
Finance--4.7% Associates Corporation of North America:
AA- Aa3 10,500,000 5.75% due 11/01/2003 10,495,905 10,432,170
AA- Aa3 500,000 7.40% due 5/15/2006 544,845 532,780
AA- Aa3 2,750,000 6.95% due 11/01/2018 2,733,830 2,775,327
A A2 9,500,000 Beneficial Corporation, 6.80% due 9/16/2003 9,500,000 9,676,605
A Aa3 5,950,000 CIT Capital Trust I, 7.70% due 2/15/2027 6,259,341 5,840,151
A+ Aa3 6,000,000 CIT Group Inc., 5.50% due 2/15/2004 5,978,040 5,827,380
BBB+ Baa1 6,000,000 ComDisco Inc., 6% due 1/30/2002 5,983,400 6,066,858
Commercial Credit Co.:
A+ Aa3 5,000,000 6.45% due 7/01/2002 5,009,800 5,092,400
A+ Aa3 2,000,000 6.125% due 12/01/2005 2,049,240 1,979,740
A+ Aa3 5,000,000 6.75% due 7/01/2007 5,143,700 5,125,200
A+ Aa3 1,800,000 6.25% due 1/01/2008 1,836,846 1,787,616
Finova Capital Corp.:
A- Baa1 4,500,000 6.45% due 6/01/2000 4,524,435 4,539,105
A- Baa1 7,850,000 6.25% due 11/01/2002 7,819,934 7,898,905
BBB Baa3 6,180,000 Newcourt Credit Group, 6.875% due
2/16/2005 (a) 6,159,050 6,317,598
-------------- --------------
74,038,366 73,891,835
Finance-- Bear Stearns Companies, Inc.:
Other-- A A2 2,000,000 6.50% due 7/05/2000 1,996,360 2,016,660
7.7% A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,031,980
A A2 1,000,000 6.875% due 10/01/2005 1,027,720 1,020,680
Citigroup Inc.:
AA- Aa2 3,000,000 9.50% due 3/01/2002 3,163,980 3,282,639
AA- Aa2 6,500,000 7.875% due 5/15/2025 6,547,818 7,178,418
BBB- Baa2 6,400,000 Commercial Net Lease Realty, 7.125% due
3/15/2008 6,382,656 6,088,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- Donaldson Lufkin & Jenrette Inc.:
Other A- A3 $11,000,000 6.875% due 11/01/2005 $ 10,952,615 $ 11,112,310
(concluded) A- A3 3,500,000 6.50% due 6/01/2008 3,485,475 3,419,605
A A2 7,500,000 Equitable Life Assurance Society
of the US, 7.70% due 12/01/2015 (a) 7,448,310 8,031,165
BBB- Baa3 4,600,000 Hospitality Properties Trust, 7%
due 3/01/2008 4,591,720 4,285,038
Lehman Brothers Holdings, Inc.:
A Baa1 4,000,000 6.50% due 10/01/2002 3,996,200 3,998,880
A Baa1 8,500,000 7.125% due 9/15/2003 8,654,380 8,683,600
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,940,322 4,031,765
Morgan Stanley, Dean Witter,
Discover & Co.:
A+ Aa3 3,500,000 6.75% due 8/15/2000 3,486,805 3,556,175
A+ Aa3 8,000,000 6.09% due 3/09/2011 (b) 7,998,720 8,036,880
Paine Webber Group Inc.:
BBB+ Baa1 3,250,000 9.25% due 12/15/2001 3,503,533 3,485,463
BBB+ Baa1 7,500,000 7.99% due 6/09/2017 7,500,000 7,600,208
A+ A2 5,300,000 Prudential Insurance Co., 6.375% due
7/23/2006 (a) 5,276,574 5,270,622
Salomon Smith Barney Holdings, Inc.:
A Aa3 10,000,000 7.125% due 10/01/2006 10,402,900 10,439,790
A Aa3 2,850,000 7.375% due 5/15/2007 2,847,464 3,034,110
BBB+ Baa1 1,000,000 Simon Debartolo, 6.75% due 6/15/2005 990,460 983,781
BBB Baa2 6,605,000 Spieker Properties LP, 7.35% due
12/01/2017 6,586,828 6,404,796
BBB Baa3 9,700,000 Storage USA, 7.45% due 7/01/2018 9,688,554 8,779,907
-------------- --------------
122,463,074 122,772,472
Industrial-- Anheuser-Busch Companies Inc.:
Consumer A+ A1 3,000,000 8.75% due 12/01/1999 3,367,590 3,069,240
Goods--3.9% A+ A1 12,990,000 6.50% due 1/01/2028 13,856,953 12,622,513
A A2 10,000,000 Avon Products Inc., 6.25% due
5/01/2018 (a)(b) 9,987,600 10,078,870
BBB- Baa3 2,500,000 Flowers Industries Inc., 7.15%
due 4/15/2028 2,486,750 2,347,700
Nabisco Inc.:
BBB Baa2 9,000,000 6% due 2/15/2011 (b) 8,997,750 8,959,410
BBB Baa2 4,000,000 7.55% due 6/15/2015 3,988,860 4,122,120
Phillip Morris Companies, Inc.:
A A2 9,500,000 9% due 1/01/2001 9,698,815 9,995,710
A A2 5,000,000 6.15% due 3/15/2010 (b) 4,997,400 5,033,650
A A2 5,000,000 7.75% due 1/15/2027 5,361,500 5,261,050
-------------- --------------
62,743,218 61,490,263
Industrial-- BBB Baa2 5,000,000 ANR Pipeline, 9.625% due 11/01/2021 6,492,300 6,413,350
Energy--4.4% BBB+ Baa1 5,000,000 Apache Finance Property Ltd.,
7% due 3/15/2009 4,966,850 5,099,265
AA+ Aa1 4,075,000 BP America Inc., 9.375% due 11/01/2000 4,488,287 4,312,287
A- A3 9,420,000 Burlington Resources, 7.375%
due 3/01/2029 9,395,320 9,714,950
BBB- Baa3 3,000,000 CMS Panhandle Holding Co., 6.50% due
7/15/2009 (a) 2,997,690 2,993,472
BBB- Baa3 3,500,000 Coastal Corp., 6.375% due 2/01/2009 3,489,640 3,470,190
Occidental Petroleum Corp.:
BBB Baa3 7,250,000 6.50% due 4/01/2005 7,208,675 7,068,387
BBB Baa3 8,750,000 7.65% due 2/15/2006 8,783,863 8,959,650
BBB+ Baa1 14,600,000 Sonat Inc., 7% due 2/01/2018 14,836,782 14,408,156
A+ A1 5,750,000 Texaco Capital Inc., 8.625% due
11/15/2031 7,583,733 7,094,408
-------------- --------------
70,243,140 69,534,115
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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-- Applied Materials Inc.:
Manufacturing-- BBB+ A3 $ 5,000,000 6.75% due 10/15/2007 $ 4,996,750 $ 5,034,550
14.2% BBB+ A3 13,000,000 7.125% due 10/15/2017 12,911,080 12,485,460
A+ A2 2,800,000 Danaher Corp., 6% due 10/15/2008 2,784,964 2,722,496
Equistar Chemicals LP (a):
BBB- Baa3 6,000,000 8.50% due 2/15/2004 5,999,520 6,081,762
BBB- Baa3 2,200,000 8.75% due 2/15/2009 2,253,196 2,239,310
First Data Corporation:
A A2 11,500,000 6.75% due 7/15/2005 11,911,930 11,647,430
A A2 10,000,000 6.375% due 12/15/2007 9,974,300 10,088,400
A A1 7,000,000 Ford Motor Company, 8.90% due 1/15/2032 8,650,180 8,753,640
Ford Motor Credit Company:
A A1 5,000,000 8.20% due 2/15/2002 5,328,850 5,313,250
A A1 5,000,000 8% due 6/15/2002 5,286,350 5,311,300
A A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,330,100
A A1 1,000,000 7.75% due 3/15/2005 999,090 1,080,480
A A1 10,000,000 5.104% due 8/27/2006 (b) 9,993,068 9,977,200
General Electric Capital Corp.:
AAA Aaa 500,000 8.75% due 5/21/2007 611,680 587,650
