MERRILL LYNCH
CORPORATE
HIGH YIELD
FUND, INC.
FUND LOGO
Quarterly Report
December 31, 1998
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate High Yield Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH CORPORATE HIGH YIELD FUND, INC.
TO OUR SHAREHOLDERS
The High-Yield Market
During a year of exceptional gyrations in global financial markets,
the high-yield market fared poorly. Events which contributed to
1998's volatility included Russia's default on its sovereign debt,
the economic meltdown in many Pacific Rim nations, most notably
Indonesia, and the collapse and bailout of a prominent US hedge
fund. After a massive sell-off and flight to quality in the third
quarter of 1998, three successive interest rate cuts by the Federal
Reserve Board in the fall boosted investor confidence in both the
equity and fixed-income markets. The high-yield market rebounded in
the fourth quarter, particularly in the month of November, but ended
up lagging the strong returns posted by the US Treasury and equity
markets. Specifically, the unmanaged Credit Suisse First Boston High
Yield Index registered a total return of +0.58% for the year,
compared to the US Treasury return of +12.25% and the remarkable
advance of 28.58% for the Standard & Poor's 500 Index.
Merrill Lynch Corporate High Yield Fund, Inc. commenced operations
on May 1, 1998. The first months of the Fund's operations proved
extremely difficult. Total returns for the Fund's Class A, Class B,
Class C and Class D Shares for the eight months ended December 31,
1998 were -1.92%, -2.42%, -2.45% and -2.08%, respectively.
(Investment results shown do not reflect sales charges and would be
lower if sales charges were included. See pages 5 and 6 of this
report to shareholders for complete performance information.)
Although disappointing, these results compare favorably to the
- -3.08% total return for the unmanaged Credit Suisse First Boston
High Yield Index for the same eight-month period.
The 1998 bear market for high-yield debt produced some real
positives. The market correction squeezed out speculation, and hedge
funds and other leveraged investors liquidated holdings.
Furthermore, the financial crisis reminded investors of risk. We
measure value in the high-yield market as a yield spread or
differential between high-yield bonds and US Treasury securities of
similar maturities. The spread is the compensation that investors
receive for assuming the credit risk and lower liquidity associated
with lower-quality corporate bonds. In our opinion, exceptionally
wide spreads at December 31, 1998 suggested excellent value.
Portfolio Strategy
Throughout its brief history, the Fund has received steady inflows.
During the quarter ended December 31, 1998, net assets grew almost
30% and totaled $626 million at year-end. At December 31, 1998, the
Fund held bonds of 109 different issuers, which represented 38
industries. The generally soft markets over the months of August--
December provided a superb investment environment. Because most high-
yield issues are in the $100 million--$200 million range, it can
often be difficult to purchase as many bonds as we would like of
certain issues. In turbulent markets, purchasing becomes easier as
volatile fund cash flows create many sellers of high-yield debt.
Consequently, market conditions allowed us to be highly selective in
our purchases throughout the December quarter.
While we are not anticipating a recession in 1999, it does seem
likely that both world and US economic growth will slow. Imports
from economically depressed regions such as Asia and Brazil severely
depressed the pricing structure of certain industries. Accordingly,
the Fund is underweighted in steel, paper, chemicals and textiles.
We remain slightly overweighted in energy (6% of net assets) where
weak oil and gas pricing have depressed stock and bond values. The
market reflects the negatives and some bargains are appearing. Our
largest areas of industry exposure include cable television and
broadcasting, 10.7% of net assets; communications (telephone and
paging), 16%; and health services, 6.8%. We believe that these
industries will experience healthy profit growth in 1999, regardless
of the economic environment.
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
During the quarter ended December 31, 1998, we added 26 new
investments to the Fund, increased our current positions in ten
holdings, and eliminated three positions. One of our largest new
investments was Protection One Alarm, the second-largest national
provider of security alarm services. Protection One Alarm is a BB-
rated company with a stable revenue stream, good margins and free
cash flow, which allows for debt reduction. We also added Harrah's
Operating Co., Inc. and Park Place, two large BB-rated new
investments in the gaming sector. These additions are well-
diversified casino companies that operate traditional casino hotels
in Atlantic City and Las Vegas, as well as riverboat and Indian
reservation casinos. Harrah's and Park Place are public companies
whose common stocks trade on the New York Stock Exchange. Based on
year-end stock prices, each company had an equity market
capitalization in excess of $1 billion. All three credits were
purchased at attractive levels with spreads between 330 basis points
(3.30%) and 354 basis points. During the December quarter, we also
added HMH Properties Inc., Corning Consumer Products Co., and
Fresenius Medical Capital Trust I to our bond positions. Also, we
eliminated bonds of Regal Cinemas, Inc. and La Petite Academy for
valuation reasons.
