HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 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
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
The Investment Environment
The six-month period ended September 30, 2000 provided feeble
returns in most financial markets. The high-yield sector was no
exception with the unmanaged benchmark Credit Suisse First Boston
(CSFB) Global High Yield Index returning +1.14% for the same period.
High Income Portfolio modestly underperformed the Index with total
returns of -0.86%, -1.07%, -1.10% and -0.82% for its Class A, Class
B, Class C and Class D Shares, respectively, for the same six-month
period. (Results shown do not include sales charges and would be
lower if sales charges were included. Complete performance
information can be found on pages 5-7 of this report to
shareholders.)
The period included a 0.50% increase in the Federal Funds rate in
mid-May, the last in a series of tightening moves by the Federal
Reserve Board that increased the Federal Funds rate to 6.50%. These
moves appear to be having the effect on the economy that the Federal
Reserve Board desires, as various indicators of broad economic
behavior have shown some signs of slowing. Oil prices and their
potential negative effect on the economy were prominently featured
in the news. With the unsettlement in the Middle East and a
presidential election campaign in the United States, it is not
surprising to us that investors lacked conviction. As a result, the
high-yield market drifted. New issuance was quite low as high
interest rates on high-yield new issues priced companies out of the
market and forced reliance on other financial sources.
The high-yield market has been strained by a combination of
technical and fundamental factors. Of the two, the technical factors
have probably had the greatest effect. High-yield funds have
experienced outflows all year. Through September, net outflows were
$4.5 billion. Dealer market making, which has been limited since the
upheavals of 1998, seems to be even more constrained following the
recent news that Morgan Stanley Dean Witter has sustained large
trading losses on high-yield bond inventories. Furthermore,
investors who focus on distressed issues appear much less involved
this year than in the past, perhaps focusing more of their attention
on fallen equities. The confluence of these three factors has
resulted in illiquidity and lower bond prices than would otherwise
be the case.
The fundamental picture is a mixed one. The bad news is that Moody's
Investors Service's trailing 12-month default rate through September
was 5.13%, which is well above the long-term average of 3.4%.
Further evidence of credit deterioration is reflected in the
upgrade/downgrade ratio. The rating firm KDP Investment Advisors has
upgraded issues 215 times in the 33 months from January 1998--
September 2000 compared with 294 downgrades. The good news is that
the default rate peaked slightly above 6% in the autumn of 1999 and
has been declining since then. We are not comfortable with
forecasting future default rates. Forecasting models have not
generally been reliable in the past. We also doubt that currently
depressed prices are a reliable indicator or discounter of future
defaults. While we are concerned about credit quality in select
industries such as telecommunications, it is difficult to imagine
default rates similar to the 10% annualized levels in 1990 and 1991.
At that time, the default problem stemmed largely from overleveraged
buyouts coupled with the impact of a recession. The 12-month moving
average in July 1991 actually peaked at an astounding 13.1%.
At this time, valuation appears exceptional to us. At September 30,
2000, the CSFB Global High Yield Index reflected an average price of
$81.75 and a yield to maturity slightly above 14%. The yield spread
of the Index relative to Treasury bonds of similar maturity was
about 8.375%. The norm for much of the 1990s was 5%--5.50% and the
all-time peak was slightly over 10%. We believe that these levels
offer the long-term investor an outstanding buying opportunity.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
Portfolio Strategy
At September 30, 2000, the Portfolio was fully invested with an
average maturity of 6.5 years. The quality of the Portfolio
approximated the benchmark. The Portfolio's largest overweights as a
percentage of net assets were:
* Emerging markets--Portfolio weighting 20% compared to 10% for the
Index. This sector includes US dollar-denominated bonds issued by
companies domiciled largely in Argentina, Brazil and Mexico. The
credit parameters of individual issues are typically much higher
than US corporate bonds of a similar rating. Rating quality assigned
by ratings services is constrained by country rating. Currently, our
outlook is very positive on emerging markets.
* Health Services--Portfolio weighting 9.0% compared to 3.6% for the
Index. We are quite bullish on the earnings outlook for acute and
extended care hospitals because of increased Medicare reimbursement.
Other healthcare holdings represented special situations.
* Energy--Portfolio weighting 8.8% compared to 6.7% for the Index.
Oil and gas prices have buoyed fundamentals in this industry.
Refining has also experienced strong profitability.
The Portfolio's largest underweight was fixed telecommunications.
This sector comprised 12.7% of Index and approximately 1.7% of the
Portfolio. The sector included competitive local exchange carriers'
Internet companies, fiber optic and long distance. Many of these
companies are young and generate insufficient cash flow to support
debt levels. While many will be successful, it is difficult
discerning the winners from the losers at this time. However, we do
believe that wireless communications is attractive. This area
consists mainly of cellular telephony, which retains excellent
fundamentals. Portfolio exposure here was 9.6% compared to 8.3% for
the benchmark.
Fiscal Year in Review
For the fiscal year ended September 30, 2000, total returns for the
Portfolio's Class A, Class B, Class C and Class D Shares were
+2.31%, +1.70%, +1.49% and +2.22%, respectively, compared to the
+2.30% total return for the CSFB Global High Yield Index for the
same period. The Portfolio's relative performance during the 12-
month period resulted from the strong returns in emerging markets
and gains in energy and healthcare sectors. Our underweighted
positions in the poor performing sectors such as auto,
communications and retail also limited the negative effects to the
Portfolio's performance. However, large losses in certain credits
such as PharMerica, Inc., US Office Products Co. and Signature
Resorts, Inc. hindered the Portfolio's performance.
In Conclusion
We appreciate your ongoing investment in High Income Portfolio of
Merrill Lynch Corporate Bond Fund, Inc., and we look forward to
assisting you with your financial needs in the months and years
ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
November 14, 2000
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
As of September 30, 2000
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
Nextel Nextel is the largest specialized mobile radio (SMR) and enhanced specialized mobile 3.3%
Communications, radio (ESMR) provider in the United States, with licenses covering 98% of the American
Inc.* population. While Nextel's SMR system is virtually nationwide, the company is still
building out a national ESMR system. Through its 100%-owned subsidiary, Nextel
International Inc., Nextel is also building networks in Latin America and Asia.
UnitedGlobalCom, Inc. UnitedGlobalCom (formerly known as United International Holdings) is a global 2.0
broadband communications provider of video, voice and data services with operations
in various countries around the world. The company serves video subscribers, telephony
access lines, and high-speed broadband accounts. United Global Communications also
provides television programming services to subscribers worldwide.
GS Superhighway The company is an indirect holding company that owns a 50% stake in Guangzhou- 2.0
Holdings Shenzhen-Zhuhai East Superhighway Company Limited (GSZ East), Ltd., a joint-venture
company with the Guangdong Provincial Bureau of Communications. Open to traffic and
collecting tolls since 1994, GSZ East is a 122.8-km, dual three lane expressway that
serves as the principal highway transportation route linking the highly populous
region of southern Guangdong Province and Hong Kong with the rest of Guangdong Province
and the other southern provinces in the People's Republic of China.
Millicom International Millicom International Cellular develops and operates cellular telephone systems 1.9
Cellular worldwide. The company has interest in 33 cellular systems in 20 countries, primarily
in emerging markets.
Columbia/HCA Columbia/HCA Healthcare Corp. is the nation's largest investor-owned hospital manage- 1.7
Healthcare Corp. ment company. The company currently operates 205 general, acute care hospitals and 81
outpatient surgery centers in 24 states, London and Geneva. Columbia's US facilities are
primarily located in urban areas.
Fresenius Medical Fresenius Medical Care is the world's largest vertically integrated provider of dialysis 1.7
Care AG products and services to patients suffering from chronic kidney failure. Fresenius
Medical Care is a 50.3% subsidiary of Fresenius AG and is based in Germany.
Comunicacion Celular SA Comcel provides cellular telecommunications services. The Company covers approximately 1.4
(Comcel) 75% of the Eastern Region of Colombia, which has a population of 17.8 million.
CSN Iron SA CSN (Companhia Siderurgica Nacional) is the largest steel producer in Latin America. It 1.3
manufactures and distributes hot-rolled, cold-rolled and galvanized steel products and
tin mill products. CSN distributes primarily to customers in the automobile, auto-parts,
civil construction, tubes and pipes and electrical equipment industries. The company
markets its products mainly in Latin America, North America, Europe and Asia.
Espirito Santo-Escelsa The company generates, transmits and distributes electric power throughout the Brazilian 1.3
state of Espirito Santo. The company's major customers are industrial and residential
consumers. Through its subsidiary Magistra Participacoes SA, Escelsa has an interest
in the electric utility Enersul and the cable company TV a Cabo Vitoria SA.
USAir Inc. USAir Inc. the primary operating subsidiary of US Airways Group, Inc., is the sixth- 1.3
largest domestic air carrier, as ranked by revenue passenger miles flown. The company
dominates East Coast airports from New England to Florida with its fleet of 383 jets,
and provides regularly scheduled service at 107 airports, including airports in Canada,
Mexico, France, Germany, Italy, Spain, the United Kingdom and the Caribbean. Its
principal hubs are located at major airports in Charlotte, Philadelphia and Pittsburgh.
The company's more than 2,000 daily flights transported 56 million passengers in 1999.
*Includes combined holdings.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
PORTFOLIO INFORMATION (concluded)
As of September 30, 2000
Quality Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 2.4%
BB/Ba 28.8
B/B 56.7
CCC/Caa 8.3
NR (Not Rated) 3.8
*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
Health Services 9.0%
Energy 8.8
Transportation 7.8
Wireless Communications--International 5.9
Cable--International 5.8
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Mexico 4.3%
Argentina 3.9
Brazil 3.7
Canada 2.8
Indonesia 2.7
*All holdings are denominated in US dollars.
<TABLE>
PROXY RESULTS
During the six-month period ended September 30, 2000, Merrill Lynch
Corporate Bond, Inc.'s shareholders voted on the following
proposals. Proposals 1 and 2 were approved at a shareholders'
meeting on July 25, 2000. Proposal 3 was approved at a shareholders'
meeting on August 22, 2000. The description of each proposal and
number of shares voted are as follows:
Shares Voted
For
<S> <S> <C>
1. To elect the Fund's Terry K. Glenn 645,602,416
Board of Directors: Ronald W. Forbes 645,250,956
Cynthia A. Montgomery 645,383,807
Charles C. Reilly 645,147,762
Kevin A. Ryan 645,378,042
Roscoe S. Suddarth 645,326,894
Richard R. West 645,574,379
Arthur Zeikel 645,018,810
Edward D. Zinbarg 645,306,917
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the
Fund's independent auditors for the current fiscal year. 611,674,164 8,144,160 27,872,579
3. To convert the Fund to "master/feeder" structure. 588,549,512 27,788,321 49,534,095
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 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. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent Performance Results
<CAPTION>
Ten Year/
6 Month 12 Month Since Inception Standardized
As of September 30, 2000 Total Return Total Return Total Return 30-day Yield
<S> <C> <C> <C> <C>
High Income Portfolio Class A Shares* -0.86% +2.31% +177.20% 12.43%
High Income Portfolio Class B Shares* -1.07 +1.70 +157.07 12.14
High Income Portfolio Class C Shares* -1.10 +1.49 + 41.74 12.09
High Income Portfolio Class D Shares* -0.82 +2.22 + 46.56 12.19
Merrill Lynch High Yield US Corporates, Cash Pay Index** +1.99 +1.23 +190.93/+59.31 --
CS First Boston Global High Yield Index** +1.14 +1.92 +204.15/+53.97 --
Ten-Year US Treasury Securities*** +3.42 +4.83 +113.27/+54.51 --
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/since inception periods are ten years for Class A &
Class B Shares and from 10/21/94 for Class C & Class D Shares.
**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 ten years and from 10/21/94, respectively. Ten
year/since inception total returns for CS First Boston Global High
Yield Index are ten years and from 10/31/94, respectively.
***Ten year/since inception total returns are ten years and from
10/31/94, respectively.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in ML Corporate
Bond Fund, Inc.'s High Income Portolio++--Class A and Class B Shares
compared to growth of the Credit Suisse First Boston Global High
Yield Index++++. Beginning and ending values are:
9/90 9/00
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++
--Class A Shares* $10,000 $26,609
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++
--Class B Shares* $10,000 $25,708
Credit Suisse First Boston Global
High Yield Index++++ $10,000 $30,529
A line graph depicting the growth of an investment in ML Corporate
Bond Fund, Inc.'s High Income Portolio++--Class C and Class D Shares
compared to growth of the Credit Suisse First Boston Global High
Yield Index++++. Beginning and ending values are:
9/90 9/00
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++
--Class C Shares* $10,000 $14,174
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++
--Class D Shares* $ 9,600 $14,070
Credit Suisse First Boston Global
High Yield Index++++ $10,000 $15,454
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests principally in fixed-income securities which
are rated in the lower rating categories of the established rating
services, or in unrated securities of comparable quality.
