HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Quarterly Report
December 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
The High-Yield Market
During a year of exceptional gyrations in global financial markets,
the high-yield market fared poorly. Events that contributed to
1998's volatility included Russia's default on its sovereign debt,
the economic meltdown in many Pacific Rim nations, most notably
Indonesia, and the collapse and bailout of a prominent US hedge
fund. After a massive sell-off and flight to quality in the third
quarter of 1998, three successive interest rate cuts by the Federal
Reserve Board in the fall boosted investor confidence in both the
equity and fixed-income markets. The high-yield market rebounded in
the fourth quarter, particularly in the month of November, but ended
up lagging the strong returns posted by the US Treasury and equity
markets. Specifically, the unmanaged CS First Boston High Yield
Index registered a total return of +0.58% for the year, compared to
the US Treasury return of +12.25% and the remarkable total return
advance of 28.58% for the Standard & Poor's 500 Index.
The 1998 bear market for high-yield debt produced some real
positives. The market correction squeezed out speculation, since
hedge funds and other leveraged investors liquidated holdings.
Furthermore, the financial crisis reminded investors of risk. We
measure value in the high-yield market as a yield spread or
differential between high-yield bonds and US Treasury securities of
similar maturities. The spread is the compensation that investors
receive for assuming the credit risk and lower liquidity associated
with lower-quality corporate bonds. In our opinion, exceptionally
wide spreads at December 31, 1998 suggested excellent value.
Another valuation yardstick in the high-yield market is that of risk
premium, which measures the yield of high-yield debt as a percentage
of the yield on long-term US Treasury securities. The historical
average premium is 70.5%, while the current high-yield market
premium is close to an all-time high of 130%. What is noteworthy
about the market trading at both very high spread and premium to US
Treasury securities is that it has never occurred during a period of
relatively healthy economic, monetary and credit conditions.
Instead, it has been associated with recession and/or high corporate
default rates in the past.
Portfolio Strategy
During the quarter ended December 31, 1998, certain industries in
the United States were impacted by economic weakness elsewhere.
Imports from economically depressed regions such as Asia and Brazil
severely depressed the pricing structure of steel, chemicals, paper
and textiles. We believe improvement is unlikely until late 1999 at
the earliest. Accordingly, the Portfolio owns only the strongest
issuers and is underweighted in these industries. As of December 31,
1998, we remain slightly overweighted in energy (8.7% of net assets)
where weak oil and gas pricing have depressed stock and bond values.
The market reflects the negatives and some bargains are appearing.
Our largest areas of industry exposure include cable television and
broadcasting, 14.7% of net assets; communications (telephone and
paging), 11.1%; and health services, 7.6%. We believe that these
industries will experience healthy profit growth in 1999, regardless
of the economic environment and the undervalued appearance of some
issuers.
Throughout the December quarter, we maintained our overweighted
exposure to emerging markets since this sector continued to provide
numerous compelling bargains. Our holdings in emerging markets are
mostly large companies with good balance sheets and strong market
positions. We believe default risk is low and price appreciation is
high if global conditions improve, as we expect. Emerging markets
issuers (all US dollar denominated) comprised 16.7% of the Portfolio
at December 31, 1998, compared to a 6% weighting for the CS First
Boston High Yield Index.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
While the Portfolio's net assets declined because of net shareholder
redemptions, the quality structure of the Portfolio remained little
changed. As of December 31, 1998, the two highest-quality categories
(BBB/BB) comprised 35.5% of net assets and the lowest rated (CCC)
category totaled 3.8%, nearly unchanged from 35.5% and 4.2%,
respectively, at September 30, 1998.
In Conclusion
Looking ahead, we believe that the high-yield market will see
continued volatility in the first half of 1999, largely because of
equity market fluctuations, political/economic news in emerging
markets, concerns about corporate earnings, and possible
supply/demand imbalances. Nevertheless, we believe high-yield
securities remain attractive. The market appears to be discounting
both a dramatic slowdown in the North American economy and a sharp
increase in default statistics. In our view, neither of these is
likely. Accordingly, we believe the market offers good value at
current levels.
We appreciate your ongoing investment in High Income Portfolio of
Merrill Lynch Corporate Bond Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years
ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
February 16, 1999
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
NTL Inc. Through various subsidiaries, NTL Inc. owns and operates television and radio broadcasting, 2.7%
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 communications services throughout the United 2.5
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.
TransAmerican TransAmerican is a privately held holding company whose principal subsidiaries are 1.9
Energy wholly-owned TransAmerican Refining Corp. (TARC) and 69%-owned TransTexas Gas Corp.,
Corp. a publicly held company which explores for and produces oil and natural gas primarily in
south Texas. TARC is in the midst of a two-phase construction and expansion program which,
when finished, will give it one of the largest and most complex refineries in the United States.
Our bonds are secured by some 33 million shares of TransTexas common and the common stock
of a subsidiary whose major asset is the refinery.
Century Century owns and operates 70 cable systems in 25 states and Puerto Rico. In addition, 1.6
Communications the company has a 31.8% common equity interest in Centennial Cellular, a provider of
Corporation wireless telephone service in four geographic areas in the United States and Puerto Rico.
RSL RSL Communications is a global facilities-based telecommunications company that provides 1.4
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.
Fresenius Fresenius Medical Care is the world's largest integrated provider of dialysis products and 1.4
Medical services. Its 910 dialysis centers treat 68,000 patients worldwide, including approximately
Care AG 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, Philadelphia 1.3
and Baltimore and routes covering most of the Eastern half of the United States. Our
investment includes a sizable amount of equipment trust certificates secured by modern,
saleable aircraft.
Trump Atlantic Trump Atlantic City owns and operates the Trump Taj Mahal, the Trump Plaza and the 1.2
City Associates/ Trump World's Fair hotel-casinos, all located on the boardwalk in Atlantic City, New Jersey.
Funding Inc. These bonds are secured by mortgages on the properties.
Paging Network, The company is the largest provider of paging services in the United States with 1.1
Inc. operations in all 50 states, Puerto Rico and Canada. A recently launched service
called "Voice Now" provides voice messages plus CNN News, sports and stock quotes.
Sinclair This is a diversified broadcasting company that owns or provides programming to 1.1
Broadcasting television and radio stations across the United States.
Group, Inc.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
PORTFOLIO INFORMATION (concluded)
As of December 31, 1998
Quality Profile* Percent of
S&P Rating/Moody's Rating Long-Term Investments
BBB/Baa 5.5%
BB/Ba 30.0
B/B 56.5
CCC/Caa 3.8
Not Rated 4.2
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Energy 8.7%
Health Services 7.6
Cable--Domestic 6.3
Wireless Communications--
Domestic Paging & Cellular 5.6
Cable--International 5.4
Geographic Profile Percent of
Top Five Countries* Net Assets
Brazil 4.5%
United Kingdom 4.1
Argentina 3.5
Canada 2.9
Mexico 2.7
[FN]
*All holdings are denominated in US dollars.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Christopher G. Ayoub, Senior Vice President
Jay C. Harbeck, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Treasurer
Philip M. Mandel, Secretary
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., High Income Portfolio
December 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 - 3.05% - 6.92%
Five Years Ended 12/31/98 + 6.96 + 6.09
Ten Years Ended 12/31/98 +10.67 +10.22
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 -3.78% -7.19%
Five Years Ended 12/31/98 +6.13 +6.13
Ten Years Ended 12/31/98 +9.84 +9.84
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 -3.96% -4.81%
Inception (10/21/94)
through 12/31/98 +7.88 +7.88
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/98 -3.29% -7.16%
Inception (10/21/94)
through 12/31/98 +8.49 +7.44
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
PERFORMANCE DATA (concluded)
<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 12/31/98
<S> <C> <C> <C> <C>
High Income Portfolio Class A Shares* - 3.05% +3.77% +175.70% 10.67%
High Income Portfolio Class B Shares* - 3.78 +3.57 +155.64 10.33
High Income Portfolio Class C Shares* - 3.96 +3.41 + 37.47 10.28
High Income Portfolio Class D Shares* - 3.29 +3.71 + 40.75 10.43
Merrill Lynch High Yield US Corporates, Cash Pay Index** + 3.66 +2.87 +186.00/+56.61
CS First Boston High Yield Index** + 0.58 +2.74 +177.44/+49.32
Ten-Year US Treasury Securities*** +12.25 -1.39 +152.65/+57.14
<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 dates are Class A & Class B Shares,
for the ten years ended 12/31/98 and Class C & Class D Shares, from
10/21/94 to 12/31/98.
**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 12/31/98 and from
10/21/94 to 12/31/98, respectively. Ten year/since inception total
returns for CS First Boston High Yield Index are for the ten years
ended 12/31/98 and from 10/31/94 to 12/31/98, respectively.
***Ten year/since inception total returns are for the ten years
ended 12/31/98 and from 10/31/94 to 12/31/98, respectively.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds
<S> <S> <S> <C> <S> <C> <C>
Aerospace--0.4% B+ B1 $ 25,000,000 Kitty Hawk, Inc., 9.95% due 11/15/2004 $ 25,033,750 $ 24,875,000
Airlines--1.4% Piedmont Aviation, Inc.:
B+ Ba2 1,304,000 Series 88J, 10.05% due 5/13/2005 1,181,685 1,436,460
BB Ba2 1,116,000 Series 88J, 10.10% due 5/13/2007 999,021 1,263,881
BB Ba2 3,767,000 Series 88J, 10.10% due 5/13/2009 3,327,542 4,345,008
BB Ba2 2,710,000 Series 88J, 10.15% due 5/13/2011 2,366,806 3,184,982
B+ Ba2 2,226,000 Series 88K, 10% due 5/13/2004 2,026,506 2,428,143
B+ Ba2 2,666,000 Series 88K, 10.10% due 5/13/2008 2,374,020 3,048,251
B+ Ba2 2,550,000 Series 88K, 10.15% due 5/13/2010 2,251,293 2,974,473
B+ Ba2 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 2,268,815
B+ Ba2 1,950,000 Series F, 10.35% due 3/28/2011 1,999,719 2,319,837
BB Ba2 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,762,005