As of December 31, 1998, non-US domiciled bonds totaled 19.0% of the
Fund's net assets, with emerging markets issues accounting for 6.1%
of net assets. The average maturity of bonds in the Fund was eight
years, and the average rating was B+.
Looking ahead, we will continue to emphasize credit quality because
of our concern over an economic slowdown and corporate profit
pressures. Consequently, we increased the mix of BB- and higher-
rated securities in the Fund from 32.7% of net assets at September
30, 1998 to 37.4% at December 31, 1998. This weighting exceeds the
29.8% level relative to the unmanaged Credit Suisse First Boston
High Yield Index.
In Conclusion
We appreciate your investment in Merrill Lynch Corporate High Yield
Fund, Inc., and we look forward to assisting you with your financial
needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent T. Lathbury III)
Vincent T. Lathbury III
Senior Vice President and Portfolio Manager
February 16, 1999
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
PORTFOLIO INFORMATION
<CAPTION>
Percent of
Ten Largest Corporate Holdings Net Assets
<S> <S> <C>
HMH Properties Inc. HMH, a wholly-owned subsidiary of Host Marriott Corporation, owns or holds 2.4%
controlling interests in 69 full-service hotels, comprising the majority of
Host Marriott's lodging properties. These properties are generally operated
under the Marriott and Ritz-Carlton brand names. Host Marriott manages most
of the properties for fees based on revenues or operating profit.
NTL Inc. Through various subsidiaries, NTL Inc. owns and operates television and radio 2.0
broadcasting, cable television and telecommunications systems in the United
Kingdom. The company also owns Comcast and Diamond cable and telephone operations.
TeleWest This company provides cable television and telephone communications services 1.8
Communications PLC to UK residential and business customers.
Call-Net The company is the largest alternative provider of long distance telephone 1.6
Enterprises Inc. services in Canada, marketing under the brand name Sprint Canada. Sprint
Communications Company L.P., the third-largest long distance services carrier
in the United States, owns approximately 25% of The company's shares.
Cendant Corp. Cendant Corp. provides consumer and business services worldwide. The company 1.6
franchises hotels and rental car agencies and provides vacation exchange
services as well as motorist assistance. Cendant also offers mortgage services,
real estate brokerage and corporate employee relocation services.
Protection One The company is a leading provider of security alarm monitoring and related 1.6
Alarm services in North America and Europe with approximately 1.5 million subscribers.
Fresenius Medical Fresenius Medical Capital Trust is the world's largest integrated provider of 1.6
Capital Trust I dialysis products and services. Its 910 dialysis centers treat 68,000 patients
worldwide, including approximately 23% of the US dialysis patients. The company
also is the world's second-largest manufacturer and distributor of dialysis
equipment and related supplies, selling products in more than 110 companies.
Signature Signature Resorts, Inc. is now known as Sunterra. Sunterra is the world's largest 1.5
Resorts, Inc. timeshare company. Its 87 resorts spread across North America, Europe and the
Caribbean serve 210,000 owner families.
USAir Inc. USAir is the sixth-largest US airline, with major hubs in Pittsburgh, Charlotte, 1.4
Philadelphia and Baltimore and routes covering most of the Eastern half of the
United States. Our investment includes a sizable amount of equipment trust
certificates secured by modern, saleable aircraft.
KinderCare KinderCare Learning Centers is the largest provider of for-profit preschool 1.4
Learning educational and child care services in the United States, operating approximately
Centers, Inc. 1,147 centers with licensed capacity for 143,000 children. The company provides
center-based preschool educational and child care services five days a week
throughout the year to children between the ages of six weeks and 12 years.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
PORTFOLIO INFORMATION (concluded)
As of December 31, 1998
Quality Profile* Percent of
S&P Rating/Moody's Rating Long-Term Investments
BBB/Baa 4.3%
BB/Ba 33.1
B/B 61.7
CCC/Caa 0.9
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Health Services 6.8%
Energy 6.0
Cable--International 6.0
Telephone--Competitive Local Exchange Carriers 5.5
Gaming 4.8
Geographic Profile Percent of
Top Five Foreign Countries* Net Assets
Canada 4.8%
United Kingdom 4.7
Argentina 2.6
Brazil 1.9
Mexico 1.3
[FN]
*All holdings are denominated in US dollars.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Aldona Schwartz, Vice President
Donald C. Burke, Treasurer
Philip M. Mandel, Secretary
Custodian
State Street Bank and Trust Company
One Heritage Drive, P2N
North Quincy, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Aggregate 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.
