HIGH INCOME
PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
Over the past year, the economic and interest rate environment was
characterized by countervailing forces. For example, the last
quarter of 1998 witnessed collapsing equity markets and widespread
bond market illiquidity as concerns of global recession resulted in
a flight to the safety of US Treasury notes and bonds and away from
lower-quality fixed-income investments. High-yield bonds carry more
credit risk than US Government and high-grade corporate bonds and
are therefore vulnerable to quality deterioration in periods of
economic weakness.
The economic and interest rate consensus was confounded in the first
half of 1999 when the expected slowdown in the US economy failed to
materialize. In addition, a rebound occurred in Europe and Asia
(including long-dormant Japan). Investor focus then shifted from
recession to inflation. The Federal Reserve Board reversed its
policy of monetary easing and became restrictive, raising the
Federal Funds rate twice to slow economic growth. Long-term interest
rates soared. This environment proved both good and bad for the high-
yield market. The rise in interest rates was a negative. On the
other hand, the stronger economy proved helpful to a number of
economically sensitive industries. For example, paper, energy and
steel experienced volume increases and product price improvement,
thus easing credit concerns somewhat. Perceptions of credit risk in
emerging markets also eased, allowing this asset category to
rebound.
The illiquidity that gripped the corporate bond markets in late 1998
eased in 1999 but remained more pronounced than has been the norm
throughout much of the 1990s. A major reason would seem to be the
decision made by Wall Street market makers to reduce inventory
exposure to corporate bonds. Firms were surprised by the steep bond
price markdowns in 1998 on securities held in inventory for resale
and sought to reduce this exposure. In addition, many firms closed
proprietary trading portfolios that focused on producing profits by
buying distressed securities at low prices. Thus, the support for
high-yield issuers that experienced credit problems diminished
considerably. The result brought much steeper declines in the price
of bonds experiencing credit deterioration and default.
The third quarter of 1999 reflected this weak environment. For the
three-month period ended September 30, 1999, the Portfolio's Class
A, Class B, Class C and Class D Shares had total returns of -1.80%,
- - -2.13%, -1.99% and -2.00%, respectively. This is compared to a
- - -1.60% total return for the unmanaged Credit Suisse First Boston
(CSFB) Global High Yield Index for the same period. Throughout the
September quarter, liquidity was poor and the market struggled to
absorb a relatively heavy new-issue calendar. By late August, the
cost to finance had risen to a point that many issuers cancelled
financing plans. New-issue supply slowed precipitously, and the
market moved sideways for the remainder of the September quarter.
Investment Outlook
The interest rate outlook hinges on the US economy. We believe the
Federal Reserve Board is committed to maintaining noninflationary
growth and can be counted on to tighten monetary policy until growth
slows. In the short run, this is negative for bonds. In the long run
it is extremely positive, ensuring that the United States will
continue to experience low inflation and interest rates. We believe
that while interest rates will probably rise further in this
tightening cycle, it is likely that most of the damage has been
done. Yields on ten-year Treasury notes have risen from 4.65% at
December 31, 1998 to over 6% in late October.
At this time, the high-yield market is attractive relative to
Treasury bonds. Yield spreads are well above the historic norm. At
September 30, 1999, the yield difference between the CSFB Global
High Yield Index and US Treasury issues of comparable maturity was
6.32% compared to an average of 5.45% over the last ten years. Yield
premiums exceeding 100% are at the wide end of the range over the
past ten years. Overall credit quality is improving and even problem
credits appear to have declined more than is justified by the
underlying fundamentals. The yield-to-maturity on the CSFB Global
High Yield Index exceeded 12%.
The macroeconomic outlook also appears generally favorable for the
high-yield market. Economic growth is occurring around the world,
strengthening the demand for goods and services, particularly
commodities. We are seeing the effects of this growth reflected in
improved earnings and outlook for a number of companies held in the
Portfolio. We believe this improvement may continue.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
Portfolio Strategy
We believe that the high-yield market currently offers value. In our
view, bond prices are likely to move higher, and yields will move
lower over the coming year. We do not necessarily believe that a
peak in interest rates is imminent; markets may continue to
deteriorate for a while longer. However, we are positioning for the
future. We prefer lower-coupon discount bonds to more defensive par
or premium bonds because of greater total return potential in a
falling interest rate environment.
During the September quarter, we maintained credit quality in the
Portfolio modestly above the benchmark CSFB Global High Yield Index.
There are currently no distortions (and therefore no investment
opportunities) between quality categories. Bond selection remains
important as disappointing earnings provides punishing price
declines.
The largest industry representation in the Portfolio was
communications, at 12.5% of net assets at September 30, 1999. This
industry includes Nextel Communications, Inc., a rapidly growing
wireless telephone operator, and other communications companies with
strong fundamentals. Cable television, the second-largest industry
in the Portfolio, constituted 8.6% of net assets. While its
traditional role as a provider of video programming is a highly
stable business, this industry has excellent growth prospects as an
increasingly important carrier of Internet traffic and telephony.
The energy sector comprised 7.2% of Portfolio assets and consisted
largely of oil and gas production and service companies. Earnings
have surged in this sector as a result of the sharp rise in oil and
gas prices over the last six months. (See page 4 of this report to
shareholders for a list of the Five Largest Industries and Top Five
Foreign Countries in the Portfolio.)
We held a major portfolio overweighting in emerging markets, which
constituted 18.9% of net assets and included corporate bonds from a
variety of industries. The credit quality parameters of these
holdings are typically much higher than US high-yield issuers and
the companies much more dominant in their respective industries.
Examples included Grupo Televisa SA, the dominant TV broadcaster and
programmer in Mexico; Telefonica de Argentina, one of two telephone
companies sharing the Argentine market; and Asia Pulp and Paper, a
Singapore domiciled manufacturer of many types and grades of paper
with distribution around the world. All three companies have
publicly traded common stock listed on the New York Stock Exchange,
each with multi-billion dollar market capitalizations. The improving
economy benefited emerging markets more than the US high-yield
market this year. We believe this sector is likely to continue to
outperform.
Fiscal Year in Review
For the fiscal year ended September 30, 1999, the Portfolio
outperformed the unmanaged CSFB Global High Yield Index. Total
returns for the Portfolio's Class A, Class B, Class C and Class D
Shares were +5.90%, +5.10%, +5.06% and +5.64%, respectively,
compared to the +3.95% total return for the Index. Specific holdings
that most benefited the Portfolio's 12-month performance included
our overweighting in the emerging market sector, which rebounded
from extraordinarily depressed levels, selected holdings in paper
and metal/mining sectors as well as specific credit upgrades through
merger activity.
While we believe that the overall losses in the Portfolio resulting
from credit deterioration were below the average of the market, the
steep decline in the price of TransAmerican Energy bonds over the
past 12 months had a significant negative impact on the Portfolio's
performance. Through poor project management, this company's
refinery construction program ran out of funds before the project
was completed, necessitating a substantial reorganization. While we
believe that there is a chance of asset recovery, there are many
uncertainties at this time.
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 11, 1999
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
PORTFOLIO INFORMATION
As of September 30, 1999
Percent of
Ten Largest Corporate Holdings Net Assets
Nextel Nextel offers digital and analog wireless communication services throughout 1.8%
Communications, the United States. The company's digital service currently covers approximately
Inc. 50% of the total US population and, once completed, will enable Nextel to offer
nationwide digital wireless service.
NTL Through various subsidiaries, NTL Inc. owns and operates television, radio 1.8
Incorporated broadcasting, cable television and telecommunications systems in the United
Kingdom. The company also owns Comcast and Diamond cable and telephone operations.
Century Century owns and operates 70 cable systems in 25 states and Puerto Rico. Since 1.8
Communications March 5, the company has been in the process of a merger with Adelphia Communication.
Corporation
Fresenius Medical Fresenius Medical Care is the world's largest integrated provider of dialysis 1.5
Care AG 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 countries.
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.
Millicom Millicom International develops and operates cellular telephone systems worldwide. 1.3
International The company has interest in 33 cellular systems in 20 countries, primarily
Cellular in emerging markets in Asia, Latin America, Europe and Africa.
Columbia/ Columbia, together with its subsidiaries, operates hospitals and related health 1.3
HCA Healthcare care entities. The company currently operates general, acute care hospitals that
Corp. offer a full range of services. Columbia's facilities are primarily located in
urban areas in the United States.
Tucson Electric & This electric utility serves Tucson, Arizona and surrounding areas. Our bonds 1.3
Power Co. are secured lease obligation bonds on the company's Springerville coal-fired
power generation plant.
United International The company has interests in and operates cable television, telephony, high 1.3
Holdings, Inc. speed Internet access and programming services in ten countries across Europe
and in Israel.
Sinclair Broadcasting This is a diversified broadcasting company that owns or provides programming 1.2
Group Inc. to television and radio stations across the United States.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
PORTFOLIO INFORMATION (concluded)
As of September 30, 1999
Credit Profile* Percent of
S&P Rating/Moody's Rating Market Value
BBB/Baa 2.8%
BB/Ba 29.7
B/B 55.7
CCC/Caa 5.1
Not Rated 6.7
[FN]
*In cases when bonds are rated differently by Standard & Poor's
Corporation and Moody's Investors Service, Inc., bonds are
categorized according to the higher of the two ratings.
Percent of
Five Largest Industries Net Assets
Energy 7.4%
Health Services 6.8
Transportation 5.5
Steel 5.1
Cable--International 4.4
Geographic Profile Percent of
Top Five Countries* Net Assets
Brazil 5.7%
Mexico 3.7
Argentina 2.8
Canada 2.8
United Kingdom 2.7
[FN]
*All holdings are denominated in US dollars.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Recent Performance Results
Ten Year/
3 Month 12 Month Since Inception Standardized
As of September 30, 1999 Total Return Total Return Total Return 30-day Yield
High Income Portfolio Class A Shares* -1.80% +5.90% +165.66% 11.21%
High Income Portfolio Class B Shares* -2.13 +5.10 +146.36 10.89
High Income Portfolio Class C Shares* -1.99 +5.06 + 39.66 10.82
High Income Portfolio Class D Shares* -2.00 +5.64 + 43.38 10.97
Merrill Lynch High Yield US Corporates, Cash Pay Index** -1.25 +3.37 +171.74/+57.37 --
CS First Boston Global High Yield Index** -1.60 +3.95 +171.90/+51.07 --
Ten-Year US Treasury Securities*** +2.30 -7.50 +112.39/+46.41 --
*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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the CS First Boston Global High Yield Index. Beginning
and ending values are:
9/89 9/99
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class A Shares* $ 9,600 $25,501
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class B Shares* $10,000 $24,636
CS First Boston Global High Yield
Index++++ $10,000 $27,190
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the CS First Boston Global High Yield Index. Beginning
and ending values are:
10/21/94** 9/99
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class C Shares* $10,000 $13,966
ML Corporate Bond Fund, Inc.'s
High Income Portfolio++--
Class D Shares* $ 9,600 $13,765
CS First Boston Global High Yield
Index++++ $10,000 $15,107
[FN]
*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, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 + 5.90% +1.66%
Five Years Ended 9/30/99 + 7.67 +6.79
Ten Years Ended 9/30/99 +10.26 +9.81
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 +5.10% +1.38%
Five Years Ended 9/30/99 +6.85 +6.85
Ten Years Ended 9/30/99 +9.44 +9.44
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/99 +5.06% +4.13%
Inception (10/21/94)
through 9/30/99 +6.99 +6.99
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/99 +5.64% +1.41%
Inception (10/21/94) through 9/30/99 +7.56 +6.68
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds
Aerospace--1.1% B- B3 $ 20,000,000 Fairchild Corporation, 10.75% due 4/15/2009 $ 17,100,000
B+ B1 15,000,000 Hexcel Corporation, 9.75% due 1/15/2009 13,275,000
B+ B1 25,000,000 Kitty Hawk, Inc., 9.95% due 11/15/2004 24,375,000
--------------
54,750,000
Airlines--1.4% Piedmont Aviation, Inc.:
B+ Ba3 1,985,000 Series E, 10.30% due 3/28/2007 2,113,122
B+ Ba3 1,950,000 Series F, 10.35% due 3/28/2011 2,118,987
BB Ba3 1,500,000 Series H, 10% due 11/08/2012 1,599,900
B+ Ba3 1,304,000 Series J, 10.05% due 5/13/2005 1,350,044
B+ Ba3 1,116,000 Series J, 10.10% due 5/13/2007 1,176,649
BB+ Ba3 3,767,000 Series J, 10.10% due 5/13/2009 4,000,139
BB Ba3 2,710,000 Series J, 10.15% due 5/13/2011 2,907,586
B+ Ba3 2,226,000 Series K, 10% due 5/13/2004 2,303,966
B+ Ba3 2,666,000 Series K, 10.10% due 5/13/2008 2,819,601
B+ Ba3 2,550,000 Series K, 10.15% due 5/13/2010 2,726,345
USAir Inc.:
B B3 15,000,000 9.625% due 2/01/2001 15,163,500
B+ Ba3 1,092,000 Series 88F, 10.70% due 1/01/2003 1,142,560
B+ Ba3 1,092,000 Series 88G, 10.70% due 1/01/2003 1,142,560
B+ Ba3 1,092,000 Series 88H, 10.70% due 1/01/2003 1,142,560
B+ Ba3 1,092,000 Series 88I, 10.70% due 1/01/2003 1,142,560
BB Ba3 4,101,563 Series 89A1, 9.33% due 1/01/2006+++ 4,359,859
BB Ba3 15,000,000 Series 93A3, 10.375% due 3/01/2013 15,010,950
BB Ba3 1,432,000 Series A, 10.70% due 1/15/2007 1,543,037
BB Ba3 1,815,000 Series C, 10.70% due 1/15/2007 1,955,735
BB Ba3 1,107,000 Series E, 10.70% due 1/15/2007 1,192,837
--------------
66,912,497
Automotive-- Venture Holdings Trust (j):
0.7% B B2 25,000,000 11% due 6/01/2007 24,625,000
B- B3 10,000,000 12% due 6/01/2009 9,900,000
--------------
34,525,000
Broadcasting-- NR* NR* 4,686,000 Acme Intermediate Holdings/Finance, 0/12% due
Radio & 9/30/2005 (f) 3,303,630
Television-- B- B3 3,000,000 Acme Television/Finance, 10.976% due 9/30/2004 (f) 2,595,000
2.6% B- B3 15,000,000 LIN Holdings Corp., 10.299% due 3/01/2008 (f) 9,900,000
B- B3 25,000,000 LIN Television Corporation, 8.375% due 3/01/2008 23,437,500
B B3 23,022,000 SFX Broadcasting Inc., 10.75% due 5/15/2006 25,669,530
Sinclair Broadcasting Group Inc.:
B B2 45,000,000 10% due 9/30/2005 45,000,000
B B2 15,000,000 8.75% due 12/15/2007 14,137,500
--------------
124,043,160
Building Nortek Inc.:
Materials-- B- B3 14,550,000 9.875% due 3/01/2004 14,368,125
0.5% B+ B1 9,000,000 9.25% due 3/15/2007 8,775,000
--------------
23,143,125
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Cable-- B+ NR* $ 10,000,000 Adelphia Communications, 7.875% due 5/01/2009 $ 9,150,000
Domestic--4.1% CCC Ca 5,328,724 American Telecasting Inc., 26.322% due 8/15/2005 (f) 5,368,689
BB- B1 8,750,000 CSC Holdings Inc., 9.875% due 5/15/2006 9,056,250
Century Communications Corporation:
BB- Ba3 30,000,000 9.75% due 2/15/2002 30,187,500
BB- Ba3 45,000,000 9.50% due 3/01/2005 45,000,000
B+ B2 15,000,000 Charter Communications Holdings LLC, 8.625% due
4/01/2009 (j) 14,250,000
B B2 21,000,000 Intermedia Capital Partners LP, 11.25% due 8/01/2006 23,625,000
BB- B1 10,000,000 Lenfest Communications, Inc., 8.25% due 2/15/2008 10,050,000
B+ B1 50,000,000 Olympus Communications LP/Capital Corp., 10.625% due
11/15/2006 53,125,000
--------------
199,812,439
Cable-- ++Australis Media Ltd.:
International-- NR* NR* 1,077,816 14.398% due 11/01/2002 (f) 619,744
3.8% D NR* 79,117,000 1.75%/15.75% due 5/15/2003 (b)(e) 1,977,925
D NR* 1,353,490 1.75%/15.75% due 5/15/2003 (e) 20,302
BB B1 25,000,000 Cablevision SA, 13.75% due 5/01/2009 (j) 23,312,500
B- B2 20,000,000 Comcast UK Cable Partners Ltd., 11.278% due
11/15/2007 (f) 18,200,000
B- B3 25,000,000 Diamond Cable Communications PLC, 10.87% due
2/15/2007 (f) 19,625,000
B- B3 30,000,000 International Cabletel, Inc., 12.034% due
2/01/2006 (f) 26,250,000
D Caa3 33,500,000 ++Supercanal Holdings SA, 11.50% due 5/15/2005 (j) 17,922,500
B+ B1 14,500,000 TeleWest Communications PLC, 11.131% due 10/01/2007 (f) 12,941,250
B B3 100,000,000 United International Holdings, Inc., 10.75% due
2/15/2008 (d)(f) 60,875,000
--------------
181,744,221
Capital Goods-- International Wire Group, Inc.:
1.1% B- B3 15,000,000 11.75% due 6/01/2005 15,487,500
B- B3 15,000,000 Series B, 11.75% due 6/01/2005 15,487,500
B- B3 25,250,000 Trench Electric & Trench Inc., 10.25% due 12/15/2007 22,851,250
--------------
53,826,250
Chemicals-- ISP Holdings Inc.:
1.1% BB- Ba3 19,502,000 9.75% due 2/15/2002 19,697,020
BB- Ba3 10,000,000 9% due 10/15/2003 9,900,000
BB Ba3 23,000,000 Lyondell Chemical Company, 9.625% due 5/01/2007 22,942,500
--------------
52,539,520
Child Care-- B- B3 20,000,000 Kindercare Learning Centers, Inc., 9.50% due 2/15/2009 18,950,000
0.4%
Computer B B2 40,000,000 Advanced Micro Devices, Inc., 11% due 8/01/2003 36,200,000
Services-- CCC Caa1 40,500,000 Dictaphone Corp., 11.75% due 8/01/2005 29,767,500
Electronics-- B- B3 25,000,000 PSINet, Inc., 10% due 2/15/2005 24,031,250
2.6% NR* NR* 11,000,000 Splitrock Services Inc., 11.75% due 7/15/2008 9,955,000
B- B2 30,000,000 Zilog Inc., 9.50% due 3/01/2005 27,600,000
--------------
127,553,750
Conglomerates-- BB Ba3 20,000,000 Dine, SA de CV, 8.75% due 10/15/2007 17,600,000
1.8% B- B3 25,000,000 Eagle-Picher Industries, 9.375% due 3/01/2008 22,375,000
B+ NR* 50,000,000 Voto-Votorantim O/S Trading, 8.50% due 6/27/2005 (j) 44,480,000
--------------
84,455,000
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Consumer B- B3 $ 10,000,000 Albecca Inc., 10.75% due 8/15/2008 $ 7,650,000
Products-- B B3 13,000,000 Corning Consumer Products, 9.625% due 5/01/2008 10,351,250
0.4% --------------
18,001,250
Consumer B- Caa2 8,000,000 AP Holdings Inc., 11.164% due 3/15/2008 (f) 4,060,000
Services-- B- Caa1 15,000,000 Apcoa Inc., 9.25% due 3/15/2008 12,862,500
0.4% --------------
16,922,500
Convertible NR* Caa3 6,195,000 ++Builders Transport, 8% due 8/15/2005 (2) 46,462
Bonds**--0.1% BB+ Ba3 6,375,000 Quantum Health Resources, Inc., 4.75% due 10/01/2000 (1) 5,865,000
--------------
5,911,462
Energy--7.0% B B3 20,000,000 Benton Oil & Gas Co., 9.375% due 11/01/2007 10,900,000
B B3 20,000,000 Chesapeake Energy Corp., 9.625% due 5/01/2005 19,250,000
B+ B2 15,000,000 Clark R & M, Inc., 8.875% due 11/15/2007 12,375,000
B+ B3 25,000,000 Clark USA Inc., 10.875% due 12/01/2005 21,750,000
B B2 15,000,000 Energy Corp. of America, 9.50% due 5/15/2007 13,125,000
BB- B1 25,000,000 Ocean Energy Inc., 8.375% due 7/01/2008 24,250,000
CCC B3 27,000,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 21,195,000
B+ B1 39,500,000 Parker Drilling Co., 9.75% due 11/15/2006 38,315,000
Petroleo Brasileiro SA:
NR* B1 15,000,000 10% due 10/17/2006 13,950,000
NR* B1 10,500,000 10% due 10/17/2006 (j) 9,765,000
BB- Ba3 30,000,000 RBF Finance Company, 11% due 3/15/2006 31,725,000
CCC- Caa2 15,000,000 Southwest Royalties Inc., 10.50% due 10/15/2004 7,275,000
BB- B1 30,000,000 Tesoro Petroleum Corp., 9% due 7/01/2008 29,550,000
D C 289,840,000 ++TransAmerican Energy Corp., 13% due 6/15/2002 32,607,000
NR* NR* 36,000,000 TransAmerican Refining Corporation, 13% due
12/15/2002 (h) 36,180,000
B+ B1 6,000,000 Triton Energy Ltd./Corp., 9.25% due 4/15/2005 5,940,360
B- B3 14,500,000 United Refining Co., 10.75% due 6/15/2007 9,642,500
--------------
337,794,860
Entertainment-- CCC+ Caa1 27,495,000 AMF Bowling Worldwide Inc., 12.581% due 3/15/2006 (f) 16,222,049
1.4% B- B3 16,250,000 Premier Parks Inc., 10% due 4/01/2008 (f) 10,400,000
B- Caa1 24,000,000 Regal Cinemas Inc., 9.50% due 6/01/2008 16,440,000
B- B2 15,000,000 Six Flags Entertainment, 8.875% due 4/01/2006 14,362,500
B B1 10,000,000 Vail Resorts Inc., 8.75% due 5/15/2009 (j) 9,325,000
--------------
66,749,549
Financial CCC+ Caa3 20,000,000 Amresco Inc., 9.875% due 3/15/2005 12,900,000
Services--1.3% NR* ba1 30,000,000 IBJ Capital Co. LLC (Preferred), 8.79% (a)(i)(j) 28,663,469
BB+ ba3 10,000,000 SIG Capital Trust I, 9.50% due 8/15/2027 (j) 7,525,000
B NR* 17,000,000 Veritas Capital Trust, 10% due 1/01/2028 12,792,500
--------------
61,880,969
Food & Chiquita Brands International Inc.:
Beverage--1.2% B+ B1 25,000,000 9.125% due 3/01/2004 24,812,500
B+ B1 20,000,000 10.25% due 11/01/2006 20,150,000
CCC Caa1 20,000,000 DGS International Finance Company BV, 10% due
6/01/2007 (j) 13,250,000
--------------
58,212,500
Foreign B+ B2 12,500,000 Republic of Brazil, 10.125% due 5/15/2027 9,343,750
Government
Obligations--0.2%
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Gaming--3.8% NR* NR* $ 3,600 Capital Gaming International Inc., 12% due 5/28/2001 $ 1,079
D C 42,126,000 ++GB Property Funding Corp., 10.875% due 1/15/2004 25,486,229
BB+ Ba2 5,000,000 Harrah's Operating Co. Inc., 7.875% due 12/15/2005 4,787,500
Jazz Casino Co. LLC:
NR* NR* 42,231,321 5.867% due 11/15/2009++++ 25,919,472
NR* NR* 2,524,830 Contigent Notes, due 11/15/2009 (g) 0
BB+ Ba2 25,000,000 Park Place Entertainment, 7.875% due 12/15/2005 23,750,000
B+ B1 4,000,000 Station Casinos Inc., 9.75% due 4/15/2007 4,080,000
Trump Atlantic City Associates/Funding Inc.:
B B2 35,100,000 11.25% due 5/01/2006 30,010,500
B B2 32,900,000 11.25% due 5/01/2006 27,965,000
Venetian Casino/LV Sands:
B- B3 35,000,000 12.25% due 11/15/2004 28,175,000
CCC+ Caa1 17,500,000 10% due 11/15/2005 12,337,500
--------------
182,512,280
Health Services B- B3 8,800,000 ALARIS Medical Systems, Inc., 9.75% due 12/01/2006 8,096,000
- - --6.8% B+ Ba3 40,000,000 Beverly Enterprises Inc., 9% due 2/15/2006 34,600,000
Columbia/HCA Healthcare Corp.:
BB+ Ba2 1,000,000 6.91% due 6/15/2005 895,734
BB+ Ba2 8,460,000 8.85% due 1/01/2007 8,290,800
BB+ Ba2 10,000,000 7.25% due 5/20/2008 8,778,400
BB+ Ba2 14,150,000 8.70% due 2/10/2010 13,554,142
BB+ Ba2 17,640,000 9% due 12/15/2014 16,978,500
BB+ Ba2 2,500,000 7.50% due 12/15/2023 1,926,386
BB+ Ba2 15,000,000 8.36% due 4/15/2024 13,350,000
CCC+ B2 37,250,000 Extendicare Health Services, 9.35% due 12/15/2007 19,928,750
B+ Ba3 36,091,000 Fresenius Medical Capital Trust I, 9% due 12/01/2006 35,639,861
B+ Ba3 40,000,000 Fresenius Medical Capital Trust II, 7.875% due 2/01/2008 36,700,000
B- B3 25,000,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 18,375,000
B- Caa1 50,000,000 Magellan Health Services, 9% due 2/15/2008 42,750,000
Mariner Post-Acute Network:
C D 49,000,000 9.50% due 11/01/2007 3,185,000
C D 12,750,000 18.346% due 11/01/2007 (f) 701,250
BBB Ba2 5,700,000 PharMerica, Inc., 8.375% due 4/01/2008 5,557,500
Tenet Healthcare Corp.:
BB- Ba3 30,000,000 8.625% due 1/15/2007 28,575,000
BB- Ba3 30,000,000 8.125% due 12/01/2008 27,525,000
--------------
325,407,323
Home Builders-- US Home Corp.:
0.6% BB- B1 24,500,000 8.88% due 8/15/2007 22,172,500
BB- B1 7,500,000 8.875% due 2/15/2009 6,576,150
--------------
28,748,650
Hotels--1.3% HMH Properties, Inc.:
BB Ba2 3,000,000 7.875% due 8/01/2005 2,775,000
BB Ba2 40,000,000 7.875% due 8/01/2008 35,900,000
BB Ba2 9,000,000 8.45% due 12/01/2008 8,370,000
Signature Resorts, Inc.:
BB- B2 10,000,000 9.25% due 5/15/2006 9,550,000
B B3 5,000,000 9.75% due 10/01/2007 4,525,000
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Independent The AES Corporation:
Power B+ Ba3 $ 30,000,000 10.25% due 7/15/2006 $ 30,300,000
Producers--3.0% B+ Ba3 15,000,000 8.375% due 8/15/2007 13,725,000
BB+ Ba2 30,000,000 CE Casecnan Water & Energy Co., 11.45% due 11/15/2005 27,975,000
BB Ba2 45,000,000 Calpine Corporation, 8.75% due 7/15/2007 44,606,250
BB Ba1 10,000,000 ESI Tractebel Acquisition Corp., 7.99% due 12/30/2011 8,982,790
BB Ba1 25,000,000 Monterrey Power, SA de CV, 9.625% due 11/15/2009 (j) 20,437,500
--------------
146,026,540
Industrial CCC+ Caa1 9,500,000 Thermadyne Holdings Corp., 12.426% due 6/01/2008 (f) 4,180,000
Services--0.3% CCC+ B3 12,000,000 Thermadyne Manufacturing, 9.875% due 6/01/2008 9,660,000
--------------
13,840,000
Industrials--0.8% CCC B3 3,100,000 American Skiing Co., 12% due 7/15/2006 2,867,500
B B1 16,000,000 Energis PLC, 9.75% due 6/15/2009 (j) 16,400,000
BB+ Ba3 30,000,000 Protection One Alarm Monitoring, 8.625% due 1/15/2009 (j) 20,250,000
--------------
39,517,500
Internet BB- B2 20,000,000 Williams Communication Group Inc., 10.875% due
Transport--0.4% 10/01/2009 19,849,800
Media & NR* NR* 45,500,000 Comtel Brasileira Ltd., 10.75% due 9/26/2004 (j) 40,495,000
Communications-- Globo Comunicacoes e Participacoes, Ltd. (j):
International-- B+ B2 35,000,000 10.50% due 12/20/2006 26,407,500
4.0% B+ B2 10,000,000 10.625% due 12/05/2008 7,365,000
BB Ba2 35,000,000 Grupo Televisa SA, 11.875% due 5/15/2006 36,618,750
B+ B2 31,750,000 Impsat Corp., 12.375% due 6/15/2008 24,209,375
B+ B2 40,000,000 Orion Network Systems, Inc., 15.877% due 1/15/2007 (f) 21,200,000
Telefonica de Argentina:
BBB- B1 25,000,000 11.875% due 11/01/2004 25,875,000
BBB- B1 10,000,000 9.125% due 5/07/2008 (j) 8,775,000
--------------
190,945,625
Metals & B- Caa1 20,000,000 AEI Resources Inc., 11.50% due 12/15/2006 (j) 17,700,000
Mining--3.3% BB Ba2 15,000,000 Great Central Mines Ltd., 8.875% due 4/01/2008 13,500,000
CCC+ B3 40,000,000 Kaiser Aluminum & Chemical Corp., 12.75% due 2/01/2003 40,600,000
B B2 20,000,000 Metals USA Inc., 8.625% due 2/15/2008 18,200,000
BB- B1 25,000,000 Murrin Murrin Holdings Property, 9.375% due 8/31/2007 21,875,000
B B3 20,000,000 Ormet Corporation, 11% due 8/15/2008 (j) 17,900,000
B B2 30,000,000 P & L Coal Holdings Corp., 9.625% due 5/15/2008 29,025,000
--------------
158,800,000
Oil Refineries BB Ba2 15,000,000 Eott Energy Partners LP, 11% due 10/01/2009 15,000,000
- - --0.3%
Packaging--0.6% Vicap SA:
B+ Ba3 5,000,000 10.25% due 5/15/2002 4,618,750
B+ Ba3 25,000,000 11.375% due 5/15/2007 22,375,000
--------------
26,993,750
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Paper & Forest CCC+ Caa1 $ 21,000,000 APP Financial II Mauritius Ltd., 12% (h)(i) $ 11,287,500
Products--3.5% CCC+ Caa1 40,000,000 APP International Finance, 11.75% due 10/01/2005 26,899,114
B B2 25,000,000 Ainsworth Lumber Company, 12.50% due 7/15/2007++++ 27,687,500
Container Corporation of America:
B- B2 15,420,000 9.75% due 4/01/2003 15,824,775
B- B2 13,000,000 11.25% due 5/01/2004 13,552,500
B Caa1 60,000,000 Doman Industries Limited, 8.75% due 3/15/2004 42,750,000
CCC+ Caa1 14,500,000 Indah Kiat International Finance, 12.50% due 6/15/2006 9,642,500
CCC+ Caa1 10,000,000 Pindo Deli Financial Mauritius, 10.75% due 10/01/2007 5,425,000
CCC+ Caa1 32,500,000 Tjiwi Kimia Finance Mauritius, 10% due 8/01/2004 17,956,250
--------------
171,025,139
Product Ameriserve Food Distributors:
Distribution-- B- B3 10,000,000 8.875% due 10/15/2006 7,900,000
0.9% CCC+ Caa1 35,000,000 10.125% due 7/15/2007 22,575,000
CCC+ Caa1 25,000,000 US Office Products Co., 9.75% due 6/15/2008 13,812,500
--------------
44,287,500
Publishing & BB- Ba3 8,500,000 Hollinger International Publishing, Inc., 9.25% due
Printing--0.7% 2/01/2006 8,436,250
BB- Ba3 7,250,000 Primedia, Inc., 7.625% due 4/01/2008 6,815,000
BB- Baa3 20,000,000 World Color Press Inc., 7.75% due 2/15/2009 18,900,000
--------------
34,151,250
Real Estate-- BB- Ba3 30,000,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 28,650,000
0.6%
Restaurants-- BB NR* 27,000,000 FM 1993A Corp., 9.75% due 11/01/2003 27,607,500
0.6%
Steel--5.1% BB Ba2 25,000,000 AK Steel Corp., 9.125% due 12/15/2006 25,000,000
NR* B2 75,000,000 CSN Iron SA, 9.125% due 6/01/2007 (j) 55,687,500
BB- B1 20,000,000 Hylsa, SA de CV, 9.25% due 9/15/2007 (j) 15,500,000
B- Caa2 20,000,000 Renco Steel Holdings, 10.875% due 2/01/2005 16,700,000
B B3 20,000,000 Republic Technology, 13.75% due 7/15/2009 (c)(j) 19,100,000
B+ B2 25,000,000 WCI Steel Inc., 10% due 12/01/2004 24,312,500
B- B3 25,000,000 WHX Corp., 10.50% due 4/15/2005 23,625,000
Weirton Steel Corp.:
B B2 3,000,000 11.375% due 7/01/2004 2,992,500
B B2 23,000,000 10.75% due 6/01/2005 22,137,500
B+ B2 43,000,000 Wheeling Pittsburgh Corp., 9.25% due 11/15/2007 40,205,000
--------------
245,260,000
Supermarkets Pueblo Xtra International Inc.:
- - --0.4% NR* B3 21,075,000 9.50% due 8/01/2003 18,440,625
B- B3 3,000,000 Series C, 9.50% due 8/01/2003 2,505,000
--------------
20,945,625
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (continued)
Telephony-- B- Caa1 $ 5,500,000 Esprit Telecom Group PLC, 10.875% due 6/15/2008 $ 5,582,500
Competitive B B2 25,000,000 Intermedia Communications Inc., 8.60% due 6/01/2008 21,562,500
Local Exchange B B3 5,000,000 Level 3 Communications Inc., 9.125% due 5/01/2008 4,543,750
Carriers--2.4% B B3 43,000,000 Nextlink Communications Inc., 9% due 3/15/2008 40,097,500
RSL Communications PLC:
B- B2 20,000,000 9.125% due 3/01/2008 17,200,000
B- B2 50,000,000 10.819% due 3/01/2008 (f) 28,500,000
--------------
117,486,250
Textiles--0.8% B Caa3 25,000,000 Galey & Lord, Inc., 9.125% due 3/01/2008 6,375,000
B B2 18,750,000 Polymer Group Inc., 8.75% due 3/01/2008 17,671,875
++Polysindo International Finance Company BV:
D Caa3 7,500,000 8.719% (l) 1,893,750
D Caa3 45,600,000 11.375% due 6/15/2006 11,514,000
D Caa3 14,250,000 9.375% due 7/30/2007 3,598,125
--------------
41,052,750
Transportation BB- NR* 42,000,000 Autopistas del Sol SA, 10.25% due 8/01/2009 (j) 30,870,000
- - --5.5% CCC Caa1 20,000,000 Cathay International Ltd., 13% due 4/15/2008 (j) 10,300,000
BB- Ba3 25,000,000 Eletson Holdings, Inc., 9.25% due 11/15/2003 22,625,000
GS Superhighway Holdings:
BB B1 43,000,000 9.875% due 8/15/2004 24,241,250
BB B1 49,000,000 10.25% due 8/15/2007 25,173,750
B+ B1 20,000,000 Gearbulk Holding Ltd., 11.25% due 12/01/2004 20,350,000
NR* C 40,000,000 ++Hvide Marine, Inc., 8.375% due 2/15/2008 17,800,000
B+ B2 45,000,000 TFM, SA de CV, 12.564% due 6/15/2009 (f) 24,412,500
Transportacion Maritima Mexicana, SA de CV:
BB- Ba3 23,000,000 9.25% due 5/15/2003 16,100,000
BB- Ba3 28,800,000 10% due 11/15/2006 19,872,000
B- B2 55,606,000 Transtar Holdings LP, 11.759% due 12/15/2003 (f) 54,215,850
--------------
265,960,350
Utilities--4.2% NR* NR* 20,000,000 CIA Saneamento Basico, 10% due 7/28/2005 (j) 14,900,000
BB- Ba2 10,000,000 Empresa Electricidad del Norte, 10.50% due 6/15/2005 (j) 6,262,500
B+ B2 70,000,000 Espirito Santo-Escelsa, 10% due 7/15/2007 51,100,000
BB NR* 37,000,000 Inversora de Electrica, 9% due 9/16/2004 (j) 23,865,000
NR* NR* 14,884,360 Sunflower Electric Power Corp., 8% due 12/31/2016 9,656,229
BB+ Ba2 41,067,600 TransGas de Occidente SA, 9.79% due 11/01/2010 (j)+++ 33,993,952
Tucson Electric & Power Co. (h)+++:
NR* NR* 34,947,781 10.21% due 1/01/2009 37,598,570
NR* NR* 21,759,590 10.732% due 1/01/2013 23,922,275
--------------
201,298,526
Waste BB- Ba3 25,000,000 Allied Waste North America, 7.625% due 1/01/2006 22,500,000
Management-- NR* Ca 23,700,000 ++Mid-American Waste Systems, Inc., 12.25% due 2/15/2003 829,500
1.1% B+ B2 29,000,000 Safety-Kleen Services, 9.25% due 6/01/2008 29,145,000
--------------
52,474,500
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds (concluded)
Wireless B- B2 $ 8,000,000 Cencall Communications Corporation, 10.125% due
Communications 1/15/2004 $ 8,040,000
- - --Domestic CCC+ B3 10,000,000 Metrocall Inc., 9.75% due 11/01/2007 6,050,000
Paging & B- B2 25,000,000 Nextel Communications, Inc., 9.75% due 8/15/2004 25,250,000
Cellular--2.3% CCC+ B3 40,000,000 Nextel Partners Inc., 14% due 2/01/2009 (f) 23,600,000
NR* NR* 29,000,000 Pagemart Wireless Inc., 11.25% due 2/01/2008 (f) 9,570,000
Paging Network, Inc.:
B- Caa1 15,500,000 10.125% due 8/01/2007 4,417,500
B- Caa1 49,500,000 10% due 10/15/2008 13,488,750