AAA Aaa 4,305,000 8.50% due 7/24/2008 5,228,853 5,066,124
General Motors Acceptance Corp.:
A A2 4,000,000 6.625% due 9/19/2002 3,915,080 4,098,560
A A2 2,000,000 5.875% due 1/22/2003 2,022,400 1,998,140
A A2 8,170,000 7.125% due 5/01/2003 8,642,634 8,522,454
A A2 10,000,000 General Motors Corporation, 7.70% due
4/15/2016 10,911,500 10,909,100
BBB- Baa2 9,800,000 Georgia-Pacific Group, 7.25%
due 6/01/2028 9,841,198 9,688,280
A- Baa1 3,500,000 Goodrich (BF) Co., 7% due 4/15/2038 3,479,385 3,267,040
International Business Machines Corp.:
A+ A1 5,000,000 5.25% due 12/01/2003 4,992,300 4,911,730
A+ A1 10,000,000 6.50% due 1/15/2028 10,313,400 9,777,200
A- Baa1 3,000,000 LaFarge Corp., 6.875% due 7/15/2013 2,992,770 2,928,450
BBB+ Baa1 5,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 4,995,950 5,110,450
BBB+ Baa1 11,000,000 Loral Corp., 8.375% due 6/15/2024 11,056,040 12,627,340
Lucent Technologies Inc.:
A A2 2,000,000 5.50% due 11/15/2008 2,018,460 1,924,720
A A2 7,050,000 6.50% due 1/15/2028 7,295,727 6,912,454
Martin Marietta Corp.:
BBB+ Baa1 6,500,000 6.50% due 4/15/2003 6,539,845 6,607,120
BBB+ Baa1 4,000,000 7.375% due 4/15/2013 3,846,440 4,264,720
BBB Baa2 6,875,000 Meritor Automotive Inc., 6.80%
due 2/15/2009 6,844,269 6,854,994
AA- A1 5,000,000 Motorola Inc., 7.60% due 1/01/2007 5,414,700 5,473,300
Raytheon Co.:
BBB Baa1 2,750,000 6.30% due 3/15/2005 2,743,812 2,769,552
BBB Baa1 4,000,000 7% due 11/01/2028 3,998,040 3,997,520
BBB Ba1 14,000,000 Seagate Technology Inc., 7.125%
due 3/01/2004 13,975,500 13,396,460
BBB Baa2 7,300,000 Union Carbide Corp., 6.25% due 6/15/2003 7,190,646 7,191,741
-------------- --------------
225,100,107 224,950,477
Industrial-- A A2 10,000,000 Bass North America, Inc., 8.125%
Services-- due 3/31/2002 10,250,610 10,545,300
14.7% A A2 8,000,000 Carnival Corp., 7.70% due 7/15/2004 8,076,380 8,538,960
BBB- Baa3 10,000,000 Circus Circus Enterprises, Inc., 6.70%
due 11/15/2096 9,977,700 9,535,400
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
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-- BBB- Baa3 $ 3,000,000 Comcast Cable Communications,
Services 6.20% due 11/15/2008 $ 2,992,050 $ 2,960,310
(concluded) A- Baa1 11,000,000 Computer Associates International,
Inc., 6.375% due 4/15/2005 10,941,810 10,599,050
BBB Baa1 5,000,000 Dillard's Inc., 9.125% due 8/01/2011 6,054,000 5,757,850
A A2 13,015,995 Disney Custom Repackaged Asset
Vehicle-403, 6.85% due
1/10/2007 (a)** 13,007,275 13,277,617
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 8,141,420
A A1 8,470,000 May Department Stores Co., 6.70%
due 9/15/2028 8,629,862 8,364,633
AAA Aaa 3,000,000 Merck & Co. Inc., 5.95% due 12/01/2028 2,975,100 2,780,220
A A3 2,500,000 National Service Industries Inc.,
6% due 2/01/2009 2,493,475 2,403,925
BBB- Baa3 12,445,000 News America Holdings, Inc., 8.625%
due 2/01/2003 13,585,486 13,506,185
BBB- Baa3 6,000,000 News America Inc., 7.25% due 5/18/2018 6,279,960 6,035,556
A A2 5,750,000 Nordstrom, Inc., 6.95% due 3/15/2028 5,824,520 5,768,055
Oracle Corporation:
BBB+ Baa2 5,000,000 6.72% due 2/15/2004 5,000,000 5,022,400
BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 4,016,840
BBB+ Baa1 5,000,000 Rite Aid Corp., 6.875% due 12/15/2028 (a) 5,139,500 4,619,005
BBB- Baa3 12,500,000 Royal Caribean Cruises Ltd., 6.75%
due 3/15/2008 12,421,548 12,280,500
BBB Baa2 4,000,000 Safeway Inc., 5.875% due 11/15/2001 3,988,520 3,997,212
A- A2 8,000,000 Sears Roebuck Acceptance Corp., 6.82%
due 10/17/2002 8,016,320 8,228,160
Service Corporation International:
BBB Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 7,036,610
BBB Baa1 8,500,000 7.20% due 6/01/2006 8,263,700 8,534,425
BBB Baa1 7,000,000 6.30% due 3/15/2020 (b) 6,992,300 6,873,790
AA- A2 8,980,000 TCI Communications Inc., 8.75%
due 8/01/2015 10,534,079 10,914,023
Time Warner Entertainment Co.:
BBB Baa2 6,000,000 10.15% due 5/01/2012 7,356,180 7,820,520
BBB Baa2 9,900,000 8.375% due 3/15/2023 10,525,871 11,459,547
BBB+ Baa2 5,350,000 USA Waste Services, 7% due 7/15/2028 5,290,455 5,201,752
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50%
due 9/15/2024 14,488,240 16,088,348
Walt Disney Company:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,597,240
A A2 8,000,000 5.125% due 12/15/2003 7,989,760 7,817,680
-------------- --------------
230,630,701 233,722,533
Industrial-- BBB+ Baa2 2,200,000 Burlington North Santa Fe,
Transportation-- 6.75% due 3/15/2029 2,185,964 2,163,216
3.2% BBB Baa2 4,000,000 CSX Corp., 7.90% due 5/01/2017 4,550,200 4,368,320
Delta Airlines:
BBB- Baa3 4,144,000 10.125% due 5/15/2010 5,185,014 5,190,484
BBB- Baa3 6,000,000 9.75% due 5/15/2021 7,495,920 7,462,680
BBB Baa2 9,000,000 Federal Express Corporation, 9.65%
due 6/15/2012 10,137,590 10,949,310
Southwest Airlines Co.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,727,300
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,146,780
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,275,310
BBB- Baa3 4,000,000 Union Pacific Corp., 6.625%
due 2/01/2008 3,964,880 4,032,960
-------------- --------------
49,818,778 50,316,360
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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-Backed Federal Home Loan Mortgage Corporation:
Securities**-- AAA Aaa $ 9,679,000 6% due 10/15/2018 $ 9,832,503 $ 9,739,494
0.9% AAA Aaa 2,000,000 6% due 6/15/2023 1,989,375 1,999,360
AAA Aaa 2,000,000 6.35% due 9/15/2023 2,022,734 2,022,500
-------------- --------------
13,844,612 13,761,354
Utilities-- A- A2 8,700,000 ALLTEL Corporation, 6.75% due 9/15/2005 8,566,020 9,001,194
Communications-- BBB Baa3 4,000,000 AT&T Capital Corp., 7.50% due 11/15/2000 3,996,280 4,102,080