Aggregate Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (5/01/98)
through 12/31/98 -1.92% -5.84%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (5/01/98)
through 12/31/98 -2.42% -6.11%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (5/01/98)
through 12/31/98 -2.45% -3.38%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (5/01/98)
through 12/31/98 -2.08% -6.00%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Standardized
3 Month Since Inception 30-day Yield
Total Return Total Return As of 12/31/98
<S> <C> <C> <C>
ML Corporate High Yield Fund, Inc. Class A Shares* +4.44% -1.92% 9.39%
ML Corporate High Yield Fund, Inc. Class B Shares* +4.23 -2.42 8.99
ML Corporate High Yield Fund, Inc. Class C Shares* +4.22 -2.45 8.95
ML Corporate High Yield Fund, Inc. Class D Shares* +4.37 -2.08 9.16
Merrill Lynch High Yield US Corporates, Cash Pay Index** +2.87 +0.31
CS First Boston High Yield Index** +2.74 -3.08
Ten-Year US Treasury Securities*** -1.39 +9.14
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The Fund
commenced operations on 5/01/98.
**Unmanaged. These market-weighted Indexes mirror the high-yield
debt market of securities rated BBB or lower. Since inception total
return for Merrill Lynch High Yield US Corporates, Cash Pay Index is
from 5/01/98 to 12/31/98. Since inception total return for CS First
Boston High Yield Index is from 4/30/98 to 12/31/98.
***Since inception total return is from 4/30/98 to 12/31/98.
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Cost Value
Bonds
<S> <S> <S> <C> <S> <C> <C>
Aerospace--0.8% B+ B1 $ 5,000,000 Kitty Hawk, Inc., 9.95% due 11/15/2004 $ 4,893,750 $ 4,975,000
Airlines--1.4% B B1 8,650,000 USAir Inc., 9.625% due 2/01/2001 9,027,000 8,982,160
Automotive--1.2% B B2 5,000,000 Collins & Aikman Corp., 11.50% due 4/15/2006 5,081,250 5,200,000
B+ B2 2,500,000 Venture Holdings Trust, 9.50% due 7/01/2005 2,560,938 2,500,000
-------------- --------------
7,642,188 7,700,000
Broadcasting-- CCC+ B3 3,000,000 Cumulus Media Inc., 10.375% due 7/01/2008 3,000,000 3,195,000
Radio & LIN Television Corp.:
Television-- B- B2 5,000,000 8.375% due 3/01/2008 4,861,250 5,025,000
2.4% B- B3 4,000,000 9.945% due 3/01/2008 (a) 2,676,546 2,820,000
B- B3 4,000,000 Salem Communications Corp., 9.50% due
10/01/2007 3,920,000 4,140,000
-------------- --------------
14,457,796 15,180,000
Building B+ B1 5,000,000 Nortek Inc., 8.875% due 8/01/2008 4,982,050 5,125,000
Materials--0.8%
Cable-- BB- Ba3 4,500,000 Century Communications Corporation, 9.75%
Domestic--1.7% due 2/15/2002 4,725,000 4,837,500
Cable-- B- B3 20,000,000 NTL Inc., 11.909% due 10/01/2008 (a) 11,762,235 12,625,000
International-- B B3 12,000,000 Supercanal Holdings S.A., 11.50% due 5/15/2005 9,040,000 7,260,000
6.0% TeleWest Communications PLC:
B+ B1 7,000,000 10.793% due 10/01/2007 (a) 5,870,724 5,827,500
B+ B1 5,000,000 11.25% due 11/01/2008 5,000,000 5,625,000
B B3 11,000,000 United International Holdings, Inc., 12.37%
due 2/15/2008 (a) 6,405,524 5,995,000
-------------- --------------
38,078,483 37,332,500
Chemicals--0.9% BB- Ba3 5,000,000 ISP Holdings Inc., 9.75% due 2/15/2002 5,256,250 5,337,500
