Exhibit 17(g)
(BULL LOGO)
Merrill Lynch Investment Managers
Annual Report
September 30, 2002
Core Bond Portfolio &
Intermediate Term Portfolio
of Merrill Lynch Bond Fund, Inc.
www.mlim.ml.com
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 Bond Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Core Bond Portfolio & Intermediate Term Portfolio
TO OUR SHAREHOLDERS
Investment Environment
During the last 12 months, the U.S. economy has grown a respectable
2.4% and inflation has trended lower. Interest rates have declined
dramatically with ten-year U.S. Treasury yields plunging by about
100 basis points (1.00%) from 4.55% to 3.60%. Based on historical
evidence, this would appear to be the perfect environment for
equities. However, this is not a typical economic recovery. This is
an environment where the U.S. economy has had to absorb a number of
shocks from the deflating of the asset bubble, an overleveraged
corporate America, high-profile bankruptcies, scandals and fraud,
potential threats of terrorist attacks, worldwide political
instability, higher oil prices, and a potential war with Iraq. In
retrospect, it is not too hard to see why equities have done so
poorly, in our opinion. The unmanaged Standard & Poor's (S&P) 500
Index has underperformed 30-year U.S. Treasury bonds for the last
five years by more than 10% for the period ended September 30, 2002.
The S&P 500 Index posted results of -1.62% compared to +9.35% for
Treasuries. This is unprecedented by historical standards.
The traditional mechanisms to stimulate demand are working to some
extent. The largest fiscal package since the early 1960s, at roughly
2.5% of gross domestic product (GDP) implemented in the fourth
quarter of 2001 has served to help some sectors of the economy, most
notably the aerospace and defense sector. This sector should
continue to be supported because national security will be a high
priority for years to come. Monetary policy, the other traditional
form of stimulus, has also worked well to help stimulate growth in
those sectors affected by interest rates. This would include
consumer purchases of durable goods expected to last three years or
more, such as household appliances and automobiles, and the sector
probably most sensitive to interest rates, the housing market.
Automobile purchases have been remarkably strong, running at a 17
million annual selling rate, which is undoubtedly being helped by 0%
financing by the automobile companies. This is very strong but
nothing compares to the contribution to growth in the economy from
the surge in mortgage refinancing and the buying of new and existing
homes. The housing market has continued to defy expectations coming
in at annual selling rates of 1 million and 5.28 million units (as
of August 2002) for new and existing homes. These levels are even
higher than the record levels recorded in 2001. In addition, cash-
out refinancing on existing homes is expected to add $150 billion -
$200 billion to consumers' potential buying power. It is estimated
that this could add 1% - 1.5% to GDP growth over the next three to
six months.
One notable sector that has failed to benefit from lower interest
rates is equities. Traditional wisdom suggests that lower interest
rates (more specifically the Federal Funds rate) of 75 basis points
or more below current levels would be the signal to take more risk
and buy equities. The logic appears sound as lower interest rates
make equities seem more attractive to other asset classes and the
present value of future earnings discounted at lower interest rates
should help lift prices. However, the excesses of the 1990s are
still being worked off and overcapacity in areas such as technology
and telecommunications are still downsizing.
In addition, the economic malaise that the United States is
experiencing is not isolated to our shores, as it does not appear
that the United States can count on foreign economies to help lift
its growth prospects. The Eurozone area is struggling with
maintaining inflation targets under 2% and fiscal deficits as a
percent of GDP of under 3%. The Maastrict Treaty requirements along
with high unemployment are keeping growth very weak with GDP
expected to come in at 0.5% for 2002 and 1.5% for 2003. This is
considerably lower than the United States. Japan continues to
struggle with deflation and a paralyzed banking system. The Japanese
government recently announced plans to buy stocks from banks to
allow the banking system to raise capital requirements and attempt
to improve the flow of credit to the real economy. This desperate
attempt to solve the banking systems problems is a potentially
dangerous strategy.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
However, on a more positive note we do believe that over the next
six months--12 months recovery will take place. The double dose of
fiscal policy and monetary policy will set the foundation for
recovery while the low level of business inventories, cash-out
refinancing and strong productivity gains will help to sustain
growth.