B B3 3,250,000 Pinnacle Holdings Inc., 10% due 3/15/2008 (f) 1,868,750
NR* NR* 5,000,000 SBA Communications Corp., 12.308% due 3/01/2008 (f) 2,700,000
B- B3 15,000,000 Western Wireless Corp., 10.50% due 2/01/2007 15,600,000
--------------
110,585,000
Wireless B B1 11,000,000 CTI Holdings SA, 11.50% due 4/15/2008 (f) 5,500,000
Communications-- NR* B3 10,000,000 ClearNet Communications, 10.044% due 5/01/2009 (f) 6,100,000
International B B3 56,472,000 Comunicacion Celular SA, 12.68% due 3/01/2005 (f)(j) 30,071,340
Paging & CCC+ Caa1 23,500,000 Dolphin Telecom PLC, 14% due 5/15/2009 (f)(j) 9,752,500
Cellular--3.5% B- Caa1 46,000,000 McCaw International Ltd., 13.611% due 4/15/2007 (f) 27,830,000
B- Caa1 90,000,000 Millicom International Cellular, 13.39% due
6/01/2006 (f) 64,800,000
B- Caa1 33,000,000 Nextel International Inc., 12.125% due 4/15/2008 (f) 17,325,000
CCC+ Caa1 18,000,000 Telesystem International Wireless Inc., 13.151% due
6/30/2007 (f) 9,270,000
--------------
170,648,840
Total Investments in Bonds--90.0% 4,337,266,500
Shares
Held
Preferred Stocks
Cable--Domestic--0.2% 104,855 CSC Holdings Inc. (Series A)++++ 11,245,699
Cable-- 21,711 NTL Incorporated (Series B)++++ 23,067,938
International--0.5%
Conglomerates--0.3% 3,100 Eagle-Picher Industries (Series B) 14,957,500
Energy--0.2% 10,000 R&B Falcon Corporation 9,525,000
TCR Holdings (Convertible)(h):
465,596 (Class B) 27,936
256,078 (Class C) 14,340
675,114 (Class D) 35,781
1,396,787 (Class E) 87,998
--------------
9,691,055
Financial Services--0.6% 1,230,000 California Federal Bank (Series A) 28,905,000
Product 288,913 Nebco Evans Holding Co.++++ 10,762,009
Distribution--0.2%
Publishing & Primedia, Inc.:
Printing--0.8% 125,000 (Series D) 12,406,250
292,500 (Series H) 26,398,125
--------------
38,804,375
Telephony--Competitive 14,056 Intermedia Communications Inc. (Convertible)++++ 12,826,100
Local Exchange
Carriers--0.3%
Utilities--0.1% 3,362 Crown Castle International Corporation++++ 3,404,025
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
Shares Value
Industries Held Issue (Note 1a)
Preferred Stocks (concluded)
Wireless Nextel Communications, Inc.++++:
Communications-- 25,291 (Series D) $ 26,429,095
Domestic Paging 18,321 (Series E) 18,000,383
& Cellular--1.1% 6,838 Rural Cellular Corp. (Series B)++++ 6,991,855
--------------
51,421,333
Total Investments in Preferred Stocks--4.3% 205,085,034
Common Stocks
Cable--Domestic--0.0% 2,887 ++CS Wireless Systems, Inc. 4,331
Cable--International 50,000 ++UnitedGlobalCom Inc. (Class A) 3,600,000
- - --0.1%
Energy--0.2% 914,710 ++Chi Energy Inc. (Series B) 10,519,165
Entertainment--0.5% 1,184,150 ++On Command Corporation 22,387,836
Gaming--0.1% 985 ++Capital Gaming International Inc. 10
732,105 ++JCC Holding Company (Class A) 5,948,353
--------------
5,948,363
Wireless Communications 170,421 ++Nextel Communications, Inc. (Class A) 11,562,000
- - --Domestic Paging
& Cellular--0.2%
Total Investments in Common Stocks--1.1% 54,021,695
Warrants (k)
Cable--Domestic--0.0% 25,000 People's Choice TV Corp. 12,625
Cable-- 45,000 UIH Australia/Pacific 180,000
International--0.0%
Computer 7,000 Splitrock Services Inc. 504,000
Services--
Electronics--0.0%
Energy--0.0% Chi Energy Inc.:
74,562 (Series B) 111,843
48,400 (Series C) 72,600
--------------
184,443
Entertainment--0.1% 385,661 On Command Corporation 2,579,108
Gaming--0.0% 113,386 Trump Castle Funding, Inc. 1
Media & Communications-- 15,000 Orion Network Systems, Inc. 144,375
International--0.0%
Wireless Communications 57,040 Page Mart Inc. 149,730
- - --Domestic Paging & 50,338 Wireless One Inc. 503
Cellular--0.0% --------------
150,233
Wireless Communications 53,472 Comunicacion Celular SA (j) 16,710
- - --International
Paging & Cellular
- - --0.0%
Total Investments in Warrants--0.1% 3,771,495
Total Long-Term Investments
(Cost $5,706,564,158)--95.5% 4,600,144,724
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
Face Value
Amount Issue (Note 1a)
Short-Term Securities
Commercial Paper*** $ 35,842,000 Associates First Capital Corp., 5.63% due
- - --1.8% 10/01/1999 $ 35,842,000
39,000,000 CIT Group Holdings, Inc. (The), 5.61% due
10/01/1999 39,000,000
12,000,000 CSW Credit Inc., 5.28% due 10/13/1999 11,978,880
--------------
86,820,880
US Government Agency 9,577,000 Federal Home Loan Mortgage Corporation, 5.23% due
Obligations***--0.2% 11/15/1999 9,514,390
Total Investments in Short-Term Securities
(Cost--$96,335,270)--2.0% 96,335,270
Total Investments (Cost--$5,802,899,428)--97.5% 4,696,479,994
Other Assets Less Liabilities--2.5% 122,751,483
--------------
Net Assets--100.0% $4,819,231,477
==============
*Not Rated.
**Industry classifications for convertible bonds are: (1) Health
Services; (2) Transportation Services.
***Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Portfolio.
++Non-income producing security.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
+++Subject to principal paydowns.
(a)Floating rate note.
(b)Each $1,000 face amount contains one warrant of Australis Media
Ltd.
(c)Each $1,000 face amount contains one warrant of Republic
Technology.
(d)Each $1,000 face amount contains one warrant of United
International Holdings, Inc.
(e)Represents a step bond. Coupon payments are paid-in-kind, in
which the Portfolio receives additional face amount at an annual
rate of 1.75% until May 15, 2000. Subsequently, the Portfolio will
receive cash coupon payments at an annual rate of 15.75% until
maturity.
(f)Represents a zero coupon or step bond; the interest rate shown is
the effective yield at the time of purchase by the Portfolio.
(g)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.
(h)Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was approximately $109,154,000,
representing 2.3% of net assets.
Acquisition Value
Issue Date(s) Cost (Note 1a)
APP Financial II Mauritius
Ltd., 12% 4/24/1998-5/01/1998 $ 18,425,000 $ 11,287,500
TCR Holdings
(Convertible Preferred):
(Class B) 12/10/1998 27,936 27,936
(Class C) 12/10/1998 14,340 14,340
(Class D) 12/10/1998 35,781 35,781
(Class E) 12/10/1998 87,998 87,998
TransAmerican Refining
Corporation, 13% due 12/15/2002 12/09/1997 35,640,000 36,180,000
Tucson Electric & Power Co.:
10.21% due 1/01/2009 7/27/1993-4/15/1998 33,168,609 37,598,571
10.732% due 1/01/2013 7/16/1993-10/06/1998 20,606,895 23,922,275
Total $108,006,559 $109,154,401
============ ============
(i)The security is a perpetual bond and has no definite maturity
date.
(j)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(k)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.
(l)Maturity of this security is pending as a result of bankruptcy
proceedings.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of September 30, 1999
Assets: Investments, at value (identified cost--$5,802,899,428) (Note 1a) $4,696,479,994
Cash 2,810,030
Receivables:
Interest $ 110,488,152
Securities sold 96,660,211
Capital shares sold 1,464,467
Dividends 1,457,935 210,070,765
--------------
Prepaid registration fees and other assets (Note 1e) 96,453
--------------
Total assets 4,909,457,242
--------------
Liabilities: Payables:
Securities purchased 50,008,171
Capital shares redeemed 18,369,660
Dividends to shareholders (Note 1f) 17,702,272
Distributor (Note 2) 2,408,446
Investment adviser (Note 2) 219,008 88,707,557
--------------
Accrued expenses and other liabilities 1,518,208
Total liabilities 90,225,765
--------------
Net Assets: Net assets $4,819,231,477
==============
Net Assets Class A Common Stock, $.10 par value, 500,000,000 shares
Consist of: authorized $ 12,260,751
Class B Common Stock, $.10 par value 1,500,000,000 shares
authorized 49,918,636
Class C Common Stock, $.10 par value 200,000,000 shares
authorized 5,482,599
Class D Common Stock, $.10 par value 500,000,000 shares
authorized 5,451,207
Paid-in capital in excess of par 5,978,729,598
Accumulated distributions in excess of realized capital gains on
investments--net (Note 1f) (126,191,880)
Unrealized depreciation on investments--net (1,106,419,434)
--------------
Net assets $4,819,231,477
==============
Net Asset Class A--Based on $807,942,434 and 122,607,507 shares
Value: outstanding $ 6.59
==============
Class B--Based on $3,290,248,351 and 499,186,363 shares
outstanding $ 6.59
==============
Class C--Based on $361,605,709 and 54,825,988 shares
outstanding $ 6.60
==============
Class D--Based on $359,434,983 and 54,512,073 shares
outstanding $ 6.59
==============
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations for the Year Ended September 30, 1999
Investment Interest and discount earned $ 597,657,872
Income Dividends 22,522,943
(Note 1d): Other 4,524,491
--------------
Total income 624,705,306
--------------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 29,698,456
Investment advisory fees (Note 2) 23,406,691
Transfer agent fees--Class B (Note 2) 3,761,597
Account maintenance and distribution fees--Class C (Note 2) 3,675,150
Account maintenance fees--Class D (Note 2) 1,003,128
Transfer agent fees--Class A (Note 2) 724,828
Transfer agent fees--Class C (Note 2) 454,023
Accounting services (Note 2) 422,772
Transfer agent fees--Class D (Note 2) 325,146
Printing and shareholder reports 290,093
Professional fees 277,753
Custodian fees 156,557
Registration fees (Note 1e) 91,244
Directors' fees and expenses 27,738
Pricing fees 25,205
Other 78,753
--------------
Total expenses 64,419,134
--------------
Investment income--net 560,286,172
--------------
Realized & Realized loss on investments--net (120,681,720)
Unrealized Change in unrealized depreciation on investments--net (112,214,466)
Loss on --------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 327,389,986
(Notes 1b, 1d &3): ==============
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1999 1998
Operations: Investment income--net $ 560,286,172 $ 684,885,587
Realized gain (loss) on investments--net (120,681,720) 157,220,808
Change in unrealized appreciation/depreciation on
investments--net (112,214,466) (1,302,774,162)
-------------- --------------
Net increase (decrease) in net assets resulting from operations 327,389,986 (460,667,767)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (92,923,653) (100,823,273)
Shareholders Class B (382,415,655) (477,061,317)
(Note 1f): Class C (44,201,661) (58,977,217)
Class D (40,745,203) (48,023,780)
Realized gains on investments--net:
Class A (670,291) (6,089,227)
Class B (3,070,864) (32,962,441)
Class C (367,912) (4,011,904)
Class D (299,510) (3,027,610)
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 (689,159,391) (730,976,769)
-------------- --------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (1,191,917,429) (111,186,550)
(Note 4): -------------- --------------
Net Assets: Total decrease in net assets (1,553,686,834) (1,302,831,086)
Beginning of year 6,372,918,311 7,675,749,397
-------------- --------------
End of year $4,819,231,477 $6,372,918,311
============== ==============
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights
The following per share data and ratios have been derived from
information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997++ 1996++ 1995
Per Share Net asset value, beginning of year $ 7.05 $ 8.29 $ 7.93 $ 7.80 $ 7.66
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .72 .75 .74 .75 .81
Realized and unrealized gain
(loss) on investments--net (.31) (1.19) .36 .14 .14
---------- ---------- ---------- ---------- ----------
Total from investment operations .41 (.44) 1.10 .89 .95
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.72) (.75) (.74) (.76) (.81)
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 (.87) (.80) (.74) (.76) (.81)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.59 $ 7.05 $ 8.29 $ 7.93 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.90% (5.98%) 14.58% 11.95% 13.27%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .51% .49% .51% .51% .55%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.40% 9.40% 9.23% 9.57% 10.70%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $ 807,942 $ 922,820 $1,044,799 $ 947,479 $ 902,321
========== ========== ========== ========== ==========
Portfolio turnover 19.74% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
*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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
The following per share data and ratios have been derived from
information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997++ 1996++ 1995
Per Share Net asset value, beginning of year $ 7.05 $ 8.30 $ 7.93 $ 7.80 $ 7.66
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .67 .69 .68 .69 .75
Realized and unrealized gain (loss)
on investments--net (.31) (1.20) .37 .15 .14
---------- ---------- ---------- ---------- ----------
Total from investment operations .36 (.51) 1.05 .84 .89
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.67) (.69) (.68) (.71) (.75)
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 (.82) (.74) (.68) (.71) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 6.59 $ 7.05 $ 8.30 $ 7.93 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.10% (6.80%) 13.86% 11.11% 12.41%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.28% 1.25% 1.27% 1.28% 1.32%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 9.66% 8.63% 8.46% 8.80% 9.81%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $3,290,248 $4,469,452 $5,495,488 $4,250,539 $3,220,767
========== ========== ========== ========== ==========
Portfolio turnover 19.74% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
*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.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
Class C
The following per share data and ratios have been derived from For the Period
information provided in the financial statements. Oct. 21, 1994++++
For the Year Ended September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997++ 1996++ 1995
Per Share Net asset value, beginning of period $ 7.06 $ 8.30 $ 7.94 $ 7.81 $ 7.59
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .66 .69 .68 .68 .71
Realized and unrealized gain (loss)
on investments--net (.31) (1.19) .36 .15 .22
---------- ---------- ---------- ---------- ----------
Total from investment operations .35 (.50) 1.04 .83 .93
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.66) (.69) (.68) (.70) (.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 (.81) (.74) (.68) (.70) (.71)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.60 $ 7.06 $ 8.30 $ 7.94 $ 7.81
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.06% (6.72%) 13.66% 11.05% 12.92%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.33% 1.31% 1.32% 1.33% 1.38%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 9.62% 8.58% 8.39% 8.73% 9.06%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 361,606 $ 550,482 $ 638,626 $ 362,518 $ 135,019
========== ========== ========== ========== ==========
Portfolio turnover 19.74% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
Class D
The following per share data and ratios have been derived from For the Period
information provided in the financial statements. Oct. 21, 1994++++
For the Year Ended September 30, to Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997++ 1996++ 1995
Per Share Net asset value, beginning of period $ 7.05 $ 8.30 $ 7.94 $ 7.80 $ 7.59
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .70 .73 .72 .72 .75
Realized and unrealized gain (loss)
on investments--net (.31) (1.20) .36 .16 .21
---------- ---------- ---------- ---------- ----------
Total from investment operations .39 (.47) 1.08 .88 .96
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.70) (.73) (.72) (.74) (.75)
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 (.85) (.78) (.72) (.74) (.75)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 6.59 $ 7.05 $ 8.30 $ 7.94 $ 7.80
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.64% (6.32%) 14.29% 11.82% 13.37%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .76% .74% .76% .76% .81%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 10.15% 9.14% 8.95% 9.30% 9.70%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $ 359,435 $ 430,164 $ 496,836 $ 267,687 $ 102,676
========== ========== ========== ========== ==========
Portfolio turnover 19.74% 41.97% 38.58% 32.44% 24.58%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
+++++Amount is less than $.01 per share.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of three portfolios
in Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Portfolio's
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. The Portfolio has offered four
classes of shares under the Merrill Lynch Select Pricing SM System.