6.8% AA+ Aa3 6,000,000 Ameritech Capital Funding, 6.45%
due 1/15/2018 6,300,600 5,896,140
AA Aa2 6,350,000 Bell Telephone Company of Pennsylvania,
7.375% due 7/15/2007 7,090,029 6,886,892
A A3 4,650,000 Frontier Corp., 6% due 10/15/2013 (b) 4,643,676 4,559,278
AA- A2 9,500,000 GTE California, Inc., 8.07% due 4/15/2024 10,152,935 10,157,495
GTE Corp.:
A Baa1 7,500,000 9.375% due 12/01/2000 8,235,170 7,942,875
A Baa1 3,600,000 6.84% due 4/15/2018 3,700,728 3,643,380
MCI WorldCom Inc.:
BBB+ Baa2 11,000,000 7.75% due 4/01/2007 11,977,665 12,051,270
BBB+ Baa2 6,000,000 6.95% due 8/15/2028 5,943,900 6,093,600
Southwestern Bell Telecommunications Corp.:
AA Aa3 2,000,000 6.125% due 3/01/2000 2,011,250 2,014,860
AA Aa3 5,000,000 6.375% due 11/15/2007 5,023,800 5,112,700
Sprint Capital Corporation:
A- Baa1 5,000,000 5.70% due 11/15/2003 4,999,150 4,934,500
A- Baa1 8,000,000 6.875% due 11/15/2028 7,986,880 7,899,200
US West Capital Funding Inc.:
A- A3 4,000,000 6.375% due 7/15/2008 4,271,560 4,069,280
A- A3 8,920,000 6.50% due 11/15/2018 8,868,799 8,729,380
A- A3 5,000,000 6.875% due 7/15/2028 5,333,900 5,003,650
-------------- --------------
109,102,342 108,097,774
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison,
Electric-- 7.13% due 7/01/2007 6,137,177 6,140,569
5.5% BBB- Baa3 5,000,000 Commonwealth Edison, Inc., 6.95% due
7/15/2018 4,978,600 5,053,000
A+ A1 9,115,000 Consolidated Edison, Inc., 6.25%
due 2/01/2008 9,115,000 9,231,216
BBB+ Baa3 5,000,000 Consumers Energy, 6.375% due 2/01/2008 4,951,650 4,997,375
AA+ Aa1 2,500,000 Emerson Electric Co., 5.85% due 3/15/2009 2,497,575 2,488,725
A A1 10,000,000 Mississippi Power, 6.05% due 5/01/2003 10,224,800 10,050,200
AA- A1 8,000,000 Pacific Gas and Electric Company,
6.25% due 8/01/2003 8,149,200 8,133,280
A- A3 3,000,000 Pennsylvania Power & Light Co.,
6.125% due 5/01/2006 (b) 2,998,200 3,029,370
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,000,000 5,217,200
BBB Baa3 6,000,000 Texas Utilities, 5.94% due 10/15/2011 (b) 6,000,000 6,049,380
Texas Utilities Electric Company:
AAA Aaa 6,971,000 6.375% due 10/01/2004 6,995,198 7,105,171
BBB- Baa1 5,000,000 8.175% due 1/30/2037 5,000,000 5,057,000
Virginia Electric & Power Co.:
A- A3 5,000,000 5.73% due 11/25/2008 5,000,000 4,826,755
A A2 8,500,000 8.625% due 10/01/2024 8,377,160 9,478,350
-------------- --------------
85,424,560 86,857,591
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee AA- Aa3 $ 6,000,000 ABN AMRO Bank NV (Chicago), 7.125%
Corporates++-- due 6/18/2007 (2) $ 5,997,060 $ 6,284,820
9.9% AmVescap PLC (2):
BBB A3 3,000,000 6.375% due 5/15/2003 2,994,570 2,995,800
BBB A3 9,000,000 6.60% due 5/15/2005 8,987,645 8,877,960
A+ A1 6,000,000 Australia & New Zealand Banking Group
Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,356,160
A A1 7,500,000 Banco Central Hispanoamercano SA
(Cayman Islands), 7.70% due
7/15/2006 (2) 7,973,775 7,912,350
AAA Aaa 13,000,000 Banco Santander-Chile, 6.50% due
11/01/2005 (2) 12,938,770 12,784,486
A- Baa1 5,000,000 Cable & Wireless Communication,
6.75% due 3/06/2008 (3) 5,196,350 5,045,550
BBB Baa2 5,550,000 Canadian National Railway Co.,
6.90% due 7/15/2028 (3) 5,526,135 5,477,628
Enersis SA (3):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,366,850
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,826,160
Fairfax Financial Holdings Ltd. (2):
BBB+ Baa3 300,000 7.375% due 4/15/2018 299,346 281,088
BBB+ Baa3 9,800,000 7.75% due 7/15/2037 (a) 9,751,098 9,192,498
Ford Capital BV (2):
A A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,095,400
A A1 3,995,000 9.50% due 6/01/2010 4,430,215 4,922,559
A- A3 8,000,000 Israel Electric Corp. Ltd., 7.75% due
3/01/2009 (a)(3) 7,991,760 8,152,808
BBB+ A3 1,500,000 Koninklijke (Royal) Philips Electronics
NV, 7.75% due 4/15/2004 (3) 1,602,615 1,562,730
A Aa3 2,000,000 Midland Bank PLC, 7.65% due 5/01/2025 (2) 2,191,680 2,073,040
A A2 6,500,000 Norsk Hydro A/S, 6.70% due 1/15/2018 (3) 6,466,720 6,152,594
BBB Baa3 5,443,000 Petro Geo-Services ASA, 7.125% due
3/30/2028 (3) 5,045,121 5,066,889
BBB Baa3 2,000,000 Saga Petroleum ASA, 7.25% due
9/23/2027 (3) 1,979,980 1,776,040
A+ Aa3 4,000,000 Sony Corporation, 6.125% due
3/04/2003 (3) 3,991,520 4,045,720
AA Aa2 15,500,000 Swiss Bank Corp. of New York, 7.375%
due 6/15/2017 (2) 16,581,680 16,047,460
A- A2 6,000,000 Trans-Canada Pipelines, 6.49% due
1/21/2009 (3) 6,000,000 6,065,040
Tyco International Group SA (3):
A- Baa1 7,000,000 5.875% due 11/01/2004 (a) 6,997,130 6,884,178
A- Baa1 10,500,000 7% due 6/15/2028 10,424,295 10,379,985
A A2 2,000,000 WMC Finance (USA) Ltd., 6.75% due
12/01/2006 (2) 2,029,600 1,979,060
-------------- --------------
158,405,095 157,604,853
Yankee AA+ Aa2 1,500,000 Canadian Government Bond, 5.25% due
Sovereign++-- 11/05/2008 (1) 1,499,655 1,440,555
0.3% BBB+ A3 4,000,000 People's Republic of China, 7.30% due
12/15/2008 (1) 3,994,400 3,963,892
-------------- --------------
5,494,055 5,404,447
Total Investments in Bonds &
Notes--97.7% 1,550,582,255 1,549,439,608
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face Value
Industries Rating Rating Amount Issue Cost (Note 1a)
Short-Term Securities Investment Grade Portfolio
<S> <C> <S> <C> <C>
Repurchase $19,069,000 Warburg Dillon Read LLC, purchased on
Agreements***--1.2% 3/31/1999 to yield 4.89% to 4/01/1999 $ 19,069,000 $ 19,069,000
Total Investments in
Short-Term Securities--1.2% 19,069,000 19,069,000
Total Investments--98.9% $1,569,651,255 1,568,508,608
==============
Other Assets Less Liabilities--1.1% 18,074,112
--------------
Net Assets--100.0% $1,586,582,720
==============
<FN>
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(b)Floating Rate Note.
*Not Rated.