Child Care-- B- B3 8,750,000 KinderCare Learning Centers, Inc., 9.50% due
1.4% 2/15/2009 8,652,500 8,750,000
Computer B Ba3 5,000,000 Advanced Micro Devices, Inc., 11% due
Services-- 8/01/2003 5,225,000 5,300,000
Electronics-- B B2 6,000,000 Hadco Corp., 9.50% due 6/15/2008 5,893,000 5,970,000
3.7% B- B3 7,000,000 PSINet Inc., Series B, 10% due 2/15/2005 7,070,000 6,965,000
B- B3 6,000,000 Verio Inc., 11.25% due 12/01/2008 6,000,000 6,060,000
B- B2 6,000,000 Zilog Inc., Series B, 9.50% due 3/01/2005 4,732,500 4,950,000
-------------- --------------
28,920,500 29,245,000
Conglomerates-- BBB Baa1 10,000,000 Cendant Corp., 7.75% due 12/01/2003 9,982,800 10,106,700
3.0% B- B3 5,000,000 Eagle-Picher Industries, 9.375% due
3/01/2008 4,600,000 4,725,000
BB- NR* 5,000,000 Voto-Votorantim S.A., 8.50% due 6/27/2005 4,638,750 4,187,500
-------------- --------------
19,221,550 19,019,200
Consumer B B3 10,000,000 Corning Consumer Products Co., 9.625% due
Products--2.3% 5/01/2008 9,428,219 7,050,000
B B2 7,000,000 Revlon Consumer Products, 9% due 11/01/2006 6,900,350 7,000,000
-------------- --------------
16,328,569 14,050,000
Consumer B- NR* 3,500,000 AP Holdings Inc., 11.174% due 3/15/2008 (a) 2,226,809 1,907,500
Services--1.9% BB+ Ba3 10,000,000 Protection One Alarm, 8.125% due 1/15/2009 10,000,000 10,050,000
-------------- --------------
12,226,809 11,957,500
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Energy--6.0% B B3 $ 4,720,000 Chesapeake Energy Corporation, 9.625% due
5/01/2005 $ 4,784,350 $ 3,563,600
BBB- Ba3 5,000,000 Compania Naviera Perez Companc
S.A.C.F.I.M.F.A., 9% due 1/30/2004 5,085,937 4,862,500
Ocean Energy Inc.:
BB+ Ba2 2,000,000 7.625% due 7/01/2005 1,967,500 1,920,000
BB- B1 7,000,000 8.375% due 7/01/2008 6,915,490 6,545,000
B- B3 6,000,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 5,840,000 4,830,000
B+ B1 6,000,000 Parker Drilling Co., Series D, 9.75% due
11/15/2006 6,077,500 5,370,000
B- B3 2,500,000 Southwest Royalties Inc., 10.50% due
10/15/2004 2,025,000 1,012,500
BB- B1 5,000,000 Tesoro Petroleum Corp., Series B, 9% due
7/01/2008 4,971,450 4,875,000
NR* B3 9,000,000 TransAmerican Energy Corp., Series B, 0/13%
due 6/15/2002 (a) 5,459,559 2,520,000
B- B2 3,000,000 United Refining Co., 10.75% due 6/15/2007 2,865,000 2,025,000
-------------- --------------
45,991,786 37,523,600
Entertainment-- Intrawest Corp.:
1.0% B+ B1 3,275,000 9.75% due 8/15/2008 3,373,250 3,373,250
B+ B1 3,000,000 9.75% due 8/15/2008 2,953,230 3,090,000
-------------- --------------
6,326,480 6,463,250
Financial CCC+ B2 5,000,000 Amresco, Inc., Series 98-A, 9.875% due
Services--1.2% 3/15/2005 5,090,000 3,500,000
BBB- Baa1 4,000,000 SB Treasury Company LLC, 9.40% due 12/29/2049 4,005,000 3,806,940
-------------- --------------
9,095,000 7,306,940
Food & Beverage-- B B3 5,000,000 Agrilink Foods Inc., 11.875% due 11/01/2008 5,000,000 5,112,500
2.5% B+ B1 5,250,000 Aurora Foods Inc., Series B, 8.75% due
7/01/2008 5,254,375 5,486,250
B+ B1 5,000,000 Chiquita Brands International, Inc., 9.125%
due 3/01/2004 4,906,250 5,112,500
-------------- --------------
15,160,625 15,711,250