USAir Inc.:
B B1 16,500,000 9.625% due 2/01/2001 13,309,906 17,133,600
BB Ba2 21,000,000 10.375% due 3/01/2013 20,768,125 24,311,490
B+ B1 4,634,836 Series 89A1, 9.33% due 1/01/2006++ 4,384,418 5,117,113
BB B1 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,666,963
BB B1 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 2,112,805
BB B1 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,288,637
B+ B1 1,092,000 Series F, 10.70% due 1/01/2003 984,165 1,195,467
B+ B1 1,092,000 Series G, 10.70% due 1/01/2003 984,165 1,195,467
B+ B1 1,092,000 Series H, 10.70% due 1/01/2003 984,165 1,195,467
B+ B1 1,092,000 Series I, 10.70% due 1/01/2003 984,165 1,195,467
-------------- --------------
66,891,899 81,444,331
Automotive--0.8% B B2 10,000,000 Collins & Aikman Corp., 11.50%
due 4/15/2006 10,000,000 10,400,000
B+ B2 40,000,000 Venture Holdings Trust, 9.50%
due 7/01/2005 38,740,539 40,000,000
-------------- --------------
48,740,539 50,400,000
Broadcasting-- CCC NR* 4,686,000 ACME Intermediate Holdings/Finance,
Radio & 0/12% due 9/30/2005 (a) 2,996,264 2,858,460
Television--3.0% B- B3 3,000,000 ACME Television/Finance, 10.976% due
9/30/2004 (a) 2,483,812 2,407,500
NR* B3 4,000,000 Big City Radio Inc., 11.129%
due 3/15/2005 (a) 3,166,759 2,660,000
BB+ Ba2 17,500,000 EZ Communications, Inc., 9.75% due
12/01/2005 17,361,575 19,031,250
B- B3 23,000,000 LIN Holdings Corp., 10% due
3/01/2008 (a) 15,330,174 16,215,000
B- B2 30,000,000 LIN Television Corp., 8.375% due
3/01/2008 29,929,800 30,150,000
B- B3 23,022,000 SFX Broadcasting Inc., 10.75% due
5/15/2006 22,940,750 25,554,420
B- B3 17,000,000 Salem Communications Corp., 9.50% due
10/01/2007 17,160,625 17,595,000
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 15,225,000
-------------- --------------
171,654,228 179,396,630
Building Nortek Inc.:
Materials-- B- B3 14,550,000 9.875% due 3/01/2004 14,409,525 14,913,750
0.4% B+ B1 9,000,000 9.25% due 3/15/2007 8,947,980 9,270,000
-------------- --------------
23,357,505 24,183,750
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- American Telecasting, Inc. (a):
Domestic--5.9% CCC Ca $ 26,664,306 22.395% due 6/15/2004 $ 18,496,507 $ 4,532,932
CCC Ca 5,328,724 26.322% due 8/15/2005 2,499,530 612,803
BB- B1 8,750,000 CSC Holdings Inc., 9.875% due 5/15/2006 8,857,500 9,603,125
Century Communications Corporation:
BB- Ba3 40,000,000 9.75% due 2/15/2002 40,474,688 43,000,000
BB- Ba3 45,000,000 9.50% due 3/01/2005 44,542,813 50,850,000
BB- Ba3 4,050,000 8.375% due 12/15/2007 3,976,250 4,333,500
B- B2 50,000,000 Echostar Communications Corp., 11.928%
due 6/01/2004 (a) 47,861,454 51,447,875
CCC+ B3 25,000,000 Echostar Satellite Broadcasting, 11.25%
due 3/15/2004 (a) 22,551,165 25,062,500
B B2 31,000,000 Intermedia Capital Partners L.P.,
11.25% due 8/01/2006 31,002,500 35,030,000
Lenfest Communications, Inc.:
BB- B2 40,000,000 10.50% due 6/15/2006 40,444,200 46,800,000
BB- B2 10,000,000 8.25% due 2/15/2008 9,972,600 10,475,000
B B1 50,000,000 Olympus Communications L.P., 10.625%
due 11/15/2006 50,282,500 55,250,000
B B3 40,000,000 TCI Satellite Entertainment, Inc.,
12.15% due 2/15/2007 (a) 27,701,609 7,800,000
CCC+ Ca 50,338,000 Wireless One Inc., 13.50%
due 8/01/2006 (a) 35,073,812 4,278,730
-------------- --------------
383,737,128 349,076,465
Cable-- Australis Media Ltd.:
International-- NR* NR* 2,274,493 14.399% due 11/01/2002 (a) 1,776,180 1,307,833
5.0% NR* NR* 79,117,000 1.75%/15.75% due 5/15/2003 (d)(g)++++ 56,318,088 2,769,095
D C 1,353,490 1.75%/15.75% due 5/15/2003 (g)++++ 751,091 20,302
B- B2 55,000,000 Comcast UK Cable Partners Ltd.,
11.23% due 11/15/2007 (a) 44,807,579 46,200,000
Diamond Cable Communications PLC (a):
B- Caa1 15,000,000 11.366% due 12/15/2005 12,186,728 12,337,500
B- Caa1 25,000,000 10.87% due 2/15/2007 17,907,380 17,750,000
B- B3 80,000,000 International Cabletel, Inc., Series B,
11.701% due 2/01/2006 (a) 62,660,095 66,000,000
B- B3 20,000,000 NTL Inc., 10% due 2/15/2007 20,012,500 20,600,000
B B3 30,000,000 Supercanal Holdings S.A., 11.50%
due 5/15/2005 28,050,000 18,150,000
B+ B1 60,000,000 TeleWest Communications PLC, 11.02% due
10/01/2007 (a) 49,709,788 49,950,000
B- B2 5,000,000 Tevecap S.A., 12.625% due 11/26/2004 5,087,500 3,137,500
B B3 107,500,000 United International Holdings, Inc.,
10.75% due 2/15/2008 (a) 69,850,662 58,587,500
-------------- --------------
369,117,591 296,809,730
Capital Goods-- International Wire Group, Inc.:
0.9% B- B3 15,000,000 11.75% due 6/01/2005 14,986,250 15,862,500
B- B3 15,000,000 Series B, 11.75% due 6/01/2005 16,312,500 15,862,500
B- B3 25,250,000 Trench Electric & Trench Inc., 10.25%
due 12/15/2007 25,315,625 23,861,250
-------------- --------------
56,614,375 55,586,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Chemicals-- BB- Ba3 $ 10,000,000 Agriculture Minerals & Chemicals
0.7% Company, L.P., 10.75% due 9/30/2003 $ 10,060,000 $ 10,200,000
ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 20,818,385
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 10,575,000
-------------- --------------
39,534,100 41,593,385
Child Care-- B- B3 20,000,000 KinderCare Learning Centers, Inc.,
0.3% 9.50% due 2/15/2009 19,924,375 20,000,000
Computer B Ba3 50,000,000 Advanced Micro Devices, Inc., 11%
Services-- due 8/01/2003 52,330,000 53,000,000
Electronics-- CCC Caa1 40,500,000 Dictaphone Corp., 11.75% due 8/01/2005 40,114,375 30,577,500
2.7% B+ B3 15,000,000 Jordan Telecom Products, Series B,
9.875% due 8/01/2007 14,882,460 14,925,000
B- B3 25,000,000 PSINet Inc., Senior Notes, 10%
due 2/15/2005 25,135,000 24,875,000
NR* NR* 7,000,000 Splitrock Services Inc., 11.75%
due 7/15/2008 (c) 6,923,000 6,090,000
B- B3 4,000,000 Verio Inc., 10.375% due 4/01/2005 4,000,000 3,940,000
B- B2 30,000,000 Zilog, Inc., Series B, 9.50% due
3/01/2005 28,266,250 24,750,000
-------------- --------------
171,651,085 158,157,500
Conglomerates-- BBB Baa1 16,000,000 Cendant Corp., 7.75% due 12/01/2003 15,972,480 16,170,720
2.2% BB Ba3 15,000,000 Dine, S.A. de C.V., 8.75% due 10/15/2007 14,887,200 11,962,500
B- B3 25,000,000 Eagle-Picher Industries, 9.375% due
3/01/2008 25,109,540 23,625,000
B+ B- 26,000,000 Sequa Corp., 9.375% due 12/15/2003 25,146,563 26,455,000
BB- NR* 60,000,000 Voto-Votorantim S.A., 8.50% due
6/27/2005 58,884,775 50,250,000
-------------- --------------
140,000,558 128,463,220
Consumer B- B3 5,000,000 Albecca Inc., 10.75% due 8/15/2008 5,000,000 4,925,000
Products--0.3% B- B3 3,000,000 Bell Sports Corp., 11% due 8/15/2008 3,000,000 3,060,000
B B3 13,000,000 Corning Consumer Products Co., 9.625%
due 5/01/2008 12,432,431 9,165,000
-------------- --------------
20,432,431 17,150,000
Consumer B- NR* 8,000,000 AP Holdings Inc., 11.164% due
Services--0.6% 3/15/2008 (a) 5,085,750 4,360,000
B- NR* 15,000,000 Apcoa Inc., 9.25% due 3/15/2008 15,012,500 13,875,000
B+ B2 13,650,000 Coinmach Corp., 11.75% due 11/15/2005 15,004,875 14,946,750
-------------- --------------
35,103,125 33,181,750
Convertible NR* B3 6,195,000 Builders Transport, Inc., 8%
Bonds**--0.1% due 8/15/2005 (2) 3,614,250 1,239,000
BB+ Ba3 6,375,000 Quantum Health Resources, Inc., 4.75%
due 10/01/2000 (1) 5,956,562 5,514,375
-------------- --------------
9,570,812 6,753,375
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Energy--8.5% B+ B2 $ 20,000,000 Benton Oil & Gas Co., 9.375%
due 11/01/2007 $ 20,097,688 $ 12,100,000
Chesapeake Energy Corporation:
B B3 25,000,000 9.625% due 5/01/2005 25,056,250 18,875,000
B B3 4,400,000 9.125% due 4/15/2006 4,388,100 3,256,000
B B3 1,000,000 Series B, 7.875% due 3/15/2004 983,750 720,000
B+ B2 15,000,000 Clark R & M Holdings, Inc., 8.875% due
11/15/2007 14,892,150 13,425,000
B+ B3 25,000,000 Clark USA Inc., Series B, 10.875%
due 12/01/2005 26,515,000 23,250,000
BBB- Ba3 40,000,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due 1/30/2004 41,372,500 38,900,000
B B2 10,000,000 Cross Timbers Oil Company, 8.75% due
11/01/2009 10,000,000 8,900,000
B B2 15,000,000 Energy Corp. of America, 9.50%
due 5/15/2007 15,000,000 13,950,000
B- B3 20,000,000 Forcenergy, Inc., 8.50% due 2/15/2007 19,740,050 14,900,000
KCS Energy Inc.:
B B1 22,000,000 11% due 1/15/2003 22,723,750 20,350,000
B- B3 20,000,000 8.875% due 1/15/2008 19,900,000 14,000,000
BB- B1 25,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 24,788,350 23,375,000
B- B3 27,000,000 Ocean Rig Norway AS, 10.25% due
6/01/2008 26,990,000 21,735,000
BBB- Baa3 27,187,500 Oleoducto Centrale S.A., 9.35%
due 9/01/2005++ 27,178,437 23,551,172
Parker Drilling Co.:
B+ B1 25,500,000 Series B, 9.75% due 11/15/2006 25,510,725 22,950,000
B+ B1 14,000,000 Series D, 9.75% due 11/15/2006 14,373,310 12,530,000
Petroleo Brasileiro S.A.--Petrobras:
B+ B1 15,000,000 10% due 10/17/2006 15,097,500 14,250,000
BB- B1 15,000,000 10% due 10/17/2006 14,869,812 14,025,000
B- B3 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 Corporation,
Series B, 9% due 7/01/2008 29,828,700 29,250,000
NR* B3 289,840,000 TransAmerican Energy Corp.,
Series B, 13.176% due 6/15/2002 (a) 272,093,914 81,155,200
NR* NR* 36,000,000 TransAmerican Refining Corporation,
13% due 12/15/2002 35,640,000 36,180,000
Trico Marine Services, Inc.:
BB- Ba3 5,000,000 8.50% due 8/01/2005 5,012,500 4,325,000
BB- Ba3 10,000,000 Series C, 8.50% due 8/01/2005 10,100,000 8,650,000
Triton Energy Corp.:
B+ B1 1,000,000 8.75% due 4/15/2002 922,500 895,000
B+ B1 14,000,000 9.25% due 4/15/2005 13,940,780 12,979,120
B- B2 14,500,000 United Refining Co., 10.75%
due 6/15/2007 14,355,000 9,787,500
-------------- --------------
767,508,266 505,148,992
Entertainment-- CCC+ B3 27,495,000 AMF Group Inc., Series B, 12.581%
1.4% due 3/15/2006 (a) 20,786,837 14,847,300
B+ B1 1,500,000 Intrawest Corporation, 9.75% due
8/15/2008 1,476,615 1,545,000
B- B3 16,250,000 Premier Parks Inc., 10% due
4/01/2008 (a) 10,742,161 11,090,625
B B3 20,000,000 Regal Cinemas, Inc., 9.50% due
6/01/2008 19,966,200 20,900,000
Six Flags Theme Parks Inc.:
B- B3 20,000,000 8.611% due 6/15/2005 (a) 22,001,583 22,100,000
B- B3 15,000,000 8.875% due 4/01/2006 15,000,000 15,468,750
-------------- --------------
89,973,396 85,951,675
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Financial CCC+ B2 $ 20,000,000 Amresco, Inc., 9.875% due 3/15/2005 $ 20,087,500 $ 14,000,000
Services--2.0% BB+ Ba1 40,000,000 Fuji JGB Investments LLC (Preferred),
9.87% (f) 39,980,000 29,247,160
NR* Baa2 30,000,000 IBJ Capital Co. LLC (Preferred),
8.79% (f) 29,655,000 25,846,770
CCC- B2 9,000,000 Penncorp Financial Group Inc.,
9.25% due 12/15/2003 9,090,000 5,310,000
BBB- Baa1 25,000,000 SB Treasury Company LLC, 9.40% (f) 25,000,000 23,793,375
BB+ Ba3 10,000,000 SIG Capital Trust I, 9.50% due
8/15/2027 10,000,000 8,325,000
BB- NR* 17,000,000 Veritas Capital Trust, 10% due
1/01/2028 17,290,000 15,342,500
-------------- --------------
151,102,500 121,864,805
Food & Chiquita Brands International Inc.:
Beverage--1.4% B+ B1 25,000,000 9.125% due 3/01/2004 24,585,625 25,562,500
B+ B1 20,000,000 10.25% due 11/01/2006 19,881,400 21,200,000
CCC B2 20,000,000 DGS International Finance Co.,
10% due 6/01/2007 20,068,200 12,275,000
B- B2 24,000,000 International Home Foods, Inc.,
10.375% due 11/01/2006 24,000,000 26,100,000
-------------- --------------
88,535,225 85,137,500
Foreign BB- B2 12,500,000 Republic of Brazil, Global Bonds,
Government 10.125% due 5/15/2027 10,406,250 8,343,750
Obligations--0.1%
