INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Semi-Annual Report
March 31, 2000
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
During the six-month period ended March 31, 2000, fixed-income
markets remained very volatile as short-term interest rates trended
higher and intermediate-term and long-term interest rates trended
lower. The front end of the Treasury yield curve continued to suffer
under the pressures exerted by the implementation of a restrictive
monetary policy by the Federal Reserve Board. Specifically, a supply
imbalance, brought on by the combination of reduced new issuance and
a budgetary surplus-inspired Treasury buyback program, has produced
an inversion in the Treasury yield curve in the 5-year--30-year
sector. While longer-dated, higher coupon Treasury issues will be
the focus of the Treasury buyback program, we believe that the ten-
year portion of the curve will continue to benefit from the
benchmark focus it is currently receiving.
Despite second quarter of 1999 gross domestic product (GDP) growth
of 1.8%, the US economy continued to move forward at a strong pace,
as highlighted by the alarming rebound in the third quarter of 1999
GDP to 5.7%, and the even stronger 7.3% growth in the fourth
quarter. Consumer spending continued to fuel the economic fires,
although recent reports could point to the beginning of a higher
interest rate induced slowdown. Consensus opinion is forecasting a
3.5%--4.5% growth rate for the first quarter of 2000. Consumers
continued to benefit from low unemployment rates and the wealth
effect generated by a strong stock market. Although the strength in
domestic markets has been focused largely on only a few sectors, the
amount of new wealth generated by the "new economy" is
unprecedented. On a less positive note, consumers continue to
leverage their balance sheets, as reflected by the record levels of
consumer debt and brokerage margin.
Although inflation has been relatively well contained, the scope of
the global recovery has led to fears of a rekindling of inflation.
The Commodities Research Bureau Index has trended consistently
higher since year-end. Commodities, such as copper, aluminum,
plywood and other building materials, and chemicals gained in price.
More importantly, the price of oil continued to surge throughout
most of the first quarter of 2000, spurred on by not only the
Organization of Petroleum Exporting Countries' production
limitations, but also on increased demand by recovering economies.
However, the Saudi-led production increases agreed to in late March
have pushed the price of oil well off its recent highs, and should
translate into lower prices for the foreseeable future. At this
stage, economic data points to minimal inflation. The ability to
export manufacturing capacity, combined with the high levels of
productivity, has served to limit the impact of low unemployment.
Furthermore, inflation as measured by both the producer price index
and consumer price index remains well within acceptable levels and
clearly points to a lack of pricing pressures. Notwithstanding the
inflation outlook, we expect the Federal Reserve Board to remain
focused on the need to slow economic momentum.
The strength of the economy and the irrational valuation of
financial assets have necessitated a need for a restrictive monetary
policy. During the six-month period, the Federal Reserve Board
increased the overnight Federal Funds rate by 1.25%. Most investors
believe that the Federal Reserve Board will continue to push the
Federal Funds rate higher until 6.50% is reached. We expect the
Federal Reserve Board to move the overnight rate higher by another
0.25% at its May Federal Open Market Committee meeting, at which
time we expect it to implement a wait-and-see approach.
On the corporate bond front, underwriting activity, which increased
significantly during the third quarter of 1999 as issuers sought to
get their funding programs done well in advance of Year 2000 market
pressures, slowed dramatically during the final quarter of 1999.
Swap spreads (that is, the difference in basis points at which an AA-
rated bank could issue debt relative to a similar maturity Treasury
security) had widened during the third quarter, but moved tighter as
the corporate bond supply dried up.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
Likewise, corporate bonds with a spread to US Treasury securities,
which exhibited comparable widening across all sectors in the third
quarter, compressed during the last quarter of 1999. Furthermore,
some new money flowed into this sector given the strong relative
value attributes. As we entered 2000, corporate issuance remained
very light, although most transactions that came to market were
fairly well received. However, by late January the rally was over,
with respect to corporate bonds with a spread to US Treasury
securities. The impact from a lack of new money flowing into the
sector, combined with limited broker/dealer inventory accumulation
activity and concerns that the Federal Reserve Board would
accelerate monetary policy, pushed yield spreads significantly
higher. In fact, corporate bond yield spreads are wider than those
incurred during the crisis of 1998. At this point, we believe that
the market for fixed-income securities with a spread to US Treasury
issues will remain very volatile with a bias toward wider yield
spreads, until such time that the Federal Reserve Board shifts
towards a neutral monetary policy.
Portfolio Matters
The Investment Grade Portfolio's investment strategy remained
somewhat conservative given the outlook for higher interest rates.
Throughout the six-month period ended March 31, 2000, the Investment
Grade Portfolio's duration was modestly short (0.25 years--0.35
years) relative to the benchmark unmanaged Merrill Lynch USCorporate
Master Index. For the Intermediate Term Portfolio, we continued to
match the duration of the unmanaged Merrill Lynch Corporate BBB 5-10
Year Index, despite a negative outlook as to the direction of
interest rates. We did not look to shorten the Portfolio's duration
since the duration of the Index is approximately one year shorter
than that of our peer group. In addition, by matching the duration
of the Index we are incorporating a defensive posture.
As we entered the final quarter of 1999, we shifted approximately
10% of each Portfolio's net assets into cash and Treasury securities
to satisfy year-end liquidity needs. However, by October, improved
fundamentals within the investment-grade market prompted a partial
reallocation back into high-grade, large benchmark issues. It was
our intention to be ahead of the reinvestment curve that we believed
would develop as we entered 2000, a situation that would see too
much money chasing too little product. Although yield spreads
compressed into year-end, the technical expectations relative to the
high-grade corporate bond market have yet to materialize. In fact,
yield spread relationships widened substantially during the first
quarter of 2000, despite a modest calendar of new issuance. Clearly,
investors are very concerned about the impact Federal Reserve Board
monetary policy will have on the state of the economy, although we
believe corporate profitability measurements will remain strong.
With respect to investment strategy, we remained committed to the
bigger, more liquid issues and emphasized issues with higher
coupons. As part of our liquidity strategy, we have attempted to
consolidate industry holdings into the benchmark issues. Although
this came at modest yield concessions, this strategy has worked as
the smaller, less liquid transactions significantly underperformed
the global transactions. Our investment strategy shifted to
incorporate a more barbelled rather than bulleted approach, given
prevailing Federal Reserve Board monetary policy and the technical
factors influencing the longer end of the curve. (A barbelled
approach utilizes an overweighting of short-term investments and
long-term investments as compared to a bulleted approach in which
investments are spread evenly along the yield curve.) We reduced
both Portfolios' exposure in the two-year--five-year sector in
favor of short-term floating rate securities and cash. Additionally,
we increased the Portfolios' exposure at the longer end of the
curve, although our corporate bond exposure was focused in the ten-
year sector, with a 30-year exposure emphasizing Treasury issues and
agency issues with a spread to US Treasury issues. With regard to
our corporate bond strategy, we believed the ten-year sector offered
greater relative value given the flatness of the 10-year--30-year
corporate credit curve.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
With respect to security-specific issues, we held an overweighted
position in real estate investment trusts, railroads, energy-related
issuers, airlines, life insurers, retailers and defense contractors.
During the later part of the period, we began to reduce the
Portfolios' holdings in defense issues, retailers and airlines. On
the other hand, we are looking to add to positions in life insurers,
supermarkets, railroads and metals/mining companies in both
Portfolios as well as to Yankee corporates and sovereign bonds in
the Intermediate Term Portfolio. We continue to underweight paper
and pulp producers and health care companies in both Portfolios, as
well as Yankee banks in the Intermediate Term Portfolio.
Going forward, we will look to reverse an overweighting we have had
in the finance sector, with reallocation back to the industrial
companies, a sector that we have underweighted for the past year.
Yield spreads for industrials have become very attractive, and we
want to be in a position to benefit from the cyclical upswing in
that sector. Accordingly, we expect to take these two sectors to a
market neutral-weighted posture.
We have formulated an investment strategy based on our belief that
the yield curve will remain inverted in the near term, although our
long-term expectations are for a trend that will point toward lower
interest rates and a flatter yield curve as the economy slows. With
respect to corporate bonds, we are looking for yield spread
relationships to improve as we move into the second half of 2000.
However, in the near term, the front end of the Treasury yield curve
will remain under pressure and corporate bond yield spreads will
remain wide, given the probability that the Federal Reserve Board
will maintain a restrictive monetary policy into its May meeting.
In Conclusion
We appreciate your ongoing investment in Investment Grade and
Intermediate Term Portfolios of Merrill Lynch Corporate Bond Fund,
Inc., and we look forward to assisting you with your financial needs
in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Christopher G. Ayoub)
Christopher G. Ayoub
Senior Vice President and Portfolio Manager
May 5, 2000
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Christopher G. Ayoub, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Ira Shapiro, 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.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Investment Grade
Portfolio. Intermediate Term Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Investment Grade Portfolio is subject to a
distribution fee of 0.50% and an account maintenance fee of 0.25%.