Since March 24, 1998, shares of the Portfolio have no longer been
available for purchase (or exchange), except under the following
circumstances: shareholders of the Portfolio may continue to elect
to have dividends and distributions paid on shares of the Portfolio
reinvested in additional shares of the Portfolio; certain
participants in employer-sponsored retirement or savings plans,
including eligible 401(k) plans, will continue to be permitted to
purchase shares of the Portfolio through such plans; and shares of
the Portfolio will continue to be available for purchase by
participants in certain fee-based programs, such as the Mutual Fund
Advisor program administered by Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"), a subsidiary of Merrill Lynch & Co.
("ML & Co."). In addition, shares of the Portfolio will continue to
be available for purchase in single transactions over $1,000,000.
Shares of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject to a contingent
deferred sales charge. All classes of shares have identical voting,
dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear
certain expenses related to the account maintenance of such shares,
and Class B and Class C Shares also bear certain expenses related to
the distribution of such shares. Each class has exclusive voting
rights with respect to matters relating to its account maintenance
and distribution expenditures. The following is a summary of
significant accounting policies followed by the Portfolio.
(a) Valuation of investments--Portfolio securities 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 ask 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 strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Portfolio enters into a closing transaction), the
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Interest income (including amortization of discount)
is recognized on the accrual basis. Realized gains and losses on
security transactions are determined on the identified cost basis.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of net investment income and realized capital gains are due
primarily to differing tax treatments for post-October losses.
(g) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$1,727,238 have been reclassified between accumulated distributions
in excess of net realized capital gains and accumulated
distributions in excess of net investment income. These
reclassifications have no effect on net assets or net asset values
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of ML & Co., which is the limited partner. The Fund has
also entered into a Distribution Agreement and Distribution Plans
with Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"),
a division of Princeton Funds Distributor, Inc. ("PFD"), which is a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee with respect to the Portfolio
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .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, 1999, the
aggregate average daily net assets of the Fund's three Portfolio's
was approximately $7,730,587,000.
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% --
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
Pursuant to a sub-agreement with the Distributor, MLPF&S, a
subsidiary of ML & Co., also provides account maintenance and
distribution services to the Fund. The ongoing account maintenance
fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders.
The ongoing distribution fee compensates the Distributor and MLPF&S
for providing shareholder and distribution-related services to Class
B and Class C shareholders.
For the year ended September 30, 1999, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Class A $14,365 $130,522
Class D $10,195 $ 89,060
For the year ended September 30, 1999, MLPF&S received contingent
deferred sales charges of $8,576,134 and $83,009 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively, and front-end sales charge waivers of $32,999 relating
to transactions in Class A Shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the year ended September 30, 1999, the Portfolio paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $7,572 for
security price quotations to compute the net asset value of the
Portfolio.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1999 were $1,078,090,009 and
$2,420,499,776, respectively.
Net realized gains (losses) for the year ended September 30, 1999
and net unrealized losses as of September 30, 1999 were as follows:
Realized Unrealized
Gains (Losses) Losses
Long-term investments $(120,683,389) $(1,106,419,434)
Short-term investments 1,669 --
------------- ---------------
Total $(120,681,720) $(1,106,419,434)
============= ===============
As of September 30, 1999, net unrealized depreciation for Federal
income tax purposes aggregated $1,114,970,992, of which $68,285,615
related to appreciated securities and $1,183,256,607 related to
depreciated securities. The aggregate cost of investments at
September 30, 1999 for Federal income tax purposes was
$5,811,450,986.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $1,191,917,429 and $111,186,550 for the years ended September
30, 1999 and September 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Ended Dollar
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)
============= ==============
Class A Shares for the Year Ended Dollar
September 30, 1998 Shares Amount
Shares sold 37,248,132 $ 300,632,499
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,991,792 39,932,897
------------- --------------
Total issued 42,239,924 340,565,396
Shares redeemed (37,279,139) (293,764,069)
------------- --------------
Net increase 4,960,785 $ 46,801,327
============= ==============
Class B Shares for the 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)
============= ==============
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 105,658,317 $ 861,469,852
Shares issued to shareholders
in reinvestment of dividends
and distributions 26,492,259 212,040,844
------------- --------------
Total issued 132,150,576 1,073,510,696
Automatic conversion of
shares (2,243,101) (18,085,780)
Shares redeemed (158,335,084) (1,243,554,133)
------------- --------------
Net decrease (28,427,609) $ (188,129,217)
============= ==============
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 C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 24,007,667 $ 196,182,886
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,036,571 32,326,933
------------- --------------
Total issued 28,044,238 228,509,819
Shares redeemed (26,939,585) (212,824,675)
------------- --------------
Net increase 1,104,653 $ 15,685,144
============= ==============
Class D Shares for the 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)
============= ==============
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 17,388,402 $ 141,752,082
Automatic conversion of
shares 2,241,712 18,085,780
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,165,204 25,339,375
------------- --------------
Total issued 22,795,318 185,177,237
Shares redeemed (21,664,714) (170,721,041)
------------- --------------
Net increase 1,130,604 $ 14,456,196
============= ==============
5. Capital Loss Carryforward:
At September 30, 1999, the Portfolio had a net capital loss
carryforward of approximately $74,969,000, all of which expires in
2007. 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, 1999
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, 1999, 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 generally accepted
auditing standards. 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, 1999 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. 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, 1999, the results of its operations, the changes
in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 16, 1999
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, 1999, 3.80% qualifies for the
dividends received deduction for corporations. Additionally, the
Fund paid a long-term capital gains distribution of $.115813 per
share to shareholders of record on December 22, 1998. All of this
distribution is subject to the 20% tax rate.
Please retain this information for your records.
Merrill Lynch Corporate Bond Fund, Inc., High Income Portfolio
September 30, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Christopher G. Ayoub, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
INVESTMENT GRADE
PORTFOLIO &
INTERMEDIATE
TERM PORTFOLIO
Merrill Lynch
Corporate Bond Fund, Inc.
FUND LOGO
Annual Report
September 30, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Corporate Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Investment Grade Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
During the three-month period ended September 30, 1999, the fixed-
income markets remained very volatile as interest rates continued to
trend higher. For example, the yield on the Treasury's 30-year bond
ranged from 5.85% to 6.28%. Investor expectations that the Federal
Reserve Board would move to tighten monetary policy in the face of
strong economic growth around the world led to the rise in Treasury
yields. First quarter US gross domestic product (GDP) gained a
stronger-than-expected 4.3%, spurred on by consumer spending, which
jumped 6.7%. Although final reports showed that second quarter GDP
grew at a lower 1.6%, much of the decline could be attributed to
inventory reductions and therefore led many investors to believe
that economic activity would rise in the second half of 1999.
Consumers continued to benefit from low unemployment rates and the
wealth effect generated from a strong stock market, although some
gains were surrendered recently. Overseas, Asian countries at the
heart of the crises in 1998 showed the beginnings of economic
recovery.
This global recovery led to fears of a rekindling of inflation.
Commodities, such as copper, plywood and other building materials,
gained in price. More importantly, the price of oil surged, spurred
on mainly by an agreement by the Organization of Petroleum Exporting
Countries to limit production, but also on expectations of increased
demand by recovering economies. Wage inflation continued to be of
concern given the low level of unemployment. However, inflation, as
measured by both the producer price index and consumer price index,
remains well within acceptable levels, with productivity
measurements still extremely favorable. Beyond the gain in interest
rates, the market environment was influenced by a "flight from
quality." This is in stark contrast to the "flight-to-quality"
trades we saw in the third quarter of last year. Credit spreads have
been expanding steadily since early May, in part a result of the
large increase in corporate debt issuance during this period.
However, we believe that the rising spreads offer investors a unique
opportunity to benefit on a long-term investment horizon from the
current market inefficiencies that have been priced into current
yields.
Chairman Alan Greenspan's comments that the Federal Reserve Board
needed to be preemptive with monetary policy and its use as a tool
against inflation reinforced investor concerns. Investors
consistently priced in expectations that the Federal Reserve Board
would seek to recapture the 75 basis point (0.75%) easing
experienced during the liquidity crisis of 1998. Investor
expectations were validated as the Federal Reserve Board pushed
short-term interest rates higher by 50 basis points during the
September quarter. This was followed by a move to a tightening bias
at the early October Federal Open Market Committee meeting, which
suggests that another 25 basis point hike by year-end is still
possible.
Although the economy has exhibited some signs of moderating, the
effect of low unemployment levels has recently begun to translate
into higher employment cost pressures. In July and August, average
hourly earnings rose, while second quarter unit labor cost (up 4.5%)
and the employment cost index (up 1.1%) both exceeded investor
expectations. This, combined with Greenspan's cautionary message
during his Humphrey-Hawkins testimony as well as Year 2000 (Y2K)
liquidity issues, produced higher interest rates.
On the corporate bond front, underwriting activity increased
significantly since mid-year as issuers sought to get funding
programs in before the final quarter of 1999. As a result, corporate
yield spreads exhibited widening across all sectors, although dollar-
denominated foreign issues (excluding Canadian securities) have
outperformed the domestic issues and issues rated BBB have
outperformed issues rated at least A on both a price and total
return basis. However, in September, corporate yield spreads
tightened slightly, following a sooner-than-expected drop in new
underwriting activity. Furthermore, new assets flowed into the
corporate investment-grade sector given its strong relative value.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
Fiscal Year in Review
For the 12-month period ended September 30, 1999, the Investment
Grade Portfolio's Class A, Class B, Class C and Class D Shares had
total returns of -1.70%, -2.45%, -2.58% and -2.03%, respectively, as
compared to a -1.03% total return for the unmanaged Merrill Lynch
Corporate Master Index and -2.19% for the Lipper Corporate A-rated
average. For the same period, the Intermediate Term Portfolio's
Class A, Class B, Class C and Class D Shares had total returns of
- - -0.18%, -0.69%, -0.70% and -0.28%, respectively, as compared to a
- - -0.56% total return for the unmanaged Merrill Lynch Corporate BBB
1-10 Year Index and -1.01% for the Lipper Intermediate Investment
Grade Corporate average.
During the fiscal year ended September 30, 1999, our investment
strategy for the Investment Grade and Intermediate Term Portfolios
remained somewhat conservative relative to their benchmark Indexes,
the unmanaged Merrill Lynch Corporate Master Index and the unmanaged
Merrill Lynch Corporate BBB 1-10 Year Index, respectively. This
strategy was in alignment with our outlook for higher interest rates
and wider yield spreads between corporate bonds and Treasury
securities. From a duration perspective, we continued to maintain a
duration that was modestly short (0.10 years--0.20 years) relative
to the Portfolios' benchmarks. During the second quarter of the
fiscal year, we believed that interest rates on the 30-year bond
would trade within a range of 5.75%--6.25%, a band slightly higher
and wider than previously witnessed. Initially, our strategy was to
raise each Portfolio's duration as interest rates climbed closer to
the high end of the expected range. By early August, we began to
reallocate a portion of assets away from issues with a yield spread
to the US Treasury bond and into cash and Treasury securities, in
preparation for year-end liquidity needs. By the end of the fiscal
year, we had shifted 10% of each Portfolio's assets into this
sector. We are hopeful that interest rates and yield spreads will
begin a positive trend by late in the fourth quarter of 1999.
We remained committed to the bigger, more liquid corporate bonds and
emphasized higher-coupon issues. As part of our liquidity strategy,
we attempted to consolidate industry holdings into the larger, more
liquid issues. Although this comes with modest yield concessions, we
believe this is the appropriate course of action considering the
uncertainty surrounding the Y2K issue.
With respect to industry allocations, we continued to maintain an
overweighted position in each Portfolio in electric utilities,
finance companies, securities firms, retailers, energy-related
issuers, airlines and defense contractors and information technology
entities. During the latter part of the fiscal year, we slightly
reduced each Portfolio's position in real estate investment trusts
given the strong performance during early 1999. However, we still
have an overweighted position relative to the benchmark indexes,
since we believe this sector will continue to perform well. We
continued to underweight money center banks, property and casualty
insurance companies and metals, mining, chemicals and paper and
forest products issuers.
Currently, we have a 5% overweighted position relative to the
benchmark indexes in corporate bonds rated BBB or Baa, a position we
expect to maintain given the attractive spread relationship and the
favorable relative value attributes of that group. During the fiscal
year, the unmanaged Merrill Lynch Corporate BBB-Rated Index
outperformed the unmanaged Merrill Lynch Corporate A-AAA Rated Index
by 50 basis points as measured by total return. We believe that this
sector will continue to outperform; therefore, we expect to maintain
our overweighting into the new year.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
During the fiscal year ended September 30, 1999, interest rates
trended higher. When interest rates rise dramatically, as has been
the case recently, fixed-income portfolios typically suffer. In
addition, yield spreads for corporate bonds relative to Treasury
securities widened during parts of the fiscal year. This was because
a significant increase in corporate issuance created an oversupply
of corporate bonds, putting pressure on the market. As a result,
corporate bonds underperformed other classes of securities. These
factors negatively impacted each Portfolio, both of which were
relatively fully invested. As a result, each Portfolio had poor
total returns (in absolute terms).
However, as a result of our conservative investment strategy during
the fiscal year ended September 30, 1999, the Investment Grade
Portfolio achieved competitive total returns and the Intermediate
Term Portfolio had above-average total returns, as measured by
Lipper Analytical Services, Inc.
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 12, 1999
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees for Investment Grade Portfolio. Intermediate Term Portfolio
incurs a maximum initial sales charge (front-end load) of 1% and
bears no ongoing distribution or account maintenance fees. Class A
Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year for Investment Grade
Portfolio. Intermediate Term Portfolio is subject to a maximum
contingent deferred sales charge of 1% if redeemed within one year
of purchase. In addition, Investment Grade Portfolio is subject to a
distribution fee of 0.50% and an account maintenance fee of 0.25%.