**Subject to principal paydowns.
***Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++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.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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 US Treasury Bonds & Notes:
Obligations-- AAA Aaa $ 2,000,000 5.50% due 5/31/2000 $ 2,013,125 $ 2,012,500
2.3% AAA Aaa 2,000,000 7.875% due 11/15/2004 2,252,500 2,246,880
AAA Aaa 6,800,000 7% due 7/15/2006 7,428,609 7,439,608
AAA Aaa 100,000 5.625% due 5/15/2008 106,219 101,797
-------------- --------------
11,800,453 11,800,785
Asset-Backed NR* Baa2 3,500,000 Bistro Trust 1998-1000, 6.58% due
Securities++-- 3/26/2001 (b) 3,499,860 3,427,550
7.9% AAA NR* 2,862,745 DLJ Commercial Mortgage Corp., 6.11% due
12/10/2007 2,893,944 2,873,108
AAA Aaa 2,000,000 First Bank, Corporate Card Master Trust,
6.40% due 2/15/2003 1,997,545 2,026,860
NR* Aaa 10,000,000 Morgan Stanley Capital I, 5.91% due
4/15/2008 10,051,170 9,922,100
AAA Aaa 8,000,000 Premier Auto Trust, 5.82% due 2/01/2001 7,999,360 8,030,000
NR* NR* 10,000,000 Spinnaker I, 5.938% due 5/01/2001 (a)(b) 10,000,000 9,800,000
BBB- Baa1 5,000,000 York Funding Ltd., 6% due
6/15/2005 (a)(b) 5,000,000 4,000,000
-------------- --------------
41,441,879 40,079,618
Banking--12.7% BankAmerica Corp.:
A Aa3 4,000,000 7.50% due 10/15/2002 4,268,880 4,218,400
A+ Aa2 3,000,000 7.125% due 5/12/2005 2,956,500 3,137,490
A A2 3,500,000 Bank of New York Co., Inc., 7.875% due
11/15/2002 3,873,450 3,727,885
A+ Aa3 5,000,000 Bank One Corp., 5.625% due 2/17/2004 4,980,000 4,898,450
A A1 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,064,620
A- A3 2,000,000 HSBC Americas Inc., 7% due 11/01/2006 2,016,410 2,044,100
A- A2 2,800,000 Key Bank NA, 7.55% due 9/15/2006 3,039,316 2,992,136
A A3 6,000,000 Mellon Financial Co., 6.875% due 3/01/2003 5,483,220 6,185,700
A- A3 1,500,000 Merita Bank, 6.50% due 4/01/2009 1,499,385 1,490,205
A+ Aa2 4,500,000 NationsBank Corp., 6.65% due 4/09/2002 4,426,620 4,593,195
Norwest Corp.:
A+ Aa3 2,000,000 6.125% due 10/15/2000 1,996,440 2,021,820
A A1 1,000,000 6.625% due 3/15/2003 1,003,060 1,025,540
BBB- Baa3 5,000,000 Providian National Bank, 6.75% due
3/15/2002 4,996,700 5,025,300
A A2 3,750,000 Republic of New York Corp., 9.70% due
2/01/2009 4,672,460 4,613,475
BBB+ A3 9,000,000 Washington Mutual Inc., 7.25% due
8/15/2005 8,930,520 9,264,150
-------------- --------------
63,691,781 64,302,466
Canadian AA Aa2 2,000,000 Province of British Columbia,
Provinces**--3.1% 5.375% due 10/29/2008 (1) 1,989,620 1,910,740
Province of Ontario (1):
AA- Aa3 5,000,000 7.75% due 6/04/2002 5,341,550 5,296,400
AA- Aa3 3,000,000 5.50% due 10/01/2008 2,982,240 2,890,320
A+ A2 5,000,000 Province of Quebec, 8.80% due
4/15/2003 (1) 5,538,670 5,515,300
-------------- --------------
15,852,080 15,612,760
Finance--7.4% American General Finance:
A+ A2 2,200,000 7.45% due 7/01/2002 2,326,940 2,302,850
A+ A2 2,400,000 7.25% due 5/15/2005 2,583,432 2,537,088
AA- Aa3 3,500,000 Associates Corporation of North America,
5.75% due 11/01/2003 3,498,635 3,477,390
A A2 9,250,000 Beneficial Corporation, 6.80% due
9/16/2003 9,250,000 9,421,957
CIT Group Inc.:
A+ Aa3 5,000,000 5.50% due 2/15/2004 4,981,700 4,856,150
A+ Aa3 1,000,000 6.625% due 6/15/2005 1,003,390 1,017,400
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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 Commercial Credit Co.:
(concluded) A+ Aa3 $ 3,000,000 6.45% due 7/01/2002 $ 3,005,880 $ 3,055,440
A+ Aa3 2,080,000 6.25% due 1/01/2008 2,122,578 2,065,690
A- Baa1 2,500,000 Finova Capital Corp., 6.25% due
11/01/2002 2,490,425 2,515,575
A A2 6,000,000 WMC Finance (USA) Ltd., 6.75% due
12/01/2006 6,088,800 5,937,180
-------------- --------------
37,351,780 37,186,720
Finance-- BBB Baa3 2,500,000 AT&T Capital Corp., 7.50% due 11/15/2000 2,497,675 2,563,800
Other--8.2% A A2 1,750,000 Bear Stearns Companies, Inc., 8.75% due
3/15/2004 1,912,260 1,932,927
BBB Baa2 5,000,000 Centerpoint Properties, 6.75% due
4/01/2005 4,978,150 4,780,250
AA- Aa2 2,000,000 Citigroup Inc., 9.50% due 3/01/2002 2,168,400 2,188,426
BBB- Baa2 5,000,000 Commercial Net Lease Realty, 7.125% due
3/15/2008 4,986,450 4,756,250
A- A3 2,000,000 Donaldson Lufkin & Jenrette Inc., 6% due
12/01/2001 1,997,600 2,007,938
BBB- Baa3 4,250,000 Hospitality Properties Trust, 7%
due 3/01/2008 4,242,350 3,959,002
A Baa1 5,000,000 Lehman Brothers Holdings, Inc., 6.50% due
10/01/2002 4,974,200 4,998,600
A+ Aa3 1,400,000 Morgan Stanley, Dean Witter, Discover & Co.,
5.625% due 1/20/2004 1,393,630 1,382,542
BBB+ Baa1 2,000,000 Paine Webber Group Inc., 6.45% due
12/01/2003 2,000,000 1,997,238
Salomon Smith Barney Holdings, Inc.:
A Aa3 2,000,000 6.50% due 3/01/2000 2,000,000 2,020,700
A Aa3 2,500,000 6.25% due 1/15/2005 2,494,525 2,489,160
A Aa3 1,400,000 7.125% due 10/01/2006 1,456,406 1,461,571
A Aa3 1,000,000 7.375% due 5/15/2007 999,110 1,064,600
BBB+ Baa1 4,000,000 Simon Debartolo, 6.75% due 6/15/2005 3,961,840 3,935,124
-------------- --------------
42,062,596 41,538,128
Industrial-- A+ A1 5,481,000 Anheuser-Busch Companies Inc.,
Consumer 8.75% due 12/01/1999 6,189,909 5,607,501
Goods--5.1% A A2 2,000,000 Avon Products Inc., 6.25% due
5/01/2018 (a)(b) 1,997,520 2,015,774
Nabisco Inc.:
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 3,044,820
BBB Baa2 6,000,000 6% due 2/15/2011 (a) 5,998,500 5,972,940
Phillip Morris Companies, Inc.:
A A2 3,500,000 9% due 1/01/2001 3,576,195 3,682,630
A A2 4,000,000 7.25% due 1/15/2003 4,196,640 4,155,120
A A2 1,000,000 6.15% due 3/15/2010 (a) 999,480 1,006,730
-------------- --------------
25,952,544 25,485,515
Industrial-- BBB Baa3 3,000,000 Occidental Petroleum Corp., 6.50% due
Energy--2.2% 4/01/2005 2,982,900 2,924,850
A+ A1 2,000,000 Texaco Capital Inc., 9% due 12/15/1999 2,342,460 2,052,160
BBB Baa2 6,000,000 Ultramar Credit, 8.625% due 7/01/2002 6,521,940 6,315,000
-------------- --------------
11,847,300 11,292,010
Industrial-- A A2 3,000,000 AlliedSignal Inc., 6.20% due 2/01/2008 2,995,980 2,970,780
Manufacturing-- BBB+ A3 4,000,000 Applied Materials Inc., 6.65% due
13.2% 9/05/2000 4,000,000 4,046,320
BBB Ba1 3,000,000 Blount Inc., 7% due 6/15/2005 2,968,650 2,929,320
A A3 3,500,000 Corning Inc., 6.30% due 3/01/2009 3,498,985 3,514,560
A+ A2 1,500,000 Danaher Corp., 6% due 10/15/2008 1,491,945 1,458,480
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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-- Ford Motor Credit Company,:
Manufacturing A A1 $ 3,000,000 8.20% due 2/15/2002 $ 3,211,740 $ 3,187,950
(concluded) A A1 2,700,000 5.103% due 8/27/2006 (a) 2,698,128 2,693,844