++++This unmanaged market-weighted Index, which mirrors the high-
yield debt market, is comprised of 423 securities rated BBB or
below. The starting date for the Index in the Class C & Class D
Shares' graph is from 10/31/94.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/00 + 2.31% - 1.79%
Five Years Ended 9/30/00 + 5.50 + 4.64
Ten Years Ended 9/30/00 +10.73 +10.28
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/00 +1.70% -1.95%
Five Years Ended 9/30/00 +4.73 +4.73
Ten Years Ended 9/30/00 +9.90 +9.90
*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*
One Year Ended 9/30/00 +1.49% +0.58%
Five Years Ended 9/30/00 +4.65 +4.65
Inception (10/21/94)
through 9/30/00 +6.04 +6.04
*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*
One Year Ended 9/30/00 +2.22% -1.87%
Five Years Ended 9/30/00 +5.27 +4.41
Inception (10/21/94)
through 9/30/00 +6.64 +5.91
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds
<S> <S> <S> <C> <S> <C> <C>
Aerospace--1.6% B- B3 $25,000,000 Fairchild Corporation, 10.75% due 4/15/2009 $ 23,333,125 $ 20,375,000
B B2 15,000,000 Hexcel Corporation, 9.75% due 1/15/2009 15,000,000 14,025,000
NR* Ca 25,000,000 ++Kitty Hawk, Inc., 9.95% due 11/15/2004 25,033,750 14,500,000
-------------- --------------
63,366,875 48,900,000
Airlines--1.9% Piedmont Aviation, Inc.:
NR* Ba3 1,985,000 Series E, 10.30% due 3/28/2007 1,855,291 1,904,695
NR* Ba3 1,950,000 Series F, 10.35% due 3/28/2011 1,999,718 1,891,149
BB- Ba3 1,500,000 Series H, 10% due 11/08/2012 1,493,250 1,409,770
NR* Ba3 1,304,000 Series J, 10.05% due 5/13/2005 1,181,685 1,266,686
BB- Ba3 1,116,000 Series J, 10.10% due 5/13/2007 999,021 1,078,848
BB- Ba3 3,767,000 Series J, 10.10% due 5/13/2009 3,327,542 3,613,043
BB- Ba3 2,710,000 Series J, 10.15% due 5/13/2011 2,366,806 2,593,497
NR* Ba3 2,226,000 Series K, 10% due 5/13/2004 2,026,506 2,165,453
NR* Ba3 2,666,000 Series K, 10.10% due 5/13/2008 2,374,020 2,565,172
NR* Ba3 2,550,000 Series K, 10.15% due 5/13/2010 2,251,293 2,446,253
USAir Inc.:
CCC+ B3 5,000,000 9.625% due 2/01/2001 4,149,906 4,982,990
BB- Ba3 1,092,000 Series 88F, 10.70% due 1/01/2003 984,165 1,086,120
BB- Ba3 1,092,000 Series 88G, 10.70% due 1/01/2003 984,165 1,086,120
BB- Ba3 1,092,000 Series 88H, 10.70% due 1/01/2003 984,165 1,086,120
BB- Ba3 1,092,000 Series 88I, 10.70% due 1/01/2003 984,165 1,086,120
BB- Ba3 3,521,292 Series 89A1, 9.33% due 1/01/2006+++ 3,331,038 3,279,044
BB- Ba3 25,000,000 Series 93A3, 10.375% due 3/01/2013 23,968,125 22,736,900
BB- Ba3 1,432,000 Series A, 10.70% due 1/15/2007 1,525,137 1,423,565
BB- Ba3 1,815,000 Series C, 10.70% due 1/15/2007 1,933,048 1,804,310
BB- Ba3 1,107,000 Series E, 10.70% due 1/15/2007 1,159,472 1,100,480
-------------- --------------
59,878,518 60,606,335
Automotive BB Ba2 2,500,000 Federal-Mogul Corporation, 7.375% due
--0.7% 1/15/2006 1,893,750 987,500
Venture Holdings Trust:
B B2 25,000,000 11% due 6/01/2007 25,000,000 16,125,000
B- B3 10,000,000 12% due 6/01/2009 10,000,000 5,550,000
-------------- --------------
36,893,750 22,662,500
Broadcasting NR* NR* 4,686,000 Acme Intermediate Holdings/Finance,
--Radio & 0/12% due 9/30/2005 (e) 3,677,149 3,209,910
Television B- B3 3,000,000 Acme Television/Finance, 10.976% due
--1.7% 9/30/2004 (e) 2,988,008 2,865,000
B- B3 16,500,000 LIN Holdings Corp., 10.60% due 3/01/2008 (e) 12,580,999 12,086,250
B- B2 17,000,000 LIN Television Corporation, 8.375% due
3/01/2008 16,960,220 16,235,000
Sinclair Broadcasting Group Inc.:
B B2 5,000,000 10% due 9/30/2005 5,136,250 4,975,000
B B2 15,000,000 8.75% due 12/15/2007 14,941,200 13,987,500
-------------- --------------
56,283,826 53,358,660
Cable-- B+ B2 10,000,000 Adelphia Communications Corporation,
Domestic--2.3% 7.875% due 5/01/2009 10,000,000 8,412,500
B+ B2 20,000,000 Century Cable LLC, 9.50% due 3/01/2005 19,855,000 19,200,000
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Cable-- B+ B2 $15,000,000 Charter Communications Holdings,
Domestic 8.625% due 4/01/2009 $ 14,954,250 $ 13,537,500
(concluded) B+ B2 30,000,000 Olympus Communications LP/Capital Corp.,
10.625% due 11/15/2006 30,282,500 30,000,000
-------------- --------------
75,091,750 71,150,000
Cable-- ++Australis Media Ltd.:
International-- NR* NR* 1,077,816 14.398% due 11/01/2002 (e) 1,065,591 619,744
5.1% D NR* 1,353,490 15.75% due 5/15/2003++++ 751,091 20,302
D NR* 79,117,000 15.75% due 5/15/2003 (a)++++ 56,318,088 1,977,925
CCC+ Caa1 10,000,000 Cable Satisfaction International, 12.75% due
3/01/2010 9,338,820 8,650,000
Cablevision SA:
BB B1 15,000,000 13.75% due 4/30/2007 14,830,350 13,575,000
BB B1 15,000,000 13.75% due 5/01/2009 15,000,000 13,387,500
B- B3 23,000,000 Callahan Nordrhein-Westf, 16% due
7/15/2010 (e) 11,006,312 10,637,500
B B2 10,000,000 Diamond Cable Communications PLC,
11.014% due 2/15/2007 (e) 8,542,224 7,550,000
B- B3 9,000,000 Ekabel Hessen, 14.50% due 9/01/2010 8,882,100 9,045,000
D Caa3 33,500,000 ++Supercanal Holdings SA, 11.50% due
5/15/2005 (i) 29,896,250 13,609,375
B- B3 93,000,000 UnitedGlobalCom, Inc., 10.75%
due 2/15/2008 (e) 72,541,981 64,170,000
B B2 35,000,000 United Pan-Europe Communications, 13.75%
due 2/01/2010 (e) 19,672,410 16,012,500
-------------- --------------
247,845,217 159,254,846
Capital Goods International Wire Group, Inc.:
--1.3% B- B3 14,000,000 11.75% due 6/01/2005 13,986,250 14,140,000
B- B3 11,000,000 Series B, 11.75% due 6/01/2005 11,962,500 11,110,000
CCC+ B3 25,250,000 Trench Electric & Trench Inc., 10.25% due
12/15/2007 25,315,625 15,781,250
51,264,375 41,031,250
Chemicals--1.5% ISP Holdings Inc.:
BB- Ba3 19,502,000 9.75% due 2/15/2002 19,502,000 17,551,800
BB- Ba3 10,000,000 9% due 10/15/2003 9,972,100 8,850,000
BB Ba3 20,000,000 Lyondell Chemical Company, 9.625% due
5/01/2007 20,108,750 19,575,000
-------------- --------------
49,582,850 45,976,800
Child Care B- B3 20,000,000 Kindercare Learning Centers, Inc., 9.50%
--0.6% due 2/15/2009 19,924,375 18,600,000
Computer CCC B3 20,500,000 Dictaphone Corp., 11.75% due 8/01/2005 20,114,375 19,372,500
Services-- PSINet, Inc.:
Electronics B- B3 8,000,000 10% due 2/15/2005 7,760,000 5,240,000
--1.9% B- B3 15,000,000 10.50% due 12/01/2006 15,000,000 9,825,000
B B2 30,000,000 Zilog Inc., 9.50% due 3/01/2005 28,266,250 25,650,000
-------------- --------------
71,140,625 60,087,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Conglomerates B- B3 $20,000,000 Eagle-Picher Industries, 9.375% due
--0.5% 3/01/2008 $ 20,117,740 $ 16,500,000
Consumer B B3 23,000,000 Corning Consumer Products, 9.625% due
Products--0.2% 5/01/2008 20,034,931 7,705,000
Consumer CCC+ Caa2 8,000,000 AP Holdings Inc., 11.164% due 3/15/2008 (e) 6,134,810 840,000
Services--0.7% CCC+ Caa1 15,000,000 Apcoa Inc., 9.25% due 3/15/2008 15,012,500 5,550,000
B- Caa1 30,000,000 Protection One Alarm Monitoring, 8.125% due
1/15/2009 (i) 28,550,000 16,650,000
-------------- --------------
49,697,310 23,040,000
Energy--8.1% Benton Oil & Gas Co.:
B B3 3,150,000 11.625% due 5/01/2003 2,149,875 2,220,750
B B3 20,000,000 9.375% due 11/01/2007 20,097,687 12,100,000
B B2 20,000,000 Chesapeake Energy Corp., 9.625% due 5/01/2005 20,056,250 19,950,000
B B2 15,000,000 Clark R & M, Inc., 8.875% due 11/15/2007 14,892,150 10,575,000
B B3 25,000,000 Clark USA Inc., 10.875% due 12/01/2005 26,515,000 15,625,000
B- Caa1 25,000,000 Energy Corp. of America, 9.50% due 5/15/2007 21,214,000 19,125,000
BB- Ba3 25,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 24,788,350 25,125,000
CCC B3 30,000,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 29,405,000 27,150,000
B+ B1 30,000,000 Parker Drilling Co., 9.75% due 11/15/2006 30,458,610 30,075,000
BB- Ba3 20,000,000 RBF Finance Company, 11% due 3/15/2006 20,112,500 23,000,000
BB- B1 25,000,000 Tesoro Petroleum Corp., 9% due 7/01/2008 24,857,250 24,562,500
NR* NR* 36,000,000 TransAmerican Refining Corporation, 13% due
12/15/2002 (g) 35,640,000 36,180,000
B- B3 16,000,000 United Refining Co., 10.75% due 6/15/2007 15,326,250 10,640,000
-------------- --------------
285,512,922 256,328,250
Entertainment D Ca 27,495,000 ++AMF Bowling Worldwide Inc., 12.581% due
--0.7% 3/15/2006 (e) 25,276,595 5,773,950
CC Caa3 3,100,000 American Skiing Co., 12% due 7/15/2006 3,235,625 2,557,500
CC Ca 24,000,000 Regal Cinemas Inc., 9.50% due 6/01/2008 23,018,700 3,000,000
B B1 10,000,000 Vail Resorts Inc., 8.75% due 5/15/2009 10,000,000 9,550,000
-------------- --------------
61,530,920 20,881,450
Financial CCC- Caa3 20,000,000 Amresco Inc., 9.875% due 3/15/2005 20,087,500 8,900,000
Services--0.6% D ca 20,000,000 SIG Capital Trust I, 9.50% due 8/15/2027 (i) 13,100,000 2,500,000
C NR* 17,000,000 Veritas Capital Trust, 10% due 1/01/2028 17,290,000 8,542,500
-------------- --------------
50,477,500 19,942,500
Food & Chiquita Brands International Inc.:
Beverage--1.0% B B1 20,000,000 9.125% due 3/01/2004 19,585,625 14,700,000
B B1 20,000,000 10.25% due 11/01/2006 19,881,400 14,700,000
CC Caa1 20,000,000 DGS International Finance Company BV,
10% due 6/01/2007 (i) 20,068,200 3,050,000
-------------- --------------
59,535,225 32,450,000
Gaming--4.3% D Caa1 25,391,000 ++GB Property Funding Corp., 11% due
1/15/2005 36,468,630 25,503,801
Jazz Casino Co. LLC:
NR* NR* 44,784,504 1.27% due 11/15/2009 (d)++++ 24,734,162 8,285,133
NR* NR* 2,524,830 Contingent Notes, due 11/15/2009 (f) 0 0
BB- Ba3 10,000,000 Mandalay Resort Group, 10.25% due
8/01/2007 (i) 10,000,000 10,362,500
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Gaming BB+ Ba2 $20,000,000 Park Place Entertainment, 7.875% due
(concluded) 12/15/2005 $ 20,000,000 $ 19,325,000
Trump Atlantic City Associates/Funding Inc.:
B- B3 20,000,000 11.25% due 5/01/2006 19,329,375 13,900,000
B- B3 32,900,000 Series B, 11.25% due 5/01/2006 32,430,609 22,865,500
Venetian Casino/LV Sands:
B- Caa1 20,000,000 12.25% due 11/15/2004 19,775,000 20,600,000
CCC+ Caa3 15,000,000 14.25% due 11/15/2005 14,921,356 15,525,000
-------------- --------------
177,659,132 136,366,934
Health B- B3 8,800,000 ALARIS Medical Systems, Inc., 9.75% due
Services--9.0% 12/01/2006 8,994,312 6,468,000
B+ B1 34,000,000 Beverly Enterprises Inc., 9% due 2/15/2006 33,126,862 32,130,000
Columbia/HCA Healthcare Corp.:
BB+ Ba2 5,000,000 8.85% due 1/01/2007 5,307,850 5,066,120
BB+ Ba2 5,000,000 7.25% due 5/20/2008 4,696,650 4,653,855
NR* Ba2 14,150,000 8.70% due 2/10/2010 14,502,652 14,114,625
BB+ Ba2 17,640,000 9% due 12/15/2014 18,400,090 17,372,401
BB+ Ba2 15,000,000 8.36% due 4/15/2024 14,614,910 14,100,000
CCC+ B3 39,491,000 Extendicare Health Services, 9.35% due
12/15/2007 38,387,460 22,312,415
Fresenius Medical Capital:
B+ ba3 20,000,000 Trust I, 9% due 12/01/2006 20,605,277 19,950,000
B+ ba3 35,000,000 Trust II, 7.875% due 2/01/2008 35,010,000 33,162,500
BB+ Ba3 15,000,000 Healthsouth Corp., 10.75% due 10/01/2008 (i) 14,900,700 15,063,435
CCC B3 20,000,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 19,544,656 15,900,000
B- Caa1 50,000,000 Magellan Health Services, 9% due 2/15/2008 49,996,875 33,500,000
++Mariner Post - Acute Network:
D C 49,000,000 9.50% due 11/01/2007 48,781,460 1,225,000
D C 12,750,000 0%/10.50% due 11/01/2007 6,536,557 191,250
NR* C 8,000,000 Mediq Inc./PRN Life Support, 11% due 6/01/2008 2,780,000 280,000
B+ B3 25,000,000 PharMerica, Inc., 8.375% due 4/01/2008 19,156,250 18,875,000
Tenet Healthcare Corporation:
BB- Ba3 10,000,000 8.625% due 1/15/2007 9,989,400 9,950,000
BB- Ba3 20,000,000 8.125% due 12/01/2008 19,922,400 19,250,000
-------------- --------------
385,254,361 283,564,601
Hotels--1.3% HMH Properties, Inc.:
BB Ba2 35,000,000 7.875% due 8/01/2008 34,773,200 32,375,000
BB Ba2 9,000,000 8.45% due 12/01/2008 8,969,760 8,595,000
-------------- --------------
43,742,960 40,970,000
Independent AES Corporation:
Power B+ Ba3 25,000,000 10.25% due 7/15/2006 25,000,000 25,687,500
Producers B+ Ba3 15,000,000 8.375% due 8/15/2007 14,929,500 14,287,500
--3.2% BB+ Ba2 28,000,000 CE Casecnan Water & Energy Co., 11.45% due
11/15/2005 28,000,000 26,390,000
BB Ba1 10,000,000 ESI Tractebel Acquisition Corp., 7.99% due
12/30/2011 10,000,000 9,022,340
BB+ Baa3 25,000,000 Monterrey Power, SA de CV, 9.625% due
11/15/2009 (i) 24,977,680 24,187,500
-------------- --------------
102,907,180 99,574,840
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Industrial CCC+ Caa1 $ 9,500,000 Thermadyne Holdings Corp., 12.426% due
Services--0.4% 6/01/2008 (e) $ 6,897,624 $ 3,372,500
CCC+ B3 13,500,000 Thermadyne Manufacturing, 9.875% due
6/01/2008 13,088,370 10,479,375
-------------- --------------
19,985,994 13,851,875
Media & Globo Comunicacoes e Participacoes, Ltd. (i):
Communications B+ B2 30,000,000 10.50% due 12/20/2006 30,200,350 26,850,000
--International B+ B2 5,000,000 10.625% due 12/05/2008 5,009,500 4,362,500
--3.4% B B3 40,000,000 Impsat Corp., 12.375% due 6/15/2008 37,197,500 31,300,000
B+ B2 40,000,000 Orion Network Systems, Inc., 15.877% due
1/15/2007 (e) 28,898,139 13,800,000
Telefonica de Argentina:
BBB- B1 20,000,000 11.875% due 11/01/2004 19,643,125 20,950,000
BBB- B1 10,000,000 9.125% due 5/07/2008 (i) 8,712,500 9,262,500
-------------- --------------
129,661,114 106,525,000
Metals & CC C 27,500,000 AEI Resources Inc., 11.50% due 12/15/2006 (i) 20,675,000 1,787,500
Mining--3.8% BB+ Ba2 9,000,000 Great Central Mines Ltd., 8.875% due
4/01/2008 9,000,000 7,830,000
CCC+ B3 30,000,000 Kaiser Aluminum & Chemical Corp., 12.75%
due 2/01/2003 31,438,125 27,750,000
B B2 22,000,000 Metals USA Inc., 8.625% due 2/15/2008 21,335,000 15,950,000
BB- B1 25,000,000 Murrin Murrin Holdings Property, 9.375% due 24,845,000 22,625,000
8/31/2007
B B3 17,000,000 Ormet Corporation, 11% due 8/15/2008 (i) 16,996,250 15,895,000
B B2 30,000,000 P & L Coal Holdings Corp., 9.625% due
5/15/2008 29,914,200 29,250,000
-------------- --------------
154,203,575 121,087,500
Packaging B+ Ba3 30,000,000 Vicap SA, 11.375% due 5/15/2007 27,909,500 26,250,000
--0.8%
Paper & CCC+ caa 21,000,000 APP Financial II Mauritius Ltd., 12% (g)(h) 18,425,000 8,032,500
Forest CCC+ B3 40,000,000 APP International Finance, 11.75% due
Products 10/01/2005 39,716,250 25,000,000
--3.7% B B2 22,000,000 Ainsworth Lumber Company, 12.50% due
7/15/2007++++ 21,627,992 20,570,000
B Caa1 42,000,000 Doman Industries Limited, 8.75% due 3/15/2004 39,126,250 28,350,000
CCC+ B3 14,500,000 Indah Kiat International Finance, 12.50% due
6/15/2006 14,572,500 9,280,000
CCC+ B3 10,000,000 Pindo Deli Financial Mauritius, 10.75% due
10/01/2007 9,969,638 4,925,000
CCC+ B3 32,500,000 Tjiwi Kimia Finance Mauritius, 10% due
8/01/2004 30,977,000 18,931,250
-------------- --------------
174,414,630 115,088,750
Product NR* Caa3 10,000,000 ++Ameriserve Food Distributors, 8.875%
Distribution due 10/15/2006 10,000,000 400,000
--0.2% CCC- Ca 25,000,000 US Office Products Co., 9.75% due 6/15/2008 24,920,100 4,625,000
-------------- --------------
34,920,100 5,025,000
Publishing & BBB- Baa3 10,000,000 World Color Press Inc., 7.75% due 2/15/2009 9,830,100 9,339,170
Printing--0.3%
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Real Estate-- BB- Ba3 $30,000,000 Forest City Enterprises Inc., 8.50% due
0.9% 3/15/2008 $ 30,213,750 $ 28,950,000
Restaurants BB NR* 20,000,000 FM 1993A Corp., 9.75% due 11/01/2003 19,325,400 20,100,000
--0.6%
Steel--4.8% NR* B2 50,000,000 CSN Iron SA, 9.125% due 6/01/2007 (i) 45,433,750 41,625,000
BB- B1 20,000,000 Hylsa, SA de CV, 9.25% due 9/15/2007 (i) 19,872,930 15,450,000
B- Caa2 20,000,000 Renco Steel Holdings, 10.875% due 2/01/2005 20,045,700 14,900,000
CC Caa3 25,000,000 Republic Technologies, 13.75% due 7/15/2009 18,529,600 4,625,000
B+ B2 20,000,000 WCI Steel Inc., 10% due 12/01/2004 20,000,000 17,800,000
B- Caa1 25,000,000 WHX Corp., 10.50% due 4/15/2005 25,000,000 13,875,000
Weirton Steel Corp.:
B B2 5,000,000 11.375% due 7/01/2004 5,148,344 4,150,000
B B2 23,000,000 10.75% due 6/01/2005 22,413,750 18,745,000
CCC- B3 43,000,000 Wheeling Pittsburgh Corp., 9.25% due
11/15/2007 42,822,205 19,565,000
-------------- --------------
219,266,279 150,735,000
Supermarkets Pueblo Xtra International Inc.:
--0.4% CCC+ B3 21,075,000 9.50% due 8/01/2003 19,460,250 10,484,812
CCC+ B3 3,000,000 Series C, 9.50% due 8/01/2003 2,841,661 1,568,100
-------------- --------------
22,301,911 12,052,912
Telephony B- B3 6,000,000 CFW Communications Company, 13% due
--1.7% 8/15/2010 5,916,600 5,610,000
B+ B1 15,000,000 Energis PLC, 9.75% due 6/15/2009 14,943,150 14,850,000
B- B3 9,500,000 Esprit Telecom Group PLC, 10.875% due
6/15/2008 9,295,000 3,372,500
CCC- Caa1 4,500,000 ICG Holdings Inc., 13.149% due 5/01/2006 (e) 4,081,764 922,500
B B2 35,000,000 Nextlink Communications Inc., 9% due
3/15/2008 34,929,300 29,925,000
-------------- --------------
69,165,814 54,680,000
Textiles--0.9% B Ca 25,000,000 Galey & Lord, Inc., 9.125% due 3/01/2008 24,718,750 16,000,000
++Polysindo International Finance Company BV:
D Ca 7,500,000 8.719% (c) 4,200,000 1,275,000
D Ca 49,225,000 11.375% due 6/15/2006 45,254,000 8,368,250
D Ca 22,350,000 9.375% due 7/30/2007 11,266,500 3,799,500
-------------- --------------
85,439,250 29,442,750
Transportation BB- NR* 45,000,000 Autopistas del Sol SA, 10.25% due 8/01/2009 (i) 44,021,250 32,962,500
--7.5% CCC Caa1 20,000,000 Cathay International Ltd., 13.50% due
4/15/2008 (i) 20,000,000 10,150,000
GS Superhighway Holdings:
BB- B1 40,000,000 9.875% due 8/15/2004 34,963,750 28,900,000
BB- B1 49,000,000 10.25% due 8/15/2007 47,933,550 34,422,500
B+ B1 20,000,000 Gearbulk Holding Ltd., 11.25% due 12/01/2004 20,518,750 20,200,000
B+ B2 45,000,000 TFM, SA de CV, 12.564% due 6/15/2009 (e) 35,266,895 34,087,500
Transportacion Maritima Mexicana, SA de CV:
B+ Ba3 20,000,000 9.25% due 5/15/2003 16,996,625 16,650,000
B+ Ba3 25,000,000 10% due 11/15/2006 24,612,750 19,812,500
B- B2 38,606,000 Transtar Holdings LP, 13.375% due 12/15/2003 38,606,000 39,185,090
-------------- --------------
282,919,570 236,370,090
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds (concluded)
<S> <S> <S> <C> <S> <C> <C>
Utilities B+ B2 $50,000,000 Espirito Santo-Escelsa, 10% due 7/15/2007 $ 49,501,250 $ 41,125,000
--3.7% B+ NR* 33,000,000 Inversora de Electrica, 9% due 9/16/2004 (i) 32,895,000 11,632,500
NR* NR* 14,462,463 Sunflower Electric Power Corp., 8% due