Intermediate Term Portfolio is subject to a 0.25% distribution fee
and a 0.25% account maintenance fee. These shares automatically
convert to Class D Shares after approximately 10 years. (There is no
initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25% for Investment Grade Portfolio.
Intermediate Term Portfolio is subject to a distribution fee of
0.25% and an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge if
redeemed within one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee) for
Investment Grade Portfolio. Intermediate Term Portfolio incurs a
maximum initial sales charge of 1% and an account maintenance fee of
0.10% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the payable date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual Total Return--Investment Grade Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 -1.70% -5.63%
Five Years Ended 9/30/99 +7.06 +6.19
Ten Years Ended 9/30/99 +7.61 +7.17
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 -2.45% -6.14%
Five Years Ended 9/30/99 +6.25 +6.25
Ten Years Ended 9/30/99 +6.80 +6.80
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/99 -2.58% -3.50%
Inception (10/21/94)
through 9/30/99 +6.38 +6.38
[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*
Year Ended 9/30/99 -2.03% -5.95%
Inception (10/21/94)
through 9/30/99 +6.99 +6.11
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
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 Fund's
Class A Shares & Class B Shares compared to growth of an investment
in the ML US Corporate Master Index and Lehman Brothers Aggregate
Bond Index. Beginning and ending values are:
9/89 9/99
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class A Shares* $ 9,600 $19,995
Class B Shares* $10,000 $19,300
ML US Corporate
Master Index++++ $10,000 $22,926
Lehman Brothers Aggregate
Bond Index++++++ $10,000 $21,797
A line graph depicting the growth of an investment in the Fund's
Class C Shares & Class D Shares compared to growth of an investment
in the ML US Corporate Master Index and the Lehman Brothers Aggregate
Bond Index. Beginning and ending values are:
10/21/94** 9/99
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class C Shares* $10,000 $13,576
ML Corporate Bond Fund, Inc.'s
Investment Grade Portfolio++--
Class D Shares* $ 9,900 $13,404
ML US Corporate
Master Index++++ $10,000 $14,952
Lehman Brothers Aggregate
Bond Index $10,000 $14,635
[FN]
*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, 1999
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 Fund's
Class A Shares compared to growth of an investment in the ML
Corporate BBB 1-10 Year Index. Beginning and ending values are:
9/89 9/99
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class A Shares* $ 9,900 $20,716
ML Corporate BBB
1-10 Year Index++++ $10,000 $15,904
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the ML
Corporate BBB 1-10 Year Index. Beginning and ending values are:
11/13/92** 9/99
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class B Shares* $10,000 $13,769
ML Corporate BBB
1-10 Year Index++++ $10,000 $15,904
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the ML Corporate BBB 1-10 Year Index. Beginning and
ending values are:
10/21/94** 9/99
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class C Shares* $10,000 $13,769
ML Corporate Bond Fund, Inc.'s
Intermediate Term Portfolio++--
Class D Shares* $ 9,900 $13,921
ML Corporate BBB
1-10 Year Index++++ $10,000 $14,527
[FN]
*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, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/99 -0.18% -1.18%
Five Years Ended 9/30/99 +7.08 +6.86
Ten Years Ended 9/30/99 +7.66 +7.56
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/99 -0.69% -1.63%
Five Years Ended 9/30/99 +6.53 +6.53
Inception (11/13/92)
through 9/30/99 +5.87 +5.87
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/99 -0.70% -1.63%
Inception (10/21/94)
through 9/30/99 +6.69 +6.69
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/99 -0.28% -1.28%
Inception (10/21/94)
through 9/30/99 +7.14 +6.92
[FN]
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Recent Performance Results*
Ten Years/
3 Month 12 Month Since Inception Standardized
As of September 30, 1999 Total Return Total Return Total Return 30-day Yield
Investment Grade Portfolio Class A Shares** +0.17% -1.70% +108.27% 6.49%
Investment Grade Portfolio Class B Shares** -0.02 -2.45 + 93.00 5.98
Investment Grade Portfolio Class C Shares** -0.13 -2.58 + 35.76 5.93
Investment Grade Portfolio Class D Shares** +0.02 -2.03 + 39.63 6.25
Intermediate Term Portfolio Class A Shares*** +0.60 -0.18 +109.29 6.40
Intermediate Term Portfolio Class B Shares*** +0.47 -0.69 + 48.08 5.94
Intermediate Term Portfolio Class C Shares*** +0.47 -0.70 + 37.69 5.94
Intermediate Term Portfolio Class D Shares*** +0.58 -0.28 + 40.61 6.30
*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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes Investment Grade Portfolio
US Government US Treasury Bonds and Notes:
Obligations--6.6% AAA Aaa $ 8,500,000 6% due 8/15/2004 $ 8,582,365
AAA Aaa 9,500,000 6.50% due 5/15/2005 9,725,625
AAA Aaa 1,500,000 5.875% due 11/15/2005 1,490,865
AAA Aaa 7,120,000 7% due 7/15/2006 7,478,207
AAA Aaa 33,350,000 6% due 8/15/2009 33,620,802
AAA Aaa 34,800,000 5.25% due 2/15/2029 30,455,568
--------------
91,353,432
Asset-Backed Aames Mortgage Trust:
Securities**-- AAA Aaa 15,000,000 6.46% due 5/15/2028 14,543,550
8.9% AAA Aaa 4,000,000 5.912% due 9/15/2028 3,966,560
NR* Aaa 5,000,000 Bear Stearns Commercial Mortgage Securities,
1999-WF2-A2, 7.08% due 6/15/2009 5,013,850
NR* Baa2 2,000,000 Bistro Trust 1998-1000, 6.58% due 3/26/2001 (b) 1,946,940
AAA Aaa 10,000,000 Citibank Credit Card Master Trust I, 5.639% due
12/10/2008 9,910,300
AAA Aaa 5,000,000 Contimortgage Home Equity Loan Trust, 5.84% due
5/15/2016 4,937,800
AA+ Aa3 3,700,000 Continental Airlines, 7.056% due 9/15/2009 3,583,931
NR* Aaa 5,000,000 DLJ Commercial Mortgage Corp., 6.46% due 1/10/2009 4,783,500
EQCC Home Equity Loan Trust:
AAA Aaa 760,000 6.229% due 3/15/2013 755,957
AAA Aaa 11,000,000 7.067% due 1/25/2025 11,015,468
A A3 9,000,000 First Dominion Funding I, 6.254% due 7/10/2013 (b) 8,482,500
AAA Aaa 12,000,000 IMC Home Equity Loan Trust, 6.36% due 8/20/2022 11,864,040
The Money Store Home Equity Trust:
AAA Aaa 7,429,690 6.04% due 8/15/2017 7,407,103
AAA Aaa 8,850,000 6.225% due 9/15/2023 8,726,808
Nationslink Funding Corporation:
AAA Aaa 7,300,000 6.476% due 7/20/2008 7,022,454
AAA Aaa 8,000,000 6.316% due 11/20/2008 7,581,840
NR* Aaa 12,000,000 Saxon Asset Securities Trust, 6.265% due 7/25/2023 11,806,680
--------------
123,349,281
Banking--9.9% BBB+ A3 12,000,000 BB&T Corporation, 6.375% due 6/30/2025 (a) 11,401,800
A+ Aa2 3,645,000 Continental Bank NA, 7.875% due 2/01/2003 3,756,719
A- A2 11,000,000 First Union Corporation, 6.30% due 4/15/2028 (a) 10,321,663
BBB+ a1 5,500,000 First Union Institution Capital I, 8.04% due 12/01/2026 5,324,330
BBB+ a2 4,750,000 Fleet Capital Trust II, 7.92% due 12/11/2026 4,561,805
BBB+ A3 11,200,000 Great Western Bank, 9.875% due 6/15/2001 11,742,192
BBB+ a2 14,000,000 HSBC Americas Capital Trust, 7.808% due 12/15/2026 (b) 12,754,518
A- A3 6,000,000 HSBC Americas Inc., 7% due 11/01/2006 5,901,540
A- A2 2,000,000 Key Bank NA, 7.55% due 9/15/2006 2,048,240
BBB+ A2 5,000,000 KeyCorp, 7.50% due 6/15/2006 5,050,650
BBB a1 16,400,000 KeyCorp Capital I, 6.089% due 7/01/2028 (a) 15,396,320
BBB+ Baa1 13,750,000 MBNA America Bank NA, 5.819% due 6/10/2004 (a) 13,615,525
A- a2 6,000,000 Mellon Capital I, 7.72% due 12/01/2026 5,666,760
A+ A2 3,500,000 Mellon Financial Co., 5.75% due 11/15/2003 3,348,940
Merita Bank Ltd.:
A- A2 6,435,000 6.50% due 1/15/2006 6,147,420
A- A2 4,250,000 6.50% due 4/01/2009 3,953,265
NationsBank NA:
A Aa3 1,300,000 6.50% due 8/15/2003 1,293,162
A+ Aa2 2,000,000 6.125% due 7/15/2004 1,949,220
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
Banking NationsBank NA (concluded):
(concluded) A Aa3 $ 1,000,000 7.75% due 8/15/2004 $ 1,040,740
A+ Aa2 7,750,000 6.375% due 5/15/2005 7,510,293
A A1 5,000,000 Norwest Corp., 6.625% due 3/15/2003 4,954,750
--------------
137,739,852
Canadian AA- Aa3 2,500,000 Province of Manitoba, 5.50% due 10/01/2008 (1) 2,290,350
Provinces++--0.7% Province of Quebec (1):
A+ A2 6,000,000 8.80% due 4/15/2003 6,426,180
A+ A2 1,500,000 7.125% due 2/09/2024 1,439,985
--------------
10,156,515
Finance--5.4% Associates Corporation of North America:
AA- Aa3 10,500,000 5.80% due 4/20/2004 10,078,425
AA- Aa3 500,000 7.40% due 5/15/2006 505,465
AA- Aa3 2,750,000 6.95% due 11/01/2018 2,572,350
A- aa3 5,950,000 CIT Capital Trust I, 7.70% due 2/15/2027 5,510,176
A+ Aa3 6,000,000 CIT Group Inc., 5.50% due 2/15/2004 5,629,080
BBB+ Baa1 6,000,000 Comdisco Inc., 6% due 1/30/2002 5,854,746
Commercial Credit Co.:
AA- Aa3 2,000,000 6.125% due 12/01/2005 1,914,860
AA- Aa3 6,800,000 6.75% due 7/01/2007 6,646,932
A- Baa1 7,850,000 Finova Capital Corp., 6.25% due 11/01/2002 7,707,051
BBB Baa3 12,680,000 Newcourt Credit Group, 6.875% due 2/16/2005 (b) 12,425,931
Providian National Bank:
BBB- Baa3 5,000,000 6.75% due 3/15/2002 4,912,650
BBB- Baa3 12,000,000 6.65% due 2/01/2004 11,511,360
--------------
75,269,026
Finance-- Bear Stearns Companies, Inc.:
Other--7.4% A A2 2,000,000 6.75% due 5/01/2001 2,005,240
A A2 3,000,000 6.875% due 10/01/2005 2,937,570
Citigroup Inc.:
AA- Aa2 3,000,000 9.50% due 3/01/2002 3,195,618
AA- Aa2 6,500,000 7.875% due 5/15/2025 6,545,474
A A2 7,500,000 Equitable Life Assurance Society of the US, 7.70% due
12/01/2015 (b) 7,511,205
A+ A1 1,000,000 Goldman Sachs Group Inc., 7.35% due 10/01/2009 998,750
A A2 7,000,000 HSBC Holdings PLC, 7.50% due 7/15/2009 6,993,623
BBB- Baa3 4,600,000 Hospitality Properties Trust, 7% due 3/01/2008 4,092,988
Lehman Brothers Holdings, Inc.:
A A3 4,000,000 6.50% due 10/01/2002 3,935,840
A A3 8,500,000 7.125% due 9/15/2003 8,481,215
A A3 6,000,000 6.625% due 2/05/2006 5,750,520
A A3 3,500,000 7.625% due 6/01/2006 3,523,555
A A3 3,500,000 7.20% due 8/15/2009 3,379,600
AA Aa2 3,950,000 MBIA, Inc., 7.15% due 7/15/2027 3,673,777
A+ Aa3 8,000,000 Morgan Stanley Dean Witter & Co., 6.09% due
3/09/2011 (a) 7,941,600
A+ Aa3 3,500,000 Morgan Stanley Group, 8.875% due 10/15/2001 3,656,870
BBB+ Baa1 3,250,000 Paine Webber Group Inc., 9.25% due 12/15/2001 3,404,798
A Aa3 10,000,000 Salomon Smith Barney Holdings, Inc., 7.125% due
10/01/2006 9,908,310
BBB+ Baa1 1,000,000 Simon Debartolo, 6.75% due 6/15/2005 941,340
BBB Baa2 6,605,000 Spieker Properties LP, 7.35% due 12/01/2017 5,942,789
BBB Baa3 9,700,000 Susa Partnership LP, 7.45% due 7/01/2018 8,442,133
--------------
103,262,815
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
Industrial-- Anheuser-Busch Companies Inc.:
Consumer A+ A1 $ 3,000,000 8.75% due 12/01/1999 $ 3,014,970
Goods--4.2% A+ A1 12,990,000 6.50% due 1/01/2028 11,499,657
A A2 10,000,000 Avon Products Inc., 6.25% due 5/01/2018 (a)(b) 9,863,760
BBB- Baa3 2,500,000 Flowers Industries Inc., 7.15% due 4/15/2028 2,088,750
Nabisco Inc.:
BBB Baa2 9,000,000 6% due 2/15/2011 (a) 8,894,790
BBB Baa2 4,000,000 7.55% due 6/15/2015 3,880,440
Phillip Morris Companies, Inc.:
A A2 9,500,000 9% due 1/01/2001 9,768,945
A A2 5,000,000 7.75% due 1/15/2027 4,867,650
BBB- Baa2 4,000,000 RJ Reynolds Tobacco Holdings, 7.75% due 5/15/2006 (b) 3,803,492
--------------
57,682,454
Industrial-- BBB+ Baa1 5,000,000 ANR Pipeline, 9.625% due 11/01/2021 5,913,950
Energy--3.7% BBB Baa1 8,000,000 Amerada Hess Corporation, 7.875% due 10/01/2029 7,900,320
AA+ Aa1 4,075,000 BP America Inc., 9.375% due 11/01/2000 4,210,698
A- A3 9,420,000 Burlington Resources, 7.375% due 3/01/2029 8,982,516
BBB- Baa3 3,000,000 CMS Panhandle Holding Company, 6.50% due 7/15/2009 2,786,436
BBB Baa2 3,500,000 Coastal Corp., 6.375% due 2/01/2009 3,233,184
A- A3 5,000,000 Murphy Oil Corporation, 7.05% due 5/01/2029 4,577,750
BBB Baa3 7,250,000 Occidental Petroleum Corp., 6.50% due 4/01/2005 6,959,275
A+ A1 5,750,000 Texaco Capital Inc., 8.625% due 11/15/2031 6,282,910
--------------
50,847,039
Industrial-- A- Baa1 3,500,000 The B.F. Goodrich Company, 7% due 4/15/2038 3,097,850
Manufacturing-- A+ A1 3,000,000 DaimlerChrysler NA Holdings, 7.20% due 9/01/2009 3,009,525
12.1% A+ A2 2,800,000 Danaher Corp., 6% due 10/15/2008 2,555,532
BBB- Baa3 4,700,000 Equistar Chemicals LP, 8.75% due 2/15/2009 (b) 4,664,882
First Data Corporation:
A A2 11,500,000 6.75% due 7/15/2005 11,280,580
A A2 10,000,000 6.375% due 12/15/2007 9,529,400
A A1 7,000,000 Ford Motor Company, 8.90% due 1/15/2032 8,086,400
Ford Motor Credit Company:
A A1 5,000,000 8.20% due 2/15/2002 5,174,800
A A1 5,000,000 8% due 6/15/2002 5,164,850
A A1 5,000,000 6.70% due 7/16/2004 4,971,900
A A1 1,000,000 7.75% due 3/15/2005 1,038,210
A A1 10,000,000 5.80% due 1/12/2009 9,085,300
General Electric Capital Corp.:
AAA Aaa 500,000 8.75% due 5/21/2007 554,100