A A1 4,375,000 7.20% due 6/15/2007 4,783,100 4,621,969
AAA Aaa 8,500,000 General Electric Capital Corp.,
8.50% due 7/24/2008 10,324,100 10,002,800
General Motors Acceptance Corp.:
A A2 2,000,000 9% due 10/15/2002 2,213,880 2,197,540
A A2 6,000,000 8.50% due 1/01/2003 6,539,280 6,520,140
A A2 5,000,000 6.375% due 5/01/2008 5,132,550 5,007,300
AA- A1 4,000,000 Motorola Inc., 5.80% due 10/15/2008 3,994,640 3,930,320
A A3 2,000,000 National Service Industries Inc., 6% due
2/01/2009 1,994,780 1,923,140
BBB Baa1 5,000,000 Raytheon Co., 6.45% due 8/15/2002 5,173,850 5,083,000
BBB Ba1 4,000,000 Seagate Technology Inc., 7.125%
due 3/01/2004 3,993,000 3,827,560
A A2 3,000,000 Xerox Credit Corp., 5.50% due 11/15/2003 3,006,870 2,960,088
-------------- --------------
68,021,478 66,875,111
Industrial-- A A2 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 2,825,520 3,037,320
Services--13.7% A A2 6,000,000 Carnival Corp., 7.70% due 7/15/2004 5,952,060 6,404,220
BBB- Baa3 4,000,000 Comcast Cable Communications Company,
8.375% due 5/01/2007 4,060,680 4,494,020
A- Baa1 4,000,000 Computer Associates International,
6.25% due 4/15/2003 3,992,480 3,997,640
A A2 2,800,000 Computer Sciences Corp., 6.25% due
3/15/2009 2,785,552 2,814,414
A- A3 1,000,000 Dayton Hudson Corp., 6.40% due 2/15/2003 1,030,640 1,016,380
BBB Baa1 8,500,000 Dillards, Inc., 6.08% due 8/01/2010 (a) 8,498,810 8,488,780
A A2 4,267,539 Disney Custom Repackaged Asset Vehicle-403,
6.85% due 1/10/2007 (b)++ 4,264,680 4,353,317
BBB Baa3 5,000,000 HEALTHSOUTH Corp., 7% due 6/15/2008 4,952,500 4,844,305
A A1 1,275,000 May Department Stores Co., 9.875% due
12/01/2002 1,450,108 1,450,619
BBB- Baa3 4,000,000 News America Holdings, Inc., 8.625% due
2/01/2003 4,286,440 4,341,080
Service Corporation International:
BBB Baa1 1,000,000 6.75% due 6/01/2001 996,940 1,005,230
BBB Baa1 2,000,000 6.30% due 3/15/2020 (a) 1,997,800 1,963,940
TCI Communications Inc.:
AA- A2 3,000,000 8.65% due 9/15/2004 3,099,270 3,381,780
AA- A2 5,500,000 8% due 8/01/2005 5,561,380 6,024,865
BBB Baa2 5,000,000 Time Warner Entertainment, 9.625% due
5/01/2002 5,586,000 5,503,050
BBB Baa3 5,000,000 Turner Broadcasting, 7.40% due 2/01/2004 5,108,150 5,233,800
BBB+ Baa2 1,000,000 USA Waste Services Inc., 6.125% due
7/15/2001 (a) 997,950 1,004,805
-------------- --------------
67,446,960 69,359,565
Industrial-- Southwest Airlines Co.:
Transportation-- A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 6,972,745
1.8% A- A3 1,000,000 8% due 3/01/2005 994,610 1,073,390
BBB- Baa3 1,000,000 Union Pacific Corp., 6.625% due 2/01/2008 991,220 1,008,240
-------------- --------------
9,550,010 9,054,375
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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>
Utilities-- A Baa1 $ 5,000,000 360 Communications Co., 7.50%
Communications-- due 3/01/2006 $ 5,170,100 $ 5,278,300
5.1% A- A2 4,000,000 ALLTEL Corporation, 6.75% due
9/15/2005 3,938,400 4,138,480
AA Aa2 2,500,000 Bell Telephone Company of Pennsylvania,
7.375% due 7/15/2007 2,791,350 2,711,375
A A3 3,000,000 Frontier Corp., 6% due 10/15/2013 (a) 2,995,920 2,941,470
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,090,310 1,059,050
AA Aa3 2,200,000 Southwestern Bell Telecommunications
Corp., 6.625% due 4/01/2005 2,108,590 2,284,128
Sprint Capital Corporation:
A- Baa1 500,000 5.70% due 11/15/2003 499,915 493,450
A- Baa1 3,900,000 6.125% due 11/15/2008 3,897,114 3,833,973
A- A3 3,000,000 US West Capital Funding Inc., 6.375% due
7/15/2008 3,203,670 3,051,960
-------------- --------------
25,695,369 25,792,186
Utilities-- A- Baa1 4,000,000 Arizona Public Service, 6.75% due
Electric-- 11/15/2006 3,905,840 4,136,320
5.0% A A3 500,000 Central Power & Light Co., 6.625%
due 7/01/2005 522,905 513,930
AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison, 7.13%
due 7/01/2007 3,147,270 3,149,010
AAA Aaa 5,000,000 Commonwealth Edison, Inc., 8.25% due
10/01/2006 5,817,400 5,627,575
AA+ Aa1 3,000,000 Emerson Electric Co., 5.85% due 3/15/2009 2,997,090 2,986,470
A A1 4,000,000 Mississippi Power, 6.05% due 5/01/2003 4,089,920 4,020,080
AA- A1 1,500,000 Pacific Gas and Electric Company, 6.25%
due 8/01/2003 1,527,975 1,524,990
A- A3 1,000,000 Pennsylvania Power & Light Co., 6.125%
due 5/01/2006 (a) 999,400 1,009,790
BBB Baa3 2,000,000 Texaco Utilities, 5.94% due 10/15/2011 (a) 2,000,000 2,016,460
-------------- --------------
25,007,800 24,984,625
Yankee AA- Aa3 1,000,000 ABN AMRO Bank NV (Chicago), 7.55% due
Corporates**-- 6/28/2006 (2) 1,083,730 1,067,960
8.6% BBB- Baa3 3,000,000 Abitibi-Consolidated Inc., 6.95% due
4/01/2008 (3) 2,994,180 2,914,380
AmVescap PLC (2):
BBB A3 2,000,000 6.375% due 5/15/2003 1,996,380 1,997,200
BBB A3 2,000,000 6.60% due 5/15/2005 1,997,255 1,972,880
A A1 5,000,000 Banco Central Hispanoamercano SA
(Cayman Islands), 7.70% due
7/15/2006 (2) 5,315,850 5,274,900
AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due
11/01/2005 (2) 995,290 983,422
A- Baa1 1,500,000 Enersis SA, 6.90% due 12/01/2006 (3) 1,496,130 1,420,110
A A1 2,000,000 Ford Capital BV, 9.875% due 5/15/2002 (2) 2,300,380 2,219,080
BBB- Ba2 3,000,000 Gruma, SA de CV, 7.625% due 10/15/2007 (3) 2,994,960 2,715,000
AAA Aaa 2,000,000 International Bank for Reconstruction &
Development, 5.625% due 3/17/2003 (2) 1,993,300 2,007,460
A- A3 10,000,000 Israel Electric Corp. Ltd., 7.75% due
3/01/2009 (c)(3) 9,989,700 10,191,010
BBB+ A3 2,650,000 Koninklijke (Royal) Philips Electronics NV,
7.75% due 4/15/2004 (3) 2,831,287 2,760,823
BBB- Baa3 3,000,000 Korea Electric Power Corp., 8% due
7/01/2002 (3) 2,994,990 2,903,250
A- A2 5,000,000 Trans-Canada Pipelines, 6.43% due
3/15/2029 (3) 5,000,000 5,061,200
-------------- --------------
43,983,432 43,488,675
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
<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>
Yankee AA+ Aa2 $ 2,500,000 Canada Government Bond, 5.25% due
Sovereign**-- 11/05/2008 (1) $ 2,499,425 $ 2,400,925
0.8% BBB+ A3 1,500,000 People's Republic of China, 7.30% due
12/15/2008 (1) 1,497,900 1,486,460
-------------- --------------
3,997,325 3,887,385
Total Investments in Bonds &
Notes--97.1% 493,702,787 490,739,924
Repurchase 8,406,000 Warburg Dillon Read LLC, purchased on
Agreements***--1.7% 3/31/1999 to yield 4.89% to 4/01/1999 8,406,000 8,406,000
Total Investments in
Short-Term Securities--1.7% 8,406,000 8,406,000
Total Investments--98.8% $ 502,108,787 499,145,924
==============
Other Assets Less Liabilities--1.2% 5,971,116
--------------
Net Assets--100.0% $ 505,117,040
==============
<FN>
*Not Rated.