Gaming--4.5% BB- B1 15,000,000 Boyd Gaming Corporation, 9.50%
due 7/15/2007 14,848,500 14,850,000
B+ B2 37,000,000 GB Property Funding Corp., 10.875% due
1/15/2004 35,072,500 23,125,000
Grand Casinos Inc.:
BB Ba3 20,000,000 10.125% due 12/01/2003 19,837,500 21,800,000
B+ B2 5,000,000 9% due 10/15/2004 5,000,000 5,637,500
BB+ Ba2 15,000,000 Harrah's Operating Co. Inc., 7.875% due
12/15/2005 15,000,000 15,000,000
B+ B2 20,000,000 Hollywood Casino Corp., 12.75% due
11/01/2003 19,343,005 21,200,000
Jazz Casino Company, LLC:
NR* NR* 25,909,565 5.867% due 11/15/2009++++ 12,390,592 12,047,948
NR* NR* 2,524,830 Contingent Notes, due 11/15/2009 (a) 0 0
BB+ Ba2 25,000,000 Park Place Entertainment Corp.,
7.875% due 12/15/2005 25,000,000 25,156,250
B+ Ba3 4,000,000 Sun International Hotels Ltd.,
8.625% due 12/15/2007 4,000,000 4,100,000
Trump Atlantic City
Associates/Funding Inc.:
B B1 32,900,000 11.25% due 5/01/2006 32,297,942 29,116,500
BB- B1 48,100,000 11.25% due 5/01/2006 46,838,437 42,328,000
Venetian Casino Resort LLC:
CCC+ Caa1 17,500,000 10% due 11/15/1999 16,827,295 15,487,500
B- B3 38,500,000 12.25% due 11/15/2004 38,275,000 36,575,000
-------------- --------------
284,730,771 266,423,698
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Health Services-- B- B3 $ 16,800,000 ALARIS Medical Systems, Inc.,
7.6% 9.75% due 12/01/2006 $ 16,994,312 $ 17,220,000
B+ Ba3 47,725,000 Beverly Enterprises, Inc., 9%
due 2/15/2006 46,845,487 48,679,500
Columbia/HCA Healthcare Corp.:
BBB Ba2 1,000,000 6.91% due 6/15/2005 940,800 968,910
BBB Ba2 8,460,000 8.85% due 1/01/2007 8,980,882 8,903,642
BBB Ba2 10,000,000 7.25% due 5/20/2008 9,393,300 9,606,000
BBB Ba2 14,150,000 8.70% due 2/10/2010 14,502,652 14,816,748
BBB Ba2 17,640,000 9% due 12/15/2014 18,400,090 18,726,448
BBB Ba2 2,500,000 7.50% due 12/15/2023 2,258,750 2,244,450
BBB Ba2 15,000,000 8.36% due 4/15/2024 14,614,910 15,676,050
B- B2 37,250,000 Extendicare Health Services,
9.35% due 12/15/2007 37,180,000 35,573,750
B+ Ba3 50,000,000 Fresenius Medical Capital Trust I,
7.875% due 2/01/2008 50,142,250 49,625,000
B+ Ba3 36,091,000 Fresenius Medical Care AG, 9%
due 12/01/2006 36,993,597 37,760,209
B- B3 25,000,000 Kinetic Concepts, Inc., 9.625%
due 11/01/2007 25,153,750 24,062,500
B- B3 50,000,000 Magellan Health Services Inc., 9%
due 2/15/2008 49,996,875 44,250,000
Mariner Post-Acute Network Inc.:
B- B3 49,000,000 9.50% due 11/01/2007 48,781,460 37,975,000
B- B3 9,000,000 12.85% due 11/01/2007 (a) 5,121,680 4,365,000
B B2 5,000,000 Pharmerica Inc., 8.375% due 4/01/2008 5,000,000 4,525,000
CCC+ B2 20,000,000 Sun Health Care Group, Inc., 9.50% due
7/01/2007 19,771,131 16,300,000
Tenet Healthcare Corp.:
BB- Ba3 30,000,000 8.625% due 1/15/2007 29,968,200 31,350,000
BB- Ba3 30,000,000 8.125% due 12/01/2008 29,883,600 30,900,000
-------------- --------------
470,923,726 453,528,207
Home Builders-- BB+ Ba1 15,000,000 Greystone Homes Inc., 10.75%
0.8% due 3/01/2004 14,115,000 15,900,000
BB- B1 32,000,000 U.S. Home Corp., 8.88% due 8/15/2007 32,017,500 32,640,000
-------------- --------------
46,132,500 48,540,000
Hotels--1.1% HMH Properties Inc.:
BB Ba2 3,000,000 7.875% due 8/01/2005 2,999,160 2,940,000
BB Ba2 40,000,000 7.875% due 8/01/2008 39,740,800 38,800,000
BB Ba2 9,000,000 8.45% due 12/01/2008 8,969,760 9,045,000
Signature Resorts, Inc.:
BB- B2 10,000,000 9.25% due 5/15/2006 10,000,000 9,250,000
B B3 5,000,000 9.75% due 10/01/2007 5,000,000 4,150,000
-------------- --------------
66,709,720 64,185,000
Hotels & B+ B2 4,000,000 Station Casinos, Inc., 9.75%
Casinos--0.1% due 4/15/2007 3,741,745 4,200,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Independent The AES Corporation:
Power B+ Ba1 $ 30,000,000 10.25% due 7/15/2006 $ 30,000,000 $ 32,550,000
Producers--2.8% B+ Ba1 15,000,000 8.375% due 8/15/2007 14,929,500 15,187,500
BB+ Ba2 30,000,000 CE Casecnan Water & Energy Co.,
11.45% due 11/15/2005 30,000,000 25,687,500
BB- Ba2 46,000,000 Calpine Corporation, 8.75% due
7/15/2007 46,206,325 46,690,000
NR* Ba1 10,000,000 ESI Tractebal Acquisition Corp.,
7.99% due 12/30/2011 10,000,000 9,873,120
Midland Cogeneration Venture Limited
Partnership:
B B2 11,250,000 11.75% due 7/23/2005 11,310,000 13,048,875
B B2 5,500,000 13.25% due 7/23/2006 6,002,565 7,045,665
BB Ba2 25,000,000 Monterrey Power, S.A. de C.V.,
9.625% due 11/15/2009 24,977,680 19,562,500
-------------- --------------
173,426,070 169,645,160
Industrial CCC+ Caa1 9,500,000 Thermadyne Holdings Corp., 12.426%
Services--0.3% due 6/01/2008 (a) 5,598,955 4,560,000
CCC+ B3 12,000,000 Thermadyne Manufacturing LLC/Capital,
9.875% due 6/01/2008 11,905,680 11,340,000
-------------- --------------
17,504,635 15,900,000
Industrials-- B- B3 3,100,000 American Skiing Co., 12% due 7/15/2006 3,235,625 3,239,500
0.3% BB+ Ba3 15,000,000 Protection One Alarm Monitoring, Inc.,
8.125% due 1/15/2009 15,000,000 15,075,000
-------------- --------------
18,235,625 18,314,500
Media & BB- B1 45,500,000 Comtel Brasileira Ltd., 10.75%
Communications-- due 9/26/2004 44,682,550 35,831,250
International-- Globo Comunicacoes e Partcipacoes, Ltd.:
3.6% B+ B2 35,000,000 10.50% due 12/20/2006 35,172,400 22,575,000
B+ B2 10,000,000 10.625% due 12/05/2008 9,992,000 6,450,000
Grupo Televisa, S.A. de C.V.:
BB Ba2 2,500,000 11.375% due 5/15/2003 2,637,500 2,475,000
BB Ba2 40,000,000 11.875% due 5/15/2006 43,002,187 40,000,000
BB Ba2 14,000,000 11.369% due 5/15/2008 (a) 11,282,757 10,395,000
B+ B2 27,000,000 Impsat Corp., 12.375% due 6/15/2008 27,000,000 23,355,000
B+ B2 15,000,000 Orion Network Systems, Inc., 11.25%
due 1/15/2007 14,825,550 14,775,000
Philippine Long Distance Telephone
Company:
BB+ Ba2 9,600,000 10.625% due 6/02/2004 9,988,000 9,534,336
BB Ba2 8,500,000 9.875% due 8/01/2005 8,512,500 8,380,686
BBB- Ba3 40,000,000 Telefonica de Argentina S.A., 11.875%
due 11/01/2004 38,763,075 42,000,000
-------------- --------------
245,858,519 215,771,272
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Metals & B- Caa1 $ 20,000,000 AEI Resources Inc., 11.50%
Mining--2.9% due 12/15/2006 $ 20,000,000 $ 19,850,000
BB Ba2 15,000,000 Great Central Mines Ltd.,
8.875% due 4/01/2008 15,000,000 15,075,000
CCC+ B2 50,000,000 Kaiser Aluminum & Chemical Corp.,
12.75% due 2/01/2003 51,088,125 49,000,000
B B2 20,000,000 Metals USA Inc., 8.625% due 2/15/2008 19,900,000 18,450,000
BB- Ba3 25,000,000 Murrin Murrin Holdings, Inc., 9.375%
due 8/31/2007 24,845,000 22,125,000
B B3 20,000,000 Ormet Corporation, 11% due 8/15/2008 19,996,250 18,500,000
B B2 30,000,000 P & L Coal Holdings Corp., 9.625% due
5/15/2008 29,914,200 30,450,000
-------------- --------------
180,743,575 173,450,000
Packaging--0.4% B B3 5,000,000 AEP Industries Inc., 9.875% due
11/15/2007 4,961,200 5,062,500
B B1 12,000,000 Silgan Corp., 9% due 6/01/2009 12,000,000 12,150,000
B+ Ba3 10,000,000 Vicap S.A., 11.375% due 5/15/2007 9,947,000 8,850,000
-------------- --------------
26,908,200 26,062,500
Paper & Forest CCC+ Caa 21,000,000 APP Finance II Mauritius Ltd.,
Products--3.7% 12% (a)(f) 18,425,000 12,663,685
CCC+ Caa1 40,000,000 APP International Finance Co.,
11.75% due 10/01/2005 39,716,250 26,504,494
B B3 55,000,000 Ainsworth Lumber Company, 12.50% due
7/15/2007++++ 53,710,610 55,000,000
Container Corporation of America:
B- B2 15,420,000 9.75% due 4/01/2003 15,433,400 15,728,400
B- B2 13,000,000 11.25% due 5/01/2004 13,000,000 13,520,000
Doman Industries Ltd.:
B+ B1 60,000,000 8.75% due 3/15/2004 57,006,250 47,400,000
BB- B1 5,000,000 9.25% due 11/15/2007 5,000,000 3,725,000
CCC+ Caa 14,500,000 P.T. Indah Kiat International Finance,
12.50% due 6/15/2006 14,572,500 9,425,000
CCC+ Ba3 10,000,000 Pindo Deli Finance Mauritius, 10.75%
due 10/01/2007 9,969,637 5,462,500
B- B3 13,000,000 Riverwood International Corp., 10.25%
due 4/01/2006 12,478,750 12,740,000
BB Caa1 32,500,000 Tjiwi Kimia Finance Mauritius, 10% due
8/01/2004 30,977,000 17,143,750
-------------- --------------
270,289,397 219,312,829
Product AmeriServ Food Company:
Distribution-- B+ B1 14,000,000 8.875% due 10/15/2006 14,000,000 13,020,000
1.3% B- B3 42,000,000 10.125% due 7/15/2007 42,000,000 36,540,000
B+ B3 12,000,000 Fleming Companies Inc., 10.50%
due 12/01/2004 11,930,280 11,400,000
CCC B3 25,000,000 US Office Products Co., 9.75%
due 6/15/2008 24,920,100 16,437,500
-------------- --------------
92,850,380 77,397,500
Publishing & B B1 10,000,000 American Lawyer Media Inc.,
Printing--0.7% 9.75% due 12/15/2007 10,052,500 10,325,000
Hollinger International, Inc.:
BB+ Ba3 5,000,000 8.625% due 3/15/2005 4,975,000 5,275,000
BB- B1 20,000,000 9.25% due 2/01/2006 19,455,312 21,000,000
BB- Ba3 7,250,000 Primedia Inc., 7.625% due 4/01/2008 7,208,312 7,141,250
-------------- --------------
41,691,124 43,741,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Real Estate--0.5% BB- Ba3 $ 30,000,000 Forest City Enterprises Inc.,
8.50% due 3/15/2008 $ 30,213,750 $ 30,000,000
Restaurants-- BB- Ba3 27,000,000 Foodmaker, Inc., 9.75% due 11/01/2003 26,216,200 27,945,000
0.6% CCC B3 15,000,000 Planet Hollywood International,
Inc., 12% due 4/01/2005 15,000,000 5,325,000
-------------- --------------
41,216,200 33,270,000
Specialty NR* NR* 9,827,000 Cumberland Farms, Inc. DE, 10.50% due
Retailing--0.2% 10/01/2003 9,201,104 9,777,865
Steel--4.0% BB- Ba2 25,000,000 A.K. Steel Holding Corp., 9.125%
due 12/15/2006 25,056,250 26,125,000
NR* B2 95,000,000 CSN Iron S.A., 9.125% due 6/01/2007 89,758,750 58,900,000
BB Ba3 20,000,000 Hysla, S.A. de C.V., 9.25% due 9/15/2007 19,872,930 15,450,000
B- NR* 20,000,000 Renco Steel Holdings, Inc., 10.875% due
2/01/2005 20,045,700 17,300,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 25,000,000 24,937,500
B B3 25,000,000 WHX Corporation, 10.50% due 4/15/2005 25,000,000 23,375,000
Weirton Steel Inc.:
B B2 3,000,000 11.375% due 7/01/2004 3,247,500 2,670,000
B B2 23,000,000 10.75% due 6/01/2005 22,413,750 20,700,000
BB- Aaa 55,000,000 Wheeling-Pittsburgh Steel Corp.,
9.25% due 11/15/2007 54,776,725 51,700,000
-------------- --------------
285,171,605 241,157,500
Supermarkets-- Pueblo Xtra International Inc.:
0.4% B- B3 3,000,000 9.50% due 8/01/2003 2,766,809 2,850,000
B- B3 21,075,000 9.50% due 8/01/2003 19,460,250 20,232,000
-------------- --------------
22,227,059 23,082,000
Telephony-- B- Caa1 5,500,000 Esprit Telecom Group PLC, 10.875% due
Competitive 6/15/2008 5,385,000 5,596,250
Local Exchange B B2 15,500,000 Intermedia Communications Inc.,
Carriers--3.0% 8.60% due 6/01/2008 15,500,000 14,802,500
B B3 29,000,000 Level 3 Communications, Inc.,
9.125% due 5/01/2008 28,693,300 28,782,500
B B3 3,000,000 MetroNet Communications Corp.,
12.042% due 6/15/2008 (a) 1,647,379 1,852,500
B B3 43,000,000 Nextlink Communications Inc., 9%
due 3/15/2008 42,913,140 40,635,000
RSL Communications PLC:
B- B2 46,000,000 9.125% due 3/01/2008 46,000,000 42,550,000
B- B2 72,000,000 10.125% due 3/01/2008 (a) 47,730,551 41,580,000
CCC Caa1 3,000,000 Teligent, Inc., 12.122% due
3/01/2008 (a) 1,799,819 1,500,000
-------------- --------------
189,669,189 177,298,750
Textiles--1.0% B B3 25,000,000 Galey & Lord Inc., 9.125% due 3/01/2008 24,718,750 21,875,000
B B2 18,750,000 Polymer Group Inc., 8.75% due 3/01/2008 18,750,000 18,515,625
Polysindo International Finance Co.:
NR* NR* 7,500,000 8.648% due 2/12/1999 4,200,000 562,500
D Caa 45,600,000 11.375% due 6/15/2006 44,674,000 14,706,000