AAA Aaa 4,305,000 8.50% due 7/24/2008 4,736,791
General Motors Acceptance Corp.:
A A2 4,000,000 6.625% due 9/19/2002 3,991,480
A A2 2,000,000 5.875% due 1/22/2003 1,948,160
A A2 8,170,000 7.125% due 5/01/2003 8,258,726
BBB- Baa2 2,000,000 Jones Apparel Group, 7.875% due 6/15/2006 (b) 1,993,034
BBB Baa2 5,000,000 Lockheed Martin Corp., 6.85% due 5/15/2001 5,005,200
BBB Baa2 11,000,000 Loral Corp., 8.375% due 6/15/2024 11,292,490
Martin Marietta Corp.:
BBB Baa1 6,500,000 6.50% due 4/15/2003 6,326,255
BBB Baa1 4,000,000 7.375% due 4/15/2013 3,830,000
BBB Baa2 6,875,000 Meritor Automotive Inc., 6.80% due 2/15/2009 6,361,781
A+ A1 7,050,000 Motorola Inc., 6.50% due 11/15/2028 6,153,875
A A1 3,900,000 PPG Industries Inc., 7.05% due 8/15/2009 3,881,237
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
Industrial-- Raytheon Co.:
Manufacturing BBB Baa1 $ 2,750,000 6.30% due 3/15/2005 $ 2,651,798
(concluded) BBB Baa1 4,000,000 7% due 11/01/2028 3,597,680
BBB Ba1 14,000,000 Seagate Technology Inc., 7.125% due 3/01/2004 13,172,880
BBB+ Baa1 6,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 6,052,440
BBB Baa2 5,000,000 Union Carbide Corp., 6.25% due 6/15/2003 4,899,200
A+ A2 5,000,000 United Technologies Corp., 6.50% due 6/01/2009 4,830,350
--------------
167,196,706
Industrial-- BBB- Baa3 10,000,000 Circus Circus Enterprises, Inc., 6.70% due 11/15/2096 9,361,100
Services--11.4% Comcast Cable Communications:
BBB Baa2 3,000,000 6.20% due 11/15/2008 2,744,820
BBB Baa2 7,700,000 8.875% due 5/01/2017 8,487,094
BBB Baa1 5,000,000 Dillard's Inc., 9.125% due 8/01/2011 5,448,300
A A2 12,417,716 Disney Custom Repackaged Asset Vehicle-403, 6.85% due
1/10/2007 (b)** 12,432,618
BBB- Baa3 5,000,000 J Seagram & Sons, 6.80% due 12/15/2008 4,731,300
AAA Aaa 7,000,000 Johnson & Johnson, 8.72% due 11/01/2024 7,635,040
BBB- Baa3 2,000,000 Kroger Company, 6.34% due 6/01/2001 (b) 1,988,164
A+ A1 8,470,000 May Department Stores Co., 6.70% due 9/15/2028 7,641,888
AAA Aaa 3,000,000 Merck & Co. Inc., 5.95% due 12/01/2028 2,550,390
BBB- Baa3 12,445,000 News America Holdings, Inc., 8.625% due 2/01/2003 12,981,877
A A2 5,750,000 Nordstrom, Inc., 6.95% due 3/15/2028 5,235,260
BBB- Baa3 5,000,000 Rite Aid Corp., 6.875% due 12/15/2028 (b) 3,921,475
BBB Baa3 12,500,000 Royal Caribbean Cruises Ltd., 6.75% due 3/15/2008 11,734,875
A- A2 8,000,000 Sears Roebuck Acceptance Corp., 6.82% due 10/17/2002 8,060,160
Service Corporation International:
BBB Baa2 7,000,000 6.75% due 6/01/2001 6,882,400
BBB Baa2 8,500,000 7.20% due 6/01/2006 7,904,830
AA- A2 8,980,000 TCI Communications Inc., 8.75% due 8/01/2015 10,025,272
BBB Baa2 6,000,000 Time Warner Entertainment Co., 10.15% due 5/01/2012 7,176,960
BBB Ba1 5,350,000 USA Waste Services, 6.50% due 12/15/2002 5,000,966
AA Aa2 14,345,000 Wal-Mart Stores, Inc., 8.50% due 9/15/2024 15,600,618
--------------
157,545,407
Industrial-- BBB+ Baa2 2,200,000 Burlington North Santa Fe, 6.75% due 3/15/2029 1,910,502
Transportation-- BBB Baa2 4,000,000 CSX Corp., 7.90% due 5/01/2017 4,023,400
3.4% Delta Airlines:
BBB- Baa3 4,144,000 10.125% due 5/15/2010 4,814,914
BBB- Baa3 6,000,000 9.75% due 5/15/2021 6,812,280
BBB Baa2 9,000,000 Federal Express Corporation, 9.65% due 6/15/2012 10,073,160
Southwest Airlines Co.:
A- A3 10,000,000 9.40% due 7/01/2001 10,434,100
A- A3 2,000,000 8% due 3/01/2005 2,058,780
A- A3 3,000,000 7.875% due 9/01/2007 3,094,800
BBB- Baa3 4,000,000 Union Pacific Corp., 6.625% due 2/01/2008 3,788,680
--------------
47,010,616
Mortgage-Backed Federal Home Loan Mortgage Corporation:
Securities**-- AAA Aaa 9,679,000 6% due 10/15/2018 9,579,113
1.0% AAA Aaa 2,000,000 6% due 6/15/2023 1,930,000
AAA Aaa 2,000,000 6.35% due 9/15/2023 1,954,360
--------------
13,463,473
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Investment Grade Portfolio
Utilities-- A- A2 $ 8,700,000 ALLTEL Corporation, 6.75% due 9/15/2005 $ 8,539,920
Communications-- AA- A1 6,000,000 AT&T Corporation, 6.50% due 3/15/2029 5,293,800
6.3% AA+ Aa3 6,000,000 Ameritech Capital Funding, 6.45% due 1/15/2018 5,469,600
AA Aa2 6,350,000 Bell Telephone Company of Pennsylvania, 7.375%
due 7/15/2007 6,506,972
BB Ba2 4,650,000 Frontier Corp., 6% due 10/15/2013 (a) 4,354,120
AA- A2 9,500,000 GTE California, Inc., 8.07% due 4/15/2024 9,439,675
GTE Corp.:
A Baa1 7,500,000 9.375% due 12/01/2000 7,758,825
A Baa1 3,600,000 6.84% due 4/15/2018 3,386,844
A- A3 5,000,000 MCI WorldCom Inc., 7.75% due 4/01/2007 5,220,050
AA Aa2 5,000,000 Southwestern Bell Telecommunications Corp., 6.375%
due 11/15/2007 4,829,000
Sprint Capital Corporation:
BBB+ Baa1 5,000,000 5.70% due 11/15/2003 4,774,600
BBB+ Baa1 6,000,000 6.125% due 11/15/2008 5,578,740
BBB+ Baa1 8,000,000 6.90% due 5/01/2019 7,409,200
US West Capital Funding Inc.:
A- Baa1 4,000,000 6.375% due 7/15/2008 3,743,680
A- Baa1 5,000,000 6.875% due 7/15/2028 4,432,700
--------------
86,737,726
Utilities-- AAA Aaa 5,850,000 Cleveland Electric/Toledo Edison, 7.13% due 7/01/2007 5,760,202
Electric--5.4% BBB Baa2 5,000,000 Commonwealth Edison, Inc., 6.95% due 7/15/2018 4,529,750
BBB+ Baa1 2,000,000 Conectiv Inc., 6.73% due 6/01/2006 1,977,540
A+ A1 9,115,000 Consolidated Edison, Inc., 6.25% due 2/01/2008 8,652,596
BBB+ Baa3 5,000,000 Consumers Energy, 6.375% due 2/01/2008 4,626,585
A- A2 5,000,000 Edison International Inc., 6.875% due 9/15/2004 4,970,800
AA- A1 6,000,000 PG&E Corp., 6.25% due 8/01/2003 5,915,460
A- A3 3,000,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 2,996,430
AA- A1 5,000,000 TECO Energy, Inc., 9.27% due 6/12/2000 5,104,450
BBB- baa1 5,000,000 TXU Electric Capital V, 8.175% due 1/30/2037 4,799,750
Texas Utilities Company:
AAA Aaa 6,971,000 6.375% due 10/01/2004 6,838,879
BBB Baa3 6,000,000 5.94% due 10/15/2011 (a) 5,915,820
Virginia Electric & Power Co.:
A- A3 5,000,000 5.73% due 11/25/2008 4,572,705
A A2 8,500,000 8.625% due 10/01/2024 8,697,795
--------------
75,358,762
Yankee AmVescap PLC (2):
Corporates++-- BBB A3 3,000,000 6.375% due 5/15/2003 2,919,660
9.9% BBB A3 9,000,000 6.60% due 5/15/2005 8,596,260
A+ A1 6,000,000 Australia & New Zealand Banking Group Ltd., 7.55% due
9/15/2006 (2) 6,045,900
A A1 3,000,000 Banco Central Hispanoamercano SA (Cayman Islands),
7.70% due 7/15/2006 (2) 3,014,220
AAA Aaa 13,000,000 Banco Santander-Chile, 6.50% due 11/01/2005 (2) 12,411,828
A- Baa1 5,000,000 Cable & Wireless Communication, 6.75% due 3/06/2008 (3) 5,065,700
BBB Baa2 9,050,000 Canadian National Railway Co., 6.90% due 7/15/2028 (3) 7,955,402
A- Baa1 4,000,000 Enersis SA, 6.60% due 12/01/2026 (3) 3,743,080
Fairfax Financial Holdings Ltd. (2):
BBB+ Baa3 2,000,000 7.375% due 3/15/2006 1,829,084
BBB+ Baa3 300,000 7.375% due 4/15/2018 239,793
BBB+ Baa3 9,800,000 7.75% due 7/15/2037 (b) 7,997,682
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (concluded) Investment Grade Portfolio
Yankee Ford Capital BV (2):
Corporates A A1 $10,000,000 9.875% due 5/15/2002 $ 10,759,600
(concluded) A A1 3,995,000 9.50% due 6/01/2010 4,607,394
A- A3 8,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (3)(b) 7,924,128
BBB+ A3 1,500,000 Koninklijke (Royal) Philips Electronics NV, 7.75% due
4/15/2004 (3) 1,521,375
Korea Development Bank (2):
BBB- Baa3 7,000,000 7.125% due 4/22/2004 6,785,345
BBB- Baa3 8,000,000 7.375% due 9/17/2004 7,715,200
A Aa3 2,000,000 Midland Bank PLC, 7.65% due 5/01/2025 (2) 2,001,760
A A2 6,500,000 Norsk Hydro A/S, 6.70% due 1/15/2018 (3) 5,779,865
BBB Baa3 5,443,000 Petro Geo-Services ASA, 7.125% due 3/30/2028 (3) 4,826,798
A A3 2,000,000 Saga Petroleum ASA, 7.25% due 9/23/2027 (3) 1,836,780
A+ Aa3 4,000,000 Sony Corporation, 6.125% due 3/04/2003 (3) 3,955,720
BBB Baa2 3,000,000 Telecom de Puerto Rico, 6.15% due 5/15/2002 (3)(b) 2,943,726
A- A2 6,000,000 Trans-Canada Pipelines, 7.70% due 6/15/2029 (3) 5,887,830
A- Baa1 10,500,000 Tyco International Group SA, 7% due 6/15/2028 (3) 9,572,220
A A2 2,000,000 WMC Finance (USA) Ltd., 6.75% due 12/01/2006 (2) 1,916,880
--------------
137,853,230
Yankee BBB A3 4,000,000 People's Republic of China, 7.30% due 12/15/2008 (1) 3,842,020
Sovereign++--0.3%
Total Investments in Bonds & Notes (Cost--
$1,392,407,207)--96.6% 1,338,668,354
Short-Term Securities
Repurchase 31,925,000 Warburg Dillon Read LLC, purchased on 9/30/1999
Agreements***--2.3% to yield 5.32% to 10/01/1999 31,925,000
Total Investments in Short-Term Securities
(Cost $31,925,000)--2.3% 31,925,000
Total Investments (Cost--$1,424,332,207)--98.9% 1,370,593,354
Other Assets Less Liabilities--1.1% 15,691,906
--------------
Net Assets--100.0% $1,386,285,260
==============
*Not Rated.
**Subject to principal paydowns.
***Repurchase Agreements are fully collateralized by US Government &
Agency Obligations.
++Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
(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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes Intermediate Term Portfolio
US Government US Treasury Notes:
Obligations--5.5% AAA Aaa $ 1,000,000 5.75% due 11/30/2002 $ 999,370
AAA Aaa 2,500,000 6% due 8/15/2004 2,524,225
AAA Aaa 7,390,000 7% due 7/15/2006 7,761,791
AAA Aaa 100,000 5.625% due 5/15/2008 97,062
AAA Aaa 14,000,000 6% due 8/15/2009 14,113,680
--------------
25,496,128
Asset-Backed NR* Baa2 3,500,000 Bistro Trust 1998-1000, 6.58% due 3/26/2001 (b) 3,407,145
Securities++-- AAA NR* 2,772,344 DLJ Commercial Mortgage Corp., 6.11% due 12/10/2007 2,680,690
8.0% AAA Aaa 2,000,000 First Bank, Corporate Card Master Trust, 6.40%
due 2/15/2003 1,988,120
AAA Aaa 10,000,000 Honda Auto Lease Trust Series 1999-A, Class A5, 6.65%
due 7/15/2005 10,118,500
AAA Aaa 9,588,396 NationsLink Funding Corporation, 1999-1-A1, 6.042%
due 11/20/2007 9,258,651
NR* NR* 10,000,000 Spinnaker I, 6.40% due 5/01/2001 (a) 9,800,000
--------------
37,253,106
Banking-- A A2 3,500,000 Bank of New York Co., Inc., 7.875% due 11/15/2002 3,627,610
11.0% A+ Aa3 5,000,000 Bank One Corp., 5.625% due 2/17/2004 4,767,500
BankAmerica Corp.:
A Aa3 4,000,000 7.50% due 10/15/2002 4,087,080
A+ Aa2 3,000,000 7.125% due 5/12/2005 3,009,150
A- A3 2,000,000 HSBC Americas Inc., 7% due 11/01/2006 1,967,180
A- A2 2,800,000 Key Bank NA, 7.55% due 9/15/2006 2,867,536
A A3 6,000,000 Mellon Financial Co., 6.875% due 3/01/2003 5,981,880
Merita Bank, Ltd.:
A- A2 1,000,000 6.50% due 1/15/2006 955,310
A- A2 4,500,000 6.50% due 4/01/2009 4,185,810
A+ Aa2 4,500,000 NationsBank Corp., 6.65% due 4/09/2002 4,505,130
A A1 1,000,000 Norwest Corp., 6.625% due 3/15/2003 990,950
A A2 3,750,000 Republic of New York Corp., 9.70% due 2/01/2009 4,297,875
Washington Mutual Inc.:
BBB+ A3 9,000,000 7.25% due 8/15/2005 8,973,900
BBB+ A3 1,000,000 7.50% due 8/15/2006 1,003,440
--------------
51,220,351
Canadian AA- Aa3 5,000,000 Province of Ontario, 7.75% due 6/04/2002 (1) 5,159,600
Provinces***-- A+ A2 5,000,000 Province of Quebec, 8.80% due 4/15/2003 (1) 5,355,150
2.3% --------------
10,514,750
Finance--5.7% American General Finance:
A+ A2 2,200,000 7.45% due 7/01/2002 2,239,534
A+ A2 2,400,000 7.25% due 5/15/2005 2,421,552
AA- Aa3 3,500,000 Associates Corporation of North America, 5.80%
due 4/20/2004 3,359,475
A+ Aa3 3,000,000 CIT Group Inc., 5.50% due 2/15/2004 2,814,540
AA- Aa3 2,080,000 Commercial Credit Co., 6.75% due 7/01/2007 2,033,179
A- Baa1 2,500,000 Finova Capital Corp., 7.25% due 7/12/2006 2,491,200
AAA Aaa 5,500,000 General Electric Capital Corp., 8.50% due 7/24/2008 6,051,650
BBB- Baa3 5,000,000 Providian National Bank, 6.75% due 3/15/2002 4,912,650
--------------
26,323,780
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
Finance-- BBB+ Baa1 $ 5,000,000 Avalonbay Communities, 7.50% due 8/01/2009 $ 4,826,700
Other--8.4% A A2 1,750,000 Bear Stearns Companies, Inc., 8.75% due 3/15/2004 1,862,472
AA- Aa2 2,000,000 Citigroup Inc., 9.50% due 3/01/2002 2,130,412
A- A3 2,000,000 Donaldson Lufkin & Jenrette Inc., 6% due 12/01/2001 1,969,280
A+ A1 1,000,000 Goldman Sachs Group Inc., 7.35% due 10/01/2009 998,750
BBB- Baa3 4,250,000 Hospitality Properties Trust, 7% due 3/01/2008 3,781,565
Lehman Brothers Holdings, Inc.:
A A3 5,000,000 7.625% due 6/01/2006 5,033,650
A A3 5,000,000 6.625% due 2/15/2008 4,693,100
A+ Aa3 1,400,000 Morgan Stanley & Company, 5.625% due 1/20/2004 1,337,644
BBB Baa3 3,000,000 Newcourt Credit Group, 6.875% due 2/16/2005 (b) 2,939,889
BBB+ Baa1 2,000,000 Paine Webber Group Inc., 6.45% due 12/01/2003 1,947,918
Salomon Smith Barney Holdings, Inc.:
A Aa3 2,500,000 6.25% due 1/15/2005 2,412,853
A Aa3 1,400,000 7.125% due 10/01/2006 1,387,163
BBB+ Baa1 4,000,000 Simon Debartolo, 6.75% due 6/15/2005 3,765,360
--------------
39,086,756
Industrial-- A A2 2,000,000 Avon Products Inc., 6.25% due 5/01/2018 (a)(b) 1,972,752
Consumer Nabisco Inc.:
Goods--4.4% BBB Baa2 3,000,000 6.85% due 6/15/2005 2,919,180
BBB Baa2 6,000,000 6% due 2/15/2011 (a) 5,929,860
Phillip Morris Companies, Inc.:
A A2 3,500,000 9% due 1/01/2001 3,599,085
A A2 4,000,000 7.25% due 1/15/2003 4,032,760