Intermediate Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. These shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Investment Grade Portfolio.
Intermediate Term Portfolio is subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for
Investment Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/
6 Month 12 Month Since Inception Standardized
As of March 31, 2000 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares** +1.18% -0.38% +106.08% 6.79%
Investment Grade Portfolio Class B Shares** +0.79 -1.14 +90.97 6.30
Investment Grade Portfolio Class C Shares** +0.76 -1.19 +36.79 6.25
Investment Grade Portfolio Class D Shares** +1.05 -0.63 +41.09 6.56
Intermediate Term Portfolio Class A Shares*** +1.63 +1.38 +106.83 6.65
Intermediate Term Portfolio Class B Shares*** +1.36 +0.86 +50.11 6.20
Intermediate Term Portfolio Class C Shares*** +1.36 +0.85 +39.56 6.19
Intermediate Term Portfolio Class D Shares*** +1.58 +1.28 +42.82 6.55
<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 ten years for
Class A & Class B Shares and from 10/21/94 for Class C & Class D
Shares.
***The Portfolio's ten-year/since inception periods are ten years
for Class A Shares, from 11/13/92 for Class B Shares and from
10/21/94 for Class C & Class D Shares.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/00 -0.38% -4.36%
Five Years Ended 3/31/00 +6.22 +5.36
Ten Years Ended 3/31/00 +7.50 +7.06
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/00 -1.14% -4.87%
Five Years Ended 3/31/00 +5.41 +5.41
Ten Years Ended 3/31/00 +6.68 +6.68
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/00 -1.19% -2.12%
Five Years Ended 3/31/00 +5.35 +5.35
Inception (10/21/94)
through 3/31/00 +5.92 +5.92
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/00 -0.63% -4.60%
Five Years Ended 3/31/00 +5.96 +5.10
Inception (10/21/94)
through 3/31/00 +6.53 +5.73
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/00 +1.38% +0.36%
Five Years Ended 3/31/00 +6.48 +6.26
Ten Years Ended 3/31/00 +7.54 +7.43
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/00 +0.86% -0.09%
Five Years Ended 3/31/00 +5.93 +5.93
Inception (11/13/92)
through 3/31/00 +5.66 +5.66
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 3/31/00 +0.85% -0.10%
Five Years Ended 3/31/00 +5.89 +5.89
Inception (10/21/94)
through 3/31/00 +6.31 +6.31
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/00 +1.28% +0.26%
Five Years Ended 3/31/00 +6.37 +6.16
Inception (10/21/94)
through 3/31/00 +6.77 +6.57
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
US Government US Treasury Bonds & Notes:
Obligations-- AAA Aaa $ 5,735,000 5.875% due 11/15/2004 $ 5,631,024
1.3% AAA Aaa 4,000,000 6.50% due 2/15/2010 4,140,000
AAA Aaa 6,500,000 5.25% due 2/15/2029 5,828,680
--------------
15,599,704
Asset-Backed Aames Mortgage Trust:
Securities**-- AAA Aaa 15,000,000 6.46% due 5/15/2028 14,425,500
13.2% AAA Aaa 4,000,000 5.912% due 9/15/2028 3,949,560
NR* Aaa 10,300,000 Bear Stearns Commercial Mortgage Securities,
1999-WF2-A2, 7.08% due 6/15/2009 10,041,457
NR* Baa2 2,000,000 Bistro Trust 1998-1000, 6.58% due 3/26/2001 (b) 1,945,500
AAA Aaa 5,000,000 Contimortgage Home Equity Loan Trust, 5.84% due 5/15/2016 4,910,900
AA+ Aa3 3,700,000 Continental Airlines, 7.056% due 9/15/2009 3,464,791
EQCC Home Equity Loan Trust:
AAA Aaa 760,000 6.229% due 3/15/2013 750,812
AAA Aaa 11,000,000 7.067% due 11/25/2024 10,900,230
A A3 9,000,000 First Dominion Funding I, 6.841% due 7/10/2013 (b) 8,545,781
NR* Aaa 9,000,000 First Union-Chase Commercial Mortgage, 1999-C2 A2,
6.645% due 4/15/2009 8,505,196
AAA Aaa 12,000,000 IMC Home Equity Loan Trust, 6.36% due 8/20/2022 11,780,880
NR* Aaa 10,000,000 JP Morgan Commercial Mortgage Finance Corp., 7.77%
due 10/15/2032 10,149,970
The Money Store Home Equity Trust:
AAA Aaa 8,850,000 6.225% due 9/15/2023 8,609,546
AAA Aaa 5,000,000 Series 1994-A, Class A-4, 6.275% due 12/15/2022 4,904,850
NR* Aaa 11,770,000 Morgan Stanley Capital I, Series 1999-WF1, 6.21% due
9/15/2008 10,857,119
Nationslink Funding Corporation:
AAA Aaa 12,300,000 6.476% due 7/20/2008 11,516,158
AAA Aaa 13,332,000 6.316% due 11/20/2008 12,364,910
AAA NR* 5,000,000 Series 1999-2, Class A3, 7.181% due 12/20/2006 4,908,850
Saxon Asset Securities Trust:
NR* Aaa 12,000,000 6.265% due 7/25/2023 11,724,120
NR* Aaa 6,400,000 Series 1999-3, Class AF-4, 7.55% due 10/25/2026 6,346,944
--------------
160,603,074
Banking--9.7% A- A2 11,000,000 First Union Corporation, 6.30% due 4/15/2028 (a) 10,106,690
A- A2 9,800,000 Firstar Bank NA, 7.125% due 12/01/2009 9,504,824
BBB+ a2 4,750,000 Fleet Capital Trust II, 7.92% due 12/11/2026 4,446,428
BBB+ A3 11,200,000 Great Western Bank, 9.875% due 6/15/2001 11,523,792
A- a1 14,000,000 HSBC Americas Capital Trust, 7.808% due 12/15/2026 (b) 12,941,110
A+ A2 6,000,000 HSBC USA Inc., 7% due 11/01/2006 5,719,080
A- A2 2,000,000 Key Bank NA, 7.55% due 9/15/2006 1,995,780
BBB a1 16,400,000 KeyCorp Capital I, 7.03% due 7/01/2028 (a) 15,888,320
BBB+ Baa1 13,750,000 MBNA America Bank NA, 6.43% due 6/10/2004 (a) 13,699,675
A- a2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 5,491,260
A+ A2 3,500,000 Mellon Financial Co., 5.75% due 11/15/2003 3,317,755
NationsBank Corp.:
A Aa3 1,300,000 6.50% due 8/15/2003 1,270,464
A+ Aa2 2,000,000 6.125% due 7/15/2004 1,914,040
A Aa3 1,000,000 7.75% due 8/15/2004 1,016,170
A+ Aa2 7,750,000 6.375% due 5/15/2005 7,392,183
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
Banking A Aa3 $ 5,000,000 Norwest Corp., 6.625% due 3/15/2003 $ 4,909,550
(concluded) BBB+ A3 6,735,000 Washington Mutual Inc., 7.25% due 8/15/2005 6,566,827
--------------
117,703,948
Finance--3.5% Associates Corporation of North America:
A+ Aa3 10,500,000 5.80% due 4/20/2004 9,874,830
A+ Aa3 500,000 7.40% due 5/15/2006 497,615
A+ Aa3 2,750,000 6.95% due 11/01/2018 2,496,670
A- a1 5,950,000 CIT Capital Trust I, 7.70% due 2/15/2027 5,610,433