D Caa2 14,250,000 9.375% due 7/30/2007 9,930,000 4,595,625
-------------- --------------
102,272,750 60,254,750
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Transportation-- BB- NR* $ 45,000,000 Autopistas del Sol S.A., 10.25%
4.6% due 8/01/2009 $ 44,935,000 $ 34,200,000
BB- Ba3 20,000,000 Cathay International Ltd.,
13% due 4/15/2008 20,000,000 7,700,000
BB- Ba2 25,000,000 Eletson Holdings, Inc., 9.25%
due 11/15/2003 24,472,500 23,875,000
GS Superhighway Holdings:
BB Ba2 43,000,000 9.875% due 8/15/2004 37,956,250 20,747,500
BB Ba3 49,000,000 10.25% due 8/15/2007 47,933,550 23,152,500
BB Ba2 20,000,000 Gearbulk Holding, Ltd., 11.25%
due 12/01/2004 20,518,750 21,000,000
B+ B1 40,000,000 Hvide Marine Inc., 8.375% due
2/15/2008 39,872,500 32,200,000
B+ B2 25,000,000 TFM, S.A. de C.V., 11.786%
due 6/15/2009 (a) 16,824,363 11,687,500
Transportacion Maritima Mexicana,
S.A. de C.V.:
BB- Ba3 20,000,000 9.25% due 5/15/2003 17,092,750 16,600,000
BB- Ba3 31,800,000 10% due 11/15/2006 31,387,250 26,155,500
B- B3 60,606,000 Transtar Holdings LP, Series B,
11.892% due 12/15/2003 (a) 54,931,050 58,484,790
-------------- --------------
355,923,963 275,802,790
Utilities--4.1% NR* NR* 20,000,000 Companhia de Saneamento Basico
do Estado de Sao-Paulo, 10%
due 7/28/2005 20,000,000 13,650,000
BB+ Baa3 10,000,000 Empresa Electricidad del Norte,
10.50% due 6/15/2005 10,000,000 6,850,000
NR* B2 70,000,000 Espirito Santo-Escelsa, 10% due
7/15/2007 69,476,250 43,050,000
BB NR* 37,000,000 Inversora de Electrica, 9% due
9/16/2004 36,895,000 27,380,000
BBB- Ba3 40,000,000 Metrogas S.A., 12% due 8/15/2000 40,031,875 41,400,000
NR* NR* 15,083,104 Sunflower Electric Power Corp., 8% due
12/31/2016++ 9,894,089 9,766,310
BBB- Baa3 41,210,400 Trans Gas de Occidente, 9.79%
due 11/01/2010++ 41,283,990 33,978,263
Tucson Electric & Power Co.++:
NR* NR* 34,947,781 10.21% due 1/01/2009 33,168,609 40,768,684
NR* NR* 21,759,590 10.732% due 1/01/2013 20,606,895 26,090,183
-------------- --------------
281,356,708 242,933,440
Waste BB Ba2 25,000,000 Allied Waste North America,
Management-- 7.625% due 1/01/2006 25,000,000 25,250,000
0.9% D Ca 23,700,000 Mid-American Waste Systems, Inc.,
12.25% due 2/15/2003 8,468,189 829,500
B+ B2 29,000,000 Safety-Kleen Services, 9.25%
due 6/01/2008 29,000,000 30,015,000
-------------- --------------
62,468,189 56,094,500
Wireless CCC+ B2 13,000,000 Cencall Communications Corporation,
Communications-- 9.037% due 1/15/2004 (a) 12,980,906 12,740,000
Domestic Paging & BB+ Ba3 48,050,000 Comcast Cellular Communications,
Cellular--4.7% Inc., 9.50% due 5/01/2007 48,846,375 51,173,250
CCC+ B3 10,000,000 Metrocall, Inc., 9.75% due 11/01/2007 10,000,000 9,600,000
D C 50,500,000 Mobilemedia Communication, Inc.,
11.58% due 12/01/2003 (a) 20,630,116 5,807,500
Nextel Communications Inc. (a):
CCC+ B2 73,500,000 12.21% due 8/15/2004 64,465,524 71,295,000
CCC+ B2 30,000,000 10.147% due 10/31/2007 20,247,387 18,300,000
CCC+ B2 25,000,000 9.987% due 2/15/2008 16,719,443 14,937,500
NR* Caa2 29,000,000 Page Mart Inc., 11.25% due 2/01/2008 (a) 18,561,601 13,485,000
B B2 70,000,000 Paging Network, Inc., 10% due
10/15/2008 69,756,250 66,500,000
NR* NR* 3,250,000 Pinnacle Holdings Inc., 10%
due 3/15/2008 (a) 2,158,065 1,909,375
B- B3 15,000,000 Western Wireless Corp., 10.50%
due 2/01/2007 15,062,500 15,975,000
-------------- --------------
299,428,167 281,722,625
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded)
<S> <S> <S> <C> <S> <C> <C>
Wireless B B3 $ 11,000,000 CTI Holdings S.A., 11.50% due
Communications-- 4/15/2008 (a) $ 6,816,051 $ 5,005,000
International B+ B3 56,472,000 Comunicacion Celular S.A., 12.68%
Paging & due 11/15/2003 (a)(e) 43,287,795 37,130,340
Cellular--2.3% CCC+ Caa1 26,000,000 McCaw International Ltd., 12.265%
due 4/15/2007 (a) 17,839,302 14,235,000
B- B3 90,000,000 Millicom International Cellular S.A.,
13.39% due 6/01/2006 (a) 65,897,244 63,000,000
CCC+ Caa1 33,000,000 Nextel International, Inc., 12.125%
due 4/15/2008 (a) 19,941,806 15,015,000
CCC+ Caa1 13,000,000 Telesystems International Wireless
Inc., 11.382% due 6/30/2007 (a) 9,292,775 5,720,000
-------------- --------------
163,074,973 140,105,340
Total Investments in
Bonds--94.5% 6,470,858,782 5,641,489,584
Shares
Held
Preferred Stocks
Broadcasting--Radio & 5,348 Cumulus Media Inc. 5,359,655 5,722,360
Television--0.1%
Cable--Domestic--0.3% 143,904 CSC Holdings Inc.++++ 10,690,930 16,081,272
Cable--International--0.4% 24,416 NTL Inc.++++ 24,804,333 25,942,000
Conglomerates--0.3% 3,100 Eagle-Picher Holdings 17,686,590 15,732,500
Energy--0.0% 465,596 TCR Environmental Corp.
(Class B)(Convertible) 27,936 27,936
256,078 TCR Environmental Corp.
(Class C)(Convertible) 14,340 14,340
675,114 TCR Environmental Corp.
(Class D)(Convertible) 35,781 35,781
1,396,787 TCR Environmental Corp.
(Class E)(Convertible) 87,998 87,998
-------------- --------------
166,055 166,055
Financial Services--0.5% 1,230,000 California Federal Bank (Series A) 30,815,000 31,134,375
Product Distribution--0.2% 265,847 Nebco Evans Holding Co.++++ 26,137,919 13,358,812
Publishing & 292,500 Primedia Inc. 29,109,500 28,226,250
Printing--0.7% 125,000 Primedia Inc. (Series D) 12,500,000 13,062,500
-------------- --------------
41,609,500 41,288,750
Telephony--Competitive 12,726 Intermedia Communications Inc.
Local Exchange Carriers--0.2% (Series B)(Convertible) 13,062,259 12,869,168
Utilities--0.1% 5,000 Crown Castle International Corp.++++ 5,000,000 5,001,250
2 El Paso Electric Company++++ 219 214
-------------- --------------
5,000,219 5,001,464
Wireless Communications-- 21,740 Nextel Communications Inc.++++ 21,718,160 19,620,350
Domestic Paging & 23,416 Nextel Communications Inc.
Cellular--0.8% (Series D)++++ 23,766,315 24,001,400
6,288 Rural Cellular Corp.++++ 6,189,680 5,863,560
-------------- --------------
51,674,155 49,485,310
Total Investments in
Preferred Stocks--3.6% 227,006,615 216,782,066
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares
Industries Held Issue Cost Value
Common Stocks
<S> <C> <S> <C> <C>
Cable--Domestic--0.1% 2,887 CS Wireless Systems Inc. $ 20,336 $ 650
87,500 Echostar Communications Corp. (Series A) 621,482 4,246,484
-------------- --------------
641,818 4,247,134
Energy--0.2% 914,710 Chi Energy Inc. (Series B) 14,284,292 12,348,585
8,176 Pioneer Natural Resources Co. 199,648 71,540
-------------- --------------
14,483,940 12,420,125
Entertainment--0.2% 1,184,150 On Command Corporation 51,280,002 10,768,364
Gaming--0.0% 732,105 JCC Holding Company (Class A) 2,928,420 2,470,854
Wireless Communications-- 170,421 Nextel Communications Inc. 2,749,981 4,031,522
Domestic Paging & Cellular--0.1%
Total Investments in
Common Stocks--0.6% 72,084,161 33,937,999
Trusts & Warrants
Cable--Domestic--0.0% 177,500 American Telecasting, Inc. (Warrants)(b) 413,723 2,219
25,000 People's Choice T.V. 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
50,000 United International Holdings, Inc.
(Warrants)(b) 1,418,645 750,000
-------------- --------------
1,958,645 795,000
Computer Services-- 7,000 Splitrock Services Inc. (Warrants)(b) 77,000 77,000
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--0.1% 385,661 On Command Corporation (Warrants)(b) 3,033,504 1,422,125
Gaming--0.0% 7,550 Goldriver Hotel & Casino Corp.,
Liquidating Trust 192,320 0
113,386 Trump Castle Funding, Inc. (Warrants)(b) 0 0
-------------- --------------
192,320 0
Media & Communications-- 15,000 Orion Network Systems, Inc. (Warrants)(b) 174,450 161,250
International--0.0%
Wireless Communications-- 57,040 Page Mart Inc. (Warrants)(b) 236,127 178,250
Domestic Paging & Cellular--0.0%
Wireless Communications-- 53,472 Comunicacion Celular S.A. (Warrants)(b) 109,680 23,394
International Paging & Cellular--0.0%
Total Investments in
Trusts & Warrants--0.1% 7,521,903 2,856,809
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares
Industries Held Issue Cost Value
Short-Term Securities
<S> <C> <S> <C> <C>
Commercial Paper***--2.6% $ 22,000,000 Apreco Inc., 5.55% due 1/06/1999 $ 21,993,217 $ 21,993,217
du Pont (E.I.) de Nemours and Company:
25,000,000 5.16% due 1/11/1999 24,974,917 24,974,917
25,000,000 5.19% due 1/11/1999 24,974,771 24,974,771
10,927,000 General Electric Capital Corp.,
5% due 1/04/1999 10,927,000 10,927,000
25,000,000 Greyhawk Capital Corp., 5.40% due
1/12/1999 24,970,000 24,970,000
30,000,000 Lexington Parker Capital Co. LLC,
5.58% due 1/06/1999 29,990,700 29,990,700
18,000,000 Variable Funding Capital, 5.65%
due 1/04/1999 18,000,000 18,000,000
-------------- --------------
155,830,605 155,830,605
US Government Agency 96,000 Federal Home Loan Mortgage Corp.,
Obligations***--0.0% 4.70% due 1/04/1999 96,000 96,000
Total Investments in
Short-Term Securities--2.6% 155,926,605 155,926,605
Total Investments--101.4% $6,933,398,066 6,050,993,063
==============
Liabilities in Excess of Other Assets--(1.4%) (81,969,989)
--------------
Net Assets--100.0% $5,969,023,074
==============
Net Asset Class A--Based on net assets of $911,001,781 and 130,925,698 shares outstanding $ 6.96
Value: ==============
Class B--Based on net assets of $4,161,056,783 and 597,861,307 shares outstanding $ 6.96
==============
Class C--Based on net assets of $493,327,766 and 70,833,998 shares outstanding $ 6.96
==============
Class D--Based on net assets of $403,636,744 and 57,971,823 shares outstanding $ 6.96
==============
<FN>
++Subject to principal paydowns.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
*Not Rated.
**Industry classifications for convertible bonds are: (1) 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.
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(b)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock/face amount of bonds and are non-income
producing. The purchase price and number of shares/face amount are
subject to adjustment under certain conditions until the expiration
date.
(c)Each $1,000 face amount contains one warrant of 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 S.A.
(f)The security is a perpetual bond and has no definite maturity
date.
(g)Represents a step bond. Coupon payments are paid-in-kind, in
which the Portfolio receives additional face amount at an annual
rate of 1.75% until May 15, 2000. Subsequently, the Portfolio will
receive cash coupon payments at an annual rate of 15.75% until
maturity.
</TABLE>
INVESTMENT GRADE PORTFOLIO AND INTERMEDIATE TERM PORTFOLIO
MERRILL LYNCH CORPORATE BOND FUND, INC.
BEGINS HERE
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Quarterly Report
December 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
During 1998, stock and bond market volatility reflected shifting
investor perceptions regarding global economic prospects. Investor
optimism early in the year gave way to expectations of deteriorating
corporate profits and signs of a weakening economy by late summer.
Further concerns arose from the precarious state of the Russian and
other emerging market economies. As a result, world stock markets
declined in the third quarter of 1998. At the same time, the
uncertain economic picture and the resulting flight to quality by
investors pushed the 30-year US Treasury bond to record low yields.
Yields also declined in sovereign bond markets of other major
industrialized countries. In contrast, corporate bonds, mortgage-
backed securities and emerging markets debt underperformed Treasury
securities by a wide margin.