12/31/2016 9,486,968 9,472,914
BB Ba2 40,765,200 TransGas de Occidente SA, 9.79% due
11/01/2010 (i)+++ 40,837,995 31,898,769
NR* NR* 21,759,590 Tucson Electric & Power Co., 10.732% due
1/01/2013 (g)+++ 20,606,895 23,504,274
-------------- --------------
153,328,108 117,633,457
Waste BB- Ba3 25,000,000 Allied Waste North America, 7.625% due
Management-- 1/01/2006 25,000,000 22,500,000
0.8% NR* Ca 23,700,000 ++Mid-American Waste Systems, Inc., 12.25% due
2/15/2003 6,484,853 829,500
NR* NR* 18,500,000 ++Safety-Kleen Services, 9.25% due 6/01/2008 18,500,000 670,625
-------------- --------------
49,984,853 24,000,125
Wireless CCC Caa1 10,000,000 Airgate PCS Inc., 12.697% due 10/01/2009 (e) 6,259,106 6,075,000
Communications CCC+ B3 26,000,000 Nextel Partners Inc., 14% due 2/01/2009 (e) 16,562,710 18,395,000
--Domestic NR* NR* 35,000,000 Pagemart Wireless Inc., 13.086% due
--2.0% 2/01/2008 (e) 24,994,266 13,475,000
D Caa3 25,000,000 ++Paging Network, Inc., 10% due 10/15/2008 24,756,250 8,968,750
B B3 3,250,000 Pinnacle Holdings Inc., 10% due 3/15/2008 (e) 2,557,492 2,356,250
NR* NR* 5,000,000 SBA Communications Corp., 12.308% due
3/01/2008 (e) 3,716,283 3,725,000
B- B3 17,500,000 Specrasite Holdings Inc., 12.875% due
3/15/2010 (e) 10,036,433 9,100,000
-------------- --------------
88,882,540 62,095,000
Wireless B B1 15,250,000 CTI Holdings SA, 12.994% due 4/15/2008 (e) 10,606,222 7,815,625
Communications B B3 56,472,000 Comunicacion Celular SA, 14.125% due
--International 3/01/2005 (i) 56,472,000 44,189,340
--5.9% CCC+ Caa2 25,000,000 Dolphin Telecom PLC, 14.147% due
5/15/2009 (e) 15,175,937 5,125,000
B- Caa1 46,000,000 McCaw International Ltd., 13.611% due
4/15/2007 (e) 36,531,651 34,960,000
B- Caa1 70,000,000 Millicom International Cellular, 13.40% due
6/01/2006 (e) 64,004,581 60,550,000
B- Caa1 22,000,000 Nextel International Inc., 13% due 8/01/2010 (e) 21,696,840 21,615,000
CCC+ Caa1 18,000,000 Telesystem International Wireless Inc., 13.151%
due 6/30/2007 (e) 14,317,051 11,250,000
-------------- --------------
218,804,282 185,504,965
Total Investments in Bonds--90.0% 3,778,299,112 2,837,683,060
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in USdollars)
<CAPTION>
Shares
Industries Held Issue Cost Value
Preferred Stocks
<S> <C> <S> <C> <C>
Cable-- 24,674 NTL Incorporated (Series B)++++ $ 25,325,019 $ 21,774,805
International--0.7%
Conglomerates--0.2% 3,100 Eagle-Picher Industries (Series B) 17,686,590 5,502,500
Energy--0.4% 11,460 R&B Falcon Corporation 11,173,828 14,697,450
Financial Services--0.9% 1,230,000 California Federal Bank (Series A) 30,815,000 27,828,750
Product Distribution--0.0% 297,038 Nebco Evans Holding Co. (Series A)++++ 27,166,659 111,389
Publishing & Printing--1.2% Primedia, Inc.:
125,000 (Series D) 12,500,000 11,781,250
292,500 (Series H) 29,109,500 24,643,125
-------------- --------------
41,609,500 36,424,375
Telephony--0.4% 13,224 Intermedia Communications Inc.
(Convertible)++++ 13,454,514 12,628,920
Utilities--0.1% 3,811 Crown Castle International Corporation++++ 3,839,256 3,858,637
Wireless Communications-- 48,932 Nextel Communications, Inc. (Series E)++++ 48,243,785 47,097,050
Domestic--1.7% 7,650 Rural Cellular Corp. (Series B)++++ 7,508,168 6,904,125
-------------- --------------
55,751,953 54,001,175
Total Investments in Preferred
Stocks--5.6% 226,822,319 176,828,001
Common Stocks
Cable--Domestic--0.0% 2,887 ++CS Wireless Systems, Inc. 20,336 4,330
Energy--0.3% 914,710 ++Chi Energy Inc. (Series B) 14,284,292 10,519,165
5,816 ++TransTexas Gas Corporation 58 90,148
-------------- --------------
14,284,350 10,609,313
Entertainment--0.4% 1,061,496 ++On Command Corporation 47,702,687 12,936,983
Gaming--0.1% 1,240,697 ++GB Property Funding Corp. 1,781,990 1,246,209
732,105 ++JCC Holding Company (Class A) 2,928,420 503,322
-------------- --------------
4,710,410 1,749,531
Telephony--0.0% 64,000 ++McLeodUSA Incorporated (Class A) 77,000 918,003
Transportation--0.3% 1,306,668 ++HMI 40,564,936 10,044,357
Wireless Communications-- 660,670 ++Metrocall, Inc. 9,091,747 1,992,333
Domestic--0.1%
Total Investments in Common
Stocks--1.2% 116,451,466 38,254,850
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in USdollars)
<CAPTION>
Shares
Industries Held Issue Cost Value
Warrants (b)
<S> <C> <S> <C> <C>
Cable--International--0.0% 10,000 Cable Satisfaction $ 395,637 $ 205,000
45,000 UIH Australia/Pacific 540,000 1,130,625
-------------- --------------
935,637 1,335,625
Energy--0.0% Chi Energy Inc.:
74,562 (Series B) 74,562 111,843
48,400 (Series C) 48,400 72,600
-------------- --------------
122,962 184,443
Entertainment--0.1% 385,661 On Command Corporation 3,033,504 1,422,125
Media & Communications-- 15,000 Loral Space & Communications 174,450 41,250
International--0.0%
Steel--0.0% 20,000 Republic Technologies 2,162,400 200
Wireless Communications-- 57,040 Page Mart Inc. 236,127 299,460
Domestic--0.0%
Wireless Communications-- 53,472 Comunicacion Celular SA (i) 109,680 668,400
International--0.0%
Total Investments in Warrants--0.1% 6,774,760 3,951,503
Total Long-Term Investments--96.9% 4,128,347,657 3,056,717,414
Face
Amount
Short-Term Securities
Commercial Paper**--0.5% $15,819,000 General Electric Capital Services Inc., 6.69%
due 10/02/2000 15,819,000 15,819,000
Total Short-Term Investments--0.5% 15,819,000 15,819,000
Total Investments--97.4% $4,144,166,657 3,072,536,414
==============
Other Assets Less Liabilities--2.6% 81,075,473
--------------
Net Assets--100.0% $3,153,611,887
==============
*Not Rated.
**Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Portfolio.
++Non-income producing security.
++++Represents a pay-in-kind security which may pay interest/dividends
in additional face/shares.
+++Subject to principal paydowns.
(a)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(b)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(c)Maturity of this security is pending as a result of bankruptcy
proceedings.
(d)Floating rate note.
(e)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(f)Represents an obligation by Jazz Casino Co. LLC to pay a semi-
annual amount to the Portfolio through 11/15/2009. The payments are
based upon varying interest rates and the amounts, which may be paid-
in-kind, are contingent upon the earnings before income taxes,
depreciation and amortization of Jazz Casino Co. LLC on a fiscal
year basis.
(g)Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was approximately $67,717,000,
representing 2.1% of net assets.
<CAPTION>
Issue Acquisition Date(s) Cost Value
<S> <C> <C> <C>
APP Financial II Mauritius
Ltd., 12% 4/24/1998--5/01/1998 $ 18,425,000 $ 8,032,500
TransAmerican Refining
Corporation, 13% due 12/15/2002 12/09/1997 35,640,000 36,180,000
Tucson Electric & Power Co.,
10.732% due 1/01/2013 7/16/1993--10/06/1998 20,606,895 23,504,274
Total $ 74,671,895 $ 67,716,774
============ ============
(h)The security is a perpetual bond and has no definite maturity
date.
(i)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of September 30, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$4,144,166,657) $3,072,536,414
Receivables:
Interest $ 86,372,284
Securities sold 16,412,237
Dividends 1,750,403
Capital shares sold 1,696,013 106,230,937
--------------
Prepaid registration fees and other assets 457,941
--------------
Total assets 3,179,225,292
--------------
Liabilities: Payables:
Capital shares redeemed 11,557,130
Dividends to shareholders 9,775,919
Distributor 1,601,130
Investment adviser 993,259
Securities purchased 418,070 24,345,508
--------------
Accrued expenses and other liabilities 1,267,897
--------------
Total liabilities 25,613,405
--------------
Net Assets: Net assets $3,153,611,887
==============
Net Assets Class A Common Stock, $.10 par value, 500,000,000
Consist of: shares authorized $ 9,039,099
Class B Common Stock, $.10 par value, 1,500,000,000
shares authorized 35,050,340
Class C Common Stock, $.10 par value, 200,000,000
shares authorized 3,763,202
Class D Common Stock, $.10 par value, 500,000,000
shares authorized 4,397,317
Paid-in capital in excess of par 4,664,464,546
Accumulated realized capital losses on investments--net (365,280,494)
Accumulated distributions in excess of realized
capital gains on investments--net (126,191,880)
Unrealized depreciation on investments--net (1,071,630,243)
--------------
Net assets $3,153,611,887
==============
Net Asset Class A--Based on $545,424,840 and 90,390,987 shares outstanding $ 6.03
Value: ==============
Class B--Based on $2,115,412,594 and 350,503,397 shares
outstanding $ 6.04
==============
Class C--Based on $227,274,177 and 37,632,018 shares outstanding $ 6.04
==============
Class D--Based on $265,500,276 and 43,973,166 shares outstanding $ 6.04
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended September 30, 2000
<S> <S> <C> <C>
Investment Interest and discount earned $ 438,792,831
Income: Dividends 20,112,142
Other 2,949,628
--------------
Total income 461,854,601
--------------
Expenses: Account maintenance and distribution fees--Class B $ 20,102,262
Investment advisory fees 16,426,144
Transfer agent fees--Class B 2,586,353
Account maintenance and distribution fees--Class C 2,308,126
Account maintenance fees--Class D 776,504
Transfer agent fees--Class A 566,605
Professional fees 314,924
Transfer agent fees--Class C 289,411
Accounting services 270,958
Printing and shareholder reports 252,257
Transfer agent fees--Class D 251,525
Custodian fees 116,458
Registration fees 43,620
Pricing fees 35,314
Directors' fees and expenses 29,225
Other 103,053
--------------
Total expenses 44,472,739
--------------
Investment income--net 417,381,862
--------------
Realized & Realized loss on investments--net (365,280,494)
Unrealized Gain Change in unrealized depreciation on investments--net 34,789,191
(Loss) on --------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 86,890,559
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 417,381,862 $ 560,286,172
Realized loss on investments--net (365,280,494) (120,681,720)
Change in unrealized depreciation on investments--net 34,789,191 (112,214,466)
-------------- --------------
Net increase in net assets resulting from operations 86,890,559 327,389,986
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (77,078,103) (92,923,653)
Shareholders: Class B (276,931,328) (382,415,655)
Class C (29,642,579) (44,201,661)
Class D (33,729,852) (40,745,203)
Realized gain on investments--net:
Class A -- (670,291)
Class B -- (3,070,864)
Class C -- (367,912)
Class D -- (299,510)
In excess of realized gain on investments--net:
Class A -- (18,923,916)
Class B -- (86,697,810)
Class C -- (10,387,035)
Class D -- (8,455,881)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (417,381,862) (689,159,391)
-------------- --------------
Capital Share Net decrease in net assets derived from capital share
Transactions: transactions (1,335,128,287) (1,191,917,429)
-------------- --------------
Net Assets: Total decrease in net assets (1,665,619,590) (1,553,686,834)
Beginning of year 4,819,231,477 6,372,918,311
-------------- --------------
End of year $3,153,611,887 $4,819,231,477
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived from Class A
information provided in the financial statements. 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 year $ 6.59 $ 7.05 $ 8.29 $ 7.93 $ 7.80
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .71 .72 .75 .74 .75
Realized and unrealized gain (loss) on
investments--net (.56) (.31) (1.19) .36 .14
---------- ---------- ---------- ---------- ----------
Total from investment operations .15 .41 (.44) 1.10 .89
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.71) (.72) (.75) (.74) (.76)
In excess of investment income--net -- -- -- -- --+++
Realized gain on investments--net -- (.01) (.05) -- --
In excess of realized gain on
investments--net -- (.14) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.71) (.87) (.80) (.74) (.76)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.03 $ 6.59 $ 7.05 $ 8.29 $ 7.93
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.31% 5.90% (5.98%) 14.58% 11.95%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .52% .51% .49% .51% .51%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 11.07% 10.40% 9.40% 9.23% 9.57%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $ 545,425 $ 807,942 $ 922,820 $1,044,799 $ 947,479
========== ========== ========== ========== ==========
Portfolio turnover 14.44% 19.74% 41.97% 38.58% 32.44%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived from Class B
information provided in the financial statements. 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 year $ 6.59 $ 7.05 $ 8.30 $ 7.93 $ 7.80
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .66 .67 .69 .68 .69
Realized and unrealized gain (loss) on
investments--net (.55) (.31) (1.20) .37 .15
---------- ---------- ---------- ---------- ----------
Total from investment operations .11 .36 (.51) 1.05 .84
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.66) (.67) (.69) (.68) (.71)
In excess of investment income--net -- -- -- -- --+++
Realized gain on investments--net -- (.01) (.05) -- --
In excess of realized gain on
investments--net -- (.14) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.66) (.82) (.74) (.68) (.71)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.04 $ 6.59 $ 7.05 $ 8.30 $ 7.93
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 1.70% 5.10% (6.80%) 13.86% 11.11%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.29% 1.28% 1.25% 1.27% 1.28%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.30% 9.66% 8.63% 8.46% 8.80%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $2,115,413 $3,290,248 $4,469,452 $5,495,488 $4,250,539
========== ========== ========== ========== ==========
Portfolio turnover 14.44% 19.74% 41.97% 38.58% 32.44%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived from Class C
information provided in the financial statements. 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 year $ 6.60 $ 7.06 $ 8.30 $ 7.94 $ 7.81
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .66 .66 .69 .68 .68
Realized and unrealized gain (loss)
on investments--net (.56) (.31) (1.19) .36 .15
---------- ---------- ---------- ---------- ----------
Total from investment operations .10 .35 (.50) 1.04 .83
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.66) (.66) (.69) (.68) (.70)
In excess of investment income--net -- -- -- -- --+++
Realized gain on investments--net -- (.01) (.05) -- --
In excess of realized gain on
investments--net -- (.14) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.66) (.81) (.74) (.68) (.70)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.04 $ 6.60 $ 7.06 $ 8.30 $ 7.94
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 1.49% 5.06% (6.72%) 13.66% 11.05%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.34% 1.33% 1.31% 1.32% 1.33%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.25% 9.62% 8.58% 8.39% 8.73%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $ 227,274 $ 361,606 $ 550,482 $ 638,626 $ 362,518
========== ========== ========== ========== ==========
Portfolio turnover 14.44% 19.74% 41.97% 38.58% 32.44%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived from Class D
information provided in the financial statements. 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 year $ 6.59 $ 7.05 $ 8.30 $ 7.94 $ 7.80
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .70 .70 .73 .72 .72
Realized and unrealized gain (loss) on
investments--net (.55) (.31) (1.20) .36 .16
---------- ---------- ---------- ---------- ----------
Total from investment operations .15 .39 (.47) 1.08 .88
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.70) (.70) (.73) (.72) (.74)
In excess of investment income--net -- -- -- -- --+++
Realized gain on investments--net -- (.01) (.05) -- --
In excess of realized gain on
investments--net -- (.14) -- -- --
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.70) (.85) (.78) (.72) (.74)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.04 $ 6.59 $ 7.05 $ 8.30 $ 7.94
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 2.22% 5.64% (6.32%) 14.29% 11.82%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .77% .76% .74% .76% .76%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.83% 10.15% 9.14% 8.95% 9.30%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $ 265,500 $ 359,435 $ 430,164 $ 496,836 $ 267,687
========== ========== ========== ========== ==========
Portfolio turnover 14.44% 19.74% 41.97% 38.58% 32.44%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of three portfolios
in Merrill Lynch Corporate Bond Fund, Inc. (the "Fund"), which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Portfolio's
financial statements are prepared in conformity with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. The
Portfolio has offered four classes of shares under the Merrill Lynch
Select PricingSM System. On March 31, 2000, the Fund's Board of
Directors approved a proposal to resume offering the Portfolio's
shares to new investors. Since March 24, 1998, shares of the
Portfolio have no longer been available for purchase (or exchange),
except under the following circumstances: shareholders of the
Portfolio may continue to elect to have dividends and distributions
paid on shares of the Portfolio reinvested in additional shares of
the Portfolio; certain participants in employer-sponsored retirement
or savings plans, including eligible 401(k) plans, will continue to
be permitted to purchase shares of the Portfolio through such plans;
and shares of the Portfolio will continue to be available for
purchase by participants in certain fee-based programs, such as the
Mutual Fund Advisor program administered by Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of Merrill
Lynch & Co. ("ML & Co."). In addition, shares of the Portfolio will
continue to be available for purchase in single transactions over
$1,000,000. Shares of Class A and Class D are sold with a front-end
sales charge. Shares of Class B and Class C may be subject to a
contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the
Portfolio.