BBB+ Baa1 13,850,000 Comdisco Inc., 6% due 1/30/2002 13,416,772
Commercial Credit Co.:
AA- Aa3 2,000,000 6.125% due 12/01/2005 1,882,700
AA- Aa3 6,800,000 6.75% due 7/01/2007 6,483,052
A- A3 2,790,000 Heller Financial Inc., 7.375% due 11/01/2009 (b) 2,696,861
--------------
42,958,933
Finance-- Bear Stearns Companies, Inc.:
Other--11.1% A A2 5,000,000 7.625% due 2/01/2005 4,989,600
A A2 1,000,000 7.625% due 12/07/2009 981,130
Citigroup Inc.:
AA- Aa2 3,000,000 9.50% due 3/01/2002 3,114,270
AA- Aa2 6,500,000 7.875% due 5/15/2025 6,618,170
BBB+ Baa3 8,575,000 Conseco Inc., 9% due 10/15/2006 8,373,487
Donaldson, Lufkin & Jenrette Inc.:
A- A3 3,000,000 8% due 3/01/2005 3,037,500
A- A3 2,000,000 6.875% due 11/01/2005 1,915,260
BBB+ Baa1 5,350,000 Duke-Weeks Realty LP, 7.75% due 11/15/2009 5,171,149
BBB+ A3 2,650,000 ERP Operating LP, 7.125% due 10/15/2017 2,303,778
A+ A2 7,500,000 Equitable Life Assurance Society of the US, 7.70% 7,379,228
due 12/01/2015 (b)
A+ A1 4,000,000 Goldman Sachs Group Inc., 7.50% due 1/28/2005 4,032,160
A A1 7,000,000 HSBC Holdings PLC, 7.50% due 7/15/2009 6,962,900
Lehman Brothers Holdings, Inc.:
A A3 9,800,000 7.75% due 1/15/2005 9,893,198
A A3 6,000,000 6.625% due 2/05/2006 5,729,700
Lehman Brothers, Inc.:
A A3 3,500,000 7.625% due 6/01/2006 3,498,215
A A3 3,500,000 6.625% due 2/15/2008 3,263,225
BBB Baa3 7,900,000 Mack-Cali Realty LP, 7.25% due 3/15/2009 7,253,385
Morgan Stanley, Dean Witter, Discover & Co.:
A+ Aa3 2,800,000 7.125% due 1/15/2003 2,781,604
A+ Aa3 8,000,000 6.09% due 3/09/2011 (a) 7,937,760
A+ Aa3 3,500,000 Morgan Stanley Group, 8.875% due 10/15/2001 3,575,635
Paine Webber Group Inc.:
BBB+ Baa1 3,250,000 9.25% due 12/15/2001 3,333,005
BBB+ Baa1 7,000,000 6.45% due 12/01/2003 6,693,176
BBB+ Baa1 3,750,000 6.375% due 5/15/2004 3,587,700
A Aa3 10,000,000 Salomon Smith Barney Holdings, Inc., 7.125% 9,772,000
due 10/01/2006
BBB+ Baa1 1,000,000 Simon Debartolo, 6.75% due 6/15/2005 928,780
BBB Baa2 3,955,000 Spieker Properties LP, 7.35% due 12/01/2017 3,549,296
BBB Baa3 9,700,000 Susa Partnership LP, 7.45% due 7/01/2018 8,307,274
--------------
134,982,585
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
Industrial-- A+ A1 $13,000,000 Anheuser-Busch Companies Inc., 7.50% due 3/15/2012 $ 13,042,770
Consumer BBB- Ba1 2,500,000 Flowers Industries Inc., 7.15% due 4/15/2028 1,468,150
Goods--3.0% Nabisco Inc.:
BBB Baa2 9,000,000 6% due 2/15/2011 (a) 8,871,570
BBB Baa2 4,000,000 7.55% due 6/15/2015 3,384,440
A A2 9,500,000 Phillip Morris Companies, Inc., 9% due 1/01/2001 9,578,090
--------------
36,345,020
Industrial-- BBB+ Baa1 5,000,000 ANR Pipeline, 9.625% due 11/01/2021 5,811,400
Energy--4.8% BBB Baa1 8,000,000 Amerada Hess Corporation, 7.875% due 10/01/2029 7,756,400
BBB+ Baa1 10,000,000 Apache Corporation, 7.625% due 7/01/2019 9,605,600
AA+ Aa1 4,075,000 BP America Inc., 9.375% due 11/01/2000 4,132,906
A- A3 9,420,000 Burlington Resources, 7.375% due 3/01/2029 8,810,243
BBB Baa2 3,500,000 Coastal Corp., 6.375% due 2/01/2009 3,191,510
A- A3 5,000,000 Murphy Oil Corporation, 7.05% due 5/01/2029 4,451,750
A+ A1 5,750,000 Texaco Capital Inc., 8.625% due 11/15/2031 6,452,075
BBB- Baa2 8,105,000 Williams Companies, Inc., 7.625% due 7/15/2019 7,709,152
--------------
57,921,036
Industrial-- A+ A1 8,000,000 DaimlerChrysler NA Holdings, 7.20% due 9/01/2009 7,798,400
Manufacturing-- A A1 2,000,000 Dow Chemical Company, 7.375% due 11/01/2029 1,917,700
9.9% BBB- Baa3 4,700,000 Equistar Chemicals LP, 8.75% due 2/15/2009 4,524,032
A A2 11,500,000 First Data Corporation, 6.75% due 7/15/2005 11,067,140
A+ A1 7,000,000 Ford Motor Company, 8.90% due 1/15/2032 7,984,200
Ford Motor Credit Company:
A+ A1 5,500,000 7.50% due 3/15/2005 5,503,355
A+ A1 20,750,000 7.375% due 10/28/2009 20,327,945
General Electric Capital Corp.:
AAA Aaa 500,000 8.75% due 5/21/2007 544,105
AAA Aaa 4,305,000 8.50% due 7/24/2008 4,651,466
General Motors Acceptance Corp.:
A A2 4,000,000 6.625% due 9/19/2002 3,924,480
A A2 7,000,000 5.85% due 1/14/2009 6,210,820
BBB- Baa2 3,000,000 Georgia-Pacific Corporation, 7.75% due 11/15/2029 2,797,362
A+ A1 3,000,000 International Business Machines Corp., 6.50% due 1/15/2028 2,710,050
BBB- Baa3 5,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 4,952,950
BBB- Baa3 4,000,000 Martin Marietta Corp., 7.375% due 4/15/2013 3,715,160
A+ A1 6,500,000 Motorola Inc., 7.50% due 5/15/2025 6,491,875
BBB- Baa3 4,000,000 Northrop-Grumman Corporation, 7.875% due 3/01/2026 3,790,840
BBB Ba1 4,000,000 Seagate Technology Inc., 7.125% due 3/01/2004 3,837,400
BBB+ Baa1 6,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 5,970,840
BBB Baa2 5,000,000 Union Carbide Corp., 6.25% due 6/15/2003 4,836,050
United Technologies Corporation:
A+ A2 2,750,000 6.625% due 11/15/2004 2,699,098
A+ A2 5,000,000 6.50% due 6/01/2009 4,710,850
--------------
120,966,118
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
Industrial-- BB+ Baa3 $10,000,000 Circus Circus Enterprises, Inc., 6.70% due 11/15/2096 $ 9,083,800
Services-- Comcast Cable Communications:
11.6% BBB Baa2 3,000,000 6.20% due 11/15/2008 2,705,220
BBB Baa2 7,700,000 8.875% due 5/01/2017 8,378,909
BBB Baa1 5,000,000 Dillard's Inc., 9.125% due 8/01/2011 4,778,400
A A2 11,788,869 Disney Custom Repackaged Asset Vehicle-403, 6.85%
due 1/10/2007 (b)** 11,534,229
BBB- Baa3 8,500,000 Fred Meyer Inc., 7.45% due 3/01/2008 8,167,650
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,596,050
Kroger Company:
BBB- Baa3 2,000,000 6.34% due 6/01/2001 1,969,910
BBB- Baa3 5,000,000 8.05% due 2/01/2010 5,017,965
A+ A1 7,500,000 May Department Stores Company, 7.875% due 3/01/2030 7,671,525
AAA Aaa 3,000,000 Merck & Co. Inc., 5.95% due 12/01/2028 2,538,240
BBB- Baa3 6,445,000 News America Holdings, Inc., 8.625% due 2/01/2003 6,588,401
BBB Baa2 12,500,000 Royal Caribbean Cruises Ltd., 6.75% due 3/15/2008 10,837,000