Gaming--4.8% Circus Circus Enterprises, Inc.:
BB+ Ba2 2,000,000 9.25% due 12/01/2005 2,000,000 2,040,000
BBB- Baa3 1,500,000 6.45% due 2/01/2006 1,365,000 1,348,020
BB+ Ba2 4,000,000 7.625% due 7/15/2013 3,355,000 3,520,000
BB+ Ba2 7,000,000 Harrah's Operating Co., Inc., 7.875% due
12/15/2005 6,995,000 7,000,000
BB+ Ba2 7,500,000 Park Place, 7.875% due 12/15/2005 7,500,000 7,546,875
CCC B3 2,000,000 Planet Hollywood International, Inc., 12%
due 4/01/2005 1,970,000 710,000
B+ B2 5,000,000 Station Casinos, Inc., 9.75% due 4/15/2007 4,677,181 5,250,000
B B1 3,000,000 Trump Atlantic City Associates/Funding Inc.,
11.25 due 5/01/2006 2,971,591 2,655,000
-------------- --------------
30,833,772 30,069,895
Health Services B- Caa1 10,500,000 ALARIS Medical Systems Inc., 14.993% due
- --6.8% 8/01/2008 (a) 4,707,159 5,775,000
B+ Ba3 5,000,000 Beverly Enterprises, Inc., 9% due 2/15/2006 5,237,500 5,100,000
B- B2 6,000,000 Extendicare Health Services, 9.35% due
12/15/2007 5,972,500 5,730,000
B+ Ba3 10,000,000 Fresenius Medical Capital Trust I, 7.875%
due 2/01/2008 9,535,000 9,925,000
B- B3 5,500,000 Magellan Health Services Inc., 9% due
2/15/2008 5,465,625 4,867,500
B B2 6,000,000 Phar-Merica Inc., 8.375% due 4/01/2008 5,747,500 5,430,000
BB- Ba3 5,500,000 Tenet Healthcare Corp., 8.125% due
12/01/2008 5,484,975 5,665,000
-------------- --------------
42,150,259 42,492,500
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Cost Value
Bonds (continued)
<S> <S> <S> <C> <S> <C> <C>
Hotels--3.8% HMH Properties Inc.:
BB Ba2 $10,000,000 7.875% due 8/01/2008 $ 9,882,830 $ 9,700,000
BB Ba2 5,000,000 8.45% due 12/01/2008 4,983,200 5,025,000
BB- B2 10,000,000 Signature Resorts, Inc., 9.25% due 5/15/2006 9,766,250 9,250,000
-------------- --------------
24,632,280 23,975,000
Independent Power B+ Ba1 6,000,000 AES Corp., 8.375% due 8/15/2007 5,685,000 6,075,000
Producers--1.0%
Industrial B B3 5,000,000 Anthony Crane Rentals, 10.375% due 8/01/2008 5,011,250 4,825,000
Services--2.6% Neff Corporation:
B B3 4,000,000 10.25% due 6/01/2008 3,940,640 3,940,000
B B3 4,000,000 10.25% due 6/01/2008 4,000,000 3,940,000
Thermadyne Holdings Corp.:
CCC+ B3 3,000,000 9.875% due 6/01/2008 2,976,420 2,835,000
CCC+ Caa1 2,000,000 12.50% due 6/01/2008 (a) 1,172,074 960,000
-------------- --------------
17,100,384 16,500,000
Media & Call-Net Enterprises Inc.:
Communications-- BB- B1 3,000,000 8% due 8/15/2008 2,986,260 2,850,000
International-- BB- B1 13,000,000 8.94% due 8/15/2008 (a) 8,682,874 7,475,000
4.6% BB- B2 7,500,000 Globo Communicacoes e Participacoes, Ltd.,
10.50% due 12/20/2006 4,906,250 4,837,500
BB Ba2 5,000,000 Grupo Televisa, S.A. de C.V., 11.875% due
5/15/2006 4,610,000 5,000,000
B+ B2 5,000,000 Impsat Corp., 12.375% due 6/15/2008 5,000,000 4,325,000
BBB- Ba3 4,000,000 Telefonica de Argentina S.A., 11.875% due
11/01/2004 4,400,000 4,200,000
-------------- --------------
30,585,384 28,687,500
Metals & B- Caa1 6,000,000 AEI Resources Inc., 11.50% due 12/15/2006 6,000,000 5,955,000
Mining--3.6% B- B3 4,000,000 Great Lakes Carbon Corp., 11.75% due 5/15/2008 4,000,000 4,050,000
CCC+ B2 5,000,000 Kaiser Aluminum & Chemical Corp., 12.75%