BBB- Baa2 2,000,000 RJ Reynolds Tobacco Holdings, 7.75% due 5/15/2006 (b) 1,901,746
--------------
20,355,383
Industrial-- BBB Baa1 3,000,000 Amerada Hess Corporation, 7.375% due 10/01/2009 2,986,410
Energy--4.1% BBB Baa3 3,000,000 Occidental Petroleum Corp., 6.50% due 4/01/2005 2,879,700
A+ A1 2,000,000 Texaco Capital Inc., 9% due 12/15/1999 2,013,260
BBB Baa2 6,000,000 Ultramar Credit, 8.625% due 7/01/2002 6,176,460
BBB- Baa3 5,000,000 Valero Energy Corporation, 7.375% due 3/15/2006 4,746,400
--------------
18,802,230
Industrial-- A A2 3,000,000 AlliedSignal Inc., 6.20% due 2/01/2008 2,805,780
Manufacturing-- B B2 3,000,000 Blount Inc., 7% due 6/15/2005 2,527,500
13.1% A+ A1 1,000,000 DaimlerChrysler NA Holdings, 7.20% due 9/01/2009 1,003,175
A+ A2 1,500,000 Danaher Corp., 6% due 10/15/2008 1,369,035
BBB- Baa3 2,000,000 Equistar Chemicals LP, 8.75% due 2/15/2009 (b) 1,985,056
Ford Motor Credit Company:
A A1 3,000,000 8.20% due 2/15/2002 3,104,880
A A1 2,700,000 5.596% due 8/27/2006 (a) 2,695,032
General Motors Acceptance Corp.:
A A2 2,000,000 9% due 10/15/2002 2,123,060
A A2 6,000,000 8.50% due 1/01/2003 6,301,980
A A2 5,000,000 5.85% due 1/14/2009 4,611,450
BBB- Baa2 2,000,000 Jones Apparel Group, 7.875% due 6/15/2006 (b) 1,993,034
BBB Baa2 3,000,000 Lockheed Martin Corp., 7.70% due 6/15/2008 3,018,990
A A1 3,000,000 PPG Industries Inc., 7.05% due 8/15/2009 2,985,567
BBB Baa1 5,000,000 Raytheon Co., 6.45% due 8/15/2002 4,952,350
BBB Ba1 4,000,000 Seagate Technology Inc., 7.125% due 3/01/2004 3,763,680
BBB+ Baa1 2,000,000 Sun Microsystems Inc., 7.50% due 8/15/2006 2,017,480
A A2 3,000,000 Textron Inc., 6.375% due 7/15/2004 2,952,600
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (continued) Intermediate Term Portfolio
Industrial-- BBB Baa2 $ 4,000,000 Union Carbide Corp., 6.70% due 4/01/2009 $ 3,837,908
Manufacturing A+ A2 4,000,000 United Technologies Corp., 6.50% due 6/01/2009 3,864,280
(concluded) A A2 3,000,000 Xerox Corporation, 6.25% due 11/15/2003 2,944,230
--------------
60,857,067
Industrial-- BBB Baa2 4,000,000 Comcast Cable Communications, 8.375% due 5/01/2007 4,187,716
Services-- BBB+ Baa1 4,000,000 Computer Associates International, 6.25% due 4/15/2003 3,856,560
12.6% A A2 2,800,000 Computer Sciences Corp., 6.25% due 3/15/2009 2,643,035
BBB+ Baa2 2,500,000 Cox Communications Inc., 7.75% due 8/15/2006 2,551,797
A- A3 1,000,000 Dayton Hudson Corp., 6.40% due 2/15/2003 988,510
BBB Baa1 8,500,000 Dillard's, Inc., 6.08% due 8/01/2010 (a) 8,476,625
A A2 4,071,383 Disney Custom Repackaged Asset Vehicle-403, 6.85% due
1/10/2007 (b)++ 4,076,268
BBB Baa3 5,000,000 HEALTHSOUTH Corp., 7% due 6/15/2008 4,231,880
A- A3 4,000,000 Hertz Corporation, 7.625% due 8/15/2007 4,052,880
A+ A1 1,275,000 May Department Stores Co., 9.875% due 12/01/2002 1,392,326
BBB- Baa3 4,000,000 News America Holdings, Inc., 8.625% due 2/01/2003 4,172,560
BBB Baa2 5,000,000 Nielsen Media Research, 7.60% due 6/15/2009 5,000,530
BB+ Baa3 5,000,000 Saks Incorporated, 7% due 7/15/2004 4,800,700
BBB Baa2 1,000,000 Service Corporation International, 6.75% due 6/01/2001 983,200
AA- A2 3,000,000 TCI Communications Inc., 8.65% due 9/15/2004 3,228,900
BBB Baa2 2,500,000 Time Warner Entertainment Co., 9.625% due 5/01/2002 2,654,175
BBB Ba1 1,000,000 USA Waste Services Inc., 6.125% due 7/15/2001 (a) 958,775
--------------
58,256,437
Industrial-- Southwest Airlines Co.:
Transportation-- A- A3 6,500,000 9.40% due 7/01/2001 6,782,165
1.9% A- A3 1,000,000 8% due 3/01/2005 1,029,390
BBB- Baa3 1,000,000 Union Pacific Corp., 6.625% due 2/01/2008 947,170
--------------
8,758,725
Utilities-- A A2 5,000,000 360 Communications Co., 7.50% due 3/01/2006 5,085,900
Communications-- A- A2 4,000,000 ALLTEL Corporation, 6.75% due 9/15/2005 3,926,400
4.5% AA Aa2 2,500,000 Bell Telephone Company of Pennsylvania, 7.375%
due 7/15/2007 2,561,800
BB Ba2 3,000,000 Frontier Corp., 6% due 10/15/2013 (a) 2,809,110
A Baa1 1,000,000 GTE Corp., 9.375% due 12/01/2000 1,034,510
AA Aa2 2,200,000 Southwestern Bell Telecommunications Corp., 6.625% due
4/01/2005 2,188,142
BBB+ Baa1 500,000 Sprint Capital Corporation, 5.70% due 11/15/2003 477,460
A- Baa1 3,000,000 US West Capital Funding Inc., 6.375% due 7/15/2008 2,807,760
--------------
20,891,082
Utilities-- A A3 500,000 Central Power & Light Co., 6.625% due 7/01/2005 487,610
Electric-- AAA Aaa 3,000,000 Cleveland Electric/Toledo Edison, 7.13% due 7/01/2007 2,953,950
4.3% AAA Aaa 5,000,000 Commonwealth Edison Inc., 8.25% due 10/01/2006 5,299,060
BBB+ Baa1 1,000,000 Conectiv Inc., 6.73% due 6/01/2006 988,770
A- A2 3,000,000 Edison International Inc., 6.875% due 9/15/2004 2,982,480
BBB- Baa3 3,900,000 Niagra Mohawk Power Corp., 7.75% due 10/01/2008 3,965,091
AA- A1 500,000 PG&E Corp., 6.25% due 8/01/2003 492,955
A- A3 1,000,000 Pennsylvania Power & Light Co., 6.125% due 5/01/2006 (a) 998,810
BBB Baa3 2,000,000 Texas Utilities Company, 5.94% due 10/15/2011 (a) 1,971,940
--------------
20,140,666
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Value
Industries Rating Rating Amount Issue (Note 1a)
Bonds & Notes (concluded) Intermediate Term Portfolio
Yankee BBB- Baa3 $ 3,000,000 Abitibi Consolidated Financial, 7.875% due
Corporates***-- 8/01/2009 (3) $ 2,966,364
11.1% AmVescap PLC (2):
BBB A3 2,000,000 6.375% due 5/15/2003 1,946,440
BBB A3 2,000,000 6.60% due 5/15/2005 1,910,280
A A1 2,000,000 Banco Central Hispanoamercano SA (Cayman Islands),
7.70% due 7/15/2006 (2) 2,009,480
AAA Aaa 1,000,000 Banco Santander-Chile, 6.50% due 11/01/2005 (2) 954,756
BBB+ Baa3 3,000,000 Fairfax Financial Holdings Ltd., 7.375% due
3/15/2006 (2) 2,743,626
A A1 2,000,000 Ford Capital BV, 9.875% due 5/15/2002 (2) 2,151,920
BBB- Ba1 3,000,000 Gruma, SA de CV, 7.625% due 10/15/2007 (3) 2,632,500
AAA Aaa 2,000,000 International Bank for Reconstruction & Development,
5.625% due 3/17/2003 (2) 1,960,700
A- A3 10,000,000 Israel Electric Corp. Ltd., 7.75% due 3/01/2009 (b)(3) 9,905,160
BBB+ A3 2,650,000 Koninklijke (Royal) Philips Electronics NV, 7.75% due
4/15/2004 (3) 2,687,763
BBB- Baa3 3,000,000 Korea Electric Power Corp., 8% due 7/01/2002 (3) 2,969,280
A- A3 6,000,000 MCI Worldcom Inc., 6.125% due 8/15/2001 (3) 5,965,860
A- A2 5,000,000 Trans-Canada Pipelines, 6.43% due 3/15/2029 (3) 4,888,150
A A2 6,000,000 WMC Finance (USA) Ltd., 6.75% due 12/01/2006 (2) 5,750,640
--------------
51,442,919
Yankee BBB A3 1,500,000 People's Republic of China, 7.30% due 12/15/2008 (1) 1,440,758
Sovereign***--
0.3%
Total Investments in Bonds &Notes
(Cost--$464,000,813)--97.2% 450,840,138
Short-Term Securities
Repurchase 8,523,000 Warburg Dillon Read LLC, purchased on 9/30/1999 to
Agreements**-- yield 5.32% to 10/01/1999 8,523,000
1.9%
Total Investments in Short-Term Securities
(Cost--$8,523,000)--1.9% 8,523,000
Total Investments (Cost--$472,523,813)--99.1% 459,363,138
Other Assets Less Liabilities--0.9% 4,331,465
--------------
Net Assets--100.0% $ 463,694,603
==============
*Not Rated.
**Repurchase Agreements are fully collateralized by US Government
& Agency Obligations.
***Corresponding industry groups for foreign securities, which are
denominated in US dollars:
(1)Government Entity.
(2)Financial Institution.
(3)Industrial.
(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.
++Subject to principal paydowns.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION
Statements of Assets and Liabilities as of September 30, 1999
Investment Intermediate
Grade Portfolio Term Portfolio
Assets: Investments, at value* (Note 1a) $1,370,593,354 $ 459,363,138
Cash 136,629 120,309
Receivables:
Interest 24,017,014 7,689,664
Securities sold 18,911,120 6,398,848
Capital shares sold 2,028,999 906,975
Loaned securities (Note 5) 4,829 841
Prepaid registration fees and other assets (Note 1f) 33,448 17,560
-------------- --------------
Total assets 1,415,725,393 474,497,335
-------------- --------------
Liabilities: Payables:
Securities purchased 18,928,857 6,079,493
Capital shares redeemed 6,102,411 2,831,787
Dividends to shareholders (Note 1g) 3,237,449 1,067,279
Distributor (Note 2) 477,161 80,264
Investment adviser (Note 2) 55,157 18,460
Accrued expenses and other liabilities 639,098 725,449
-------------- --------------
Total liabilities 29,440,133 10,802,732
-------------- --------------
Net Assets: Net assets $1,386,285,260 $ 463,694,603
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 4,920,557 $ 1,450,282
Consist of: Class B Common Stock, $.10 par value++++ 5,848,410 1,460,091
Class C Common Stock, $.10 par value++++++ 731,383 35,137
Class D Common Stock, $.10 par value++++++++ 1,244,139 1,228,331
Paid-in capital in excess of par 1,471,933,354 485,407,286
Accumulated realized capital losses on investments--net
(Note 6) (25,147,549) (10,981,136)
Accumulated distributions in excess of realized capital
gains on investments--net (Note 1g) (19,506,181) (1,744,713)
Unrealized depreciation on investments--net (53,738,853) (13,160,675)
-------------- --------------
Net assets $1,386,285,260 $ 463,694,603
============== ==============
Net Asset Class A: Net assets $ 535,188,373 $ 161,112,984
Value: ============== ==============
Shares outstanding 49,205,566 14,502,819
============== ==============
Net asset value and redemption price per share $ 10.88 $ 11.11
============== ==============
Class B: Net assets $ 636,114,587 $ 162,211,432
============== ==============
Shares outstanding 58,484,102 14,600,911
============== ==============
Net asset value and redemption price per share $ 10.88 $ 11.11
============== ==============
Class C: Net assets $ 79,581,337 $ 3,903,573
============== ==============
Shares outstanding 7,313,833 351,369
============== ==============
Net asset value and redemption price per share $ 10.88 $ 11.11
============== ==============
Class D: Net assets $ 135,400,963 $ 136,466,614
============== ==============
Shares outstanding 12,441,386 12,283,313
============== ==============
Net asset value and redemption price per share $ 10.88 $ 11.11
============== ==============
*Identified cost $1,424,332,207 $ 472,523,813
============== ==============
++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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Statements of Operations for the Year Ended September 30, 1999
Investment Intermediate
Grade Term
Portfolio Portfolio
Investment Interest and discount earned $ 103,123,892 $ 33,748,142
Income Other 181,452 33,299
(Note 1e): -------------- --------------
Total income 103,305,344 33,781,441
-------------- --------------
Expenses: Investment advisory fees (Note 2) 5,480,662 1,779,743
Account maintenance and distribution fees--Class B (Note 2) 5,370,649 900,105
Transfer agent fees--Class B (Note 2) 1,328,354 599,363
Transfer agent fees--Class A (Note 2) 988,501 569,361
Account maintenance and distribution fees--Class C (Note 2) 695,862 25,237
Transfer agent fees--Class D (Note 2) 226,802 423,480
Account maintenance fees--Class D (Note 2) 333,150 130,881
Registration fees (Note 1f) 116,949 81,135
Transfer agent fees--Class C (Note 2) 165,046 16,845
Printing and shareholder reports 134,415 44,875
Accounting services (Note 2) 133,078 45,616
Custodian fees 85,122 41,010
Professional fees 43,099 17,418
Pricing fees 18,366 10,743
Directors' fees and expenses 7,008 2,419
Other 12,470 4,958
-------------- --------------
Total expenses 15,139,533 4,693,189
-------------- --------------
Investment income--net 88,165,811 29,088,252
-------------- --------------
Realized & Realized loss on investments--net (18,307,068) (5,110,689)
Unrealized Change in unrealized appreciation/depreciation on
Loss on investments--net (103,169,694) (26,026,481)
Investments--Net -------------- --------------
(Notes 1c, Net Decrease in Net Assets Resulting from Operations $ (33,310,951) $ (2,048,918)
1e & 3): ============== ==============
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets Investment Grade Portfolio
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1999 1998
Operations: Investment income--net $ 88,165,811 $ 75,133,001
Realized gain (loss) on investments--net (18,307,068) 12,258,526
Change in unrealized appreciation/depreciation on
investments--net (103,169,694) 32,346,813
-------------- --------------
Net increase (decrease) in net assets resulting from operations (33,310,951) 119,738,340
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (36,365,681) (34,390,305)
(Note 1g): Class B (39,073,573) (32,213,539)
Class C (4,752,280) (3,047,800)
Class D (7,974,277) (5,481,357)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (88,165,811) (75,133,001)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 21,096,414 217,046,843
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (100,380,348) 261,652,182
Beginning of year 1,486,665,608 1,225,013,426
-------------- --------------
End of year $1,386,285,260 $1,486,665,608
============== ==============
See Notes to Financial Statements.