A- A3 8,000,000 Sears Roebuck Acceptance Corp., 6.82% due 10/17/2002 7,900,560
AA- A2 8,980,000 TCI Communications Inc., 8.75% due 8/01/2015 9,835,974
BBB Baa2 6,000,000 Time Warner Entertainment Co., 10.15% due 5/01/2012 6,972,000
BBB Ba1 5,350,000 USA Waste Services, 6.50% due 12/15/2002 4,937,408
Wal-Mart Stores, Inc.:
AA Aa2 9,400,000 6.875% due 8/10/2009 9,145,072
AA Aa2 14,345,000 8.50% due 9/15/2024 15,149,898
--------------
140,808,211
Industrial-- BBB+ Baa2 2,200,000 Burlington Northern Santa Fe, 6.75% due 3/15/2029 1,918,290
Transportation BBB Baa2 4,000,000 CSX Corp., 7.90% due 5/01/2017 3,941,120
- --3.8% Delta Airlines:
BBB- Baa3 4,144,000 10.125% due 5/15/2010 4,554,049
BBB- Baa3 6,000,000 9.75% due 5/15/2021 6,416,760
BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due 6/15/2012 9,979,290
Southwest Airlines Co.:
A- A3 10,000,000 9.40% due 7/01/2001 10,184,300
A- A3 2,000,000 8% due 3/01/2005 2,001,580
A- A3 3,000,000 7.875% due 9/01/2007 3,026,040
BBB- Baa3 4,000,000 Union Pacific Corp., 6.625% due 2/01/2008 3,723,120
--------------
45,744,549
Mortgage-Backed Federal National Mortgage Association:
Securities**-- AAA Aaa 11,798,204 7% due 11/18/2027 11,538,526
2.3% AAA Aaa 18,000,000 6.25% due 5/15/2029 16,228,080
--------------
27,766,606
Utilities-- AA- A1 6,000,000 AT&T Corporation, 6.50% due 3/15/2029 5,200,980
Communications AA- Aa3 6,000,000 Ameritech Capital Funding, 6.45% due 1/15/2018 5,323,560
- --6.0% AA- Aa2 6,350,000 Bell Telephone Company of Pennsylvania, 7.375% due 7/15/2007 6,318,313
BB Ba2 4,650,000 Frontier Corp., 6% due 10/15/2013 (a) 4,312,549
AA- A2 9,500,000 GTE California, Inc., 8.07% due 4/15/2024 9,172,820
GTE Corp.:
A Baa1 7,500,000 9.375% due 12/01/2000 7,610,400
A Baa1 3,600,000 6.84% due 4/15/2018 3,307,644
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
Utilities-- AA- Aa2 $ 5,000,000 Southwestern Bell Telecommunications Corp., $ 4,700,550
Communications 6.375% due 11/15/2007
(concluded) Sprint Capital Corporation:
BBB+ Baa1 5,000,000 5.70% due 11/15/2003 4,731,900
BBB+ Baa1 10,500,000 6.125% due 11/15/2008 9,559,095
BBB+ Baa1 8,000,000 6.90% due 5/01/2019 7,343,280
A A2 6,000,000 Vodafone Airtouch PLC, 7.625% due 2/15/2005 (b) 6,054,774
--------------
73,635,865
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison, 7.13% due 7/01/2007 5,737,036
Electric-- Commonwealth Edison, Inc.:
6.2% BBB+ Baa1 5,745,000 7% due 7/01/2005 5,555,185
BBB Baa2 5,000,000 6.95% due 7/15/2018 4,502,050
BBB+ Baa1 2,000,000 Conectiv Inc., 6.73% due 6/01/2006 1,911,320
A+ A1 9,115,000 Consolidated Edison, Inc., 6.25% due 2/01/2008 8,465,465
BBB+ Baa3 5,000,000 Consumers Energy, 6.375% due 2/01/2008 4,512,550
A- A2 5,000,000 Edison International Inc., 6.875% due 9/15/2004 4,926,750
AA- A1 6,000,000 PG&E Corp., 6.25% due 8/01/2003 5,805,480
A- A3 3,000,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 2,970,750
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,025,100
BBB- baa1 5,000,000 TXU Electric Capital V, 8.175% due 1/30/2037 4,644,000
Texas Utilities Company:
AAA Aaa 6,971,000 6.375% due 10/01/2004 6,670,550
BBB Baa3 6,000,000 5.94% due 10/15/2011 (a) 5,884,140
A A2 8,500,000 Virginia Electric & Power Co., 8.625% due 10/01/2024 8,572,930
--------------
75,183,306
Yankee BBB Baa3 4,000,000 AT&T Canada Inc., 7.65% due 9/15/2006 (3) 4,011,840
Corporates++ A+ A1 6,000,000 Australia & New Zealand Banking Group Ltd., 7.55%
- --10.3% due 9/15/2006 (2) 5,946,780
A- A3 11,100,000 BHP Finance USA, 8.50% due 12/01/2012 (2) 11,640,459
A A1 4,000,000 BSCH Issuance Limited, 7.625% due 11/03/2009 (2) 3,972,280
A A1 3,000,000 Banco Central Hispanoamercano SA (Cayman Islands),
7.70% due 7/15/2006 (2) 2,988,300
AAA Aaa 13,000,000 Banco Santander-Chile, 6.50% due 11/01/2005 (2) 12,574,107
A A2 5,000,000 Cable & Wireless Communication, 6.75% due 3/06/2008 (3) 5,018,000
BBB Baa2 9,050,000 Canadian National Railway Co., 6.90% due 7/15/2028 (3) 8,004,272
Ford Capital BV (2):
A+ A1 10,000,000 9.875% due 5/15/2002 10,451,900
A+ A1 3,995,000 9.50% due 6/01/2010 4,483,788
A- A3 8,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (3)(b) 7,773,176
Korea Development Bank (2):
BBB Baa2 7,000,000 7.125% due 4/22/2004 6,726,790
BBB Baa2 8,000,000 7.375% due 9/17/2004 7,736,880
Merita Bank Ltd. (2):
A- A2 6,435,000 6.50% due 1/15/2006 6,029,273
A- A2 4,250,000 6.50% due 4/01/2009 3,955,178
A+ Aa3 2,000,000 Midland Bank PLC, 7.65% due 5/01/2025 (2) 2,061,580
A A2 6,500,000 Norsk Hydro A/S, 6.70% due 1/15/2018 (3) 5,835,505
BBB Baa3 5,443,000 Petro Geo-Services ASA, 7.125% due 3/30/2028 (3) 4,658,011
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <S> <C>
Yankee Telecom de Puerto Rico (3):
Corporates BBB Baa2 $ 3,000,000 6.15% due 5/15/2002 $ 2,910,663
(concluded) BBB Baa2 3,000,000 6.65% due 5/15/2006 2,887,392
A- A2 6,000,000 Trans-Canada Pipelines, 7.70% due 6/15/2029 (3) 5,830,260
--------------
125,496,434
Yankee BBB Baa2 1,000,000 Republic of Korea, 8.875% due 4/15/2008 (1) 1,030,990
Sovereigns++
- --0.1%
Total Investments in Bonds & Notes
(Cost--$1,222,915,427)--96.8% 1,176,746,379
Short-Term Securities
Repurchase 19,010,000 Warburg Dillon Read LLC, purchased on 3/31/2000 to
Agreements***-- yield 6.08% to 4/03/2000 19,010,000
1.6%
Total Investments in Short-Term Securities
(Cost--$19,010,000)--1.6% 19,010,000
Total Investments (Cost--$1,241,925,427)--98.4% 1,195,756,379
Other Assets Less Liabilities--1.6% 19,146,191
--------------
Net Assets--100.0% $1,214,902,570
==============
*Not Rated.
**Asset-Backed Obligations are subject to principal paydowns as a
result of prepayments or refinancings of the underlying instruments.
As a result, the average life may be substantially less than the
original maturity.
***Repurchase Agreements are fully collateralized by USGovernment &
Agency Obligations.