due 2/01/2003 4,902,500 4,900,000
B B2 3,000,000 Metals USA Inc., 8.625% due 2/15/2008 2,921,250 2,767,500
B B3 5,000,000 Ormet Corporation, 11% due 8/15/2008 5,000,000 4,625,000
-------------- --------------
22,823,750 22,297,500
Packaging--1.0% BB- B1 6,000,000 Ball Corp., 8.25% due 8/01/2008 6,000,000 6,270,000
Paper & Forest CCC+ Caa1 2,000,000 APP International Finance Co., 11.75% due
Products--2.2% 10/01/2005 1,870,000 1,325,225
B B3 5,000,000 Ainsworth Lumber Company, 12.50% due
7/15/2007 (b) 4,177,083 5,000,000
B- B2 5,000,000 Container Corporation of America, 9.75% due
4/01/2003 5,025,000 5,100,000
CCC+ Ba3 4,000,000 Pindo Deli Finance Mauritius, 10.75% due
10/01/2007 3,112,500 2,185,000
-------------- --------------
14,184,583 13,610,225
Product B- B3 4,000,000 Fisher Scientific International Inc., 9% due
Distribution-- 2/01/2008 3,861,154 4,020,000
2.6% B- Caa 5,000,000 Nebco Evans Holding Co., 16.343% due
7/15/2007 (a) 2,496,633 2,425,000
CCC B3 7,000,000 US Office Products Co., 9.75% due 6/15/2008 6,742,960 4,602,500
B B2 5,000,000 Wesco Distribution Inc., Series B, 9.125%
due 6/01/2008 4,925,000 5,025,000
-------------- --------------
18,025,747 16,072,500
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face
Industries Rating Rating Amount Bonds Cost Value
Bonds
<S> <S> <S> <C> <S> <C> <C>
Publishing & Hollinger International, Inc.:
Printing--2.4% BB- B1 $1,500,000 9.25% due 2/01/2006 $ 1,500,000 $ 1,575,000
BB- B1 3,000,000 9.25% due 3/15/2007 3,142,500 3,180,000
B B3 5,000,000 Premier Graphics Inc., 11.50% due 12/01/2005 4,990,000 5,000,000
BB- Ba3 5,000,000 Primedia Inc., 7.625% due 4/01/2008 4,725,000 4,925,000
-------------- --------------
14,357,500 14,680,000
Real Estate--0.6% BB- Ba3 4,000,000 Forest City Enterprises Inc., 8.50% due
Steel--1.2% 3/15/2008 4,025,937 4,000,000
NR* B2 5,000,000 CSN Iron S.A., 9.125% due 6/01/2007 4,507,750 3,100,000
B B2 5,000,000 Weirton Steel Inc., 11.375% due 7/01/2004 5,412,500 4,450,000
-------------- --------------
9,920,250 7,550,000
Telephone-- B B3 2,000,000 Hermes Euro Rail B.V., 10.375% due 1/15/2009 2,000,000 2,030,000
Competitive Local B B2 8,500,000 Intermedia Communications Inc., Series B,
Exchange 8.60% due 6/01/2008 8,332,500 8,117,500
Carriers--5.5% B B3 8,000,000 Level 3 Communications, Inc., 9.125% due
5/01/2008 7,702,500 7,940,000
Metronet Communications:
B B3 8,000,000 9.95% due 6/15/2008 (a) 5,194,146 4,940,000
B B3 3,500,000 10.625% due 11/01/2008 3,525,000 3,727,500
B- B2 5,000,000 RSL Communications PLC, 9.125% due 3/01/2008 4,673,750 4,625,000
B- B2 3,000,000 Time-Warner Telecom LLC, 9.75% due 7/15/2008 2,975,000 3,165,000
-------------- --------------
34,402,896 34,545,000
Textiles--1.8% B B3 7,000,000 Galey & Lord Inc., 9.125% due 3/01/2008 6,850,000 6,125,000
BB Ba3 5,000,000 Westpoint Stevens Inc., 7.875% due 6/15/2008 4,940,000 5,106,250
-------------- --------------
11,790,000 11,231,250
Transportation-- BB Ba3 3,000,000 GS Superhighway Holdings, 10.25% due 8/15/2007 2,460,000 1,417,500
2.1% B+ B1 2,000,000 Hvide Marine Inc., 8.375% due 2/15/2008 1,960,000 1,610,000
BB Ba2 7,000,000 Stena AB, 10.50% due 12/15/2005 7,515,000 7,297,500