Fiscal Year in Review
For the 12-month period ended September 30, 2002, Core Bond
Portfolio's Class A, Class B, Class C and Class D Shares had total
returns of +7.71%, +6.89%, +6.83% and +7.44%, respectively. For the
same period, Intermediate Term Portfolio's Class A, Class B, Class C
and Class D Shares had total returns of +7.43%, +6.97%, +6.97% and
+7.32%, respectively. This compares to the +8.60% return for the
Portfolios' unmanaged benchmark, the Lehman Brothers Aggregate Bond
Index. (Investment results shown do not reflect sales charges and
would be lower if sales charges were included. Complete performance
information can be found on pages 3--7 of this report to
shareholders.)
For the 12-month period ended September 30, 2002, the Portfolios
slightly underperformed the Lehman Brothers Aggregate Bond Index.
This underperformance can mainly be attributed to our exposure to
spread sectors such as corporates and asset-backed securities. In
addition, our exposure to emerging markets detracted slightly from
our relative performance.
During the first half of the fiscal year, we continued to manage the
Portfolios with a pro-cyclical bias. That is, the Portfolios were
structured with a slight short duration bias and a significant
overweight to spread sectors. These sectors would include
corporates, mortgage-backed securities, asset-backed securities and
commercial mortgage-backed securities. It appeared that after the
terrible events of September 11, 2002, the U.S. economy was well on
its way to recovery as economic growth registered 3% for the six-
month period ended March 31, 2002. The Portfolios were well
positioned with an average overweight to the mortgage market and
corporate market of 3%--8% of net assets for these asset classes
and an underweight to Treasury and agency issues.
However, as we moved through the second quarter of 2002, a change in
strategy appeared warranted. As economic data weakened and, more
importantly, equities began to test September 2001 lows, we started
to alter our strategy. This strategy involved reducing our mortgage
overweight from 8% of net assets to 2% and taking advantage of the
steep yield curve by rolling a large portion of our agency
mortgages. This strategy allowed us to mitigate the negative effects
that lower interest rates have on high dollar-priced mortgages. We
also altered our allocation to the corporate sector from a 6%
overweight to neutral as market-based indicators such as equity
prices, equity volatility, swap spreads and valuation gave us clues
as to our allocation decision.
Going forward, we are positioning the Portfolios defensively. Our
corporate overweights are in low beta sectors such as aerospace and
defense, banks, utilities and real estate investment trusts.
In Conclusion
We appreciate your ongoing interest in Core Bond and Intermediate
Term Portfolios of Merrill Lynch 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
(Patrick Maldari)
Patrick Maldari
Vice President and Portfolio Manager
(James J. Pagano)
James J. Pagano
Vice President and Portfolio Manager
October 29, 2002
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
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 Core Bond 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 Core Bond Portfolio.
Intermediate Term Portfolio is subject to a maximum contingent
deferred sales charge of 1% if redeemed within one year of purchase.
In addition, Core Bond 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 Core Bond 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 Core
Bond 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. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. 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 Years/
6-Month 12-Month Since Inception Standardized
As of September 30, 2002 Total Return Total Return Total Return 30-Day Yield
Core Bond Portfolio Class A Shares* +7.82% +7.71% +88.02% 3.74%
Core Bond Portfolio Class B Shares* +7.41 +6.89 +74.21 3.14
Core Bond Portfolio Class C Shares* +7.38 +6.83 +67.10 3.09
Core Bond Portfolio Class D Shares* +7.59 +7.44 +74.82 3.51
Intermediate Term Portfolio Class A Shares* +7.76 +7.43 +88.64 3.79
Intermediate Term Portfolio Class B Shares* +7.57 +6.97 +83.37 3.31
Intermediate Term Portfolio Class C Shares* +7.57 +6.97 +70.48 3.31
Intermediate Term Portfolio Class D Shares* +7.70 +7.32 +76.13 3.69
Lehman Brothers Aggregate Bond Index** +8.45 +8.60 +103.71/+106.37/+91.58 --
*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 Core
Bond 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 Intermediate Term 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.