++Corresponding industry groups for foreign securities:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
(a)Floating rate note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C>
US Government US Treasury Notes:
Obligations-- AAA Aaa $ 1,000,000 5.50% due 5/31/2003 $ 973,120
2.5% AAA Aaa 2,000,000 6.875% due 5/15/2006 2,052,500
AAA Aaa 7,650,000 6% due 8/15/2009 7,553,151
--------------
10,578,771
Asset-Backed NR* Baa2 3,500,000 Bistro Trust 1998-1000, 6.58% due 3/26/2001 (b) 3,404,625
Securities++-- AAA Aaa 10,000,000 Honda Auto Lease Trust, Series 1999-A, Class A5, 6.65% due
13.3% 7/15/2005 9,923,300
NR* Aaa 5,000,000 JP Morgan Commercial Mortgage Finance Corp., 7.77% due
10/15/2032 5,074,985
Morgan Stanley Capital I:
NR* NR* 3,566,000 Series 1998-HF2, Class A2, 6.48% due 11/15/2030 3,336,564
NR* Aaa 5,500,000 Series 1999-WF1, 6.21% due 9/15/2008 5,073,420
Nationslink Funding Corporation:
AAA Aaa 6,000,000 6.316% due 11/20/2008 5,564,766
AAA NR* 10,000,000 Series 1999-2, Class A3, 7.181% due 12/20/2006 9,817,700
NR* Aaa 4,000,000 Saxon Asset Securities Trust, Series 1999-3, Class AF-4,
7.55% due 10/25/2026 3,966,840
NR* NR* 10,000,000 Spinnaker I, 6.913% due 5/01/2001 (a)(c) 9,825,000
--------------
55,987,200
Banking--8.9% A A2 3,500,000 Bank of New York Company, Inc., 7.875% due 11/15/2002 3,550,645
A+ Aa2 3,000,000 BankAmerica Corporation, 7.125% due 5/12/2005 2,943,270
A- A2 3,500,000 Firstar Bank NA, 7.125% due 12/01/2009 3,394,580
A A2 2,000,000 HSBC USA Inc., 7% due 11/01/2006 1,906,360
A- A2 2,800,000 Key Bank NA, 7.55% due 9/15/2006 2,794,092
A A3 6,000,000 Mellon Financial Co., 6.875% due 3/01/2003 5,923,440
A- A2 2,250,000 National City Corp., 5.75% due 2/01/2009 1,988,572
A Aa3 1,000,000 Norwest Corp., 6.625% due 3/15/2003 981,910
A A2 3,750,000 Republic of New York Corp., 9.70% due 2/01/2009 4,241,588
Washington Mutual Inc.:
BBB+ A3 9,000,000 7.25% due 8/15/2005 8,775,270
BBB+ A3 1,000,000 7.50% due 8/15/2006 977,970
--------------
37,477,697
Finance--4.1% American General Finance:
A+ A2 2,200,000 7.45% due 7/01/2002 2,207,810
A+ A2 2,400,000 7.25% due 5/15/2005 2,375,112
Associates Corporation of North America:
A+ Aa3 3,500,000 5.80% due 4/20/2004 3,291,610
A+ Aa3 5,500,000 6.25% due 11/01/2008 5,021,170
AA- Aa3 2,080,000 Commercial Credit Co., 6.75% due 7/01/2007 1,983,051
BBB+ Baa1 2,500,000 Finova Capital Corporation, 7.25% due 7/12/2006 2,451,650
--------------
17,330,403
Finance-- BBB+ Baa1 5,000,000 Avalonbay Communities, 7.50% due 8/01/2009 4,796,650
Other--13.2% A A2 2,500,000 Bear Stearns Companies, Inc., 7.625% due 12/07/2009 2,452,825
AA- Aa2 2,000,000 Citigroup Inc., 9.50% due 3/01/2002 2,076,180
BBB+ Baa3 6,000,000 Conseco Inc., 9% due 10/15/2006 5,859,000
BBB+ Baa1 1,000,000 Duke-Weeks Realty LP, 7.75% due 11/15/2009 966,570
AAA Aaa 5,500,000 General Electric Capital Corp., 8.50% due 7/24/2008 5,942,640
A+ A1 4,900,000 Goldman Sachs Group Inc., 7.50% due 1/28/2005 4,939,396
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C>
Finance--Other Lehman Brothers, Inc.:
(concluded) A A3 $ 5,000,000 7.625% due 6/01/2006 $ 4,997,450
A A3 5,000,000 6.625% due 2/15/2008 4,661,750
BBB Baa3 1,000,000 Mack-Cali Realty LP, 7.25% due 3/15/2009 918,150
A+ Aa3 2,500,000 Morgan Stanley, Dean Witter, Discover & Co., 7.125% due
1/15/2003 2,483,575
Paine Webber Group Inc.:
BBB+ Baa1 3,000,000 6.45% due 12/01/2003 2,888,130
BBB+ Baa1 1,750,000 6.375% due 5/15/2004 1,674,260
BBB+ Baa1 3,750,000 7.625% due 12/01/2009 3,681,150
Salomon Smith Barney Holdings, Inc.:
A Aa3 2,500,000 6.25% due 1/15/2005 2,385,975
A Aa3 1,400,000 7.125% due 10/01/2006 1,368,080
BBB+ Baa1 4,000,000 Simon Debartolo, 6.75% due 6/15/2005 3,715,120
--------------
55,806,901
Industrial-- Nabisco Inc.:
Consumer BBB Baa2 3,000,000 6.85% due 6/15/2005 2,830,500
Goods--3.8% BBB Baa2 6,000,000 6% due 2/15/2011 (a) 5,914,380
Phillip Morris Companies, Inc.:
A A2 3,500,000 9% due 1/01/2001 3,528,770
A A2 4,000,000 7.25% due 1/15/2003 3,921,040
--------------
16,194,690
Industrial-- BBB Baa1 3,000,000 Amerada Hess Corporation, 7.375% due 10/01/2009 2,904,300
Energy--3.3% BBB Baa2 6,000,000 Ultramar Credit, 8.625% due 7/01/2002 6,107,520
BBB- Baa3 5,000,000 Valero Energy Corporation, 7.375% due 3/15/2006 4,746,650
--------------
13,758,470
Industrial-- A+ A1 2,000,000 DaimlerChrysler NA Holdings, 7.20% due 9/01/2009 1,949,600
Manufacturing-- BBB- Baa3 2,000,000 Equistar Chemicals LP, 8.75% due 2/15/2009 1,925,120
11.8% Ford Motor Credit Company:
A+ A1 1,320,000 7.50% due 3/15/2005 1,320,805
A+ A1 2,700,000 6.21% due 8/27/2006 (a) 2,698,002
A+ A1 3,000,000 7.375% due 10/28/2009 2,938,980
General Motors Acceptance Corp.:
A A2 2,000,000 9% due 10/15/2002 2,069,480
A A2 5,000,000 5.85% due 1/14/2009 4,436,300
A A2 3,000,000 Honeywell International, 7.50% due 3/01/2010 3,025,080
BBB- Baa3 5,000,000 Lockheed Martin Corporation, 7.95% due 12/01/2005 4,968,850
BBB- Baa3 2,500,000 Northrop-Grumman Corp., 8.625% due 10/15/2004 2,567,625
Raytheon Company (b):
BBB- Baa2 5,000,000 6.75% due 3/01/2002 (a) 4,998,340
BBB- Baa2 3,500,000 7.90% due 3/01/2003 3,488,198
BBB Ba1 1,000,000 Seagate Technology Inc., 7.125% due 3/01/2004 959,350
BBB+ Baa1 2,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 1,990,280
A A2 3,000,000 Textron Inc., 6.375% due 7/15/2004 2,904,930
BBB Baa2 4,000,000 Union Carbide Corp., 6.70% due 4/01/2009 3,798,880
A+ A2 4,000,000 United Technologies Corporation, 6.50% due 6/01/2009 3,768,680
--------------
49,808,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C>
Industrial-- BBB Baa2 $4,000,000 Comcast Cable Communications, 8.375% due 5/01/2007 $ 4,125,240
Services--14.2% BBB+ Baa1 4,000,000 Computer Associates International, 6.25% due 4/15/2003 3,828,560
A A2 2,800,000 Computer Sciences Corp., 6.25% due 3/15/2009 2,569,952
A- A2 1,000,000 Dayton Hudson Corp., 6.40% due 2/15/2003 977,800
BBB Baa1 8,500,000 Dillard's, Inc., 6.08% due 8/01/2010 (a) 8,445,090
A A2 3,865,203 Disney Custom Repackaged Asset Vehicle-403, 6.85% due
1/10/2007 (b)++ 3,781,714
BBB- Baa3 4,400,000 Fred Meyer Inc., 7.45% due 3/01/2008 4,227,960
BBB- Baa3 5,000,000 Kroger Company, 8.05% due 2/01/2010 5,017,965
A+ A1 1,275,000 May Department Stores Co., 9.875% due 12/01/2002 1,353,425
BBB- Baa3 3,000,000 News America Holdings, Inc., 8.625% due 2/01/2003 3,066,750
BB+ Baa3 5,000,000 Saks Incorporated, 7% due 7/15/2004 4,697,400
AA- A2 3,000,000 TCI Communications Inc., 8.65% due 9/15/2004 3,151,950
BBB Baa3 2,500,000 Time Warner Entertainment Co., 9.625% due 5/01/2002 2,599,850
BBB Baa3 3,000,000 Time Warner Inc., 7.75% due 6/15/2005 3,020,610
BBB Ba2 1,000,000 USA Waste Services Inc., 6.125% due 7/15/2001 (a) 956,200
AA Aa2 5,000,000 Wal-Mart Stores, Inc., 6.875% due 8/10/2009 4,864,400
A A2 3,000,000 Walt Disney Company, 7.30% due 2/08/2005 3,008,760
--------------
59,693,626
Industrial-- A- A3 1,000,000 Southwest Airlines Co., 8% due 3/01/2005 1,000,790
Transportation BBB- Baa3 1,000,000 Union Pacific Corp., 6.625% due 2/01/2008 930,780
- --0.5% --------------
1,931,570
Mortgage-Backed AAA Aaa 5,797,453 Federal National Mortgage Association, 7% due 11/18/2027 5,669,852
Securities++
- --1.4%
Utilities-- AA- A1 1,000,000 AT&T Corporation, 6% due 3/15/2009 904,790
Communications AA- Aa2 2,500,000 Bell Telephone Company of Pennsylvania, 7.375% due 7/15/2007 2,487,525
- --3.0% BB Ba2 3,000,000 Frontier Corp., 6% due 10/15/2013 (a) 2,782,290
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,014,720
AA- Aa2 2,200,000 Southwestern Bell Telecommunications Corp., 6.625% due
4/01/2005 2,140,050
BBB+ Baa1 500,000 Sprint Capital Corporation, 5.70% due 11/15/2003 473,190
A A2 3,000,000 Vodafone Airtouch PLC, 7.625% due 2/15/2005 (b) 3,027,387
--------------
12,829,952
Utilities-- AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison, 7.13% due 7/01/2007 2,942,070
Electric--4.7% AAA Aaa 5,000,000 Commonwealth Edison Inc., 8.25% due 10/01/2006 5,177,135
BBB+ Baa1 1,000,000 Conectiv Inc., 6.73% due 6/01/2006 955,660
A A3 2,500,000 Duke Capital Corp., 7.50% due 10/01/2009 2,453,925
A- A2 3,000,000 Edison International Inc., 6.875% due 9/15/2004 2,956,050
AA- A1 500,000 PG&E Corp., 6.25% due 8/01/2003 483,790
BBB- Ba1 2,000,000 PSE&G Energy Holdings, 9.125% due 2/10/2004 1,991,742
A- A3 1,000,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 990,250
BBB Baa3 2,000,000 Texas Utilities Company, 5.94% due 10/15/2011 (a) 1,961,380
--------------
19,912,002
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <S> <C>
Yankee BBB Baa3 $ 4,000,000 AT&T Canada Inc., 7.65% due 9/15/2006 (3) $ 4,011,840
Corporates*** A A1 1,500,000 BSCH Issuance Limited, 7.625% due 11/03/2009 (2) 1,489,605
- --9.2% A A1 2,000,000 Banco Central Hispanoamercano SA (Cayman Islands), 7.70%