**Corresponding industry groups for foreign securities which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
***Repurchase Agreements are fully collateralized by US Government &
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.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of March 31, 1999
<CAPTION>
Investment Intermediate
Grade Portfolio Term Portfolio
<S> <S> <C> <C>
Assets: Investments, at value* (Note 1a) $1,568,508,608 $ 499,145,924
Cash 285,655 --
Receivables:
Interest 26,769,056 8,339,566
Capital shares sold 4,072,422 2,508,612
Loaned securities (Note 5) 1,947 --
Prepaid registration fees and other assets (Note 1f) 25,685 359,696
-------------- --------------
Total assets 1,599,663,373 510,353,798
-------------- --------------
Liabilities: Payables:
Capital shares redeemed 8,143,833 3,009,693
Dividends to shareholders (Note 1g) 3,275,118 1,063,857
Distributor (Note 2) 571,548 91,945
Investment adviser (Note 2) 485,869 156,857
Custodian bank (Note 1h) -- 628,166
Accrued expenses and other liabilities 604,285 286,240
-------------- --------------
Total liabilities 13,080,653 5,236,758
-------------- --------------
Net Assets: Net assets $1,586,582,720 $ 505,117,040
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 5,310,335 $ 1,576,827
Consist of: Class B Common Stock, $.10 par value++++ 6,533,069 1,593,075
Class C Common Stock, $.10 par value++++++ 829,128 50,593
Class D Common Stock, $.10 par value++++++++ 1,235,949 1,175,076
Paid-in capital in excess of par 1,599,943,033 510,082,921
Accumulated realized capital losses on
investments--net (Note 6) (6,619,966) (4,653,876)
Accumulated distributions in excess of realized capital
gains on investments--net (Note 1g) (19,506,181) (1,744,713)
Unrealized depreciation on investments--net (1,142,647) (2,962,863)
-------------- --------------
Net assets $1,586,582,720 $ 505,117,040
============== ==============
Net Class A: Net assets $ 605,721,077 $ 181,194,589
Asset ============== ==============
Value: Shares outstanding 53,103,352 15,768,265
============== ==============
Net asset value and redemption price per share $ 11.41 $ 11.49
============== ==============
Class B: Net assets $ 745,191,410 $ 183,071,783
============== ==============
Shares outstanding 65,330,685 15,930,748
============== ==============
Net asset value and redemption price per share $ 11.41 $ 11.49
============== ==============
Class C: Net assets $ 94,610,832 $ 5,812,224
============== ==============
Shares outstanding 8,291,275 505,933
============== ==============
Net asset value and redemption price per share $ 11.41 $ 11.49
============== ==============
Class D: Net assets $ 141,059,401 $ 135,038,444
============== ==============
Shares outstanding 12,359,485 11,750,763
============== ==============
Net asset value and redemption price per share $ 11.41 $ 11.49
============== ==============
<FN>
*Identified cost $1,569,651,255 $ 502,108,787
============== ==============
++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, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Six Months Ended March 31, 1999
<CAPTION>
Investment Intermediate
Grade Term
Portfolio Portfolio
<S> <S> <C> <C>
Investment Interest and discount earned $ 51,458,900 $ 16,730,791
Income Other 165,250 29,203
(Note 1e): -------------- --------------
Total income 51,624,150 16,759,994
-------------- --------------
Expenses: Investment advisory fees (Note 2) 2,804,151 904,014
Account maintenance and distribution fees--Class B (Note 2) 2,767,829 465,977
Transfer agent fees--Class B (Note 2) 632,828 269,986
Transfer agent fees--Class A (Note 2) 470,100 259,132
Account maintenance and distribution fees--Class C (Note 2) 354,770 13,562
Transfer agent fees--Class D (Note 2) 101,360 171,490
Account maintenance fees--Class D (Note 2) 162,615 62,049
Registration fees (Note 1f) 78,121 39,388
Transfer agent fees--Class C (Note 2) 76,965 7,973
Accounting services (Note 2) 58,132 18,818
Printing and shareholder reports 58,410 18,211
Custodian fees 40,720 19,273
Professional fees 10,722 5,116
Pricing fees 6,176 4,096
Directors' fees and expenses 3,319 1,123
Other 5,865 2,509
-------------- --------------
Total expenses 7,632,083 2,262,717
-------------- --------------
Investment income--net 43,992,067 14,497,277
-------------- --------------
Realized & Realized gain on investments--net 220,515 1,216,571
Unrealized Gain Change in unrealized appreciation/depreciation on
(Loss) on investments--net (50,573,488) (15,828,669)
(Notes 1c, 1e & 3): -------------- --------------
Net Decrease in Net Assets Resulting from Operations $ (6,360,906) $ (114,821)
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 43,992,067 $ 75,133,001
Realized gain on investments--net 220,515 12,258,526
Change in unrealized appreciation/depreciation
on investments--net (50,573,488) 32,346,813
-------------- --------------
Net increase (decrease) in net assets resulting
from operations (6,360,906) 119,738,340
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (18,322,955) (34,390,305)
(Note 1g): Class B (19,557,409) (32,213,539)
Class C (2,327,881) (3,047,800)
Class D (3,783,822) (5,481,357)
-------------- --------------
Net decrease in net assets resulting from
dividends to shareholders (43,992,067) (75,133,001)
-------------- --------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 150,270,085 217,046,843
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 99,917,112 261,652,182
Beginning of period 1,486,665,608 1,225,013,426
-------------- --------------
End of period $1,586,582,720 $1,486,665,608
============== ==============
See Notes to Financial Statements.