(a) Valuation of investments--Portfolio securities 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
mean of the most recent bid and asked 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) Derivative financial instruments--The Portfolio may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which the 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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Portfolio enters into a closing transaction), the
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of 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 ML & Co., which is the limited partner. The Fund has
also entered into a Distribution Agreement and Distribution Plans
with FAM Distributors, Inc. ("FAMD" or the "Distributor"), which is
a wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee with respect to the Portfolio
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .55% of the Fund's average
daily net assets not exceeding $250 million; .50% of average daily
net assets in excess of $250 million but not exceeding $500 million;
.45% of average daily net assets in excess of $500 million but not
exceeding $750 million; and .40% of average daily net assets in
excess of $750 million. For the year ended September 30, 2000, the
aggregate average daily net assets of the Fund, including the Fund's
Investment Grade Portfolio and Intermediate Term Portfolio, was
approximately $5,618,472,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and
paid monthly at annual rates based upon the average daily net assets
of the shares of the Portfolio as follows:
Account Distribution
Maintenance Fee Fee
Class B .25% .50%
Class C .25% .55%
Class D .25% --
Pursuant to a subagreement with the Distributor, MLPF&S, a
subsidiary of ML & Co., also provides account maintenance and
distribution services to the Fund. The ongoing account maintenance
fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders.
The ongoing distribution fee compensates the Distributor and MLPF&S
for providing shareholder and distribution-related services to Class
B and Class C shareholders.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
For the year ended September 30, 2000, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Portfolio's Class A and Class D Shares
as follows:
FAMD MLPF&S
Class A $7,140 $56,754
Class D $9,550 $79,936
For the year ended September 30, 2000, MLPF&S received contingent
deferred sales charges of $5,187,490 and $14,085 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$556 and $1,231 relating to transactions subject to front-end sales
charge waivers in Class A and Class D Shares, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the year ended September 30, 2000, the Portfolio paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $4,486 for
security price quotations to compute the net asset value of the
Portfolio.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 2000 were $553,697,218 and
$1,843,791,328, respectively.
Net realized losses for the year ended September 30, 2000 and net
unrealized losses as of September 30, 2000 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $(365,280,418) $(1,071,630,243)
Short-term investments (76) --
------------- ---------------
Total $(365,280,494) $(1,071,630,243)
============= ===============
As of September 30, 2000, net unrealized depreciation for Federal
income tax purposes aggregated $1,079,655,408, of which $29,395,333
related to appreciated securities and $1,109,050,741 related to
depreciated securities. The aggregate cost of investments at
September 30, 2000 for Federal income tax purposes was
$4,152,191,822.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $1,335,128,287 and $1,191,917,429 for the years ended September
30, 2000 and September 30, 1999, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 19,964,132 $ 128,235,851
Shares issued to shareholders
in reinvestment of dividends 4,248,652 27,152,620
------------- --------------
Total issued 24,212,784 155,388,471
Shares redeemed (56,429,304) (357,927,053)
------------- --------------
Net decrease (32,216,520) $ (202,538,582)
============= ==============
Class A Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 37,334,447 $ 261,220,060
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,117,372 42,353,924
------------- --------------
Total issued 43,451,819 303,573,984
Shares redeemed (51,766,039) (360,396,170)
------------- --------------
Net decrease (8,314,220) $ (56,822,186)
============= ==============
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
Class B Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 21,467,566 $ 136,985,634
Shares issued to shareholders
in reinvestment of dividends 17,174,585 109,869,020
------------- --------------
Total issued 38,642,151 246,854,654
Automatic conversion of
shares (7,715,288) (48,887,473)
Shares redeemed (179,609,829) (1,152,894,922)
------------- --------------
Net decrease (148,682,966) $ (954,927,741)
============= ==============
Class B Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 35,328,168 $ 246,251,760
Shares issued to shareholders
in reinvestment of dividends
and distributions 30,984,036 214,651,143
------------- --------------
Total issued 66,312,204 460,902,903
Automatic conversion of
shares (4,819,675) (33,308,103)
Shares redeemed (196,217,737) (1,357,326,809)
------------- --------------
Net decrease (134,725,208) $ (929,732,009)
============= ==============
Class C Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 2,863,680 $ 18,295,183
Shares issued to shareholders
in reinvestment of dividends 2,274,487 14,564,966
------------- --------------
Total issued 5,138,167 32,860,149
Shares redeemed (22,332,137) (143,860,237)
------------- --------------
Net decrease (17,193,970) $ (111,000,088)
============= ==============
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 4,456,378 $ 31,228,663
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,393,975 30,452,417
------------- --------------
Total issued 8,850,353 61,681,080
Shares redeemed (32,048,468) (222,320,613)
------------- --------------
Net decrease (23,198,115) $ (160,639,533)
============= ==============
Class D Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 4,986,742 $ 32,031,788
Automatic conversion of
shares 7,714,380 48,887,473
Shares issued to shareholders
in reinvestment of dividends 2,424,984 15,538,623
------------- --------------
Total issued 15,126,106 96,457,884
Shares redeemed (25,665,013) (163,119,760)
------------- --------------
Net decrease (10,538,907) $ (66,661,876)
============= ==============
Class D Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 7,998,021 $ 55,581,473
Automatic conversion of
shares 4,815,996 33,308,103
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,676,672 25,476,676
------------- --------------
Total issued 16,490,689 114,366,252
Shares redeemed (22,965,985) (159,089,953)
------------- --------------
Net decrease (6,475,296) $ (44,723,701)
============= ==============
5. Short-Term Borrowings:
On December 3, 1999, the Portfolio, along with certain other funds
managed by FAM and its affiliates, entered into a $1,000,000,000
credit agreement with Bank of America, N.A. and certain other
lenders. The Portfolio may borrow under the credit agreement to fund
shareholder redemptions and for other lawful purposes other than for
leverage. The Portfolio may borrow up to the maximum amount
allowable under the Portfolio's current prospectus and statement of
additional information, subject to various other legal, regulatory
or contractual limits. The Portfolio pays a commitment fee of .09%
per annum based on the Portfolio's pro rata share of the unused
portion of the facility. Amounts borrowed under the facility bear
interest at a rate equal to, at each fund's election, the Federal
Funds rate plus .50% or a base rate as determined by Bank of
America, N.A. The Portfolio did not borrow under the facility during
the year ended September 30, 2000.
6. Capital Loss Carryforward:
At September 30, 2000, the Portfolio had a net capital loss
carryforward of approximately $135,369,000, of which $74,969,000
expires in 2007 and $60,400,000 expires in 2008. This amount will be
available to offset like amounts of any future taxable gains.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate Bond Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of the High
Income Portfolio of Merrill Lynch Corporate Bond Fund, Inc. as of
September 30, 2000, the related statements of operations for the
year then ended and changes in net assets for each of the years in
the two-year period then ended, and the financial highlights for
each of the years in the five-year period then ended. These
financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and the financial
highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at September 30, 2000 by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
the High Income Portfolio of Merrill Lynch Corporate Bond Fund, Inc.
as of September 30, 2000, the results of its operations, the changes
in its net assets, and the financial highlights for the respective
stated periods in conformity with accounting principles generally
accepted in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
November 17, 2000
</AUDIT-REPORT>
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 2000
IMPORTANT TAX INFORMATION (unaudited)
Of the ordinary income distributions paid monthly by High Income
Portfolio of Merrill Lynch Corporate Bond Fund, Inc. during the
fiscal year ended September 30, 2000, 4.03% qualifies for the
dividends received deduction for corporations. Additionally, there
were no capital gains distributions paid by the Fund during the
year.
Please retain this information for your records.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 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
Roscoe S. Suddarth, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, 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
Phillip Gillespie, 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
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 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 12-month period ended September 30, 2000, the fixed-
income markets remained volatile as short-term interest rates
trended significantly higher and intermediate-term--long-term
interest rates trended somewhat lower. The front end of the Treasury
yield curve continued to suffer under the pressures exerted by the
Federal Reserve Board's implementation of a restrictive monetary
policy. Specifically, investors continued to demand greater premiums
in shorter-dated securities to account for expected increases in the
Federal Reserve Board's overnight rate. Although longer interest
rates finished the period only slightly lower, the 30-year Treasury
bond traded through 5.55% at one point as a technical supply
situation, combined with a favorable inflation outlook, produced an
inversion of the yield curve. A supply imbalance, brought on by the
combination of reduced new issuance and a Treasury buyback program,
combined with the Federal Reserve Board's inflation fighting stance,
provided ample reason for the inversion.
The mounting strength of the US economy during the third and fourth
quarter of 1999, up 5.4% and 7.3%, respectively, combined with the
"irrational" valuation of financial assets, prompted the Federal
Reserve Board to institute a restrictive monetary policy. During the
first half of the year, the forward Federal Funds contract had
priced in the expectation for a 50 basis point -75 basis point
(0.50% - 0.75%) increase. By period-end, the Federal Reserve Board
had raised short-term interest rates by 1.75%. Consumer spending
continued to fuel the economic fires, although recent reports such
as new housing sales and auto purchases could arguably point to the
beginning of a higher interest rate-induced slowdown. Consensus
opinion is forecasting a 3.5%--4.0% growth rate for the second half
of 2000, which would represent an appropriate rate of growth given
prevailing levels of productivity.
Although inflation has been well contained for the most part, the
scope of the global recovery has led to fears of a rekindling of
inflation. The Commodities Research Bureau (CRB) 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 much of the period, spurred on by not only the OPEC
production limitations, but also by the increased demand of
recovering economies. With respect to wage inflation, whether one
evaluates wage pressures via hourly earnings, real earnings or
employment cost measures, the results point to minimal inflation.
The ability to export manufacturing capacity, combined with the high
levels of productivity, has limited the effect 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.
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-related
market pressures, slowed dramatically during the fourth quarter of
1999. Swap spreads, which widened during the third quarter, moved
tighter as corporate supply dried up. Likewise, corporate spreads,
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
light, although most transactions that came to market were fairly
well received. However, by late January, the rally, with respect to
corporate spreads, was over. 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 its monetary policy, pushed spreads
significantly higher. At one point, corporate spreads actually
exceeded the wide levels incurred during the financial crisis of
1998. However, investor sentiment turned decidedly more positive
once the economy began to show signs of an interest rate induced
slowdown. By the end of the second quarter of 2000, spreads on
corporate bonds began a rally, which would be sustained through the
third quarter.
Fiscal Year in Review
For the 12-month period ended September 30, 2000, Investment Grade
Portfolio's Class A, Class B, Class C and Class D Shares had total
returns of +5.09%, +4.29%, +4.23% and +4.83%, respectively. This
compares to the +5.69% total return for the unmanaged Merrill Lynch
U.S. Corporate Master Index. For the same 12-month period,
Intermediate Term Portfolio's Class A, Class B, Class C and Class D
Shares had total returns of +5.02%, +4.49%, +4.48% and +4.92%,
respectively. This compares to the total return of +6.17% for the
unmanaged Merrill Lynch U.S. Corporate 1-10 Year Index for the same
12-month period. (Investment results shown do not reflect sales
charges and would be lower if sales charges were included. Complete
performance information can be found on pages 5-9 of this report to
shareholders.) Portfolio performance for both Portfolios was
enhanced by a 20% diversification away from the corporate market, a
sector that produced the lowest total return results within the
investment-grade market. Each Portfolio's strategy relative to
corporate holdings proved beneficial as larger, more liquid global
transactions, which we emphasized, outperformed the smaller non-
global issues, which we sold. Finally, our implementation of a
barbelled strategy during the first half of the fiscal year
capitalized on the inversion of the yield curve. By mid-period, our
shift to a more bulleted approach, where cash balances were
reinvested back into issues with a spread to US Treasury securities,
produced excess returns as spread relationships tightened. On the
negative side, our holdings in Conseco Inc. and Finova Group Inc.
greatly impacted performance, given the deterioration of those
credits. We sold those securities during the second quarter of 2000,
in view of our concern about the long-term stand-alone viability of
those companies.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
Portfolio Activities
Our investment strategy remained somewhat conservative given the
outlook for higher interest rates. From a duration perspective, we
continued to maintain a duration that was modestly short of (0.25 -
0.35 years) each Portfolios' benchmark. We shifted the Portfolios'
investment strategy following the May Federal Open Market Committee
meeting to incorporate a more bullish, spread-oriented emphasis.
Specifically, we shifted away from a barbelled structure, which was
implemented to take advantage of the inversion in the yield curve,
to one that incorporated a more bulleted approach. We liquidated
each Portfolios' cash and Treasury positions, which had been built
up during the early part of the year to limit the impact of wider
corporate spreads, and invested the proceeds in the corporate spread
market. Additionally, we sold floating rate securities, which had
been originally purchased to take advantage of rising short-term
interest rates, in favor of corporate spread product. From a curve
perspective, we reversed an underweight in the two-year - five-year
sector, maintained a market weight in the ten-year sector. In the
case of the Investment Grade Portfolio, we removed the overweight in
the 30-year sector. With respect to duration, we brought each
Portfolios' duration closer to that of the relevant Merrill Lynch
Corporate Index, although we plan to maintain a 5% underweight until
the Federal Reserve Board returns to a neutral stance. We expect
this to occur sometime prior to 2001.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
We remained committed to the bigger, more liquid issues and
emphasized those 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.