due 7/15/2006 (2) 1,992,200
AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due 11/01/2005 (2) 967,239
A+ A1 2,000,000 Ford Capital BV, 9.875% due 5/15/2002 (2) 2,090,380
BB+ Ba1 3,000,000 Gruma, SA de CV, 7.625% due 10/15/2007 (3) 2,666,250
A- A3 10,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (3)(b) 9,716,470
BBB Baa3 3,000,000 Korea Electric Power Corp., 8% due 7/01/2002 (3) 2,969,850
Merita Bank Ltd. (2):
A- A2 1,000,000 6.50% due 1/15/2006 936,950
A- A2 4,500,000 6.50% due 4/01/2009 4,187,835
BBB Baa2 3,000,000 Telecom de Puerto Rico, 6.65% due 5/15/2006 (3) 2,887,392
A- A2 5,000,000 Trans-Canada Pipelines, 6.43% due 3/15/2004 (3) 4,808,900
--------------
38,724,911
Yankee BBB Baa2 4,000,000 Republic of Korea, 8.875% due 4/15/2008 (1) 4,123,960
Sovereigns*** BB+ Baa3 3,000,000 United Mexican States, 9.875% due 2/01/2010 (1) 3,172,500
- --1.7% --------------
7,296,460
Total Investments in Bonds & Notes
(Cost--$413,640,993)--95.6% 403,001,005
Short-Term Securities
Repurchase 16,122,000 Warburg Dillon Read LLC, purchased on 3/31/2000 to yield
Agreements**--3.8% 6.08% to 4/03/2000 16,122,000
Total Investments in Short-Term Securities
(Cost--$16,122,000)--3.8% 16,122,000
Total Investments (Cost--$429,762,993)--99.4% 419,123,005
Other Assets Less Liabilities--0.6% 2,536,468
--------------
Net Assets--100.0% $ 421,659,473
==============
*Not Rated.
**Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
***Corresponding industry groups for foreign securities:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
++Asset-Backed Obligations are subject to principal paydowns as a
result of prepayments or refinancings of the underlying instruments.
As a result, the average life may be substantially less than the
original maturity.
(a)Floating rate note.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(c)Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was $9,825,000, representing
2.3% of net assets.
Acquisition
Issue Date Cost Value
Spinnaker I, 6.913% due
5/01/2001 4/16/1998 $ 10,000,000 $ 9,825,000
Total $ 10,000,000 $ 9,825,000
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of March 31, 2000
<CAPTION>
Investment Intermediate
Grade Portfolio Term Portfolio
<S> <S> <C> <C>
Assets: Investments, at value* $1,195,756,379 $ 419,123,005
Cash 65,187 115,543
Receivables:
Interest 22,182,748 6,739,383
Securities sold 3,730,516 --
Capital shares sold 1,044,011 593,404
Loaned securities 3,111 850
Prepaid registration fees and other assets 45,074 25,060
-------------- --------------
Total assets 1,222,827,026 426,597,245
-------------- --------------
Liabilities: Payables:
Capital shares redeemed 4,540,119 3,787,972
Dividends to shareholders 2,126,232 724,952
Distributor 431,156 75,855
Investment adviser 340,504 118,619
Accrued expenses and other liabilities 486,445 230,374
-------------- --------------
Total liabilities 7,924,456 4,937,772
-------------- --------------
Net Assets: Net assets $1,214,902,570 $ 421,659,473
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 4,709,639 $ 1,382,177
Consist of: Class B Common Stock, $.10 par value++++ 4,843,945 1,243,722
Class C Common Stock, $.10 par value++++++ 574,433 26,504
Class D Common Stock, $.10 par value++++++++ 1,291,855 1,206,665
Paid-in capital in excess of par 1,331,888,840 451,325,270
Accumulated realized capital losses on investments--net (62,730,913) (21,140,164)
Accumulated distributions in excess of realized capital
gains on investments--net (19,506,181) (1,744,713)
Unrealized depreciation on investments--net (46,169,048) (10,639,988)
-------------- --------------
Net assets $1,214,902,570 $ 421,659,473
============== ==============
Net Asset Class A: Net assets $ 500,987,455 $ 151,016,421
Value: ============== ==============
Shares outstanding 47,096,385 13,821,769
============== ==============
Net asset value and redemption price per share $ 10.64 $ 10.93
============== ==============
Class B: Net assets $ 515,284,784 $ 135,896,669
============== ==============
Shares outstanding 48,439,446 12,437,215
============== ==============
Net asset value and redemption price per share $ 10.64 $ 10.93
============== ==============
Class C: Net assets $ 61,129,094 $ 2,896,124
============== ==============
Shares outstanding 5,744,330 265,040
============== ==============
Net asset value and redemption price per share $ 10.64 $ 10.93
============== ==============
Class D: Net assets $ 137,501,237 $ 131,850,259
============== ==============
Shares outstanding 12,918,552 12,066,649
============== ==============
Net asset value and redemption price per share $ 10.64 $ 10.93
============== ==============
*Identified cost $1,241,925,427 $ 429,762,993
============== ==============
++Authorized shares--Class A 250,000,000 100,000,000
============== ==============
++++Authorized shares--Class B 250,000,000 50,000,000
============== ==============
++++++Authorized shares--Class C 100,000,000 50,000,000
============== ==============
++++++++Authorized shares--Class D 100,000,000 50,000,000
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Six Months Ended March 31, 2000
<CAPTION>
Investment Intermediate
Grade Term
Portfolio Portfolio
<S> <S> <C> <C>
Investment Interest and discount earned $ 48,179,973 $ 16,028,980
Income: Other 34,667 14,904
-------------- --------------
Total income 48,214,640 16,043,884
-------------- --------------
Expenses: Investment advisory fees 2,386,323 804,942
Account maintenance and distribution fees--Class B 2,198,107 378,876
Transfer agent fees--Class B 607,191 298,180
Transfer agent fees--Class A 494,389 290,257
Transfer agent fees--Class D 130,832 257,207
Account maintenance and distribution fees--Class C 285,301 9,066
Account maintenance fees--Class D 172,719 67,961
Accounting services 77,934 22,959
Transfer agent fees--Class C 74,757 7,223
Registration fees 44,365 30,142
Custodian fees 43,111 21,468
Printing and shareholder reports 45,179 14,240
Professional fees 21,947 11,644
Pricing fees 9,747 5,577
Directors' fees and expenses 4,263 1,386
Other 11,218 4,086
-------------- --------------
Total expenses 6,607,383 2,225,214
-------------- --------------
Investment income--net 41,607,257 13,818,670
-------------- --------------
Realized & Realized loss on investments--net (37,583,364) (10,159,028)
Unrealized Gain Change in unrealized depreciation on investments--net 7,569,805 2,520,687
(Loss) on -------------- --------------
Investments Net Increase in Net Assets Resulting from Operations $ 11,593,698 $ 6,180,329
- --Net: ============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets Investment Grade Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 41,607,257 $ 88,165,811
Realized loss on investments--net (37,583,364) (18,307,068)
Change in unrealized appreciation/depreciation on
investments--net 7,569,805 (103,169,694)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations 11,593,698 (33,310,951)
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (17,567,739) (36,365,681)
Class B (17,457,764) (39,073,573)
Class C (2,104,887) (4,752,280)
Class D (4,476,867) (7,974,277)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (41,607,257) (88,165,811)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions: share transactions (141,369,131) 21,096,414
Net Assets: Total decrease in net assets (171,382,690) (100,380,348)
Beginning of period 1,386,285,260 1,486,665,608
-------------- --------------
End of period $1,214,902,570 $1,386,285,260
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets Intermediate Term Portfolio
<CAPTION>
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 13,818,670 $ 29,088,252
Realized loss on investments--net (10,159,028) (5,110,689)
Change in unrealized appreciation/depreciation on
investments--net 2,520,687 (26,026,481)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 6,180,329 (2,048,918)
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (4,931,052) (10,897,908)
Class B (4,479,087) (10,046,366)
Class C (107,046) (281,121)
Class D (4,301,485) (7,862,857)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (13,818,670) (29,088,252)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions: share transactions (34,396,789) 4,562,908
-------------- --------------
Net Assets: Total decrease in net assets (42,035,130) (26,574,262)
Beginning of period 463,694,603 490,268,865
-------------- --------------
End of period $ 421,659,473 $ 463,694,603
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Investment Grade Portfolio
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .36 .70 .73 .76 .76
Realized and unrealized gain (loss) on
investments--net (.24) (.90) .38 .24 (.35)
--------- --------- --------- --------- ---------
Total from investment operations .12 (.20) 1.11 1.00 .41