The US Federal Reserve Board and other central banks responded to
the uncertain economic outlook through a series of monetary policy
easings that served to restore investor confidence as 1998 drew
toward a close. Stock markets around the world rallied, with the
total returns for the unmanaged Standard & Poor's 500 Index rising
21.3% and the unmanaged Morgan Stanley Capital International World
Index (Ex-US) increasing 20.5% during the fourth quarter of 1998.
However, as 1999 began, uncertainty regarding global economic
prospects again began to cloud the investment outlook. At the same
time, with stronger-than-expected economic results, prospects dimmed
for further Federal Reserve Board monetary policy easings in the
near future. The notable exception to the more subdued investment
outlook in the United States was the unprecedented popularity of
Internet-related stocks.
The weakening of the US dollar relative to the Japanese yen was one
of the year's more surprising developments. Since a stronger yen
would have a negative impact on the important export sector of
Japan's fragile economy, the Japanese central bank intervened in the
currency markets in January. For the overall global economy, the
deepening recession in Japan is of great concern. At the same time,
the difficulties in emerging economies such as Russia and Brazil
remain. Furthermore, progress in easing strains within the global
financial system would likely provide an important element of
stability to the volatile investment environment.
Portfolio Strategy
Although the Federal Reserve Board aggressively moved to lower short-
term interest rates during the final quarter of 1998, the overall
trend in US interest rates was an upward flattening shift in the
entire US Treasury yield curve, with the five-year sector impacted
the most. During the quarter ended December 31, 1998, fixed-income
markets exhibited a significant degree of volatility, with yield
spread relationships among the various types of bonds fluctuating
with shifting market conditions. In the investment-grade corporate
bond market, yield spreads relative to US Treasury securities
initially widened because of the overwhelming pressure arising from
the global liquidity crisis and the deleveraging of financial
markets. This was followed by the renarrowing of yield spreads as a
result of the easings by the Federal Reserve Board. By the end of
the quarter, yield spread relationships had retraced approximately
60% from their widest levels reached during 1998.
With the flight to quality that occurred in the second half of 1998,
there was a significant increase in cash inflows into the Investment
Grade and Intermediate Term Portfolios as investors sought higher-
quality investment alternatives. We invested these assets primarily
in the US Treasury market to help insulate the Portfolios against
widening yield spreads and declining market liquidity. At this
point, we decided to reduce each Portfolio's exposure to the
financial services sector as well as to commodity-based companies
that might experience problems, as resource rich, cash-strapped
countries flooded the market with those commodities.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
During the December quarter, we maintained our underweighted
positions in high-end retailers and money center banks in both
Portfolios. Also, we added to our existing positions in discount
retailers, telecommunication providers, diversified regional banks
and utilities. Following the first two of three Federal Reserve
Board easings, we decided to focus on the asset reallocation process
in late October and sought to take advantage of the very attractive
opportunities that had developed in the corporate bond market. Since
liquidity was still a concern, we limited our new investments to the
larger, higher-rated issues. The strategy of selling US Treasury
positions in favor of corporate securities proved correct as
corporate yield spreads tightened approximately 30 basis points--60
basis points (0.30%--0.60%) on average across the investment-grade
universe. Recent additions to one or both Portfolios included:
Associates Corp. N.A., Anheuser-Busch Cos., Inc., McDonald's Corp.,
Raytheon Co., Lucent Technologies Inc., Motorola Inc., Coca-Cola
Enterprises Inc., Canadian Government Bonds and Tyco International
Group S.A.
The US Treasury market lost momentum after the November Federal Open
Market Committee meeting, indicating a shift from an easing bias to
a neutral posture. As a result, the US Treasury market sold off
during the third week of December, although the backup was short-
lived as investors quickly found value in the higher yields that
developed. Throughout this period, we maintained the duration of
both Portfolios in the 5.9-year--6.0-year range, which was
consistent with the duration of the unmanaged Merrill Lynch
Corporate Master Index.
Looking ahead, we expect the financial markets to remain extremely
volatile with liquidity remaining at a premium. Although we do not
expect the US economy to enter a deep recessionary environment, we
believe that the Federal Reserve Board will move back to a more
accommodative posture as we head into the second quarter of 1999 and
the domestic economy begins to slow. The Federal Reserve Board is
clearly concerned about the global credit crunch that has developed
as well as the negative implications that could arise as the global
financial markets deleverage. However, the US Treasury market may
well come under near-term pressure as investors focus on the newly
launched euro and the recent strength in the yen relative to the US
dollar. Accordingly, we will continue to emphasize liquidity and
high-quality issues in both Portfolios' investment strategies.
In Conclusion
We appreciate your ongoing investment in Investment Grade and
Intermediate Term Portfolios of Merrill Lynch Corporate Bond Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and Portfolio Manager
(Jay C. Harbeck)
Jay C. Harbeck
Senior Vice President and Portfolio Manager
January 29, 1999
As of January 29, 1999, Jay C. Harbeck retired as Senior Vice
President and Portfolio Manager of Investment Grade Portfolio and
Intermediate Term Portfolio of Merrill Lynch Corporate Bond Fund,
Inc. His colleagues at Merrill Lynch Asset Management, L.P. join the
Fund's Board of Directors in wishing Mr. Harbeck well in his
retirement.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Investment Grade
Portfolio. Intermediate Term Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Investment Grade Portfolio is subject to a
distribution fee of 0.50% and an account maintenance fee of 0.25%.
Intermediate Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. These shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Investment Grade Portfolio.
Intermediate Term Portfolio is subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for
Investment Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "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.
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +8.10% +3.78%
Five Years Ended 12/31/98 +6.37 +5.50
Ten Years Ended 12/31/98 +8.89 +8.45
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +7.27% +3.27%
Five Years Ended 12/31/98 +5.56 +5.56
Ten Years Ended 12/31/98 +8.06 +8.06
[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 12/31/98 +7.22% +6.22%
Inception (10/21/94)
through 12/31/98 +8.32 +8.32
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/98 +7.83% +3.52%
Inception (10/21/94)
through 12/31/98 +8.94 +7.88
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +7.38% +6.31%
Five Years Ended 12/31/98 +6.31 +6.10
Ten Years Ended 12/31/98 +8.65 +8.54
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +6.83% +5.83%
Five Years Ended 12/31/98 +5.76 +5.76
Inception (11/13/92)
through 12/31/98 +6.74 +6.74
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/98 +6.74% +5.74%
Inception (10/21/94)
through 12/31/98 +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 12/31/98 +7.28% +6.20%
Inception (10/21/94)
through 12/31/98 +8.58 +8.32
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
<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 12/31/98
<S> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares** +8.10% +0.55% +134.37% 5.48%
Investment Grade Portfolio Class B Shares** +7.27 +0.35 +117.19 4.94
Investment Grade Portfolio Class C Shares** +7.22 +0.34 + 39.83 4.89
Investment Grade Portfolio Class D Shares** +7.83 +0.49 + 43.21 5.24
Intermediate Term Portfolio Class A Shares*** +7.38 +0.19 +129.18 5.39
Intermediate Term Portfolio Class B Shares*** +6.83 +0.06 + 49.20 4.93
Intermediate Term Portfolio Class C Shares*** +6.74 -0.03 + 38.61 4.93
Intermediate Term Portfolio Class D Shares*** +7.28 +0.16 + 41.24 5.29
<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 12/31/98 and Class C & Class D
Shares, from 10/21/94 to 12/31/98.
***The Portfolio's ten-year/since inception periods are: Class A
Shares, for the ten years ended 12/31/98; Class B Shares, from
11/13/92 to 12/31/98; and Class C & Class D Shares, from 10/21/94 to
12/31/98.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations-- AAA Aaa $ 3,000,000 5.50% due 3/31/2000 $ 2,998,242 $ 3,029,520
4.1% AAA Aaa 1,250,000 5.25% due 8/15/2003 1,298,535 1,281,838
AAA Aaa 1,500,000 5.875% due 2/15/2004 1,533,281 1,582,500
AAA Aaa 3,000,000 7.50% due 2/15/2005 3,280,781 3,435,000
AAA Aaa 8,500,000 4.75% due 11/15/2008 8,456,562 8,566,385
AAA Aaa 12,600,000 6.125% due 11/15/2027 14,121,813 14,104,062
AAA Aaa 22,000,000 5.50% due 8/15/2028 23,299,375 23,027,840
AAA Aaa 10,000,000 5.25% due 11/15/2028 10,403,125 10,237,500
-------------- --------------
65,391,714 65,264,645
Asset-Backed AAA Aaa 15,000,000 Aames Financial Corp., 6.46% due 5/15/2028 14,995,313 15,154,688
Securities++ AAA Aaa 4,000,000 Aames Mortgage Trust, Series 1998-C,
- --5.6% Class A2A, 5.912% due 9/15/2028++++ 4,000,000 4,002,040
NR+++ Baa2 2,000,000 Bistro Trust 1998-1000, 6.58% due 3/26/2001 1,999,920 2,029,360
AAA Aaa 10,000,000 Citibank Credit Card Master Trust I, 5.364%
due 12/10/2008++++ 9,996,100 9,730,200
AAA Aaa 5,000,000 Conti Mortgage, 1998-3-A10, 5.84% due
5/15/2016 4,998,955 4,980,750
A A2 9,000,000 First Dominion Funding I, 5.71% due
7/10/2013++++ 8,966,133 8,460,000
AAA Aaa 6,039,066 First Greensboro, 6.55% due 12/25/2029 6,039,066 6,005,097
AAA Aaa 7,365,351 GMAC Grantor Trust, 6.50% due 4/15/2002 7,363,297 7,429,208
AAA Aaa 12,000,000 IMC-Home Equity, 6.36% due 8/20/2022++++ 11,997,673 12,113,040
The Money Store Home Equity Trust:
AAA Aaa 11,000,000 6.13% due 12/15/2000 11,000,000 11,012,870
AAA Aaa 8,850,000 6.225% due 9/15/2023 8,848,685 8,905,135
-------------- --------------
90,205,142 89,822,388