With respect to security-specific issues, we added to positions in
several sectors including energy-related industries, electric
utilities, defense contractors, brokerage firms and cable/media
companies. In all cases, we are either positive on the outlook for
that sector or have a favorable view on the prevailing operating
picture with respect to interest margins and cash flows. We
liquidated some of our positions in several industries including
commercial finance companies, retailers and airlines. In this case,
we believe operating margins will remain under pressure, which in
turn will weaken cash flow positions. Those sectors we will continue
to avoid for the most part include property and casualty insurers,
tobacco, metals and mining, auto part manufacturers, and gaming and
leisure. Sectors that are becoming more attractive given improving
spread/risk attributes are forest product and paper producers,
telecommunication providers (particularly US companies), railroads
and real estate investment trusts.
Market Outlook
Going forward, we believe the investment-grade bond market will
continue to perform well as the Federal Reserve Board, having
achieved a noninflationary soft landing, moves to a neutral monetary
policy. The yield curve will seek a more upward sloping shape in the
front to intermediate sector, while the long end should continue to
benefit from a shortage of supply.
In Conclusion
We appreciate your ongoing interest 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
November 7, 2000
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
PROXY RESULTS
During the six-month period ended September 30, 2000, Merrill Lynch
Corporate Bond Fund, Inc.'s shareholders voted on the following
proposals. Proposals 1 and 2 were approved at a shareholders'
meeting on July 25, 2000. Proposal 3 was approved at a shareholders'
meeting on August 22, 2000. The description of each proposal and
number of shares voted are as follows:
<TABLE>
<CAPTION>
Shares Voted
For
<S> <S> <C>
1. To elect the Fund's Board of Directors: Terry K. Glenn 645,602,416
Ronald W. Forbes 645,250,956
Cynthia A. Montgomery 645,383,807
Charles C. Reilly 645,147,762
Kevin A. Ryan 645,378,042
Roscoe S. Suddarth 645,326,894
Richard R. West 645,574,379
Arthur Zeikel 645,018,810
Edward D. Zinbarg 645,306,917
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To ratify the selection of Deloitte & Touche LLP as the Fund's
independent auditors for the current fiscal year.
611,674,164 8,144,160 27,872,579
3. To convert the Fund to "master/feeder" structure.
588,549,512 27,788,321 49,534,095
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 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 September 30, 2000 Total Return Total Return Total Return 30-day Yield
<S> <C> <C> <C> <C>
Investment Grade Portfolio Class A Shares** +3.87% +5.09% +108.02% 6.79%
Investment Grade Portfolio Class B Shares** +3.47 +4.29 + 92.76 6.30
Investment Grade Portfolio Class C Shares** +3.45 +4.23 + 41.51 6.25
Investment Grade Portfolio Class D Shares** +3.74 +4.83 + 46.37 6.55
Intermediate Term Portfolio Class A Shares*** +3.34 +5.02 +104.36 6.74
Intermediate Term Portfolio Class B Shares*** +3.08 +4.49 + 54.73 6.29
Intermediate Term Portfolio Class C Shares*** +3.08 +4.48 + 43.86 6.29
Intermediate Term Portfolio Class D Shares*** +3.29 +4.92 + 47.52 6.64
*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
September 30, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Investment Grade Portfolio
A line graph depicting the growth of an investment in the Investment
Grade Portfolio's Class A and Class B Shares compared to growth of
an investment in the ML U.S. Corporate Master Index++++ and the
Lehman Brothers Aggregate Bond Index+++++. Beginning and ending
values are:
9/90 9/00
ML Corporate Bond, Inc.'s
Investment Grade Portfolio++--
Class A Shares* $ 9,600 $19,971
ML Corporate Bond, Inc.'s
Investment Grade Portfolio++--
Class B Shares* $10,000 $19,276
ML U.S. Corporate Master Index++++ $10,000 $22,946
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $21,681
A line graph depicting the growth of an investment in the Investment
Grade Portfolio's Class C and Class D Shares compared to growth of
an investment in the ML U.S. Corporate Master Index++++ and the
Lehman Brothers Aggregate Bond Index+++++. Beginning and ending
values are:
10/21/94* 9/00
ML Corporate Bond, Inc.'s
Investment Grade Portfolio++--
Class C Shares* $10,000 $14,151
ML Corporate Bond, Inc.'s
Investment Grade Portfolio++--
Class D Shares* $ 9,600 $14,052
ML U.S. Corporate Master Index++++ $10,000 $15,803
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $15,658
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests primarily in long-term corporate bonds rated
A or better by Moody's Investors Service, Inc. or Standard & Poor's
Corp.
++++This unmanaged Index is comprised of all investment-grade
corporate bonds rated BBB3 or higher, of all maturities.
++++++This unmanaged market-weighted Index is comprised of
investment-grade corporate bonds (rated BBB or better), mortgages
and US Treasury and Government agency issues with at least one year
to maturity.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
PERFORMANCE DATA (continued)
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/00 +5.09% +0.89%
Five Years Ended 9/30/00 +5.16 +4.31
Ten Years Ended 9/30/00 +7.60 +7.16
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/00 +4.29% +0.36%
Five Years Ended 9/30/00 +4.36 +4.36
Ten Years Ended 9/30/00 +6.78 +6.78
*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*
One Year Ended 9/30/00 +4.23% +3.25%
Five Years Ended 9/30/00 +4.31 +4.31
Inception (10/21/94)
through 9/30/00 +6.01 +6.01
*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*
One Year Ended 9/30/00 +4.83% +0.64%
Five Years Ended 9/30/00 +4.90 +4.05
Inception (10/21/94)
through 9/30/00 +6.62 +5.89
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Intermediate Term Portfolio
A line graph depicting the growth of an investment in the
Intermediate Term Portfolio's Class A and Class B Shares compared to
growth of an investment in the ML U.S. Corporate Master Index++++
and the Lehman Brothers Aggregate Bond Index+++++. Beginning and
ending values are:
9/90 9/00
ML Corporate Bond, Inc.'s
Intermediate Term Portfolio++--
Class A Shares* $ 9,600 $19,971
ML Corporate Bond, Inc.'s
Intermediate Term Portfolio++--
Class B Shares* $10,000 $19,276
ML U.S. Corporate Master Index++++ $10,000 $22,946
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $21,681
A line graph depicting the growth of an investment in the
Intermediate Term Portfolio's Class C and Class D Shares compared to
growth of an investment in the ML U.S. Corporate Master Index++++
and the Lehman Brothers Aggregate Bond Index+++++. Beginning and
ending values are:
10/21/94* 9/00
ML Corporate Bond, Inc.'s
Intermediate Term Portfolio--
Class C Shares* $10,000 $14,151
ML Corporate Bond, Inc.'s
Intermediate Term Portfolio--
Class D Shares* $ 9,600 $14,052
ML U.S. Corporate Master Index++++ $10,000 $15,803
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $15,658
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests primarily in bonds rated in the four highest
rating categories (Baa or higher by Moody's Investors Service, Inc.
or BBB or higher by Standard & Poor's Corp.), with a maximum
remaining maturity not to exceed ten years and, depending on market
conditions, an average remaining maturity of five to seven years.
++++This unmanaged Index is comprised of all investment-grade
corporate bonds rated BBB maturing in from one to ten years.
Past performance is not predictive of future performance.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
PERFORMANCE DATA (concluded)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/00 +5.02% +3.97%
Five Years Ended 9/30/00 +5.46 +5.25
Ten Years Ended 9/30/00 +7.41 +7.30
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/00 +4.49% +3.50%
Five Years Ended 9/30/00 +4.92 +4.92
Inception (11/13/92)
through 9/30/00 +5.69 +5.69
*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*
One Year Ended 9/30/00 +4.48% +3.50%
Five Years Ended 9/30/00 +4.90 +4.90
Inception (10/21/94)
through 9/30/00 +6.31 +6.31
*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*
One Year Ended 9/30/00 +4.92% +3.87%
Five Years Ended 9/30/00 +5.36 +5.14
Inception (10/21/94)
through 9/30/00 +6.76 +6.58
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<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> <C> <C> <C>
US Government & NR* Aaa $ 3,500,000 Federal Home Loan Banks, 6.75% due
Agency 5/01/2002 $ 3,458,980 $ 3,510,920
Obligations--1.6% US Treasury Bonds & Notes:
AAA Aaa 6,000,000 5.75% due 8/15/2003 5,958,750 5,966,220
AAA Aaa 6,500,000 6.50% due 2/15/2010 6,734,946 6,773,195
AAA Aaa 2,430,000 5.75% due 8/15/2010 2,418,686 2,420,134
-------------- --------------
18,571,362 18,670,469
Asset-Backed Aames Mortgage Trust:
Securities**-- AAA Aaa 15,000,000 6.46% due 6/15/2028 14,995,313 14,665,718
13.3% AAA Aaa 4,000,000 5.912% due 9/15/2028 4,000,000 3,951,156
NR* Aaa 10,300,000 Bear Stearns Commercial Mortgage Securities,
1999-WF2-A2, 7.08% due 6/15/2009 10,097,289 10,297,277
NR* Baa2 2,000,000 Bistro Trust 1998-1000, 6.58% due
3/26/2001 (b) 1,999,920 1,990,000
AAA Aaa 5,500,000 Centex Home Equity, 6.39% due 10/25/2027 5,164,844 5,365,360
AAA Aaa 3,240,699 Contimortgage Home Equity Loan Trust, 5.84%
due 5/15/2016 3,240,022 3,210,410
EQCC Home Equity Loan Trust:
AAA Aaa 695,501 6.229% due 3/15/2013 701,071 690,390
AAA Aaa 11,000,000 7.067% due 11/25/2024 10,999,983 11,002,090
A A3 9,000,000 First Dominion Funding I, 7.584% due
7/10/2013 (b) 8,966,133 8,628,750
NR* Aaa 9,000,000 First Union-Chase Commercial Mortgage,
1999-C2 A2, 6.645% due 4/15/2009 8,533,828 8,763,766
AAA Aaa 12,000,000 IMC Home Equity Loan Trust, 6.36% due
8/20/2022 11,997,673 11,867,520
The Money Store Home Equity Trust:
AAA Aaa 8,850,000 6.225% due 9/15/2023 8,848,685 8,700,170
AAA Aaa 5,000,000 Series 1994-A, Class A-4, 6.275% due
12/15/2022 4,861,719 4,945,475
NR* Aaa 11,770,000 Morgan Stanley Capital I, Series 1999-WF1,
6.21% due 9/15/2008 10,722,194 11,183,887
Nationslink Funding Corporation:
AAA Aaa 12,300,000 6.476% due 7/20/2008 12,220,020 11,882,137
AAA Aaa 13,332,000 6.316% due 11/20/2008 13,006,486 12,734,334
AAA NR* 5,000,000 Series 1999-2, Class A3, 7.181% due
12/20/2006 4,920,508 5,036,151
Saxon Asset Securities Trust:
NR* Aaa 12,000,000 6.265% due 7/25/2023 12,000,000 11,827,680
NR* Aaa 6,400,000 Series 1999-3, Class AF-4, 7.55% due
10/25/2026 6,398,750 6,414,720
-------------- --------------
153,674,438 153,156,991
Banking--10.7% A Aa3 2,750,000 Bank One Corp., 7.625% due 8/01/2005 2,744,500 2,805,027
Citigroup Inc.:
AA- Aa2 3,000,000 9.50% due 3/01/2002 3,163,980 3,102,630
AA- Aa2 6,500,000 7.875% due 5/15/2025 6,547,818 6,684,340
A- A2 11,000,000 First Union Corporation, 6.30% due
4/15/2028 (a) 10,958,420 10,198,870
A A1 9,800,000 Firstar Bank NA, 7.125% due 12/01/2009 9,714,544 9,589,300
BBB+ a2 4,750,000 Fleet Capital Trust II, 7.92% due
12/11/2026 4,690,720 4,316,230
A A2 3,000,000 Fleetboston Financial Corp., 7.25% due
9/15/2005 2,996,520 3,020,310
BBB+ A3 11,200,000 Great Western Bank, 9.875% due 6/15/2001 12,414,640 11,390,512
A- a1 14,000,000 HSBC Americas Capital Trust, 7.808% due
12/15/2026 (b) 13,838,440 12,303,718
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<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> <C> <C> <C>
Banking A A2 $ 6,000,000 HSBC USA Inc., 7% due 11/01/2006 $ 5,949,600 $ 5,872,920
(concluded) BBB a1 16,400,000 KeyCorp Capital I, 7.519% due 7/01/2028 (a) 16,235,016 16,099,880
A- a1 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 6,000,000 5,414,580
A+ A1 3,500,000 Mellon Financial Co., 5.75% due 11/15/2003 3,493,525 3,389,575
NationsBank Corp.:
A Aa3 1,300,000 6.50% due 8/15/2003 1,336,075 1,288,235
A+ Aa2 2,000,000 6.125% due 7/15/2004 2,045,760 1,948,060
A Aa3 1,000,000 7.75% due 8/15/2004 1,077,770 1,027,820
A+ Aa2 5,000,000 6.375% due 5/15/2005 5,081,535 4,851,750
A Aa3 5,000,000 Norwest Corp., 6.625% due 3/15/2003 5,104,650 4,957,100
BBB+ A3 6,735,000 Washington Mutual Inc., 7.25% due 8/15/2005 6,703,009 6,702,133
A+ Aa2 8,100,000 Wells Fargo & Co., 7.25% due 8/24/2005 8,068,572 8,184,645
-------------- --------------
128,165,094 123,147,635
Finance--3.2% A+ A1 500,000 Associates Corporation of North America,
7.40% due 5/15/2006 544,845 508,840
BBB Baa2 13,850,000 Comdisco Inc., 6% due 1/30/2002 13,595,780 13,256,804
Commercial Credit Co.:
AA- Aa3 2,000,000 6.125% due 12/01/2005 2,049,240 1,922,780
AA- Aa3 6,800,000 6.75% due 7/01/2007 6,984,092 6,631,020