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.36) (.70) (.73) (.76) (.76)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.64 $ 10.88 $ 11.78 $ 11.40 $ 11.16
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.18%++ (1.70%) 10.05% 9.22% 3.60%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .59%* .57% .58% .57% .56%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.71%* 6.22% 6.32% 6.73% 6.64%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 500,988 $ 535,188 $ 600,655 $ 519,708 $ 608,901
Data: ========= ========= ========= ========= =========
Portfolio turnover 56.09% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .32 .61 .64 .67 .67
Realized and unrealized gain (loss) on
investments--net (.24) (.90) .38 .24 (.35)
--------- --------- --------- --------- ---------
Total from investment operations .08 (.29) 1.02 .91 .32
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.32) (.61) (.64) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.64 $ 10.88 $ 11.78 $ 11.40 $ 11.16
========= ========= ========= ========= =========
Total Investment Based on net asset value per share .79%++ (2.45%) 9.21% 8.39% 2.81%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.35%* 1.33% 1.34% 1.34% 1.32%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.94%* 5.46% 5.56% 5.96% 5.88%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 515,285 $ 636,115 $ 685,345 $ 577,989 $ 724,089
Data: ========= ========= ========= ========= =========
Portfolio turnover 56.09% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
Class C
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.88 $ 11.79 $ 11.40 $ 11.17 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .32 .61 .63 .67 .66
Realized and unrealized gain (loss) on
investments--net (.24) (.91) .39 .23 (.34)
--------- --------- --------- --------- ---------
Total from investment operations .08 (.30) 1.02 .90 .32
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.32) (.61) (.63) (.67) (.66)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.64 $ 10.88 $ 11.79 $ 11.40 $ 11.17
========= ========= ========= ========= =========
Total Investment Based on net asset value per share .76%++ (2.58%) 9.25% 8.23% 2.85%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.41%* 1.38% 1.40% 1.39% 1.38%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.89%* 5.41% 5.50% 5.91% 5.83%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 61,129 $ 79,581 $ 77,464 $ 49,918 $ 64,931
Data: ========= ========= ========= ========= =========
Portfolio turnover 56.09% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
<CAPTION>
Class D
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.88 $ 11.79 $ 11.41 $ 11.17 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .35 .67 .70 .73 .73
Realized and unrealized gain (loss) on
investments--net (.24) (.91) .38 .24 (.34)
--------- --------- --------- --------- ---------
Total from investment operations .11 (.24) 1.08 .97 .39
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.35) (.67) (.70) (.73) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.64 $ 10.88 $ 11.79 $ 11.41 $ 11.17
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.05%++ (2.03%) 9.77% 8.95% 3.43%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .84%* .82% .82% .82% .81%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.46%* 5.98% 6.07% 6.47% 6.40%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 137,501 $ 135,401 $ 123,202 $ 77,398 $ 63,822
Data: ========= ========= ========= ========= =========
Portfolio turnover 56.09% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
Class A
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .36 .70 .73 .73 .73
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .34 .21 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .18 (.02) 1.07 .94 .51
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.36) (.70) (.73) (.73) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.93 $ 11.11 $ 11.83 $ 11.49 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.63%++ (.18%) 9.59% 8.59% 4.56%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .79%* .73% .67% .65% .59%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.41%* 6.09% 6.27% 6.43% 6.41%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 151,016 $ 161,113 $ 200,679 $ 179,115 $ 216,545
Data: ========= ========= ========= ========= =========
Portfolio turnover 70.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
<CAPTION>
Class B
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .33 .64 .67 .67 .67
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .33 .22 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .15 (.08) 1.00 .89 .45
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.33) (.64) (.67) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.93 $ 11.11 $ 11.83 $ 11.50 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.36%++ (.69%) 8.94% 8.13% 4.02%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.30%* 1.24% 1.18% 1.17% 1.11%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.89%* 5.58% 5.75% 5.91% 5.89%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 135,897 $ 162,211 $ 178,464 $ 148,148 $ 216,641
Data: ========= ========= ========= ========= =========
Portfolio turnover 70.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
Class C
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .33 .64 .67 .67 .67
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .34 .21 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .15 (.08) 1.01 .88 .45
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.33) (.64) (.67) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.93 $ 11.11 $ 11.83 $ 11.49 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.36%++ (.70%) 9.03% 7.99% 3.99%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.31%* 1.24% 1.20% 1.20% 1.15%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.89%* 5.57% 5.70% 5.89% 5.86%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 2,896 $ 3,904 $ 4,832 $ 1,571 $ 10,144
Data: ========= ========= ========= ========= =========
Portfolio turnover 70.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
<CAPTION>
Class D
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .35 .69 .71 .72 .72
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .33 .22 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .17 (.03) 1.04 .94 .50
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.35) (.69) (.71) (.72) (.72)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 10.93 $ 11.11 $ 11.83 $ 11.50 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 1.58%++ (.28%) 9.39% 8.58% 4.46%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .89%* .83% .77% .77% .71%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.31%* 6.01% 6.16% 6.32% 6.32%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 131,850 $ 136,467 $ 106,294 $ 64,335 $ 33,270
Data: ========= ========= ========= ========= =========
Portfolio turnover 70.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
The Investment Grade Portfolio and the Intermediate Term Portfolio
("Portfolio" or "Portfolios") are two of the three portfolios in
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Portfolios'
financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. These
unaudited financial statements reflect all adjustments, which are,
in the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal recurring nature. Each Portfolio offers four classes of
shares under the Merrill Lynch Select Pricingsm System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Portfolios.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more dealers that
make markets in the securities. Portfolio securities that are traded
both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market, and
it is expected that for debt securities this ordinarily will be the
over-the-counter market. Short-term securities are valued at
amortized cost, which approximates market value.
Options written or purchased are valued at the last sale price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price at the close of such
exchanges. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund, including valuations furnished by a pricing service retained
by the Fund which may use a matrix system for valuations.
(b) Repurchase agreements--The Portfolios invest in US Government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Portfolios take possession of the
underlying securities, mark to market such securities and, if
necessary, receive additions to such securities daily to ensure that
the contract is fully collateralized. If the counterparty defaults
and the fair value of the collateral declines, liquidation of the
collateral by the Portfolios may be delayed or limited.