TFM, S.A. de C.V.:
B+ B2 2,000,000 10.25% due 6/15/2007 2,045,000 1,650,000
B+ B2 3,000,000 11.903% due 6/15/2009 (a) 2,002,860 1,402,500
-------------- --------------
15,982,860 13,377,500
Waste BB Ba2 6,500,000 Allied Waste N.A., 7.375% due 1/01/2004 6,490,445 6,597,500
Management-- B+ B2 4,000,000 Safety-Kleen Services, 9.25% due 6/01/2008 4,000,000 4,140,000
1.7% -------------- --------------
10,490,445 10,737,500
Wireless BB+ Ba3 7,000,000 Comcast Cellular Communications, Inc., 9.50%
Communications-- due 5/01/2007 7,223,750 7,455,000
Domestic Paging CCC+ B3 7,000,000 Metrocall Inc., 11% due 9/15/2008 6,951,280 7,070,000
& Cellular--3.4% CCC+ B2 7,000,000 Nextel Communications, Inc., 11.309% due
8/15/2004 (a) 6,477,701 6,790,000
-------------- --------------
20,652,731 21,315,000
Wireless CCC+ Caa1 7,000,000 Nextel International, Inc., 11.656% due
Communications-- 4/15/2008 (a) 4,380,276 3,185,000
International-- B+ Ba3 5,000,000 Orange PLC, 8% due 8/01/2008 4,961,900 5,075,000
1.3% -------------- --------------
9,342,176 8,260,000
Total Investments in Bonds--91.2% 593,972,290 571,242,770
</TABLE>
Merrill Lynch Corporate High Yield Fund, Inc.
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares
Held Issue Cost Value
Preferred Stocks
<S> <C> <S> <C> <C>
Broadcasting-- 3,209 Cumulus Media Inc. $ 3,215,965 $ 3,433,630
Radio & Television--0.6%
Energy--0.0% TCR Holdings Corp. (Convertible):
6,426 Class B 386 386
3,534 Class C 198 198
9,317 Class D 494 494
19,277 Class E 1,214 1,214
-------------- --------------
2,292 2,292
Product Distribution--0.0% 5,558 Nebco Evans Holding Co. (b) 522,494 279,289
Wireless Communications-- 5,000 Crown Castel International Corp. (b) 5,000,000 5,001,250
Domestic Paging & Cellular--1.2% 2,644 Rural Cellular Corp. (b) 2,634,840 2,465,530
-------------- --------------
7,634,840 7,466,780
Total Investments in Preferred Stocks--1.8% 11,375,591 11,181,991
Face
Amount
Short-Term Securities
Commercial $23,076,000 General Motors Acceptance Corp., 5.13% due
Paper**--7.7% 1/04/1999 23,076,000 23,076,000
15,000,000 Lexington Parker Capital LLC, 5.55% due
1/06/1999 14,995,375 14,995,375
10,000,000 Variable Funding Capital, 5.54% due
1/08/1999 9,993,844 9,993,844
Total Investments in
Short-Term Securities--7.7% 48,065,219 48,065,219
Total Investments--100.7% $ 653,413,100 630,489,980
==============
Liabilities in Excess of Other Assets--(0.7%) (4,190,789)
--------------
Net Assets--100.0% $ 626,299,191
==============
Net Asset Class A--Based on net assets of $14,471,622 and 1,569,498 shares outstanding $ 9.22
Value: ==============
Class B--Based on net assets of $431,145,535 and 46,753,370 shares outstanding $ 9.22
==============
Class C--Based on net assets of $107,585,557 and 11,666,994 shares outstanding $ 9.22
==============
Class D--Based on net assets of $73,096,477 and 7,926,488 shares outstanding $ 9.22
==============
<FN>
*Not Rated.
**Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by the
Fund.
(a)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Fund.
(b)Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
</TABLE>