<CAPTION>
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 14,497,277 $ 26,075,215
Realized gain on investments--net 1,216,571 3,775,926
Change in unrealized appreciation/depreciation
on investments--net (15,828,669) 9,218,836
-------------- --------------
Net increase (decrease) in net assets resulting
from operations (114,821) 39,069,977
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (5,604,980) (11,720,141)
(Note 1g): Class B (5,094,021) (8,877,407)
Class C (148,186) (120,517)
Class D (3,650,090) (5,357,150)
-------------- --------------
Net decrease in net assets resulting from
dividends to shareholders (14,497,277) (26,075,215)
-------------- --------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 29,460,273 84,105,026
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 14,848,175 97,099,788
Beginning of period 490,268,865 393,169,077
-------------- --------------
End of period $ 505,117,040 $ 490,268,865
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.78 $ 11.40 $ 11.16 $ 11.51 $ 10.77
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .35 .73 .76 .76 .80
Realized and unrealized gain (loss) on
investments--net (.37) .38 .24 (.35) .74
--------- --------- --------- --------- ---------
Total from investment operations (.02) 1.11 1.00 .41 1.54
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.35) (.73) (.76) (.76) (.80)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.41 $ 11.78 $ 11.40 $ 11.16 $ 11.51
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.17%)++ 10.05% 9.22% 3.60% 14.93%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .55%* .58% .57% .56% .58%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.06%* 6.32% 6.73% 6.64% 7.30%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 605,721 $ 600,655 $ 519,708 $ 608,901 $ 472,388
Data: ========= ========= ========= ========= =========
Portfolio turnover 38.19% 149.41% 113.46% 88.53% 108.07%
========= ========= ========= ========= =========
<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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.78 $ 11.40 $ 11.16 $ 11.51 $ 10.77
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .31 .64 .67 .67 .72
Realized and unrealized gain (loss) on
investments--net (.37) .38 .24 (.35) .74
--------- --------- --------- --------- ---------
Total from investment operations (.06) 1.02 .91 .32 1.46
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.31) (.64) (.67) (.67) (.72)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.41 $ 11.78 $ 11.40 $ 11.16 $ 11.51
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.55%)++ 9.21% 8.39% 2.81% 14.04%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.31%* 1.34% 1.34% 1.32% 1.35%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.30%* 5.56% 5.96% 5.88% 6.52%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 745,192 $ 685,345 $ 577,989 $ 724,089 $ 631,517
Data: ========= ========= ========= ========= =========
Portfolio turnover 38.19% 149.41% 113.46% 88.53% 108.07%
========= ========= ========= ========= =========
<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, 1999
FINANCIAL INFORMATION (continued)
<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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.79 $ 11.40 $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .30 .63 .67 .66 .67
Realized and unrealized gain (loss) on
investments--net (.38) .39 .23 (.34) .84
--------- --------- --------- --------- ---------
Total from investment operations (.08) 1.02 .90 .32 1.51
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.30) (.63) (.67) (.66) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.41 $ 11.79 $ 11.40 $ 11.17 $ 11.51
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.66%)+++ 9.25% 8.23% 2.85% 14.60%+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.37%* 1.40% 1.39% 1.38% 1.40%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.25%* 5.50% 5.91% 5.83% 6.27%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 94,611 $ 77,464 $ 49,918 $ 64,931 $ 25,778
Data: ========= ========= ========= ========= =========
Portfolio turnover 38.19% 149.41% 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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.79 $ 11.41 $ 11.17 $ 11.51 $ 10.67
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .34 .70 .73 .73 .73
Realized and unrealized gain (loss) on
investments--net (.38) .38 .24 (.34) .84
--------- --------- --------- --------- ---------
Total from investment operations (.04) 1.08 .97 .39 1.57
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.34) (.70) (.73) (.73) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.41 $ 11.79 $ 11.41 $ 11.17 $ 11.51
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.37%)+++ 9.77% 8.95% 3.43% 15.22%+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .80%* .82% .82% .81% .83%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.82%* 6.07% 6.47% 6.40% 6.91%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 141,059 $ 123,202 $ 77,398 $ 63,822 $ 25,153
Data: ========= ========= ========= ========= =========
Portfolio turnover 38.19% 149.41% 113.46% 88.53% 108.07%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.83 $ 11.49 $ 11.28 $ 11.50 $ 10.90
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .35 .73 .73 .73 .79
Realized and unrealized gain (loss) on
investments--net (.34) .34 .21 (.22) .60
--------- --------- --------- --------- ---------
Total from investment operations .01 1.07 .94 .51 1.39
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.35) (.73) (.73) (.73) (.79)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.49 $ 11.83 $ 11.49 $ 11.28 $ 11.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share .06%++ 9.59% 8.59% 4.56% 13.33%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .68%* .67% .65% .59% .59%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.98%* 6.27% 6.43% 6.41% 7.14%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 181,195 $ 200,679 $ 179,115 $ 216,545 $ 217,714
Data: ========= ========= ========= ========= =========
Portfolio turnover 46.87% 111.03% 76.99% 96.40% 142.84%
========= ========= ========= ========= =========
<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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.83 $ 11.50 $ 11.28 $ 11.50 $ 10.90
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .32 .67 .67 .67 .74
Realized and unrealized gain (loss) on
investments--net (.34) .33 .22 (.22) .60
--------- --------- --------- --------- ---------
Total from investment operations (.02) 1.00 .89 .45 1.34
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.32) (.67) (.67) (.67) (.74)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.49 $ 11.83 $ 11.50 $ 11.28 $ 11.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.19%)++ 8.94% 8.13% 4.02% 12.73%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.19%* 1.18% 1.17% 1.11% 1.11%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.47%* 5.75% 5.91% 5.89% 6.61%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 183,072 $ 178,464 $ 148,148 $ 216,641 $ 212,146
Data: ========= ========= ========= ========= =========
Portfolio turnover 46.87% 111.03% 76.99% 96.40% 142.84%
========= ========= ========= ========= =========
<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, 1999
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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.83 $ 11.49 $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .32 .67 .67 .67 .70
Realized and unrealized gain (loss) on
investments--net (.34) .34 .21 (.22) .69
--------- --------- --------- --------- ---------
Total from investment operations (.02) 1.01 .88 .45 1.39
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.32) (.67) (.67) (.67) (.70)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.49 $ 11.83 $ 11.49 $ 11.28 $ 11.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (.19%)+++ 9.03% 7.99% 3.99% 13.25%+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.20%* 1.20% 1.20% 1.15% 1.14%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.46%* 5.70% 5.89% 5.86% 6.24%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 5,812 $ 4,832 $ 1,571 $ 10,144 $ 6,806
Data: ========= ========= ========= ========= =========
Portfolio turnover 46.87% 111.03% 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: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.83 $ 11.50 $ 11.28 $ 11.50 $ 10.81
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .34 .71 .72 .72 .74
Realized and unrealized gain (loss) on
investments--net (.34) .33 .22 (.22) .69
--------- --------- --------- --------- ---------
Total from investment operations -- 1.04 .94 .50 1.43
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.34) (.71) (.72) (.72) (.74)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 11.49 $ 11.83 $ 11.50 $ 11.28 $ 11.50
========= ========= ========= ========= =========
Total Investment Based on net asset value per share .01%+++ 9.39% 8.58% 4.46% 13.65%+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .78%* .77% .77% .71% .70%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.88%* 6.16% 6.32% 6.32% 6.81%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 135,038 $ 106,294 $ 64,335 $ 33,270 $ 16,349
Data: ========= ========= ========= ========= =========
Portfolio turnover 46.87% 111.03% 76.99% 96.40% 142.84%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
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. The Portfolios'
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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 written or purchased are valued at the last sale price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price at the close of such
exchanges. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direc-tion 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 US Government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty 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, 1999
* 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.