(c) Derivative financial instruments--The Portfolios may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which each Portfolio is exposed more quickly and
efficiently than transactions in other types of instruments. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Portfolios may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, each
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, each Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by each Portfolio as unrealized
gains or losses. When the contract is closed, each Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Portfolios are authorized to purchase and write call
and put options. When each Portfolio writes an option, an amount
equal to the premium received by each Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or each Portfolio enters into a closing transaction), each
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Portfolios' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .50% of the Fund's average
daily net assets not exceeding $250 million; .45% of the average
daily net assets in excess of $250 million but not exceeding $500
million; .40% of average daily net assets in excess of $500 million
but not exceeding $750 million; and .35% of average daily net assets
in excess of $750 million. For the six months ended March 31, 2000,
the aggregate average daily net assets of the Fund, including the
Fund's High Income Portfolio, was approximately $6,180,283,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of each
Portfolio as follows:
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Investment Grade .25% .25% .25% .50% .55%
Intermediate Term .25% .25% .10% .25% .25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
For the six months ended March 31, 2000, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of each Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
Investment Grade $466 $1,352 $4,879 $14,336
Intermediate Term $ 29 $ 167 $ 429 $ 2,383
For the six months ended March 31, 2000, MLPF&S received contingent
deferred sales charges of $836,287 relating to transactions in Class
B Shares, amounting to $775,230 and $61,057 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively, $24,037
relating to transactions in Class C Shares, amounting to $23,289 and
$748 in the Investment Grade Portfolio and Intermediate Term
Portfolio, respectively. Furthermore, MLPF&S received contingent
deferred sales charges of $2,704 relating to transactions subject to
front-end sales charge waivers in Class A Shares, amounting to $515
and $2,189 in the Investment Grade Portfolio and Intermediate Term
Portfolio, respectively, and $6,550 relating to transactions subject
to front-end sales charge waivers in Class D Shares, amounting to
$4,998 and $1,552 in the Investment Grade Portfolio and Intermediate
Term Portfolio, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the six months ended March 31, 2000, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$5,042 for security price quotations to compute the net asset values
of the Portfolios.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 2000 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $ 706,766,501 $ 301,231,449
-------------- --------------
Sales $ 838,771,204 $ 341,460,776
============== ==============
Net realized losses for the six months ended March 31, 2000 and net
unrealized losses as of March 31, 2000 were as follows:
Realized Unrealized
Investment Grade Portfolio Losses Losses
Long-term investments $(37,583,364) $ (46,169,048)
------------ --------------
Total $(37,583,364) $ (46,169,048)
============ ==============
Realized Unrealized
Intermediate Term Portfolio Losses Losses
Long-term investments $(10,159,028) $ (10,639,988)
------------ --------------
Total $(10,159,028) $ (10,639,988)
============ ==============
As of March 31, 2000, net unrealized depreciation for Federal income
tax purposes was as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Gross unrealized appreciation $ 4,111,369 $ 1,379,644
Gross unrealized depreciation (50,280,417) (12,019,632)
------------ --------------
Net unrealized depreciation $(46,169,048) $ (10,639,988)
============ ==============
The aggregate cost of investments at March 31, 2000 for Federal
income tax purposes was $1,241,925,427 for the Investment Grade
Portfolio and $429,762,993 for the Intermediate Term Portfolio.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
for the six months ended March 31, 2000 was $141,369,131 for the
Investment Grade Portfolio and $34,396,789 for the Intermediate Term
Portfolio. Net increase in net assets derived from capital share
transactions for the year ended September 30, 1999 was $21,096,414
for the Investment Grade Portfolio and $4,562,908 for the
Intermediate Term Portfolio.
Transactions in capital shares for each class were as follows:
Investment Grade Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 5,799,667 $ 61,928,226
Shares issued to shareholders
in reinvestment of dividends 307,376 3,280,033
------------ --------------
Total issued 6,107,043 65,208,259
Shares redeemed (8,216,224) (87,733,272)
------------ --------------
Net decrease (2,109,181) $ (22,525,013)
============ ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 16,214,807 $ 184,883,346
Shares issued to shareholders
in reinvestment of dividends 635,438 7,199,139
------------ --------------
Total issued 16,850,245 192,082,485
Shares redeemed (18,623,574) (211,038,406)
------------ --------------
Net decrease (1,773,329) $ (18,955,921)
============ ==============
Investment Grade Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 5,585,908 $ 59,794,106
Shares issued to shareholders
in reinvestment of dividends 929,019 9,916,369
------------ --------------
Total issued 6,514,927 69,710,475
Automatic conversion of shares (1,217,090) (13,024,137)
Shares redeemed (15,342,493) (163,889,773)
------------ --------------
Net decrease (10,044,656) $ (107,203,435)
============ ==============
Investment Grade Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 26,405,937 $ 302,628,886
Shares issued to shareholders
in reinvestment of dividends 2,092,060 23,706,301
------------ --------------
Total issued 28,497,997 326,335,187
Automatic conversion of shares (1,223,169) (13,762,381)
Shares redeemed (26,957,804) (304,665,737)
------------ --------------
Net increase 317,024 $ 7,907,069
============ ==============
Investment Grade Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 535,487 $ 5,741,294
Shares issued to shareholders
in reinvestment of dividends 132,054 1,410,298
------------ --------------
Total issued 667,541 7,151,592
Shares redeemed (2,237,044) (23,916,282)
------------ --------------
Net decrease (1,569,503) $ (16,764,690)
============ ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 4,210,209 $ 48,417,409
Shares issued to shareholders
in reinvestment of dividends 287,083 3,251,882
------------ --------------
Total issued 4,497,292 51,669,291
Shares redeemed (3,755,411) (42,498,738)
------------ --------------
Net increase 741,881 $ 9,170,553
============ ==============
Investment Grade Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 3,064,300 $ 32,796,366
Automatic conversion of shares 1,216,180 13,024,137
Shares issued to shareholders
in reinvestment of dividends 172,543 1,842,156
------------ --------------
Total issued 4,453,023 47,662,659
Shares redeemed (3,975,857) (42,538,652)
------------ --------------
Net increase 477,166 $ 5,124,007
============ ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 6,777,358 $ 77,427,023
Automatic conversion of shares 1,222,361 13,762,381
Shares issued to shareholders
in reinvestment of dividends 302,244 3,425,546
------------ --------------
Total issued 8,301,963 94,614,950
Shares redeemed (6,311,279) (71,640,237)
------------ --------------
Net increase 1,990,684 $ 22,974,713
============ ==============
Intermediate Term Portfolio
Class A Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 3,107,906 $ 33,972,293
Shares issued to shareholders
in reinvestment of dividends 122,055 1,335,265
------------ --------------
Total issued 3,229,961 35,307,558
Shares redeemed (3,911,011) (42,758,274)
------------ --------------
Net decrease (681,050) $ (7,450,716)
============ ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 6,374,055 $ 73,294,708
Shares issued to shareholders
in reinvestment of dividends 270,657 3,097,759
------------ --------------
Total issued 6,644,712 76,392,467
Shares redeemed (9,106,581) (104,711,051)
------------ --------------
Net decrease (2,461,869) $ (28,318,584)
============ ==============
Intermediate Term Portfolio
Class B Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 1,825,360 $ 19,975,330
Shares issued to shareholders
in reinvestment of dividends 204,484 2,236,910
------------ --------------
Total issued 2,029,844 22,212,240
Automatic conversion of shares (148,482) (1,624,498)
Shares redeemed (4,045,058) (44,257,502)
------------ --------------
Net decrease (2,163,696) $ (23,669,760)
============ ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
March 31, 2000
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 7,074,193 $ 81,409,201
Shares issued to shareholders
in reinvestment of dividends 497,273 5,692,223
------------ --------------
Total issued 7,571,466 87,101,424
Automatic conversion of shares (142,650) (1,614,531)
Shares redeemed (7,913,874) (90,397,888)
------------ --------------
Net decrease (485,058) $ (4,910,995)
============ ==============
Intermediate Term Portfolio
Class C Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 116,930 $ 1,280,444
Shares issued to shareholders
in reinvestment of dividends 7,175 78,481
------------ --------------
Total issued 124,105 1,358,925
Shares redeemed (210,434) (2,296,986)
------------ --------------
Net decrease (86,329) $ (938,061)
============ ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 1,102,932 $ 12,670,932
Shares issued to shareholders
in reinvestment of dividends 17,371 198,807
------------ --------------
Total issued 1,120,303 12,869,739
Shares redeemed (1,177,570) (13,475,781)
------------ --------------
Net decrease (57,267) $ (606,042)
============ ==============
Intermediate Term Portfolio
Class D Shares for the Six Months Dollar
Ended March 31, 2000 Shares Amount
Shares sold 2,510,359 $ 27,481,484
Automatic conversion of shares 148,482 1,624,498
Shares issued to shareholders
in reinvestment of dividends 75,806 829,265
------------ --------------
Total issued 2,734,647 29,935,247
Shares redeemed (2,951,311) (32,273,499)
------------ --------------
Net decrease (216,664) $ (2,338,252)
============ ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 7,804,394 $ 89,873,204
Automatic conversion of shares 142,649 1,614,531
Shares issued to shareholders
in reinvestment of dividends 187,617 2,147,865
------------ --------------
Total issued 8,134,660 93,635,600
Shares redeemed (4,836,590) (55,237,071)
------------ --------------
Net increase 3,298,070 $ 38,398,529
============ ==============
5. Loaned Securities:
At March 31, 2000, the Investment Grade Portfolio held US Treasury
Bonds/Notes having an aggregate value of approximately $4,223,000 as
collateral for Portfolio securities loaned having a market value of
$4,140,000. The Intermediate Term Portfolio held US Treasury Notes
having an aggregate value of approximately $7,739,000 as collateral
for Portfolio securities loaned having a market value of
approximately $7,553,000.
6. Capital Loss Carryforward:
At September 30, 1999, the Fund had a capital loss carryforward of
approximately $23,807,000 in the Investment Grade Portfolio, of
which $21,203,000 expires in 2003 and $2,604,000 expires in 2005 and
approximately $6,884,000 in the Intermediate Term Portfolio, of
which $6,608,000 expires in 2003 and $276,000 expires in 2005. These
amounts will be available to offset like amounts of any future
taxable gains.