Banking--10.4% BB&T Corporation:
BBB+ A3 6,250,000 7.25% due 6/15/2007 6,220,813 6,817,563
BBB+ A3 12,000,000 6.375% due 6/30/2025 12,050,880 12,253,680
A+ Aa2 3,000,000 BankAmerica Corp., 6.65% due 5/01/2001 2,997,090 3,081,780
A+ Aa3 10,000,000 First Bank System, Inc., 6.375% due
3/15/2001 9,919,862 10,202,300
A- A2 11,000,000 First Union Corporation, 6.30% due
4/15/2028++++ 10,958,420 11,152,801
BBB+ a1 5,500,000 First Union Institutional Capital I,
8.04% due 12/01/2026 5,835,280 6,057,535
BBB+ a2 4,750,000 Fleet Capital Trust II, 7.92% due
12/11/2026 4,690,720 5,274,875
HSBC Americas Inc.:
A- A3 6,000,000 7% due 11/01/2006 5,949,600 6,283,080
BBB+ a2 14,000,000 7.808% due 12/15/2026 13,838,440 13,356,406
A- A2 2,000,000 Key Bank USA N.A., 7.55% due 9/15/2006 2,170,940 2,210,980
BBB+ A2 5,000,000 KeyCorp, 7.50% due 6/15/2006 5,401,050 5,523,600
BBB a1 16,400,000 KeyCorp Capital I, 6.427% due 7/01/2028++++ 16,235,016 15,812,880
BBB+ Baa1 13,750,000 MBNA America Bank N.A., 5.543% due
6/10/2004++++ 13,537,838 13,081,063
A- a2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 6,493,260
Mellon Financial Co.:
A+ A2 3,500,000 5.75% due 11/15/2003 3,493,525 3,524,255
A A3 5,250,000 6.375% due 2/15/2010 5,258,138 5,516,385
NationsBank Corp.:
A+ Aa2 6,000,000 5.75% due 3/15/2001 5,979,480 6,051,000
A Aa3 1,300,000 6.50% due 8/15/2003 1,336,075 1,345,084
A+ Aa2 3,000,000 6.125% due 7/15/2004 3,068,640 3,069,180
A+ Aa2 7,750,000 6.375% due 5/15/2005 7,876,223 8,055,738
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Banking Norwest Corp.:
(concluded) A+ Aa3 $ 3,500,000 6.75% due 5/12/2000 $ 3,494,785 $ 3,566,290
A A1 5,000,000 6.625% due 3/15/2003 5,104,650 5,206,950
BBB+ A3 11,200,000 Washington Mutual Bank, 9.875% due
6/15/2001 12,414,640 12,243,280
-------------- --------------
163,832,105 166,179,965
Canadian AA+ Aa2 2,000,000 Province of Alberta, 4.875% due
Provinces*-- 10/29/2003 (1) 1,993,080 1,975,660
1.7% AA Aa2 6,000,000 Province of British Columbia, 5.375%
due 10/29/2008 (1) 5,968,860 5,988,360
AA- Aa3 2,500,000 Province of Manitoba, 5.50% due
10/01/2008 (1) 2,484,050 2,523,025
AA- Aa3 8,200,000 Province of Ontario, 5.50% due
10/01/2008 (1) 8,151,456 8,231,570
Province of Quebec (1):
A+ A2 6,000,000 8.80% due 4/15/2003 6,774,360 6,732,780
A+ A2 1,500,000 7.125% due 2/09/2024 1,562,415 1,637,880
-------------- --------------
26,934,221 27,089,275
Finance--3.4% Associates Corp. N.A.:
AA- Aa3 10,500,000 5.75% due 11/01/2003 10,495,905 10,594,185
AA- Aa3 2,750,000 6.95% due 11/01/2018 2,733,830 2,930,345
A A2 9,500,000 Beneficial Corporation, 6.80% due
9/16/2003 9,500,000 9,850,436
A Aa3 1,250,000 CIT Capital Trust I, 7.70% due 2/15/2027 1,244,300 1,306,141
Commercial Credit Co.:
A+ Aa3 5,000,000 6.45% due 7/01/2002 5,009,800 5,149,650
A+ Aa3 2,000,000 6.125% due 12/01/2005 2,049,240 2,040,780
A+ Aa3 6,850,000 6.75% due 7/01/2007 7,046,869 7,308,197
A+ Aa3 1,800,000 6.25% due 1/01/2008 1,836,846 1,863,288
Finova Capital Corp.:
A- Baa1 4,500,000 6.45% due 6/01/2000 4,524,435 4,542,570
A- Baa1 7,850,000 6.25% due 11/01/2002 7,819,935 7,919,708
-------------- --------------
52,261,160 53,505,300
Finance-- Bear Stearns Companies, Inc.:
Other--7.7% A A2 2,000,000 6.50% due 7/05/2000 1,996,360 2,020,340
A A2 2,000,000 6.75% due 5/01/2001 1,993,680 2,040,040
Citigroup Inc.:
AA- Aa2 3,000,000 9.50% due 3/01/2002 3,163,980 3,343,590
AA- Aa2 6,500,000 7.875% due 5/15/2025 6,547,818 7,581,132
BBB- Baa2 6,400,000 Commercial Net Lease Realty, 7.125% due
3/15/2008 6,382,656 5,922,048
A+ Aa3 3,500,000 Dean Witter, Discover & Co., 6.75% due
8/15/2000 3,486,805 3,559,220
Donaldson, Lufkin & Jenrette Inc.:
A- A3 3,350,000 6% due 12/01/2001 3,345,980 3,336,037
A- A3 11,000,000 6.875% due 11/01/2005 10,952,615 11,483,010
A- A3 3,500,000 6.50% due 6/01/2008 3,485,475 3,598,875
A A2 7,500,000 Equitable Life Assurance Society of the
US, 7.70% due 12/01/2015 7,448,310 8,227,125
BBB- Baa3 4,600,000 Hospitality Properties Trust, 7% due
3/01/2008 4,591,720 4,248,836
Lehman Brothers Holdings, Inc.:
A Baa1 4,000,000 6.50% due 10/01/2002 3,996,200 4,000,452
A Baa1 8,500,000 7.36% due 12/15/2003 8,671,445 8,794,355
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,940,323 4,231,635
A+ A1 8,000,000 Morgan Stanley, Dean Witter, Discover &
Co., 6.09% due 3/09/2011 7,998,720 8,101,280
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- BBB+ Baa1 $ 7,500,000 Paine Webber Group Inc., 7.99% due
Other 6/09/2017 $ 7,500,000 $ 7,571,325
(concluded) A+ A2 5,300,000 Prudential Insurance Co., 6.375% due
7/23/2006 5,276,574 5,457,543
Salomon Smith Barney Holdings, Inc.:
A Aa3 10,000,000 6.25% due 1/15/2005 9,942,460 10,110,990
A Aa3 2,850,000 7.375% due 5/15/2007 2,847,464 3,070,049
BBB+ Baa1 1,000,000 Simon Debartolo Group, Inc., 6.75% due
6/15/2005 990,460 982,789
BBB Baa2 6,000,000 Spieker Properties LP, 7.35% due
12/01/2017 5,999,700 5,673,276
BBB Baa3 9,700,000 Storage USA Partnership, 7.45% due
7/01/2018 9,688,554 8,840,599
-------------- --------------
120,247,299 122,194,546
Industrial-- A+ A1 3,000,000 Anheuser-Busch Cos., Inc., 8.75% due
Consumer--5.1% 12/01/1999 3,367,590 3,097,260
A A2 10,000,000 Avon Products, Inc., 6.25% due
5/01/2018++++ 9,987,600 10,249,210
A+ A3 4,250,000 Coca-Cola Enterprises Inc., 5.75% due
11/01/2008 4,221,653 4,281,450
BBB- Baa3 2,500,000 Flowers Industries, Inc., 7.15% due
4/15/2028 2,486,750 2,398,700
A+ A1 3,700,000 Hershey Foods Corporation, 6.95% due
8/15/2012 4,089,832 4,114,992
AA Aa2 11,000,000 Kimberly-Clark Corp., 6.375% due
1/01/2028 10,909,360 11,451,770
AA Aa2 5,850,000 McDonald's Corp., 5.35% due 9/15/2008 5,803,843 5,850,819
Nabisco, Inc.:
BBB Baa2 9,000,000 6% due 2/15/2011 8,997,750 8,893,080
BBB Baa2 4,000,000 7.55% due 6/15/2015 3,988,860 4,002,680
A A1 5,670,000 PepsiCo, Inc., 5.75% due 1/02/2003 5,641,310 5,726,320
Philip Morris Companies, Inc.:
A A2 9,500,000 9% due 1/01/2001 9,698,815 10,142,580
A A2 5,000,000 6.15% due 3/15/2010++++ 4,997,400 5,041,500
A A2 5,000,000 7.75% due 1/15/2027 5,361,500 5,677,250
-------------- --------------
79,552,263 80,927,611
Industrial-- AA+ Aa1 4,075,000 BP America Inc., 9.375% due 11/01/2000 4,488,287 4,375,042
Energy--2.1% BBB Baa3 7,250,000 Occidental Petroleum Corp., 6.50% due
4/01/2005 7,208,675 7,098,547
BBB+ Baa1 14,600,000 Sonat, Inc., 7% due 2/01/2018 14,836,782 14,920,908
A+ A1 5,750,000 Texaco Capital Inc., 8.625% due
11/15/2031 7,583,732 7,359,137
-------------- --------------
34,117,476 33,753,634
Industrial-- Applied Materials Inc.:
Manufacturing-- BBB+ A3 5,000,000 6.75% due 10/15/2007 4,996,750 5,032,300
12.6% BBB+ A3 13,000,000 7.125% due 10/15/2017 12,911,080 12,584,520
A+ A2 2,800,000 Danaher Corp., 6% due 10/15/2008 2,784,964 2,789,640
Emerson Electric Co.:
AA+ Aa1 3,700,000 5.50% due 9/15/2008 3,690,417 3,727,417
AA+ Aa1 4,000,000 5% due 10/15/2008 3,987,760 3,879,400
Ford Motor Credit Company:
A A1 5,000,000 8.20% due 2/15/2002 5,328,850 5,392,800
A A1 5,000,000 8% due 6/15/2002 5,286,350 5,394,200
A A1 5,000,000 7.50% due 6/15/2004 5,140,200 5,432,950
A A1 1,000,000 7.75% due 3/15/2005 999,090 1,108,730
A A1 10,000,000 5.35% due 8/27/2006++++ 9,993,068 9,975,000
A A1 7,000,000 8.90% due 1/15/2032 8,650,180 9,329,670
General Electric Capital Corp.:
AAA Aaa 500,000 8.75% due 5/21/2007 611,680 610,370
AAA Aaa 4,305,000 8.50% due 7/24/2008 5,228,853 5,277,973
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- General Motors Acceptance Corp.:
Manufacturing A A2 $ 4,000,000 6.625% due 9/19/2002 $ 3,915,080 $ 4,129,800
(concluded) A A2 9,400,000 5.875% due 1/22/2003 9,505,280 9,506,408
A A2 10,000,000 7.70% due 4/15/2016 10,911,500 11,422,900
BBB- Baa2 5,000,000 Georgia-Pacific Group, 7.25% due 6/01/2028 4,975,150 5,037,100
A- Baa1 3,500,000 The Goodrich B.F. Company, 7% due 4/15/2038 3,479,385 3,503,185
IBM Corp.:
A+ A1 5,000,000 5.25% due 12/01/2003 4,992,300 5,053,870
A+ A1 10,000,000 6.50% due 1/15/2028 10,313,400 10,495,900
A- Baa1 3,000,000 Lafarge Corporation, 6.875% due 7/15/2013 2,992,770 3,104,520
BBB+ A3 5,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 4,995,950 5,143,750
BBB+ A3 11,000,000 Loral Corporation, 8.375% due 6/15/2024 11,056,040 13,352,130
A+ A2 4,500,000 Lubrizol Corp., 5.875% due 12/01/2008 4,445,415 4,475,313
Lucent Technologies Inc.:
A A2 1,500,000 5.50% due 11/15/2008 1,493,430 1,516,104
A A2 7,050,000 6.50% due 1/15/2028 7,295,727 7,488,298
Martin Marietta Corp.:
BBB+ A3 6,500,000 6.50% due 4/15/2003 6,539,845 6,673,550
BBB+ A3 4,000,000 7.375% due 4/15/2013 3,846,440 4,400,560
AA- A1 5,000,000 Motorola Inc., 5.80% due 10/15/2008 4,993,300 5,114,700
Raytheon Co.:
BBB Baa1 2,750,000 6.30% due 3/15/2005 2,743,812 2,818,722
BBB Baa1 1,300,000 6.15% due 11/01/2008 1,296,568 1,323,881
BBB Baa1 4,000,000 7% due 11/01/2028 3,998,040 4,211,280
BBB Ba1 14,000,000 Seagate Technology, Inc., 7.125% due
3/01/2004 13,975,500 13,699,560
A A2 7,000,000 Xerox Corporation, 5.50% due 11/15/2003 7,001,070 7,046,480
-------------- --------------
194,375,244 200,052,981
Industrial-- AAA Aa1 5,700,000 Abbott Laboratories, 5.40% due 9/15/2008 5,688,657 5,751,072
Services--15.8% A A2 10,000,000 Bass America, Inc., 8.125% due 3/31/2002 10,250,610 10,658,100
A A2 8,000,000 Carnival Cruise Lines, Inc., 7.70% due
7/15/2004 8,076,380 8,666,400
BBB- Baa3 10,000,000 Circus Circus Enterprises, Inc., 6.70% due
11/15/2096 9,977,700 9,375,800
BBB- Baa3 3,000,000 Comcast Cable Communications Company,
6.20% due 11/15/2008 2,992,050 3,055,140
A- Baa1 11,000,000 Computer Associates International, Inc.,
6.375% due 4/15/2005 10,941,810 10,954,306
BBB Baa1 5,000,000 Dillard's, Inc., 9.125% due 8/01/2011 6,054,000 5,971,600
A A2 13,590,413 Disney-Custom Repackaged Asset Vehicle-403,
6.85% due 1/10/2007++ 13,581,307 14,100,053
First Data Corporation:
A A2 11,500,000 6.75% due 7/15/2005 11,911,930 11,953,675
A A2 10,000,000 6.375% due 12/15/2007 9,974,300 10,361,300
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 8,359,890
A A2 5,000,000 May Department Stores Co., 6.70% due
9/15/2028 4,979,700 5,135,650
AAA Aaa 3,000,000 Merck & Co., Inc., 5.95% due 12/01/2028 2,975,100 2,994,750
BBB- Baa3 12,445,000 News American Holdings, Inc., 8.625% due
2/01/2003 13,585,486 13,645,569
A A2 5,750,000 Nordstrom, Inc., 6.95% due 3/15/2028 5,824,520 6,053,025
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- Oracle Corporation:
Services BBB+ Baa2 $ 5,000,000 6.72% due 2/15/2004 $ 5,000,000 $ 4,996,750
(concluded) BBB+ Baa2 4,000,000 6.91% due 2/15/2007 4,000,000 4,014,440
BBB- Baa3 12,700,000 Royal Caribbean Cruises Ltd., 6.75% due
3/15/2008 12,620,404 12,498,705
BBB Baa2 4,000,000 Safeway Inc., 5.875% due 11/15/2001 3,988,520 4,011,340
A- A2 8,000,000 Sears, Roebuck & Co., 6.82% due 10/17/2002 8,016,320 8,331,920