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
For the Year Ended
September 30,
Increase (Decrease) in Net Assets: 1999 1998
Operations: Investment income--net $ 29,088,252 $ 26,075,215
Realized gain (loss) on investments--net (5,110,689) 3,775,926
Change in unrealized appreciation/depreciation on
investments--net (26,026,481) 9,218,836
-------------- --------------
Net increase (decrease) in net assets resulting from operations (2,048,918) 39,069,977
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (10,897,908) (11,720,141)
(Note 1g): Class B (10,046,366) (8,877,407)
Class C (281,121) (120,517)
Class D (7,862,857) (5,357,150)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (29,088,252) (26,075,215)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 4,562,908 84,105,026
(Note 4): -------------- --------------
Net Assets: Total increase (decrease) in net assets (26,574,262) 97,099,788
Beginning of year 490,268,865 393,169,077
-------------- --------------
End of year $ 463,694,603 $ 490,268,865
============== ==============
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights Investment Grade Portfolio
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of year $ 11.78 $ 11.40 $ 11.16 $ 11.51 $ 10.77
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .70 .73 .76 .76 .80
Realized and unrealized gain (loss) on
investments--net (.90) .38 .24 (.35) .74
-------- -------- -------- -------- --------
Total from investment operations (.20) 1.11 1.00 .41 1.54
-------- -------- -------- -------- --------
Less dividends from investment income--net (.70) (.73) (.76) (.76) (.80)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (1.70%) 10.05% 9.22% 3.60% 14.93%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .57% .58% .57% .56% .58%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 6.22% 6.32% 6.73% 6.64% 7.30%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $535,188 $600,655 $519,708 $608,901 $472,388
Data: ======== ======== ======== ======== ========
Portfolio turnover 79.06% 149.41% 113.46% 88.53% 108.07%
======== ======== ======== ======== ========
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of year $ 11.78 $ 11.40 $ 11.16 $ 11.51 $ 10.77
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .61 .64 .67 .67 .72
Realized and unrealized gain (loss) on
investments--net (.90) .38 .24 (.35) .74
-------- -------- -------- -------- --------
Total from investment operations (.29) 1.02 .91 .32 1.46
-------- -------- -------- -------- --------
Less dividends from investment income--net (.61) (.64) (.67) (.67) (.72)
-------- -------- -------- -------- --------
Net asset value, end of year $ 10.88 $ 11.78 $ 11.40 $ 11.16 $ 11.51
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (2.45%) 9.21% 8.39% 2.81% 14.04%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses 1.33% 1.34% 1.34% 1.32% 1.35%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.46% 5.56% 5.96% 5.88% 6.52%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $636,115 $685,345 $577,989 $724,089 $631,517
Data: ======== ======== ======== ======== ========
Portfolio turnover 79.06% 149.41% 113.46% 88.53% 108.07%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued) Investment Grade Portfolio
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of period $ 11.79 $ 11.40 $ 11.17 $ 11.51 $ 10.67
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .61 .63 .67 .66 .67
Realized and unrealized gain (loss) on
investments--net (.91) .39 .23 (.34) .84
-------- -------- -------- -------- --------
Total from investment operations (.30) 1.02 .90 .32 1.51
-------- -------- -------- -------- --------
Less dividends from investment
income--net (.61) (.63) (.67) (.66) (.67)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.88 $ 11.79 $ 11.40 $ 11.17 $ 11.51
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (2.58%) 9.25% 8.23% 2.85% 14.60%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.38% 1.40% 1.39% 1.38% 1.40%*
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.41% 5.50% 5.91% 5.83% 6.27%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 79,581 $ 77,464 $ 49,918 $ 64,931 $ 25,778
Data: ======== ======== ======== ======== ========
Portfolio turnover 79.06% 149.41% 113.46% 88.53% 108.07%
======== ======== ======== ======== ========
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of period $ 11.79 $ 11.41 $ 11.17 $ 11.51 $ 10.67
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .67 .70 .73 .73 .73
Realized and unrealized gain (loss) on
investments--net (.91) .38 .24 (.34) .84
-------- -------- -------- -------- --------
Total from investment operations (.24) 1.08 .97 .39 1.57
-------- -------- -------- -------- --------
Less dividends from investment
income--net (.67) (.70) (.73) (.73) (.73)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.88 $ 11.79 $ 11.41 $ 11.17 $ 11.51
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (2.03%) 9.77% 8.95% 3.43% 15.22%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses .82% .82% .82% .81% .83%*
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.98% 6.07% 6.47% 6.40% 6.91%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $135,401 $123,202 $ 77,398 $ 63,822 $ 25,153
Data: ======== ======== ======== ======== ========
Portfolio turnover 79.06% 149.41% 113.46% 88.53% 108.07%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (continued)
Financial Highlights (continued) Intermediate Term Portfolio
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of year $ 11.83 $ 11.49 $ 11.28 $ 11.50 $ 10.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .70 .73 .73 .73 .79
Realized and unrealized gain (loss) on
investments--net (.72) .34 .21 (.22) .60
-------- -------- -------- -------- --------
Total from investment operations (.02) 1.07 .94 .51 1.39
-------- -------- -------- -------- --------
Less dividends from investment income--net (.70) (.73) (.73) (.73) (.79)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.18%) 9.59% 8.59% 4.56% 13.33%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses .73% .67% .65% .59% .59%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 6.09% 6.27% 6.43% 6.41% 7.14%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $161,113 $200,679 $179,115 $216,545 $217,714
Data: ======== ======== ======== ======== ========
Portfolio turnover 113.52% 111.03% 76.99% 96.40% 142.84%
======== ======== ======== ======== ========
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of year $ 11.83 $ 11.50 $ 11.28 $ 11.50 $ 10.90
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .64 .67 .67 .67 .74
Realized and unrealized gain (loss) on
investments--net (.72) .33 .22 (.22) .60
-------- -------- -------- -------- --------
Total from investment operations (.08) 1.00 .89 .45 1.34
-------- -------- -------- -------- --------
Less dividends from investment income--net (.64) (.67) (.67) (.67) (.74)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.69%) 8.94% 8.13% 4.02% 12.73%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses 1.24% 1.18% 1.17% 1.11% 1.11%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.58% 5.75% 5.91% 5.89% 6.61%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $162,211 $178,464 $148,148 $216,641 $212,146
Data: ======== ======== ======== ======== ========
Portfolio turnover 113.52% 111.03% 76.99% 96.40% 142.84%
======== ======== ======== ======== ========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded) Intermediate Term Portfolio
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of period $ 11.83 $ 11.49 $ 11.28 $ 11.50 $ 10.81
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .64 .67 .67 .67 .70
Realized and unrealized gain (loss) on
investments--net (.72) .34 .21 (.22) .69
-------- -------- -------- -------- --------
Total from investment operations (.08) 1.01 .88 .45 1.39
-------- -------- -------- -------- --------
Less dividends from investment income--net (.64) (.67) (.67) (.67) (.70)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.11 $ 11.83 $ 11.49 $ 11.28 $ 11.50
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.70%) 9.03% 7.99% 3.99% 13.25%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.24% 1.20% 1.20% 1.15% 1.14%*
Net Assets: ======== ======== ======== ======== ========
Investment income--net 5.57% 5.70% 5.89% 5.86% 6.24%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,904 $ 4,832 $ 1,571 $ 10,144 $ 6,806
Data: ======== ======== ======== ======== ========
Portfolio turnover 113.52% 111.03% 76.99% 96.40% 142.84%
======== ======== ======== ======== ========
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended September 30, Sept. 30,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
Per Share Net asset value, beginning of period $ 11.83 $ 11.50 $ 11.28 $ 11.50 $ 10.81
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .69 .71 .72 .72 .74
Realized and unrealized gain (loss) on
investments--net (.72) .33 .22 (.22) .69
-------- -------- -------- -------- --------
Total from investment operations (.03) 1.04 .94 .50 1.43
-------- -------- -------- -------- --------
Less dividends from investment income--net (.69) (.71) (.72) (.72) (.74)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.11 $ 11.83 $ 11.50 $ 11.28 $ 11.50
======== ======== ======== ======== ========
Total Investment Based on net asset value per share (.28%) 9.39% 8.58% 4.46% 13.65%+++
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses .83% .77% .77% .71% .70%*
Net Assets: ======== ======== ======== ======== ========
Investment income--net 6.01% 6.16% 6.32% 6.32% 6.81%*
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $136,467 $106,294 $ 64,335 $ 33,270 $ 16,349
Data: ======== ======== ======== ======== ========
Portfolio turnover 113.52% 111.03% 76.99% 96.40% 142.84%
======== ======== ======== ======== ========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
The Investment Grade Portfolio and the Intermediate Term Portfolio
("Portfolio" or "Portfolios") are two of the three portfolios in
Merrill Lynch Corporate Bond Fund, Inc. (the "Fund") which is
registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The Portfolios'
financial statements are prepared in accordance with generally
accepted accounting principles, which may require the use of
management accruals and estimates. 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 Fund invests in US Government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Fund takes possession of the
underlying securities, marks to market such securities and, if
necessary, receives additions to such securities daily to ensure
that the contract is fully collateralized.
(c) Derivative financial instruments--The Portfolios may engage in
various portfolio strategies to seek to increase its return by
hedging its portfolio against adverse movements in the equity, debt
and currency markets. Losses may arise due to changes in the value
of the contract or if the counterparty does not perform under the
contract.
* Financial futures contracts--The Portfolios may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, each
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, each Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by each Portfolio as unrealized
gains or losses. When the contract is closed, each Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* 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.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or each Portfolio enters into a closing transaction), each
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Portfolios' policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for post-October losses.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "Distributor"), a division of Princeton
Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .50% of the Fund's average
daily net assets not exceeding $250 million; .45% of the average
daily net assets in excess of $250 million but not exceeding $500
million; .40% of average daily net assets in excess of $500 million
but not exceeding $750 million; and .35% of average daily net assets
in excess of $750 million. For the year ended September 30, 1999,
the aggregate average daily net assets of the Fund, including the
Fund's High Income Portfolio, was approximately $7,730,587,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of each
Portfolio as follows:
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Investment Grade.. .25% .25% .25% .50% .55%
Intermediate Term. .25% .25% .10% .25% .25%
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML &
Co., also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
For the year ended September 30, 1999, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of each Portfolio's Class A and Class D Shares
as follows:
MLFD MLPF&S
Portfolio Class A Class D Class A Class D
Investment Grade $2,709 $11,712 $21,749 $119,371
Intermediate Term $ 380 $ 837 $ 3,024 $ 8,301
For the year ended September 30, 1999, MLPF&S received contingent
deferred sales charges of $1,504,163 relating to transactions in
Class B Shares, amounting to $1,373,985 and $130,178 in the
Investment Grade Portfolio and Intermediate Term Portfolio,
respectively, $64,951 relating to transactions in Class C Shares,
amounting to $61,415 and $3,536 in the Investment Grade Portfolio
and Intermediate Term Portfolio, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $24,833 relating to
transactions subject to front-end sales charge waivers in Class D
Shares, amounting to $24,725 and $108 in the Investment Grade
Portfolio and Intermediate Term Portfolio, respectively.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
During the year ended September 30, 1999, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$19,917 for security price quotations to compute the net asset
values of the Portfolios.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 1999 were as follows:
Investment Intermediate
Grade Term
Portfolio Portfolio
Purchases $ 1,184,474,696 $ 547,736,030
--------------- --------------
Sales $ 1,164,129,983 $ 538,644,086
=============== ==============
Net realized losses for the year ended September 30, 1999 and net
unrealized losses as of September 30, 1999 were as follows:
Realized Unrealized
Investment Grade Portfolio Losses Losses
Long-term investments $ (18,307,068) $ (53,738,853)
------------- --------------
Total . $ (18,307,068) $ (53,738,853)
============= ==============
Realized Unrealized
Intermediate Term Portfolio Losses Losses
Long-term investments $ (5,110,689) $ (13,160,675)
------------- --------------
Total $ (5,110,689) $ (13,160,675)
============= ==============
As of September 30, 1999, net unrealized depreciation for Federal
income tax purposes was as follows:
Investment Intermediate
Grade Portfolio Term Portfolio
Gross unrealized
appreciation $ 3,914,785 $ 1,604,967
Gross unrealized
depreciation (58,456,342) (14,799,497)
------------- --------------
Net unrealized
depreciation $ (54,541,557) $ (13,194,530)
============= ==============
The aggregate cost of investments at September 30, 1999 for Federal
income tax purposes was $1,425,134,911 for the Investment Grade
Portfolio and $472,557,668 for the Intermediate Term Portfolio.
4. Capital Share Transactions:
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. Net increase in net assets derived from capital share
transactions for the year ended September 30, 1998 was $217,046,843
for the Investment Grade Portfolio and $84,105,026 for the
Intermediate Term Portfolio.
Transactions in capital shares for each class were as follows:
Investment Grade Portfolio
Class A Shares for the 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)
============= ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Investment Grade Portfolio
Class A Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 17,335,975 $ 199,879,084
Shares issued to shareholders
in reinvestment of dividends 718,340 8,272,550
------------- --------------
Total issued 18,054,315 208,151,634
Shares redeemed (12,662,198) (145,757,775)
------------- --------------
Net increase 5,392,117 $ 62,393,859
============= ==============
Investment Grade Portfolio
Class B Shares for the 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 B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 24,028,055 $ 277,445,871
Shares issued to shareholders
in reinvestment of dividends 1,698,194 19,561,558
------------- --------------
Total issued 25,726,249 297,007,429
Automatic conversion of shares (922,142) (10,628,787)
Shares redeemed (17,335,417) (199,555,281)
------------- --------------
Net increase 7,468,690 $ 86,823,361
============= ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1999 Shares Amount
Shares sold 4,210,209 $ 48,417,409
Shares issued to shareholders
in reinvestment of dividends 287,083 3,251,882
------------- --------------
Total issued 4,497,292 51,669,291
Shares redeemed (3,755,411) (42,498,738)
------------- --------------
Net increase 741,881 $ 9,170,553
============= ==============
Investment Grade Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 3,968,421 $ 45,833,671
Shares issued to shareholders
in reinvestment of dividends 174,287 2,008,817
------------- --------------
Total issued 4,142,708 47,842,488
Shares redeemed (1,947,717) (22,429,950)
------------- --------------
Net increase 2,194,991 $ 25,412,538
============= ==============
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
============= ==============
Investment Grade Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 7,697,534 $ 88,874,921
Automatic conversion of shares 921,625 10,628,787
Shares issued to shareholders
in reinvestment of dividends 248,628 2,867,600
------------- --------------
Total issued 8,867,787 102,371,308
Shares redeemed (5,202,013) (59,954,223)
------------- --------------
Net increase 3,665,774 $ 42,417,085
============= ==============
Intermediate Term Portfolio
Class A Shares for the 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 A Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 5,842,254 $ 67,706,458
Shares issued to shareholders
in reinvestment of dividends 313,457 3,631,322
------------- --------------
Total issued 6,155,711 71,337,780
Shares redeemed (4,773,595) (55,306,502)
------------- --------------
Net increase 1,382,116 $ 16,031,278
============= ==============
Intermediate Term Portfolio
Class B Shares for the 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)
============= ==============
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 7,031,396 $ 81,620,955
Shares issued to shareholders
in reinvestment of dividends 460,065 5,330,419
------------- --------------
Total issued 7,491,461 86,951,374
Automatic conversion of shares (276,942) (3,211,027)
Shares redeemed (5,016,417) (58,121,721)
------------- --------------
Net increase 2,198,102 $ 25,618,626
============= ==============
Intermediate Term Portfolio
Class C Shares for the 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)
============= ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 882,899 $ 10,254,262
Shares issued to shareholders
in reinvestment of dividends 6,071 70,376
------------- --------------
Total issue 888,970 10,324,638
Shares redeemed (617,010) (7,160,180)
------------- --------------
Net increase 271,960 $ 3,164,458
============= ==============
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
============= ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 1998 Shares Amount
Shares sold 6,222,564 $ 72,129,494
Automatic conversion of shares 276,942 3,211,027
Shares issued to shareholders
in reinvestment of dividends 189,794 2,199,224
------------- --------------
Total issued 6,689,300 77,539,745
Shares redeemed (3,300,479) (38,249,081)
------------- --------------
Net increase 3,388,821 $ 39,290,664
============= ==============
5. Loaned Securities:
At September 30, 1999, the Investment Grade Portfolio held US
Treasury Bonds/Notes having an aggregate value of $29,452,000 as
collateral for Portfolio securities loaned, having a market value of
approximately $28,731,000. The Intermediate Term Portfolio held
USTreasury Bonds/Notes having an aggregate value of approximately
$16,459,000 as collateral for Portfolio securities loaned, having a
market value of approximately $16,134,000.
6. Capital Loss Carryforward:
At September 30, 1999, the Fund had a capital loss carryforward of
approximately $23,807,000 in the Investment Grade Portfolio, of
which $21,203,000 expires in 2003 and $2,604,000 expires in 2005 and
approximately $6,884,000 in the Intermediate Term Portfolio, of
which $6,608,000 expires in 2003 and $276,000 expires in 2005. These
amounts will be available to offset like amounts of any future
taxable gains.
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
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 schedule of invest-ments, of Investment
Grade and Intermediate Term Portfolios of Merrill Lynch Corporate
Bond Fund, Inc. as of September 30, 1999, 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 generally accepted
auditing standards. 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, 1999 by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other
auditing procedures. 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, 1999, the results of
their operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
November 16, 1999
Merrill Lynch Corporate Bond Fund, Inc.,
Investment Grade Portfolio & Intermediate Term Portfolio
September 30, 1999
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, 1999 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.
Listed below are the percentages of total assets of the Portfolios
invested in Federal obligations* as of the end of each quarter of
the fiscal year.
For the Investment Grade Intermediate Term
Quarter Ended Portfolio Portfolio
December 31, 1998 3.98% 2.71%
March 31, 1999 1.24% 2.31%
June 30, 1999 .13% .02%
September 30, 1999 6.45% 5.38%
Of the Fund's ordinary income dividends paid monthly to shareholders
from the Intermediate Term and Investment Grade Portfolios during
the fiscal year ended September 30, 1999, 2.71% and 2.41%,
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.
[FN]
*For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Land Banks,
Federal Home Loan Banks, and the Student Loan Marketing Association.
Repurchase agreements are not included in this calculation.
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Arthur Zeikel, Director
Christopher G. Ayoub, Senior Vice President
Vincent T. Lathbury III, Senior Vice President
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863