General Electric Capital Corp.:
AAA Aaa 500,000 8.75% due 5/21/2007 611,680 548,555
AAA Aaa 4,305,000 8.50% due 7/24/2008 5,228,853 4,702,739
Household Finance Corp.:
A A2 8,000,000 8% due 5/09/2005 7,897,200 8,265,600
A A2 1,000,000 8% due 7/15/2010 1,013,230 1,029,930
-------------- --------------
37,924,920 36,866,268
Finance-- Bear Stearns Companies, Inc.:
Other--11.3% A A2 5,025,000 7.80% due 8/15/2007 5,018,266 5,087,109
A A2 1,000,000 7.625% due 12/07/2009 997,370 995,180
AA- A2 2,350,000 Boeing Capital Corp., 7.375% due 9/27/2010 2,347,532 2,370,398
Donaldson, Lufkin & Jenrette Inc.:
A- A3 3,000,000 8% due 3/01/2005 2,995,860 3,077,760
A- A3 2,000,000 6.875% due 11/01/2005 1,894,700 1,963,660
BBB+ Baa1 8,750,000 EOP Operating LP, 8.10% due 8/01/2010 8,745,947 8,806,875
BBB+ A3 2,650,000 ERP Operating LP, 7.125% due 10/15/2017 2,342,388 2,321,426
Goldman Sachs Group Inc.:
A+ A1 4,000,000 7.625% due 8/17/2005 3,999,280 4,078,440
A+ A1 9,000,000 7.35% due 10/01/2009 8,637,930 8,900,640
Lehman Brothers Holdings, Inc.:
A A3 6,000,000 6.625% due 2/05/2006 5,867,760 5,809,800
A A3 10,000,000 8.25% due 6/15/2007 9,970,143 10,355,000
A A3 3,500,000 Lehman Brothers, Inc., 7.625% due 6/01/2006 3,515,120 3,536,190
BBB+ Baa1 13,750,000 MBNA America Bank NA, 7.10% due
6/10/2004 (a) 13,537,838 13,749,038
AA- Aa3 7,000,000 Morgan Stanley, Dean Witter Corp., 7.75%
due 6/15/2005 7,000,000 7,206,850
Morgan Stanley, Dean Witter, Discover & Co.:
AA- Aa3 2,800,000 7.125% due 1/15/2003 2,799,384 2,813,104
AA- Aa3 8,000,000 6.09% due 3/09/2011 (a) 7,998,720 7,972,080
AA- Aa3 3,500,000 Morgan Stanley Group, 8.875% due 10/15/2001 3,687,145 3,562,160
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <C> <C> <C>
Finance-- Paine Webber Group Inc.:
Other BBB+ Baa1 $ 3,250,000 9.25% due 12/15/2001 $ 3,503,533 $ 3,321,955
(concluded) BBB+ Baa1 7,000,000 6.45% due 12/01/2003 6,782,230 6,872,383
BBB+ Baa1 3,750,000 6.375% due 5/15/2004 3,619,163 3,659,663
A Aa3 10,000,000 Salomon Smith Barney Holdings, Inc., 7.125%
due 10/01/2006 10,402,900 9,921,900
BBB+ Baa1 1,000,000 Simon Debartolo, 6.75% due 6/15/2005 990,460 955,280
BBB Baa2 3,955,000 Spieker Properties LP, 7.35% due 12/01/2017 3,936,961 3,525,724
BBB Baa3 9,700,000 Susa Partnership LP, 7.45% due 7/01/2018 9,688,554 8,332,882
-------------- --------------
130,279,184 129,195,497
Industrial-- A+ A1 13,000,000 Anheuser-Busch Companies Inc., 7.50%
Consumer due 3/15/2012 12,918,620 13,179,270
Goods--2.9% BBB- Ba1 2,500,000 Flowers Industries Inc., 7.15% due 4/15/2028 2,486,750 1,724,025
BBB Baa2 9,000,000 Nabisco Inc., 6% due 2/15/2011 (a) 8,997,750 8,919,810
A A2 9,500,000 Phillip Morris Companies, Inc., 9% due
1/01/2001 9,698,815 9,522,420
-------------- --------------
34,101,935 33,345,525
Industrial-- BBB+ Baa1 5,000,000 ANR Pipeline, 9.625% due 11/01/2021 6,492,300 5,810,950
Energy--5.7% BBB Baa1 8,000,000 Amerada Hess Corporation, 7.875% due
10/01/2029 7,900,320 7,980,000
BBB+ Baa1 10,000,000 Apache Corporation, 7.625% due 7/01/2019 9,997,500 9,859,200
AA+ Aa1 4,075,000 BP America Inc., 9.375% due 11/01/2000 4,488,287 4,082,253
A- A3 9,420,000 Burlington Resources, 7.375% due 3/01/2029 9,395,320 8,946,645
BBB Baa2 3,500,000 Coastal Corp., 6.375% due 2/01/2009 3,489,640 3,264,100
Enron Corp.:
BBB+ Baa1 3,000,000 7.875% due 6/15/2003 2,994,180 3,066,930
BBB+ Baa1 3,000,000 9.875% due 6/15/2003 3,145,530 3,212,760
A+ A1 5,750,000 Texaco Capital Inc., 8.625% due 11/15/2031 7,583,733 6,511,415
BBB Baa2 5,000,000 Tosco Corp., 8.125% due 2/15/2030 5,078,500 5,018,050
BBB- Baa2 8,105,000 Williams Companies, Inc., 7.625% due
7/15/2019 7,716,284 7,866,470
-------------- --------------
68,281,594 65,618,773
Industrial-- A+ A1 8,000,000 DaimlerChrysler NA Holdings, 7.20% due
Manufacturing-- 9/01/2009 7,984,510 7,804,320
9.8% A A1 2,000,000 Dow Chemical Company, 7.375% due 11/01/2029 1,977,400 1,936,260
A+ A2 11,500,000 First Data Corporation, 6.75% due 7/15/2005 11,911,930 11,290,240
A A2 7,000,000 Ford Motor Company, 8.90% due 1/15/2032 8,650,180 7,647,640
Ford Motor Credit Company:
A A2 5,500,000 7.50% due 3/15/2005 5,481,080 5,545,045
A A2 6,850,000 7.375% due 10/28/2009 6,680,046 6,692,587
A A2 13,900,000 7.875% due 6/15/2010 13,856,354 14,043,865
A A2 4,000,000 General Motors Acceptance Corp., 6.625%
due 9/19/2002 3,915,080 3,978,760
A A2 2,000,000 Honeywell International, 7.50% due
3/01/2010 1,967,200 2,026,540
A+ A1 3,000,000 International Business Machines Corp.,
6.50% due 1/15/2028 2,731,050 2,651,910
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <C> <C> <C>
Industrial-- Lockheed Martin Corp.:
Manufacturing-- BBB- Baa3 $ 5,000,000 6.85% due 5/15/2001 $ 4,995,950 $ 4,985,450
(concluded) BBB- Baa3 9,000,000 8.50% due 12/01/2029 8,942,040 9,483,570
BBB- Baa3 4,000,000 Martin Marietta Corp., 7.375% due 4/15/2013 3,846,440 3,700,040
A+ A1 6,500,000 Motorola Inc., 7.50% due 5/15/2025 6,570,915 6,379,035
BBB- Baa3 4,000,000 Northrop-Grumman Corporation, 7.875%
due 3/01/2026 3,820,200 3,830,840
BBB- Baa2 6,000,000 Raytheon Co., 6.75% due 3/15/2018 5,029,140 5,205,360
BBB Ba1 4,000,000 Seagate Technology Inc., 7.125% due
3/01/2004 3,993,000 3,799,840
BBB+ Baa1 6,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 5,974,920 6,032,100
A+ A2 6,000,000 United Technologies Corporation, 6.50%
due 6/01/2009 5,919,280 5,713,200
-------------- --------------
114,246,715 112,746,602
Industrial-- BB+ Ba2 10,000,000 Circus Circus Enterprises, Inc., 6.70% due
Services--10.0% 11/15/2096 9,977,700 9,323,800
Comcast Cable Communications:
BBB Baa2 3,000,000 6.20% due 11/15/2008 2,992,050 2,755,410
BBB Baa2 7,700,000 8.875% due 5/01/2017 8,585,731 8,461,607
A A2 11,139,204 Disney Custom Repackaged Asset Vehicle-
403, 6.85% due 1/10/2007 (b)** 11,131,740 11,077,938
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,057,420 7,612,220
BBB- Baa3 2,000,000 Kroger Company, 6.34% due 6/01/2001 1,999,780 1,984,338
AAA Aaa 3,000,000 Merck & Co. Inc., 5.95% due 12/01/2028 2,975,100 2,547,690
BBB- Baa3 8,445,000 News America Holdings, Inc., 8.625% due
2/01/2003 9,020,606 8,720,645
BBB- Baa3 10,000,000 News America Inc., 7.25% due 5/18/2018 9,063,735 8,949,400
A- A3 8,000,000 Sears Roebuck Acceptance Corp., 6.82% due
10/17/2002 8,016,320 7,928,560
AA- A2 8,000,000 TCI Communications Inc., 8.75% due 8/01/2015 9,384,480 8,325,120
AA- A2 3,000,000 Tele-Communications Inc., 8.25% due
1/15/2003 3,073,080 3,101,340
BBB Baa2 6,000,000 Time Warner Entertainment Co., 10.15% due
5/01/2012 7,356,180 7,060,920
BBB Ba1 5,350,000 USA Waste Services, 6.50% due 12/15/2002 5,025,683 5,171,417
BBB+ Baa1 7,000,000 Viacom Inc., 7.875% due 7/30/2030 7,024,660 7,061,670
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 14,488,240 15,131,823
-------------- --------------
117,172,505 115,213,898
Industrial-- BBB+ Baa2 2,200,000 Burlington North Santa Fe, 6.75% due
Transportation-- 3/15/2029 2,185,964 1,857,306
3.7% BBB Baa2 4,000,000 CSX Corp., 7.90% due 5/01/2017 4,550,200 3,940,480
AA+ Aa3 3,700,000 Continental Airlines, 7.056% due 3/15/2011 3,700,000 3,547,486
BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due
6/15/2012 10,137,590 10,052,910
Southwest Airlines Co.:
A- A3 10,000,000 9.40% due 7/01/2001 11,326,040 10,130,700
A- A3 2,000,000 8% due 3/01/2005 1,989,220 2,018,520
A- A3 3,000,000 7.875% due 9/01/2007 2,983,950 3,036,810
Union Pacific Corp.:
BBB- Baa3 4,000,000 6.625% due 2/01/2008 3,964,880 3,750,920
BBB- Baa3 5,000,000 6.625% due 2/01/2029 4,086,000 4,167,815
-------------- --------------
44,923,844 42,502,947
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Investment Grade Portfolio
<S> <S> <S> <C> <C> <C> <C>
Mortgage-Backed AAA Aaa $11,095,220 Fannie Mae, 7% due 11/18/2027 $ 10,821,740 $ 11,078,244
Securities**--
1.0%
Utilities-- AA- A1 6,000,000 AT&T Corporation, 6.50% due 3/15/2029 5,265,660 4,985,640
Communications-- AA- Aa3 6,000,000 Ameritech Capital Funding, 6.45% due
7.0% 1/15/2018 6,300,600 5,254,380
A+ Aa2 6,350,000 Bell Telephone Company of Pennsylvania, 7.375%
due 7/15/2007 7,090,029 6,416,611
BB Ba2 4,650,000 Frontier Corp., 6% due 10/15/2013 (a) 4,643,676 4,236,197
A+ Aa3 9,500,000 GTE California, Inc., 8.07% due 4/15/2024 10,152,935 9,124,180
GTE Corp.:
A+ A2 7,500,000 9.375% due 12/01/2000 8,235,170 7,529,175
A+ A2 3,600,000 6.84% due 4/15/2018 3,700,728 3,264,048
BBB+ Baa1 11,275,000 Qwest Capital Funding, 7.90% due
8/15/2010 (b) 11,252,355 11,496,948
AA- Aa2 5,000,000 Southwestern Bell Telecommunications Corp.,
6.375% due 11/15/2007 5,023,800 4,768,900
BBB+ Baa1 5,000,000 Sprint Capital Corporation, 5.70% due
11/15/2003 4,999,150 4,781,750
BBB+ Baa1 7,100,000 US West Capital Funding Inc., 6.875% due
7/15/2028 6,124,673 6,348,394
Vodafone Airtouch PLC (b):
A A2 6,000,000 7.625% due 2/15/2005 5,990,520 6,115,662
A A2 6,000,000 7.875% due 2/15/2030 5,917,380 6,075,576
-------------- --------------
84,696,676 80,397,461
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison, 7.13%
Electric--5.8% due 7/01/2007 6,137,176 5,674,149
Commonwealth Edison, Inc.:
A- Baa1 5,745,000 7% due 7/01/2005 5,671,981 5,645,037
BBB Baa2 5,000,000 6.95% due 7/15/2018 4,978,600 4,587,650
BBB+ Baa1 2,000,000 Conectiv Inc., 6.73% due 6/01/2006 2,000,000 1,955,740
A+ A1 9,115,000 Consolidated Edison, Inc., 6.25% due
2/01/2008 9,115,000 8,589,156
Dominion Resources Inc.:
BBB+ Baa1 9,000,000 7.625% due 7/15/2005 9,091,980 9,102,420
BBB+ Baa1 4,000,000 8.125% due 6/15/2010 4,001,800 4,119,320
A- A3 3,000,000 Pennsylvania Power & Light Co., 6.125% due
5/01/2006 (a) 2,998,200 2,980,350
A A1 4,000,000 South Carolina Electric & Gas, 7.50% due
6/15/2005 3,982,920 4,081,400
BBB- baa1 5,000,000 TXU Electric Capital V, 8.175% due 1/30/2037 5,000,000 4,835,100
AAA Aaa 6,971,000 Texas Utilities Company, 6.375% due
10/01/2004 6,995,198 6,836,320
A A2 8,500,000 Virginia Electric & Power Co., 8.625% due
10/01/2024 8,377,160 8,532,470
-------------- --------------
68,350,015 66,939,112
Yankee BBB Baa3 4,000,000 AT&T Canada Inc., 7.65% due 9/15/2006 (2) 3,982,560 3,991,280
Corporates++-- A- A3 11,100,000 BHP Finance USA, 8.50% due 12/01/2012 (1) 11,823,831 11,790,198
11.5% A A1 4,000,000 BSCH Issuance Limited, 7.625% due
11/03/2009 (1) 4,057,120 3,958,040
AAA Aaa 13,000,000 Banco Santander-Chile, 6.50% due
11/01/2005 (1) 12,938,770 12,562,355
BBB Baa2 9,050,000 Canadian National Railway Co., 6.90% due
7/15/2028 (2) 8,185,820 7,840,377
Ford Capital BV (1):
A A2 10,000,000 9.875% due 5/15/2002 10,531,200 10,408,100
A A2 3,995,000 9.50% due 6/01/2010 4,430,215 4,391,823
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Investment Grade Portfolio
<S> <S> <S> <C> <C> <C> <C>
Yankee A A1 $ 7,000,000 HSBC Holding PLC, 7.50% due
Corporates 7/15/2009 (1) $ 6,968,640 $ 7,007,280
(concluded) A- A3 8,000,000 Israel Electric Corp. Ltd., 7.75% due
3/01/2009 (2)(b) 7,991,760 7,838,312
Korea Development Bank (1):
BBB Baa2 7,000,000 7.125% due 4/22/2004 6,948,900 6,886,250
BBB Baa2 8,000,000 7.375% due 9/17/2004 8,003,760 7,926,560
Merita Bank Ltd. (1):
A A1 6,435,000 6.50% due 1/15/2006 6,243,726 6,183,585
A A1 4,250,000 6.50% due 4/01/2009 4,248,258 3,936,053
A+ Aa3 2,000,000 Midland Bank PLC, 7.65% due 5/01/2025 (1) 2,191,680 1,999,720
A A2 6,500,000 Norsk Hydro A/S, 6.70% due 1/15/2018 (2) 6,466,720 5,883,475
BBB Baa3 5,443,000 Petro Geo-Services ASA, 7.125% due
3/30/2028 (2) 5,045,121 4,667,699
BBB Baa2 12,500,000 Royal Caribbean Cruises Ltd., 6.75%
due 3/15/2008 (2) 12,421,548 10,781,000
Telecom de Puerto Rico (2):
BBB Baa2 3,000,000 6.15% due 5/15/2002 2,999,310 2,946,600
BBB Baa2 3,000,000 6.65% due 5/15/2006 2,823,510 2,857,731
Telefonica Europe BV (2):
A+ A2 600,000 7.75% due 9/15/2010 597,876 602,412
A+ A2 2,000,000 8.25% due 9/15/2030 1,999,160 2,041,060
A- A2 6,000,000 Trans-Canada Pipelines, 7.70% due
6/15/2029 (2) 5,992,320 5,819,220
-------------- --------------
136,891,805 132,319,130
Total Investments in
Bonds & Notes--97.5% 1,148,101,827 1,121,198,552
Short-Term Securities
Repurchase 15,035,000 Warburg Dillon Read LLC, purchased on
Agreements***--1.3% 9/29/2000 to yield 6.50% to 10/02/2000 15,035,000 15,035,000
Total Investments in
Short-Term Securities--1.3% 15,035,000 15,035,000
Total Investments--98.8% $1,163,136,827 1,136,233,552
==============
Other Assets Less Liabilities--1.2% 13,485,734
--------------
Net Assets--100.0% $1,149,719,286
==============
*Not Rated.
**Asset-Backed and Mortgage-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 US Government &
Agency Obligations.
++Corresponding industry groups for foreign securities:
(1) Financial Institution.
(2) 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.