Service Corporation International:
BBB+ Baa1 7,000,000 6.75% due 6/01/2001 6,978,580 7,164,570
BBB+ Baa1 8,500,000 7.20% due 6/01/2006 8,263,700 9,017,650
BBB+ Baa1 7,000,000 6.30% due 3/15/2020 6,992,300 7,067,550
AA- Baa3 8,980,000 TCI Communications, Inc., 8.75% due
8/01/2015 10,534,079 11,155,764
Time Warner Entertainment Co.:
BBB Baa2 6,000,000 10.15% due 5/01/2012 7,356,180 8,060,820
BBB Baa2 9,900,000 8.375% due 3/15/2023 10,525,871 12,018,402
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 14,488,240 16,563,311
Walt Disney Company:
A A2 5,500,000 6.375% due 3/30/2001 5,500,000 5,648,280
A A2 8,000,000 5.125% due 12/15/2003 7,989,760 7,955,680
BBB+ Baa3 5,350,000 Waste Management, Inc., 7% due 7/15/2028 5,290,454 5,525,640
-------------- --------------
241,415,378 251,067,152
Industrial-- BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due
Transportation-- 6/15/2012 10,137,590 11,179,170
2.0% Southwest Airlines, Inc.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,832,700
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,194,780
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,353,640
BBB- Baa3 4,000,000 Union Pacific Corp., 6.625% due 2/01/2008 3,964,880 4,108,360
-------------- --------------
30,401,680 31,668,650
Mortgage- AAA Aaa 760,000 EQCC Home Equity Loan Trust, 6.229% due
Backed 3/15/2013 766,086 755,562
Securities++ Federal Home Loan Mortgage Corp.:
- --3.9% AAA Aaa 2,000,000 5.75% due 4/15/2008 2,136,140 2,067,820
AAA Aaa 9,679,000 6% due 10/15/2018 9,832,503 9,733,396
AAA Aaa 2,000,000 6% due 6/15/2023 1,989,375 2,018,120
AAA Aaa 2,000,000 6.35% due 9/15/2023 2,022,734 2,045,620
AAA Aaa 6,480,536 Federal National Mortgage Association,
6.448% due 12/25/2012 6,496,738 6,419,781
AAA Aaa 11,000,000 Government National Mortgage Association,
6.375% due 11/20/2026 10,915,781 11,103,070
NR+++ A2 8,500,000 Mortgage Capital Funding, 6.726% due
6/18/2008 8,585,000 8,685,273
AAA Aaa 7,000,000 Nationslink Funding Corporation, 6.475%
due 7/20/2008 7,105,000 7,240,625
AAA Aaa 12,000,000 Saxon Asset Securities Trust, 6.265% due
7/25/2023 12,000,000 12,062,040
-------------- --------------
61,849,357 62,131,307
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A- A2 $ 8,700,000 ALLTEL Corporation, 6.75% due 9/15/2005 $ 8,566,020 $ 9,154,314
Communications BBB Baa3 4,000,000 AT&T Capital Corp., 7.50% due 11/15/2000 3,996,280 4,048,960
- --6.7% AA Aa2 6,350,000 Bell Telephone Company of Pennsylvania,
7.375% due 7/15/2007 7,090,029 7,178,675
A A3 4,650,000 Frontier Corporation, 6% due 10/15/2013++++ 4,643,676 4,700,452
AA- A2 9,500,000 GTE California, Inc., 8.07% due 4/15/2024 10,152,935 10,546,140
GTE Corp.:
A Baa1 7,500,000 9.375% due 12/01/2000 8,235,170 8,044,275
A Baa1 3,600,000 6.84% due 4/15/2018 3,700,728 3,838,932
Southwestern Bell Telecommunications Corp.:
AA Aa3 2,000,000 6.125% due 3/01/2000 2,011,250 2,019,920
AA Aa3 5,000,000 6.375% due 11/15/2007 5,023,800 5,323,650
Sprint Capital Corp.:
A- Baa1 5,000,000 5.70% due 11/15/2003 4,999,150 5,017,850
A- Baa1 8,000,000 6.875% due 11/15/2028 7,986,880 8,314,400
US West Capital Funding Inc.:
A- A3 4,000,000 6.375% due 7/15/2008 4,271,560 4,219,000
A- A3 8,920,000 6.50% due 11/15/2018 8,868,799 9,127,836
A- A3 5,000,000 6.875% due 7/15/2028 5,333,900 5,339,650
WorldCom Inc.:
BBB+ Baa2 11,000,000 7.75% due 4/01/2007 11,977,665 12,426,150
BBB+ Baa2 6,000,000 6.95% due 8/15/2028 5,943,900 6,441,840
-------------- --------------
102,801,742 105,742,044
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison
Electric--6.1% (Class B), 7.13% due 7/01/2007 6,137,176 6,345,378
BBB- Baa3 5,000,000 Commonwealth Edison Co., 6.95% due
7/15/2018 4,978,600 5,201,915
A+ A1 9,115,000 Consolidated Edison Company, 6.25% due
2/01/2008 9,115,000 9,568,562
BBB+ Baa3 5,000,000 Consumers Energy Company, 6.375% due
2/01/2008 4,951,650 5,041,360
A A1 10,000,000 Mississippi Power Co., 6.05% due 5/01/2003 10,224,800 10,272,400
AA- A1 8,000,000 Pacific Gas and Electric Company, 6.25%
due 8/01/2003 8,149,200 8,277,680
A- A3 3,000,000 Pennsylvania Power & Light Resources Inc.,
6.125% due 5/01/2006++++ 2,998,200 3,044,610
A- A3 10,000,000 Public Service Electric & Gas Co., 6.50%
due 6/01/2000 9,995,705 10,124,400
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,000,000 5,278,350
Texas Utilities Co.:
AAA Aaa 6,971,000 6.375% due 10/01/2004 6,995,198 7,308,557
BBB Baa3 6,000,000 5.94% due 10/15/2011 6,000,000 6,034,980
BBB Baa1 5,000,000 Texas Utilities Electric Capital V,
8.175% due 1/30/2037 5,000,000 5,590,650
Virginia Electric & Power Co.:
A A3 5,000,000 5.73% due 11/25/2008 5,000,000 5,001,225
A A2 8,500,000 8.625% due 10/01/2024 8,377,160 9,780,525
-------------- --------------
92,922,689 96,870,592
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee AA- Aa3 $ 6,000,000 ABN AMRO Holding N.V., 7.125% due
Corporates*-- 6/18/2007 (2) $ 5,997,060 $ 6,465,900
8.9% AmVescap PLC (2):
BBB A3 3,000,000 6.375% due 5/15/2003 2,994,570 2,998,911
BBB A3 9,000,000 6.60% due 5/15/2005 8,987,281 9,016,317
A+ A1 6,000,000 Australia & New Zealand Banking Group
Ltd., 7.55% due 9/15/2006 (2) 5,990,880 6,478,680
BBB+ A2 7,500,000 Banco Central Hispanoamercano S.A.
(Cayman Islands), 7.70% due 7/15/2006 (2) 7,973,775 8,085,750
AAA Aaa 13,000,000 Banco Santander--Chile, 6.50% due
11/01/2005 (2) 12,938,770 13,176,735
BBB Baa2 5,550,000 Canadian National Railway Co., 6.90% due
7/15/2028 (3) 5,526,135 5,770,890
Enersis S.A. (3):
A- Baa1 2,500,000 6.90% due 12/01/2006 2,493,550 2,272,925
A- Baa1 4,000,000 6.60% due 12/01/2026 3,992,400 3,732,760
Fairfax Financial Holdings Ltd. (2):
BBB+ Baa3 300,000 7.375% due 4/15/2018 299,346 290,469
BBB+ Baa3 9,800,000 7.75% due 7/15/2037 9,751,098 9,620,660
Ford Capital B.V. (2):
A A1 10,000,000 9.875% due 5/15/2002 10,531,200 11,296,300
A A1 3,995,000 9.50% due 6/01/2010 4,430,215 5,223,263
A Aa3 2,000,000 Midland Bank PLC, 7.65% due 5/01/2025 (2) 2,191,680 2,144,420
A A2 6,500,000 Norsk Hydro A/S, 6.70% due 1/15/2018 (3) 6,466,720 6,492,902
BBB+ A3 1,500,000 Philips Electronics N.V., 7.75% due
4/15/2004 (3) 1,602,615 1,600,740
BBB Baa3 2,000,000 Saga Petroleum ASA, 7.25% due 9/23/2027 (3) 1,979,980 1,854,580
A+ Aa3 4,000,000 Sony Corp., 6.125% due 3/04/2003 (3) 3,991,520 4,086,160
AA Aa2 15,500,000 Swiss Bank Corp.--New York, 7.375% due
6/15/2017 (2) 16,581,680 16,576,785
A- A2 6,000,000 Trans-Canada Pipelines Ltd., 6.49% due
1/21/2009 (3) 6,000,000 6,106,020
Tyco International Group S.A. (3):
A- Baa1 7,000,000 5.875% due 11/01/2004 6,997,130 6,956,845
A- Baa1 10,500,000 7% due 6/15/2028 10,424,295 10,712,625
-------------- --------------
138,141,900 140,960,637
Yankee AA+ Aa2 9,000,000 Canadian Government Bonds, 5.25% due
Sovereign*-- 11/05/2008 (1) 8,997,930 9,011,250
0.8% BBB+ A3 4,000,000 People's Republic of China, 7.30% due
12/15/2008 (1) 3,994,400 3,980,800
-------------- --------------
12,992,330 12,992,050
Total Investments in Bonds &
Notes--96.9% 1,507,441,700 1,540,222,777
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face
Amount Issue Cost Value
Short-Term Securities
<S> <C> <S> <C> <C>
Repurchase $35,557,000 Warburg Dillon Read LLC, purchased on
Agreements**--2.3% 12/31/1998 to yield 4.75% to 1/04/1999 $ 35,557,000 $ 35,557,000
Total Investments in Short-Term
Securities--2.3% 35,557,000 35,557,000
Total Investments--99.2% $1,542,998,700 1,575,779,777
==============
Other Assets Less Liabilities--0.8% 13,166,766
--------------
Net Assets--100.0% $1,588,946,543
==============
Net Asset Class A--Based on net assets of $615,250,770 and 52,751,389 shares outstanding $ 11.66
Value: ==============
Class B--Based on net assets of $756,364,924 and 64,850,339 shares outstanding $ 11.66
==============
Class C--Based on net assets of $90,837,256 and 7,785,308 shares outstanding $ 11.67
==============
Class D--Based on net assets of $126,493,593 and 10,839,362 shares outstanding $ 11.67
==============
<FN>
*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
and Agency Obligations.
++Subject to principal paydowns.
++++Floating Rate Note.
+++Not Rated.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
US Government United States Treasury Bonds & Notes:
Obligations-- AAA Aaa $ 500,000 5.875% due 2/15/2004 $ 520,234 $ 527,500
2.8% AAA Aaa 5,000,000 7.25% due 5/15/2004 5,512,563 5,603,900
AAA Aaa 4,000,000 6.50% due 5/15/2005 4,369,375 4,383,760
AAA Aaa 100,000 5.625% due 5/15/2008 106,219 106,703
AAA Aaa 3,500,000 4.75% due 11/15/2008 3,471,562 3,527,335
-------------- --------------
13,979,953 14,149,198
Asset-Backed NR+++ Baa2 3,500,000 Bistro Trust 1998-1000, 6.58% due
Securities++ 3/26/2001 3,499,860 3,551,380
- --3.9% AAA Aaa 2,000,000 First Bank, Corporate Card Master
Trust, 6.40% due 2/15/2003 1,997,545 2,055,200
NR+++ NR+++ 10,000,000 Spinnaker Industries Inc., 6.544% due
5/01/2001 (a) 10,000,000 9,950,000
BBB- Baa1 5,000,000 York Funding Ltd., 6.50% due 6/15/2005 (a) 5,000,000 4,050,000
-------------- --------------
20,497,405 19,606,580
Banking--11.2% BBB+ A3 4,000,000 BB&T Corporation, 7.25% due 6/15/2007 3,981,320 4,363,240
A A2 3,500,000 The Bank of New York Company, Inc.,
7.875% due 11/15/2002 3,873,450 3,790,220
BankAmerica Corp.:
A Aa3 4,000,000 7.50% due 10/15/2002 4,268,880 4,250,320
A+ Aa2 3,000,000 7.125% due 5/12/2005 2,956,500 3,210,540
A A1 9,000,000 First Chicago Corp., 9% due 6/15/1999 9,548,820 9,143,010
A- A3 1,000,000 HSBC Americas Inc., 7% due 11/01/2006 991,600 1,047,180
A- A2 2,800,000 Key Bank USA N.A., 7.55% due 9/15/2006 3,039,316 3,095,372
BBB+ Baa1 4,000,000 MBNA America Bank N.A., 5.543% due
6/10/2004 (a) 3,938,280 3,805,400
A A3 6,000,000 Mellon Financial Co., 6.875% due 3/01/2003 5,483,220 6,283,200
A+ Aa2 4,500,000 NationsBank Corp., 6.65% due 4/09/2002 4,426,620 4,649,040
Norwest Corp.:
A+ Aa3 2,000,000 6.125% due 10/15/2000 1,996,440 2,026,280
A A1 1,000,000 6.625% due 3/15/2003 1,003,060 1,041,390
BBB+ A3 9,000,000 Washington Mutual Bank, 7.25% due 8/15/2005 8,930,520 9,442,350
-------------- --------------
54,438,026 56,147,542
Canadian AA Aa2 2,000,000 Province of British Columbia, 5.375% due
Provinces*--2.1% 10/29/2008 (1) 1,989,620 1,996,120
AA- Aa3 3,000,000 Province of Ontario, 5.50% due
10/01/2008 (1) 2,982,240 3,011,550
A+ A2 5,000,000 Province of Quebec, 8.80% due 4/15/2003 (1) 5,538,670 5,610,650
-------------- --------------
10,510,530 10,618,320
Finance--4.4% AA- Aa3 3,500,000 Associates Corp. N.A., 5.75% due
11/01/2003 3,498,635 3,531,395
A A2 9,250,000 Beneficial Corporation, 6.80% due
9/16/2003 9,250,000 9,591,214
A+ Aa3 1,000,000 CIT Group Holdings, Inc., 6.625% due
6/15/2005 1,003,390 1,047,780
Commercial Credit Co.:
A+ Aa3 3,000,000 6.45% due 7/01/2002 3,005,880 3,089,790