(h) Custodian bank--The Intermediate Term Portfolio recorded an
amount payable to the Custodian Bank resulting from a timing
difference of security transaction settlements.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's 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,
1999, the aggregate average daily net assets of the Fund, including
the Fund's High Income Portfolio, was approximately $8,110,592,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of each
Portfolio as follows:
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Investment Grade 0.25% 0.25% 0.25% 0.50% 0.55%
Intermediate Term 0.25% 0.25% 0.10% 0.25% 0.25%
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended March 31, 1999, 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 $2,126 $8,528 $16,120 $84,242
Intermediate Term $ 147 $ 694 $ 1,979 $ 5,717
For the six months ended March 31, 1999, MLPF&S received contingent
deferred sales charges of $634,252 relating to transactions in Class
B Shares, amounting to $574,175 and $60,077 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively, $26,841
relating to transactions in Class C Shares, amounting to $24,539 and
$2,302 in the Investment Grade Portfolio and Intermediate Term
Portfolio, respectively. Furthermore, MLPF&S received contingent
deferred sales charges of $23,689 relating to transactions subject
to front-end sales charge waivers in Class D Shares, amounting to
$23,581 and $108 in the Investment Grade Portfolio and Intermediate
Term Portfolio, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 1999, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$17,041 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, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 1999 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $ 738,042,765 $ 258,262,832
-------------- --------------
Sales $ 578,041,938 $ 225,579,078
============== ==============
Net realized gains for the six months ended March 31, 1999 and net
unrealized losses as of March 31, 1999 were as follows:
Realized Unrealized
Investment Grade Portfolio Gains Losses
Long-term investments $ 220,515 $ (1,142,647)
------------ --------------
Total $ 220,515 $ (1,142,647)
============ ==============
Realized Unrealized
Intermediate Term Portfolio Gains Losses
Long-term investments $ 1,216,571 $ (2,962,863)
------------ --------------
Total $ 1,216,571 $ (2,962,863)
============ ==============
As of March 31, 1999, net unrealized depreciation for Federal income
tax purposes was as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Gross unrealized appreciation $ 20,528,212 $ 5,574,799
Gross unrealized depreciation (21,670,859) (8,537,662)
------------ --------------
Net unrealized depreciation $ (1,142,647) $ (2,962,863)
============ ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
The aggregate cost of investments at March 31, 1999 for Federal
income tax purposes was $1,569,651,255 for the Investment Grade
Portfolio and $502,108,787 for the Intermediate Term Portfolio.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
for the six months ended March 31, 1999 was $150,270,085 for the
Investment Grade Portfolio and $29,460,273 for the Intermediate Term
Portfolio. Net increase in net assets derived from capital share
transactions for the year ended September 30, 1998 was $217,046,843
for the Investment Grade Portfolio and $84,105,026 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 Ended Dollar
March 31, 1999 Shares Amount
Shares sold 9,871,970 $ 114,210,214
Shares issued to shareholders
in reinvestment of dividends 317,697 3,672,599
------------ --------------
Total issued 10,189,667 117,882,813
Shares redeemed (8,065,210) (93,262,828)
------------ --------------
Net increase 2,124,457 $ 24,619,985
============ ==============
Investment Grade Portfolio
Class A Shares for
the Year Ended Dollar
September 30, 1998 Shares Amount
Shares sold 17,335,975 $ 199,879,084
Shares issued to shareholders
in reinvestment of dividends 718,340 8,272,550
------------ --------------
Total issued 18,054,315 208,151,634
Shares redeemed (12,662,198) (145,757,775)
------------ --------------
Net increase 5,392,117 $ 62,393,859
============ ==============
Investment Grade Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 18,963,221 $ 219,754,098
Shares issued to shareholders
in reinvestment of dividends 1,042,595 12,052,333
------------ --------------
Total issued 20,005,816 231,806,431
Automatic conversion of shares (492,454) (5,688,169)
Shares redeemed (12,349,755) (142,586,241)
------------ --------------
Net increase 7,163,607 $ 83,532,021
============ ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 24,028,055 $ 277,445,871
Shares issued to shareholders
in reinvestment of dividends 1,698,194 19,561,558
------------ --------------
Total issued 25,726,249 297,007,429
Automatic conversion of shares (922,142) (10,628,787)
Shares redeemed (17,335,417) (199,555,281)
------------ --------------
Net increase 7,468,690 $ 86,823,361
============ ==============
Investment Grade Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 3,301,139 $ 38,244,991
Shares issued to shareholders
in reinvestment of dividends 138,078 1,596,689
------------ --------------
Total issued 3,439,217 39,841,680
Shares redeemed (1,719,894) (19,852,647)
------------ --------------
Net increase 1,719,323 $ 19,989,033
============ ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 3,968,421 $ 45,833,671
Shares issued to shareholders
in reinvestment of dividends 174,287 2,008,817
------------ --------------
Total issued 4,142,708 47,842,488
Shares redeemed (1,947,717) (22,429,950)
------------ --------------
Net increase 2,194,991 $ 25,412,538
============ ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Investment Grade Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 4,662,068 $ 53,948,248
Automatic conversion of shares 492,176 5,688,169
Shares issued to shareholders
in reinvestment of dividends 150,924 1,745,119
------------ --------------
Total issued 5,305,168 61,381,536
Shares redeemed (3,396,385) (39,252,490)
------------ --------------
Net increase 1,908,783 $ 22,129,046
============ ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 7,697,534 $ 88,874,921
Automatic conversion of shares 921,625 10,628,787
Shares issued to shareholders
in reinvestment of dividends 248,628 2,867,600
------------ --------------
Total issued 8,867,787 102,371,308
Shares redeemed (5,202,013) (59,954,223)
------------ --------------
Net increase 3,665,774 $ 42,417,085
============ ==============
Intermediate Term Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 4,686,412 $ 54,259,436
Shares issued to shareholders
in reinvestment of dividends 138,324 1,606,348
------------ --------------
Total issued 4,824,736 55,865,784
Shares redeemed (6,021,159) (69,879,180)
------------ --------------
Net decrease (1,196,423) $ (14,013,396)
============ ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 5,842,254 $ 67,706,458
Shares issued to shareholders
in reinvestment of dividends 313,457 3,631,322
------------ --------------
Total issued 6,155,711 71,337,780
Shares redeemed (4,773,595) (55,306,502)
------------ --------------
Net increase 1,382,116 $ 16,031,278
============ ==============
Intermediate Term Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 4,474,168 $ 52,115,846
Shares issued to shareholders
in reinvestment of dividends 257,506 2,991,068
------------ --------------
Total issued 4,731,674 55,106,914
Automatic conversion of shares (49,411) (570,593)
Shares redeemed (3,837,484) (44,516,003)
------------ --------------
Net increase 844,779 $ 10,020,318
============ ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 7,031,396 $ 81,620,955
Shares issued to shareholders
in reinvestment of dividends 460,065 5,330,419
------------ --------------
Total issued 7,491,461 86,951,374
Automatic conversion of shares (276,942) (3,211,027)
Shares redeemed (5,016,417) (58,121,721)
------------ --------------
Net increase 2,198,102 $ 25,618,626
============ ==============
Intermediate Term Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 465,466 $ 5,405,306
Shares issued to shareholders
in reinvestment of dividends 8,973 104,148
------------ --------------
Total issued 474,439 5,509,454
Shares redeemed (377,142) (4,364,725)
------------ --------------
Net increase 97,297 $ 1,144,729
============ ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 882,899 $ 10,254,262
Shares issued to shareholders
in reinvestment of dividends 6,071 70,376
------------ --------------
Total issued 888,970 10,324,638
Shares redeemed (617,010) (7,160,180)
------------ --------------
Net increase 271,960 $ 3,164,458
============ ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 1999
Intermediate Term Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 1999 Shares Amount
Shares sold 4,951,472 $ 57,681,364
Automatic conversion of shares 49,411 570,593
Shares issued to shareholders
in reinvestment of dividends 96,920 1,125,497
------------ --------------
Total issued 5,097,803 59,377,454
Shares redeemed (2,332,283) (27,068,832)
------------ --------------
Net increase 2,765,520 $ 32,308,622
============ ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 6,222,564 $ 72,129,494
Automatic conversion of shares 276,942 3,211,027
Shares issued to shareholders
in reinvestment of dividends 189,794 2,199,224
------------ --------------
Total issued 6,689,300 77,539,745
Shares redeemed (3,300,479) (38,249,081)
------------ --------------
Net increase 3,388,821 $ 39,290,664
============ ==============
5. Loaned Securities:
At March 31, 1999, the Investment Grade Portfolio held US Treasury
Bonds/Notes having an aggregate value of approximately $1,736,000 as
collateral for Portfolio securities loaned, having a market value of
approximately $1,686,000.
6. Capital Loss Carryforward:
At September 30, 1998, the Fund had a capital loss carryforward of
approximately $26,063,000 in the Investment Grade Portfolio, of
which $23,459,000 expires in 2003 and $2,604,000 expires in 2005 and
approximately $7,614,000 in the Intermediate Term Portfolio, of
which $7,338,000 expires in 2003 and $276,000 expires in 2005. These
amounts will be available to offset like amounts of any future
taxable gains.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Christopher G. Ayoub, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Gerald M. Richard, Treasurer and Philip M. Mandel, Secretary of
Merrill Lynch Corporate Bond Fund, Inc. have recently retired. Their
colleagues at Merrill Lynch Asset Management, L.P. join the Fund's
Board of Directors in wishing Mr. Richard and Mr. Mandel well in
their retirements.
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