Ratings of issues shown have not been audited by Deloitte &Touche
LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes Intermediate Term Portfolio
<S> <S> <S> <C> <C> <C> <C>
US Government US Treasury Notes:
Obligations--1.1% AAA Aaa $ 1,375,000 6.25% due 7/31/2002 $ 1,374,678 $ 1,379,730
AAA Aaa 500,000 5.75% due 8/15/2003 496,562 497,185
AAA Aaa 2,500,000 6.75% due 5/15/2005 2,581,125 2,589,850
-------------- --------------
4,452,365 4,466,765
Asset-Backed NR* Baa2 3,500,000 Bistro Trust 1998-1000, 6.58% due
Securities++-- 3/26/2001 (b) 3,499,860 3,482,500
13.8% AAA Aaa 3,000,000 Centex Home Equity, 6.39% due 10/25/2027 2,817,188 2,926,560
AAA Aaa 10,000,000 Honda Auto Lease Trust, Series 1999-A,
Class A5, 6.65% due 7/15/2005 10,004,297 9,968,686
Morgan Stanley Capital I:
NR* NR* 3,566,000 Series 1998-HF2, Class A2, 6.48% due
11/15/2030 3,300,779 3,439,549
NR* Aaa 5,500,000 Series 1999-WF1, 6.21% due 9/15/2008 5,010,371 5,226,115
Nationslink Funding Corporation:
AAA Aaa 6,000,000 6.316% due 11/20/2008 5,498,672 5,731,024
AAA NR* 10,000,000 Series 1999-2, Class A3, 7.181% due
12/20/2006 10,000,000 10,072,301
NR* Aaa 4,000,000 Saxon Asset Securities Trust, Series 1999-3,
Class AF-4, 7.55% due 10/25/2026 3,999,219 4,009,200
NR* NR* 10,000,000 Spinnaker I, 7.645% due 5/01/2001 (a)(b)(c) 10,000,000 9,912,500
-------------- --------------
54,130,386 54,768,435
Banking-- A+ Aa2 7,000,000 Bank of America Corp., 7.125% due 9/15/2006 6,964,650 7,006,930
15.2% Bank of New York Company, Inc.:
A A1 3,500,000 7.875% due 11/15/2002 3,873,450 3,569,335
A A1 5,500,000 6.625% due 6/15/2003 5,392,310 5,464,470
A Aa3 3,000,000 Bank One Corp., 7.625% due 8/01/2005 2,994,000 3,060,030
Citigroup, Inc.:
AA- Aa2 2,000,000 9.50% due 3/01/2002 2,168,400 2,068,420
AA- Aa2 3,000,000 5.80% due 3/15/2004 2,808,780 2,908,230
A A1 3,500,000 Firstar Bank NA, 7.125% due 12/01/2009 3,474,555 3,424,750
A A2 6,000,000 Fleetboston Financial Corp., 7.25% due
9/15/2005 5,993,040 6,040,620
A A2 2,000,000 HSBC USA Inc., 7% due 11/01/2006 2,016,410 1,957,640
A A2 6,000,000 Mellon Financial Co., 6.875% due 3/01/2003 5,483,220 5,994,900
A Aa3 1,000,000 Norwest Corp., 6.625% due 3/15/2003 1,003,060 991,420
A A2 3,750,000 Republic of New York Corp., 9.70% due
2/01/2009 4,672,460 4,167,188
Washington Mutual Inc.:
BBB+ A3 9,000,000 7.25% due 8/15/2005 8,930,520 8,956,080
BBB+ A3 1,000,000 7.50% due 8/15/2006 993,550 996,920
A+ Aa2 3,500,000 Wells Fargo & Co., 7.25% due 8/24/2005 3,486,420 3,536,575
-------------- --------------
60,254,825 60,143,508
Finance--5.1% A+ A1 5,500,000 Associates Corporation of North America,
6.25% due 11/01/2008 5,082,860 5,139,805
AA- Aa3 2,080,000 Commercial Credit Co., 6.75% due 7/01/2007 2,126,675 2,028,312
AAA Aaa 5,500,000 General Electric Capital Corp., 8.50% due
7/24/2008 6,680,300 6,008,145
Household Finance Corp.:
A A2 3,000,000 8% due 5/09/2005 2,961,450 3,099,600
A A2 4,000,000 8% due 7/15/2010 4,052,920 4,119,720
-------------- --------------
20,904,205 20,395,582
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <C> <C> <C>
Finance-- Avalonbay Communities:
Other--11.4% BBB+ Baa1 $ 3,500,000 8.25% due 7/15/2008 $ 3,497,410 $ 3,569,335
BBB+ Baa1 1,500,000 7.50% due 8/01/2009 1,447,545 1,457,430
A A2 2,500,000 Bear Stearns Companies, Inc., 7.625% due
12/07/2009 2,493,425 2,487,950
BBB+ Baa1 3,000,000 EOP Operating LP, 8.10% due 8/01/2010 3,018,270 3,019,500
Goldman Sachs Group Inc.:
A+ A1 2,100,000 7.625% due 8/17/2005 2,099,622 2,141,181
A+ A1 3,000,000 7.35% due 10/01/2009 2,879,310 2,966,880
A A3 5,000,000 Lehman Brothers, Inc., 7.625% due 6/01/2006 4,993,150 5,051,700
Morgan Stanley, Dean Witter Corp.:
AA- Aa3 750,000 7.75% due 6/15/2005 750,000 772,163
AA- Aa3 5,000,000 8% due 6/15/2010 5,086,200 5,215,000
AA- Aa3 2,500,000 Morgan Stanley, Dean Witter, Discover & Co.,
7.125% due 1/15/2003 2,499,450 2,511,700
Paine Webber Group Inc.:
BBB+ Baa1 3,000,000 6.45% due 12/01/2003 2,968,890 2,943,870
BBB+ Baa1 1,750,000 6.375% due 5/15/2004 1,688,942 1,707,842
BBB+ Baa1 3,750,000 7.625% due 12/01/2009 3,736,537 3,784,762
Salomon Smith Barney Holdings, Inc.:
A Aa3 2,500,000 6.25% due 1/15/2005 2,494,525 2,416,775
A Aa3 1,400,000 7.125% due 10/01/2006 1,456,406 1,389,066
BBB+ Baa1 4,000,000 Simon Debartolo, 6.75% due 6/15/2005 3,961,840 3,821,120
-------------- --------------
45,071,522 45,256,274
Industrial-- BBB Baa2 6,000,000 Nabisco Inc., 6% due 2/15/2011 (a) 5,998,500 5,946,540
Consumer Phillip Morris Companies, Inc.:
Goods--3.4% A A2 3,500,000 9% due 1/01/2001 3,576,195 3,508,260
A A2 4,000,000 7.25% due 1/15/2003 4,196,640 3,955,680
-------------- --------------
13,771,335 13,410,480
Industrial-- BBB Baa1 3,000,000 Amerada Hess Corporation, 7.375% due
Energy--5.0% 10/01/2009 2,986,410 2,979,420
Enron Corp.:
BBB+ Baa1 3,000,000 7.875% due 6/15/2003 2,994,180 3,066,930
BBB+ Baa1 2,625,000 9.875% due 6/15/2003 2,752,339 2,811,165
BBB Baa2 6,000,000 Ultramar Credit, 8.625% due 7/01/2002 6,521,940 6,122,760
BBB- Baa3 5,000,000 Valero Energy Corporation, 7.375% due
3/15/2006 4,884,150 4,986,650
-------------- --------------
20,139,019 19,966,925
Industrial-- DaimlerChrysler NA Holdings:
Manufacturing-- A+ A1 5,000,000 7.75% due 6/15/2005 4,977,800 5,104,250
9.5% A+ A1 2,000,000 7.20% due 9/01/2009 1,996,470 1,951,080
Ford Motor Credit Company:
A A2 1,320,000 7.60% due 8/01/2005 1,319,300 1,333,688
A A2 3,000,000 7.875% due 6/15/2010 2,990,580 3,031,050
A A2 2,000,000 General Motors Acceptance Corp., 9% due
10/15/2002 2,213,880 2,074,980
A A2 3,000,000 Honeywell International, 7.50% due 3/01/2010 2,989,590 3,039,810
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (continued) Intermediate Term Portfolio
<S> <S> <S> <C> <C> <C> <C>
Industrial-- BBB- Baa3 $ 5,000,000 Lockheed Martin Corporation, 7.95% due
Manufacturing 12/01/2005 $ 4,949,650 $ 5,121,950
(concluded) BBB- Baa3 2,500,000 Northrop-Grumman Corp., 8.625% due
10/15/2004 2,606,550 2,605,925
BBB- Baa2 3,500,000 Raytheon Co., 7.90% due 3/01/2003 3,494,050 3,559,126
BBB Ba1 1,000,000 Seagate Technology Inc., 7.125% due
3/01/2004 998,250 949,960
BBB+ Baa1 2,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 1,991,640 2,010,700
A A2 3,000,000 Textron Inc., 6.375% due 7/15/2004 2,984,220 2,917,770
A+ A2 4,000,000 United Technologies Corporation, 6.50% due
6/01/2009 3,973,520 3,808,800
-------------- --------------
37,485,500 37,509,089
Industrial-- BBB Baa2 4,000,000 Comcast Cable Communications, 8.375% due
Services-- 5/01/2007 4,060,680 4,181,920
9.3% BBB+ Baa1 4,000,000 Computer Associates International, 6.25% due
4/15/2003 3,992,480 3,819,560
A A2 2,800,000 Computer Sciences Corp., 6.25% due 3/15/2009 2,785,552 2,575,356
A A2 3,652,198 Disney Custom Repackaged Asset Vehicle-403,
6.85% due 1/10/2007 (b)++ 3,649,751 3,632,111
BBB- Baa3 3,000,000 News America Holdings, Inc., 8.625% due
2/01/2003 3,214,830 3,097,920
BB+ Baa3 5,000,000 Saks Incorporated, 7% due 7/15/2004 4,975,950 3,419,950
AA- A2 3,000,000 TCI Communications Inc., 8.65% due 9/15/2004 3,099,270 3,149,640
AA- A2 2,000,000 Tele-Communications Inc., 8.25% due 1/15/2003 2,048,720 2,067,560
BBB Baa2 2,500,000 Time Warner Entertainment Co., 9.625% due
5/01/2002 2,793,000 2,594,350
BBB Baa3 3,000,000 Time Warner Inc., 7.75% due 6/15/2005 3,075,180 3,074,100
BBB Ba1 1,000,000 USA Waste Services Inc., 6.125% due
7/15/2001 (a) 997,950 976,270
BBB+ Baa1 4,000,000 Viacom Inc., 7.70% due 7/30/2010 3,995,320 4,081,840
-------------- --------------
38,688,683 36,670,577
Industrial-- A- A3 1,000,000 Southwest Airlines Co., 8% due 3/01/2005 994,610 1,009,260
Transportation-- BBB- Baa3 1,000,000 Union Pacific Corp., 6.625% due 2/01/2008 991,220 937,730
0.5% -------------- --------------
1,985,830 1,946,990
Mortgage-Backed AAA Aaa 5,452,018 Fannie Mae, 7% due 11/18/2027 5,317,634 5,443,676
Securities++--1.4%
Utilities-- A+ Aa2 2,500,000 Bell Telephone Company of Pennsylvania,
Communications-- 7.375% due 7/15/2007 2,791,350 2,526,225
4.9% BB Ba2 3,000,000 Frontier Corp., 6% due 10/15/2013 (a) 2,995,920 2,733,030
A+ A2 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,090,310 1,003,890
BBB+ Baa1 2,000,000 Qwest Capital Funding, 7.90% due 8/15/2010 (b) 1,995,700 2,039,370
AA- Aa2 2,200,000 Southwestern Bell Telecommunications Corp.,
6.625% due 4/01/2005 2,108,590 2,174,392
BBB+ Baa1 500,000 Sprint Capital Corporation, 5.70% due
11/15/2003 499,915 478,175
A A2 3,000,000 Vodafone Airtouch PLC, 7.625% due 2/15/2005 (b) 2,995,260 3,057,831
A- A3 5,000,000 Worldcom Inc., 8.25% due 5/15/2010 5,158,350 5,309,750
-------------- --------------
19,635,395 19,322,663
Utilities-- AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison, 7.13% due
Electric-- 7/01/2007 3,147,270 2,909,820
5.9% AAA Aaa 5,000,000 Commonwealth Edison Inc., 8.25% due
10/01/2006 5,817,400 5,243,970
BBB+ Baa1 1,000,000 Conectiv Inc., 6.73% due 6/01/2006 1,000,000 977,870
Dominion Resources Inc.:
BBB+ Baa1 6,000,000 7.625% due 7/15/2005 5,985,960 6,068,280
BBB+ Baa1 1,500,000 8.125% due 6/15/2010 1,503,000 1,544,745
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Issue Cost Value
Bonds & Notes (concluded) Intermediate Term Portfolio
<S> <S> <S> <C> <C> <C> <C>
Utilities-- A A3 $ 2,500,000 Duke Capital Corp., 7.50% due 10/01/2009 $ 2,522,240 $ 2,516,025
Electric BBB- Ba1 2,000,000 PSE&G Energy Holdings, 9.125% due 2/10/2004 1,996,720 2,045,706
(concluded) A- A3 1,000,000 Pennsylvania Power & Light Co., 6.125%
due 5/01/2006 (a) 999,400 993,450
A A1 1,000,000 South Carolina Electric & Gas, 7.50%
due 6/15/2005 995,730 1,020,350
-------------- --------------
23,967,720 23,320,216
Yankee BBB Baa3 4,000,000 AT&T Canada Inc., 7.65% due 9/15/2006 (3) 3,988,720 3,991,280
Corporates***-- A A1 1,500,000 BSCH Issuance Limited, 7.625% due
10.2% 11/03/2009 (2) 1,521,420 1,484,265
AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due
11/01/2005 (2) 995,290 966,335
A A2 2,000,000 Ford Capital BV, 9.875% due 5/15/2002 (2) 2,300,380 2,081,620
BB+ Ba2 3,000,000 Gruma, SA de CV, 7.625% due 10/15/2007 (3) 2,994,960 2,385,000
A- A3 10,000,000 Israel Electric Corp. Ltd., 7.75% due
3/01/2009 (3)(b) 9,989,700 9,797,890
BBB Baa3 3,000,000 Korea Electric Power Corp., 8% due
7/01/2002 (3) 2,994,990 3,002,460
Merita Bank Ltd. (2):
A A1 1,000,000 6.50% due 1/15/2006 969,800 960,930
A A1 4,500,000 6.50% due 4/01/2009 4,363,545 4,167,585
BBB Baa2 3,000,000 Telecom de Puerto Rico, 6.65% due
5/15/2006 (3) 2,823,510 2,857,731
A+ A2 3,725,000 Telefonica Europe BV, 7.75% due
9/15/2010 (3) 3,711,814 3,739,975
A- A2 5,000,000 Trans-Canada Pipelines, 6.43% due
3/15/2029 (3) 5,000,000 4,809,150
-------------- --------------
41,654,129 40,244,221
Yankee BB+ Baa3 3,000,000 United Mexican States, 9.875% due
Sovereign***-- 2/01/2010(1) 3,277,140 3,189,000
0.8%
Total Investments in Bonds & Notes--97.5% 390,735,688 386,054,401
Repurchase Agreements**--1.7% 6,544,000 Warburg Dillon Read LLC, purchased on
9/29/2000 to yield 6.50% to 10/02/2000 6,544,000 6,544,000
Total Investments in Short-Term
Securities--1.7% 6,544,000 6,544,000
Total Investments--99.2% $ 397,279,688 392,598,401
==============
Other Assets Less Liabilities--0.8% 3,352,359
--------------
Net Assets--100.0% $ 395,950,760
==============
*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.
Ratings of issues shown have not been audited by Deloitte & Touche
llp.
++Asset-Backed and Mortgage-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 approximately $9,913,000,
representing 2.5% of net assets.