A+ Aa3 2,080,000 6.25% due 1/01/2008 2,122,578 2,153,133
A- Baa1 2,500,000 Finova Capital Corp., 6.25% due 11/01/2002 2,490,425 2,522,200
-------------- --------------
21,370,908 21,935,512
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Finance-- BBB Baa3 $ 2,500,000 AT&T Capital Corp., 7.50% due 11/15/2000 $ 2,497,675 $ 2,530,600
Other--7.6% BBB Baa2 5,000,000 Centerpoint Properties Corporation,
6.75% due 4/01/2005 4,978,150 4,749,300
AA- Aa2 2,000,000 Citigroup Inc., 9.50% due 3/01/2002 2,168,400 2,229,060
BBB- Baa2 5,000,000 Commercial Net Lease Realty, 7.125% due
3/15/2008 4,986,450 4,626,600
A- A3 2,000,000 Donaldson, Lufkin & Jenrette Inc., 6% due
12/01/2001 1,997,600 1,991,664
BBB- Baa3 4,250,000 Hospitality Properties Trust, 7% due
3/01/2008 4,242,350 3,925,555
A Baa1 5,000,000 Lehman Brothers Holdings, Inc., 6.50% due
10/01/2002 4,974,200 5,000,565
BBB+ Baa1 2,000,000 Paine Webber Group Inc., 6.45% due
12/01/2003 2,000,000 2,006,762
Salomon Smith Barney Holdings, Inc.:
A Aa3 2,000,000 6.50% due 3/01/2000 2,000,000 2,022,640
A Aa3 4,000,000 6.25% due 1/15/2005 3,991,240 4,044,396
A Aa3 1,000,000 7.375% due 5/15/2007 999,110 1,077,210
BBB+ Baa1 4,000,000 Simon Debartolo Group, Inc., 6.75% due
6/15/2005 3,961,840 3,931,156
-------------- --------------
38,797,015 38,135,508
Industrial-- Anheuser-Busch Cos., Inc.:
Consumer A+ A1 5,481,000 8.75% due 12/01/1999 6,189,909 5,658,694
Goods--6.9% A+ A1 2,800,000 5.65% due 9/15/2008 2,790,508 2,853,900
A A2 2,000,000 Avon Products, Inc., 6.25% due 5/01/2018 (a) 1,997,520 2,049,842
A+ A3 1,000,000 Coca-Cola Enterprises Inc., 5.75% due
11/01/2008 993,330 1,007,400
Nabisco, Inc.:
BBB Baa2 5,000,000 6.70% due 6/15/2002 4,997,050 5,000,200
BBB Baa2 3,000,000 6.85% due 6/15/2005 2,994,300 2,994,900
BBB Baa2 6,000,000 6.00% due 2/15/2011 5,998,500 5,928,720
Philip Morris Companies, Inc.:
A A2 3,500,000 9.00% due 1/01/2001 3,576,195 3,736,740
A A2 4,000,000 7.25% due 1/15/2003 4,196,640 4,235,040
A A2 1,000,000 6.15% due 3/15/2010 (a) 999,480 1,008,300
-------------- --------------
34,733,432 34,473,736
Industrial-- BBB- Baa2 9,500,000 KN Energy, Inc., 6.45% due 11/30/2001 9,493,160 9,542,845
Energy--4.1% BBB Baa3 3,000,000 Occidental Petroleum Corp., 6.50% due
4/01/2005 2,982,900 2,937,330
A+ A1 2,000,000 Texaco Capital Inc., 9% due 12/15/1999 2,342,460 2,071,300
BBB Baa2 6,000,000 Ultramar Credit Corp., 8.625% due
7/01/2002 6,521,940 6,355,080
-------------- --------------
21,340,460 20,906,555
Industrial-- A A2 3,000,000 AlliedSignal, Inc., 6.20% due 2/01/2008 2,995,980 3,051,900
Manufacturing-- Applied Materials Inc.:
14.0% BBB+ A3 4,000,000 6.65% due 9/05/2000 4,000,000 4,072,640
BBB+ A3 4,300,000 6.75% due 10/15/2007 4,297,205 4,327,778
BBB Ba1 3,000,000 Blount Inc., 7% due 6/15/2005 2,968,650 2,980,440
A+ A2 1,500,000 Danaher Corp., 6% due 10/15/2008 1,491,945 1,494,450
AA+ Aa1 3,000,000 Emerson Electric Co., 5% due 10/15/2008 2,990,820 2,909,550
A A1 2,700,000 Ford Motor Credit Company, 5.35% due
8/27/2006 (a) 2,698,128 2,693,250
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Industrial-- AAA Aaa $ 8,500,000 General Electric Capital Corp., 8.50% due
Manufacturing 7/24/2008 $ 10,324,100 $ 10,421,085
(concluded) General Motors Acceptance Corp.:
A A2 2,000,000 9% due 10/15/2002 2,213,880 2,234,180
A A2 5,000,000 6.375% due 5/01/2008 5,132,550 5,234,750
A- Baa1 3,500,000 Lafarge Corporation, 6.375% due 7/15/2005 3,495,905 3,583,510
BBB+ A3 8,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 8,018,810 8,230,000
AA- A1 4,000,000 Motorola Inc., 5.80% due 10/15/2008 3,994,640 4,091,760
Raytheon Co.:
BBB Baa1 2,750,000 5.95% due 3/15/2001 2,746,618 2,774,145
BBB Baa1 5,000,000 6.45% due 8/15/2002 5,173,850 5,128,100
BBB Ba1 4,000,000 Seagate Technology, Inc., 7.125% due
3/01/2004 3,993,000 3,914,160
A A2 3,000,000 Xerox Corporation, 5.50% due 11/15/2003 3,006,870 3,019,920
-------------- --------------
69,542,951 70,161,618
Industrial-- A A2 3,000,000 Bass America, Inc., 6.625% due 3/01/2003 2,825,520 3,025,890
Services--13.4% A A2 6,000,000 Carnival Cruise Lines, Inc., 7.70% due
7/15/2004 5,952,060 6,499,800
BBB- Baa3 4,000,000 Comcast Cable Communications Company,
8.375% due 5/01/2007 4,060,680 4,629,692
A- Baa1 4,000,000 Computer Associates International, Inc.,
6.25% due 4/15/2003 3,992,480 3,984,832
A- A3 1,000,000 Dayton Hudson Corp., 6.40% due 2/15/2003 1,030,640 1,029,550
BBB Baa1 8,500,000 Dillard's, Inc., 6.08% due 8/01/2010 (a) 8,498,810 8,517,850
A A2 4,455,873 Disney-Custom Repackaged Asset Vehicle-403,
6.85% due 1/10/2007++ 4,452,888 4,622,968
BBB Baa3 5,000,000 HEALTHSOUTH Corporation, 7% due
6/15/2008 4,952,500 4,958,720
BBB- Baa3 4,000,000 News American Holdings, Inc., 8.625% due
2/01/2003 4,286,440 4,385,880
BBB+ Baa2 1,000,000 Oracle Corporation, 6.91% due 2/15/2007 1,000,000 1,003,610
Service Corporation International:
BBB+ Baa1 1,000,000 6.75% due 6/01/2001 996,940 1,023,510
BBB+ Baa1 2,000,000 6.30% due 3/15/2020 1,997,800 2,019,300
TCI Communications, Inc.:
AA- Baa3 3,000,000 8.65% due 9/15/2004 3,099,270 3,438,000
AA- Baa3 5,500,000 8% due 8/01/2005 5,561,380 6,191,845
BBB Baa2 5,000,000 Time Warner Entertainment Co., 9.625% due
5/01/2002 5,586,000 5,600,200
BBB Baa3 5,000,000 Turner Broadcasting System, Inc.
(ClassB), 7.40% due 2/01/2004 5,108,150 5,361,900
BBB+ Baa3 1,000,000 Waste Management, Inc., 6.125% due
7/15/2001 997,950 1,011,481
-------------- --------------
64,399,508 67,305,028
Industrial-- Southwest Airlines, Inc.:
Transportation A- A3 6,500,000 9.40% due 7/01/2001 7,564,180 7,041,255
- --1.8% A- A3 1,000,000 8% due 3/01/2005 994,610 1,097,390
BBB- Baa3 1,000,000 Union Pacific Corp., 6.625% due 2/01/2008 991,220 1,027,090
-------------- --------------
9,550,010 9,165,735
Mortgage- AAA Aaa 3,500,000 Federal Home Loan Mortgage Corp., 5.75% due
Backed 4/15/2008 3,738,245 3,618,685
Securities++
- --0.7%
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Utilities-- A Baa1 $ 5,000,000 360 Communications Co., 7.50% due
Communications 3/01/2006 $ 5,170,100 $ 5,498,500
- --8.0% A- A2 4,000,000 ALLTEL Corporation, 6.75% due 9/15/2005 3,938,400 4,208,880
AA Aa2 2,500,000 Bell Telephone Company of Pennsylvania,
7.375% due 7/15/2007 2,791,350 2,826,250
A A3 3,000,000 Frontier Corporation, 6% due 10/15/2003 (a) 2,995,920 3,032,550
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,090,310 1,072,570
Southwestern Bell Telecommunications
Corp.:
AA Aa3 1,000,000 6.50% due 3/12/2003 1,009,780 1,038,340
AA Aa3 2,200,000 6.625% due 4/01/2005 2,108,590 2,339,480
Sprint Capital Corp.:
A- Baa1 500,000 5.70% due 11/15/2003 499,915 501,785
A- Baa1 3,900,000 6.125% due 11/15/2008 3,897,114 3,985,137
A- A3 3,000,000 US West Capital Funding Inc., 6.375%
due 7/15/2008 3,203,670 3,164,250
BBB+ Baa2 11,000,000 WorldCom Inc., 7.75% due 4/01/2007 11,756,720 12,426,150
-------------- --------------
38,461,869 40,093,892
Utilities-- A- Baa1 4,000,000 Arizona Public Service Company, 6.75%
Electric--6.7% due 11/15/2006 3,905,840 4,220,160
A A3 500,000 Central & Southwest Corp., 6.625% due
7/01/2005 522,905 526,810
AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison
(Class B), 7.13% due 7/01/2007 3,147,270 3,254,040
AAA Aaa 5,000,000 Commonwealth Edison Company, 8.25% due
10/01/2006 5,817,400 5,795,440
BBB+ Baa3 9,000,000 Consumers Energy Company, 6.375% due
2/01/2008 8,912,970 9,074,448
A A1 4,000,000 Mississippi Power Co., 6.05% due 5/01/2003 4,089,920 4,108,960
AA- A1 1,500,000 Pacific Gas and Electric Company, 6.25%
due 8/01/2003 1,527,975 1,552,065
A- A3 1,000,000 Pennsylvania Power & Light Resources Inc.,
6.125% due 5/01/2006 (a) 999,400 1,014,870
A- A3 2,000,000 Public Service Electric & Gas Co., 6.50%
due 6/01/2000 1,999,120 2,024,880
BBB Baa3 2,000,000 Texas Utilities Co., 5.94% due 10/15/2011 2,000,000 2,011,660
-------------- --------------
32,922,800 33,583,333
Yankee BBB- Baa3 3,000,000 Abitibi-Consolidated Inc., 6.95% due
Corporates*-- 4/01/2008 (3) 2,994,180 2,900,700
8.0% AmVescap PLC (2):
BBB A3 2,000,000 6.375% due 5/15/2003 1,996,380 1,999,274
BBB A3 2,000,000 6.60% due 5/15/2005 1,997,173 2,003,626
BBB+ A2 5,000,000 Banco Central Hispanoamercano S.A.
(Cayman Islands), 7.70% due 7/15/2006 (2) 5,315,850 5,390,500
AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due
11/01/2005 (2) 995,290 1,013,595
A- Baa1 1,500,000 Enersis S.A., 6.90% due 12/01/2006 (3) 1,496,130 1,363,755
A A1 2,000,000 Ford Capital B.V., 9.875% due 5/15/2002 (2) 2,300,380 2,259,260
BBB- Ba2 3,000,000 Gruma, S.A de C.V., 7.625% due 10/15/2007 (3) 2,994,960 2,632,500
AAA Aaa 2,000,000 International Bank for Reconstruction &
Development, 5.625% due 3/17/2003 (2) 1,993,300 2,023,260
BBB+ A3 2,650,000 Philips Electronics N.V., 7.75% due
4/15/2004 (3) 2,831,286 2,827,974
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C> <C>
Yankee A- A2 $5,000,000 Trans-Canada Pipelines Ltd., 6.43% due
Corporates 3/15/2029 (3) $ 5,000,000 $ 5,097,900
(concluded) A- Baa1 4,500,000 Tyco International Group S.A., 5.875%
due 11/01/2004 (3) 4,498,155 4,472,258
BBB+ Baa2 6,000,000 WPP Finance (USA) Corp., 6.625% due
7/15/2005 (2) 5,958,540 6,086,916
-------------- --------------
40,371,624 40,071,518
Yankee AA+ Aa2 2,500,000 Canada Government Bonds, 5.25% due
Sovereign*-- 11/05/2008 (1) 2,499,425 2,503,125
0.8% BBB+ A3 1,500,000 People's Republic of China, 7.30% due
12/15/2008 (1) 1,497,900 1,492,800
-------------- --------------
3,997,325 3,995,925
Total Investments in
Bonds & Notes--96.4% 478,652,061 483,968,685
Short-Term Securities
Repurchase $14,736,000 Warburg Dillion Read LLC, purchased
Agreements**--2.9% 12/31/1998 to yield 4.75% to 1/04/1999 14,736,000 14,736,000
Total Investments in Short-Term
Securities--2.9% 14,736,000 14,736,000
Total Investments--99.3% $ 493,388,061 498,704,685
==============
Other Assets Less Liabilities--0.7% 3,290,488
--------------
Net Assets--100.0% $ 501,995,173
==============
Net Asset Class A--Based on net assets of $185,218,594 and 15,874,629 shares outstanding $ 11.67
Value: ==============
Class B--Based on net assets of $188,304,311 and 16,137,775 shares outstanding $ 11.67
==============
Class C--Based on net assets of $5,842,602 and 500,883 shares outstanding $ 11.66
==============
Class D--Based on net assets of $122,629,666 and 10,509,162 shares outstanding $ 11.67
==============
<FN>
*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
and Agency Obligations.
++Subject to principal paydowns.
+++Not rated.
(a)Floating Rate Note.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
December 31, 1998
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Christopher G. Ayoub, Senior Vice President
Jay C. Harbeck, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