Issue Acquisition Date Cost Value
Spinnaker I, 7.645% due 5/01/2001 4/16/1998 $ 10,000,000 $ 9,912,500
Total $ 10,000,000 $ 9,912,500
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION
<TABLE>
Statements of Assets and Liabilities as of September 30, 2000
<CAPTION>
Investment Intermediate
Grade Portfolio Term Portfolio
<S> <S> <C> <C>
Assets: Investments, at value* $1,136,233,552 $ 392,598,401
Cash 773 1,101
Receivables:
Interest 20,241,534 6,429,738
Securities sold 4,036,680 --
Capital shares sold 1,451,155 294,177
Loaned securities 758 130
Prepaid registration fees and other assets 66,588 47,370
-------------- --------------
Total assets 1,162,031,040 399,370,917
Liabilities: Payables:
Capital shares redeemed 4,895,048 2,092,574
Securities purchased 3,994,640 --
Dividends to shareholders 2,033,351 690,355
Distributor 359,659 63,448
Investment adviser 310,067 107,275
Accrued expenses and other liabilities 718,989 466,505
-------------- --------------
Total liabilities 12,311,754 3,420,157
Net Assets: Net assets $1,149,719,286 $ 395,950,760
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 4,587,820 $ 1,320,404
Consist of: Class B Common Stock, $.10 par value++++ 4,263,486 1,099,854
Class C Common Stock, $.10 par value++++++ 523,322 26,150
Class D Common Stock, $.10 par value++++++++ 1,393,848 1,175,209
Paid-in capital in excess of par 1,264,161,456 425,919,626
Accumulated realized capital losses on investments--net (78,801,190) (27,164,483)
Accumulated distributions in excess of realized capital
gains on investments--net (19,506,181) (1,744,713)
Unrealized depreciation on investments--net (26,903,275) (4,681,287)
-------------- --------------
Net assets $1,149,719,286 $ 395,950,760
============== ==============
Net Asset Class A: Net assets $ 489,777,617 $ 144,352,035
Value: ============== ==============
Shares outstanding 45,878,203 13,204,040
============== ==============
Net asset value and redemption price per share $ 10.68 $ 10.93
============== ==============
Class B: Net assets $ 455,162,266 $ 120,249,869
============== ==============
Shares outstanding 42,634,855 10,998,536
============== ==============
Net asset value and redemption price per share $ 10.68 $ 10.93
============== ==============
Class C: Net assets $ 55,889,399 $ 2,859,196
============== ==============
Shares outstanding 5,233,216 261,504
============== ==============
Net asset value and redemption price per share $ 10.68 $ 10.93
============== ==============
Class D: Net assets $ 148,890,004 $ 128,489,660
============== ==============
Shares outstanding 13,938,478 11,752,093
============== ==============
Net asset value and redemption price per share $ 10.68 $ 10.93
============== ==============
*Identified cost $1,163,136,827 $ 397,279,688
============== ==============
++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
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Operations for the Year Ended September 30, 2000
<CAPTION>
Investment Intermediate
Grade Term
Portfolio Portfolio
<S> <S> <C> <C>
Investment Interest and discount earned $ 91,201,764 $ 30,802,063
Income: Other 124,607 56,725
-------------- --------------
Total income 91,326,371 30,858,788
-------------- --------------
Expenses: Investment advisory fees 4,497,413 1,535,381
Account maintenance and distribution fees--Class B 3,973,201 689,895
Transfer agent fees--Class B 1,041,084 549,466
Transfer agent fees--Class A 890,712 570,087
Transfer agent fees--Class D 245,332 503,886
Account maintenance and distribution fees--Class C 513,838 15,746
Account maintenance fees--Class D 349,114 131,992
Printing and shareholder reports 121,975 37,020
Transfer agent fees--Class C 127,680 12,714
Accounting services 100,752 30,390
Custodian fees 72,581 39,776
Professional fees 38,622 17,016
Registration fees 32,506 12,294
Pricing fees 20,870 11,280
Directors' fees and expenses 8,773 3,083
Other 28,347 10,429
-------------- --------------
Total expenses 12,062,800 4,170,455
-------------- --------------
Investment income--net 79,263,571 26,688,333
-------------- --------------
Realized & Realized loss on investments--net (53,653,641) (16,183,347)
Unrealized Change in unrealized depreciation on investments--net 26,835,578 8,479,388
Gain (Loss) on -------------- --------------
Investments--Net: Net Increase in Net Assets Resulting from Operations $ 52,445,508 $ 18,984,374
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets Investment Grade Portfolio
<CAPTION>
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 79,263,571 $ 88,165,811
Realized loss on investments--net (53,653,641) (18,307,068)
Change in unrealized appreciation/depreciation on
investments--net 26,835,578 (103,169,694)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 52,445,508 (33,310,951)
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (34,301,752) (36,365,681)
Class B (31,956,562) (39,073,573)
Class C (3,839,946) (4,752,280)
Class D (9,165,311) (7,974,277)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (79,263,571) (88,165,811)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from
Transactions: capital share transactions (209,747,911) 21,096,414
-------------- --------------
Net Assets: Total decrease in net assets (236,565,974) (100,380,348)
Beginning of year 1,386,285,260 1,486,665,608
-------------- --------------
End of year $1,149,719,286 $1,386,285,260
============== ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Statements of Changes in Net Assets Intermediate Term Portfolio
<CAPTION>
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 26,688,333 $ 29,088,252
Realized loss on investments--net (16,183,347) (5,110,689)
Change in unrealized appreciation/depreciation on
investments--net 8,479,388 (26,026,481)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 18,984,374 (2,048,918)
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (9,741,127) (10,897,908)
Class B (8,278,603) (10,046,366)
Class C (188,573) (281,121)
Class D (8,480,030) (7,862,857)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (26,688,333) (29,088,252)
-------------- --------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions: share transactions (60,039,884) 4,562,908
-------------- --------------
Net Assets: Total decrease in net assets (67,743,843) (26,574,262)
Beginning of year 463,694,603 490,268,865
-------------- --------------
End of year $ 395,950,760 $ 463,694,603
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights Investment Grade Portfolio
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. 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 year $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .72 .70 .73 .76 .76
Realized and unrealized gain (loss) on
investments--net (.20) (.90) .38 .24 (.35)
--------- --------- --------- --------- ---------
Total from investment operations .52 (.20) 1.11 1.00 .41
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.72) (.70) (.73) (.76) (.76)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.68 $ 10.88 $ 11.78 $ 11.40 $ 11.16
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 5.09% (1.70%) 10.05% 9.22% 3.60%
========= ========= ========= ========= =========
Ratios to Average Expenses .57% .57% .58% .57% .56%
Net Assets ========= ========= ========= ========= =========
Investment income--net 6.79% 6.22% 6.32% 6.73% 6.64%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 489,778 $ 535,188 $ 600,655 $ 519,708 $ 608,901
Data: ========= ========= ========= ========= =========
Portfolio turnover 94.67% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. 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 year $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .64 .61 .64 .67 .67
Realized and unrealized gain (loss) on
investments--net (.20) (.90) .38 .24 (.35)
--------- --------- --------- --------- ---------
Total from investment operations .44 (.29) 1.02 .91 .32
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.64) (.61) (.64) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.68 $ 10.88 $ 11.78 $ 11.40 $ 11.16
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.29% (2.45%) 9.21% 8.39% 2.81%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.34% 1.33% 1.34% 1.34% 1.32%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.02% 5.46% 5.56% 5.96% 5.88%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 455,162 $ 636,115 $ 685,345 $ 577,989 $ 724,089
Data: ========= ========= ========= ========= =========
Portfolio turnover 94.67% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Investment Grade Portfolio
<CAPTION>
The following per share data and ratios have been derived Class C
from information provided in the financial statements. 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 year $ 10.88 $ 11.79 $ 11.40 $ 11.17 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .64 .61 .63 .67 .66
Realized and unrealized gain (loss) on
investments--net (.20) (.91) .39 .23 (.34)
--------- --------- --------- --------- ---------
Total from investment operations .44 (.30) 1.02 .90 .32
--------- --------- --------- --------- ---------
Less dividends from investment
income--net (.64) (.61) (.63) (.67) (.66)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.68 $ 10.88 $ 11.79 $ 11.40 $ 11.17
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.23% (2.58%) 9.25% 8.23% 2.85%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.39% 1.38% 1.40% 1.39% 1.38%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.96% 5.41% 5.50% 5.91% 5.83%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 55,889 $ 79,581 $ 77,464 $ 49,918 $ 64,931
Data: ========= ========= ========= ========= =========
Portfolio turnover 94.67% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
<CAPTION>
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2000 1999 1998 1997 1996
Per Share Net asset value, beginning of year $ 10.88 $ 11.79 $ 11.41 $ 11.17 $ 11.51
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .70 .67 .70 .73 .73
Realized and unrealized gain (loss) on
investments--net (.20) (.91) .38 .24 (.34)
--------- --------- --------- --------- ---------
Total from investment operations .50 (.24) 1.08 .97 .39
--------- --------- --------- --------- ---------
Less dividends from investment
income--net (.70) (.67) (.70) (.73) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.68 $ 10.88 $ 11.79 $ 11.41 $ 11.17
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.83% (2.03%) 9.77% 8.95% 3.43%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .82% .82% .82% .82% .81%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.55% 5.98% 6.07% 6.47% 6.40%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 148,890 $ 135,401 $ 123,202 $ 77,398 $ 63,822
Data: ========= ========= ========= ========= =========
Portfolio turnover 94.67% 79.06% 149.41% 113.46% 88.53%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued) Intermediate Term Portfolio
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. 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 year $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .71 .70 .73 .73 .73
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .34 .21 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .53 (.02) 1.07 .94 .51
--------- --------- --------- --------- ---------
Less dividends from investment
income--net (.71) (.70) (.73) (.73) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.93 $ 11.11 $ 11.83 $ 11.49 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 5.02% (.18%) 9.59% 8.59% 4.56%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .78% .73% .67% .65% .59%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.51% 6.09% 6.27% 6.43% 6.41%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 144,352 $ 161,113 $ 200,679 $ 179,115 $ 216,545
Data: ========= ========= ========= ========= =========
Portfolio turnover 143.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. 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 year $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .66 .64 .67 .67 .67
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .33 .22 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .48 (.08) 1.00 .89 .45
--------- --------- --------- --------- ---------
Less dividends from investment
income--net (.66) (.64) (.67) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.93 $ 11.11 $ 11.83 $ 11.50 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.49% (.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 5.98% 5.58% 5.75% 5.91% 5.89%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 120,250 $ 162,211 $ 178,464 $ 148,148 $ 216,641
Data: ========= ========= ========= ========= =========
Portfolio turnover 143.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded) Intermediate Term Portfolio
<CAPTION>
The following per share data and ratios have been derived Class C
from information provided in the financial statements. 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 year $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .65 .64 .67 .67 .67
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .34 .21 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .47 (.08) 1.01 .88 .45
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.65) (.64) (.67) (.67) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.93 $ 11.11 $ 11.83 $ 11.49 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.48% (.70%) 9.03% 7.99% 3.99%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.30% 1.24% 1.20% 1.20% 1.15%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.97% 5.57% 5.70% 5.89% 5.86%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 2,859 $ 3,904 $ 4,832 $ 1,571 $ 10,144
Data: ========= ========= ========= ========= =========
Portfolio turnover 143.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
<CAPTION>
The following per share data and ratios have been derived Class D
from information provided in the financial statements. 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 year $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .70 .69 .71 .72 .72
Realized and unrealized gain (loss) on
investments--net (.18) (.72) .33 .22 (.22)
--------- --------- --------- --------- ---------
Total from investment operations .52 (.03) 1.04 .94 .50
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.70) (.69) (.71) (.72) (.72)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 10.93 $ 11.11 $ 11.83 $ 11.50 $ 11.28
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.92% (.28%) 9.39% 8.58% 4.46%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .88% .83% .77% .77% .71%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.41% 6.01% 6.16% 6.32% 6.32%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 128,490 $ 136,467 $ 106,294 $ 64,335 $ 33,270
Data: ========= ========= ========= ========= =========
Portfolio turnover 143.77% 113.52% 111.03% 76.99% 96.40%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 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 conformity with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. 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--Each Portfolio 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
September 30, 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 FAM Distributors, Inc. ("FAMD"
or the "Distributor"), 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 year ended September 30, 2000,
the aggregate average daily net assets of the Fund, including the
Fund's High Income Portfolio, was approximately $5,618,472,000.
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%
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended September 30, 2000, FAMD 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:
FAMD MLPF&S
Portfolio Class A Class D Class A Class D
Investment Grade $855 $3,118 $7,732 $27,288
Intermediate Term $ 42 $ 202 $ 835 $ 2,990
For the year ended September 30, 2000, MLPF&S received contingent
deferred sales charges of $1,329,865 relating to transactions in
Class B Shares, amounting to $1,238,148 and $91,717 in the
Investment Grade Portfolio and Intermediate Term Portfolio,
respectively, and $28,445 relating to transactions in Class C
Shares, amounting to $27,697 and $748 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$4,666 relating to transactions subject to front-end sales charge
waivers in Class A Shares, amounting to $515 and $4,151 in the
Investment Grade Portfolio and Intermediate Term Portfolio,
respectively, and $9,646 relating to transactions subject to front-
end sales charge waivers in Class D Shares, amounting to $8,094 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 year ended September 30, 2000, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$19,088 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, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 2000 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $ 1,130,485,138 $ 584,509,844
--------------- --------------
Sales $ 1,321,272,424 $ 641,640,547
=============== ==============
Net realized losses for the year ended September 30, 2000 and net
unrealized losses as of September 30, 2000 were as follows:
Realized Unrealized
Investment Grade Portfolio Losses Losses
Long-term investments $ (53,653,641) $ (26,903,275)
--------------- --------------
Total . $ (53,653,641) $ (26,903,275)
=============== ==============
Realized Unrealized
Intermediate Term Portfolio Losses Losses
Long-term investments $ (16,183,347) $ (4,681,287)
--------------- --------------
Total $ (16,183,347) $ (4,681,287)
=============== ==============
As of September 30, 2000, net unrealized depreciation for Federal
income tax purposes was as follows:
Investment Intermediate
Grade Portfolio Term Portfolio
Gross unrealized
appreciation $ 9,262,386 $ 4,225,771
Gross unrealized
depreciation (36,972,844) (8,909,714)
--------------- --------------
Net unrealized
depreciation $ (27,710,458) $ (4,683,943)
=============== ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
The aggregate cost of investments at September 30, 2000 for Federal
income tax purposes was $1,163,944,010 for the Investment Grade
Portfolio and $397,282,344 for the Intermediate Term Portfolio.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
for the year ended September 30, 2000 was $209,747,911 for the
Investment Grade Portfolio and $60,039,884 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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 10,194,148 $ 108,164,526
Shares issued to shareholders
in reinvestment of dividends 558,004 5,915,635
--------------- --------------
Total issued 10,752,152 114,080,161
Shares redeemed (14,079,515) (149,377,774)
--------------- --------------
Net decrease (3,327,363) $ (35,297,613)
=============== ==============
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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 9,668,395 $ 102,783,751
Shares issued to shareholders
in reinvestment of dividends 1,635,475 17,344,995
--------------- --------------
Total issued 11,303,870 120,128,746
Automatic conversion of shares (2,223,218) (23,615,151)
Shares redeemed (24,929,899) (264,645,785)
--------------- --------------
Net decrease (15,849,247) $ (168,132,190)
=============== ==============
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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 1,084,759 $ 11,518,024
Shares issued to shareholders
in reinvestment of dividends 238,259 2,527,653
--------------- --------------
Total issued 1,323,018 14,045,677
Shares redeemed (3,403,635) (36,185,456)
--------------- --------------
Net decrease (2,080,617) $ (22,139,779)
=============== ==============
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
=============== ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 5,598,778 $ 59,411,765
Automatic conversion of shares 2,221,610 23,615,151
Shares issued to shareholders
in reinvestment of dividends 366,137 3,879,436
--------------- --------------
Total issued 8,186,525 86,906,352
Shares redeemed (6,689,433) (71,084,681)
--------------- --------------
Net increase 1,497,092 $ 15,821,671
=============== ==============
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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 4,438,367 $ 48,345,752
Shares issued to shareholders
in reinvestment of dividends 253,820 2,757,303
--------------- --------------
Total issued 4,692,187 51,103,055
Shares redeemed (5,990,966) (65,239,255)
--------------- --------------
Net decrease (1,298,779) $ (14,136,200)
=============== ==============
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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 3,218,357 $ 35,033,025
Shares issued to shareholders
in reinvestment of dividends 356,372 3,876,093
--------------- --------------
Total issued 3,574,729 38,909,118
Automatic conversion of shares (473,907) (5,122,161)
Shares redeemed (6,703,197) (72,931,588)
--------------- --------------
Net decrease (3,602,375) $ (39,144,631)
=============== ==============
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 Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 167,024 $ 1,822,422
Shares issued to shareholders
in reinvestment of dividends 11,848 128,927
--------------- --------------
Total issue 178,872 1,951,349
Shares redeemed (268,737) (2,927,649)
--------------- --------------
Net decrease (89,865) $ (976,300)
=============== ==============
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 issue 1,120,303 12,869,739
Shares redeemed (1,177,570) (13,475,781)
--------------- --------------
Net decrease (57,267) $ (606,042)
=============== ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2000 Shares Amount
Shares sold 4,586,412 $ 49,891,647
Automatic conversion of shares 473,907 5,122,161
Shares issued to shareholders
in reinvestment of dividends 143,420 1,558,959
--------------- --------------
Total issued 5,203,739 56,572,767
Shares redeemed (5,734,959) (62,355,520)
--------------- --------------
Net decrease (531,220) $ (5,782,753)
=============== ==============
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. Short-Term Borrowings:
On December 3, 1999, the Portfolios, along with certain other funds
managed by FAM and its affiliates, entered into a $1,000,000,000
credit agreement with Bank of America, N.A. and certain other
lenders. The Portfolios may borrow under the credit agreement to
fund shareholder redemptions and for other lawful purposes other
than for leverage. The Portfolios may borrow up to the maximum
amount allowable under the Portfolios' current prospectus and
statement of additional information, subject to various other legal,
regulatory or contractual limits. The Portfolios pay a commitment
fee of .09% per annum based on the Portfolios' pro rata share of the
unused portion of the facility. Amounts borrowed under the facility
bear interest at a rate equal to, at each fund's election, the
Federal Funds rate plus .50% or a base rate as determined by Bank of
America, N.A. The Portfolios did not borrow under the facility
during the year ended September 30, 2000.
6. Loaned Securities:
At September 30, 2000, the Investment Grade Portfolio held US
Treasury Bonds/Notes having an aggregate value of approximately
$2,073,000 as collateral for Portfolio securities loaned having a
market value of approximately $1,992,000.
7. Capital Loss Carryforward:
At September 30, 2000, the Fund had a capital loss carryforward of
approximately $51,565,000 in the Investment Grade Portfolio, of
which $21,203,000 expires in 2003, $2,604,000 expires in 2005 and
$27,758,000 expires in 2008 and approximately $14,335,000 in the
Intermediate Term Portfolio, of which $6,608,000 expires in 2003,
$276,000 expires in 2005 and $7,451,000 expires in 2008. These
amounts will be available to offset like amounts of any future
taxable gains.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Corporate Bond Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of Investment
Grade and Intermediate Term Portfolios of Merrill Lynch Corporate
Bond Fund, Inc. as of September 30, 2000, the related statements of
operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at September 30, 2000 by
correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Investment Grade and Intermediate Term Portfolios of Merrill Lynch
Corporate Bond Fund, Inc. as of September 30, 2000, the results of
their operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
Princeton, New Jersey
November 10, 2000
</AUDIT-REPORT>
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 2000
IMPORTANT TAX INFORMATION (unaudited)
None of the ordinary income distributions paid monthly by Investment
Grade and Intermediate Term Portfolios during the fiscal year ended
September 30, 2000 qualify for the dividends received deduction for
corporations. Additionally, there were no long-term capital gain
distributions paid during the year.
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Of the Fund's ordinary income dividends paid monthly to shareholders
from the Investment Grade and Intermediate Term Portfolios during
the fiscal year ended September 30, 2000, 2.62% and 3.12%,
respectively, were attributable to Federal obligations. In
calculating the foregoing percentages, expenses of the Portfolios
have been allocated on a pro rata basis.
Please retain this information for your records.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 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
Roscoe S. Suddarth, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, 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
Phillip Gillespie, 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