**This unmanaged market-weighted Index is comprised of investment-
grade corporate bonds (rated BBB or better), mortgages and U.S.
Treasury and Government agency issues with at least one year to
maturity. Ten-year/since inception total returns are from ten years,
from 11/30/92 and from 10/31/94.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Core Bond Portfolio
A line graph illustrating the growth of a $10,000 investment in
ML Bond Fund, Inc.'s Core Bond Portfolio++ Class A and Class B
Shares* compared to a similar investment in Lehman Brothers
Aggregate Bond Index++++. Values illustrated are as follows:
ML Bond Fund, Inc.'s Core Bond Portfolio++
Class A Shares*
Date Value
September 1992 $ 9,600.00
September 1993 $10,825.00
September 1994 $10,172.00
September 1995 $11,691.00
September 1996 $12,112.00
September 1997 $13,229.00
September 1998 $14,559.00
September 1999 $14,311.00
September 2000 $15,039.00
September 2001 $16,759.00
September 2002 $18,051.00
ML Bond Fund, Inc.'s Core Bond Portfolio++
Class B Shares*
Date Value
September 1992 $10,000.00
September 1993 $11,191.00
September 1994 $10,438.00
September 1995 $11,903.00
September 1996 $12,237.00
September 1997 $13,264.00
September 1998 $14,486.00
September 1999 $14,131.00
September 2000 $14,737.00
September 2001 $16,298.00
September 2002 $17,421.00
Lehman Brothers Aggregate Bond Index++++
Date Value
September 1992 $10,000.00
September 1993 $10,998.00
September 1994 $10,643.00
September 1995 $12,140.00
September 1996 $12,735.00
September 1997 $13,972.00
September 1998 $15,580.00
September 1999 $15,523.00
September 2000 $16,608.00
September 2001 $18,759.00
September 2002 $20,372.00
A line graph illustrating the growth of a $10,000 investment in
ML Bond Fund, Inc.'s Core Bond Portfolio++ Class C and Class D
Shares* compared to a similar investment in Lehman Brothers
Aggregate Bond Index++++. Values illustrated are as follows:
ML Bond Fund, Inc.'s Core Bond Portfolio++
Class C Shares*
Date Value
10/21/1994** $10,000.00
September 1995 $11,460.00
September 1996 $11,787.00
September 1997 $12,757.00
September 1998 $13,937.00
September 1999 $13,577.00
September 2000 $14,151.00
September 2001 $15,641.00
September 2002 $16,709.00
ML Bond Fund, Inc.'s Core Bond Portfolio++
Class D Shares*
Date Value
10/21/1994** $ 9,600.00
September 1995 $11,061.00
September 1996 $11,440.00
September 1997 $12,464.00
September 1998 $13,682.00
September 1999 $13,404.00
September 2000 $14,051.00
September 2001 $15,619.00
September 2002 $16,781.00
Lehman Brothers Aggregate Bond Index++++
Date Value
10/31/1994** $10,000.00
September 1995 $11,416.00
September 1996 $11,975.00
September 1997 $13,138.00
September 1998 $14,650.00
September 1999 $14,596.00
September 2000 $15,616.00
September 2001 $17,639.00
September 2002 $19,156.00
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++The Portfolio invests primarily in long-term, fixed-income
securities that are rated in the four highest categories of the
recognized rating agencies (Baa or better by Moody's Investors
Service, Inc. or BBB or better by Standard & Poor's Corp.).
++++This unmanaged market-weighted Index is comprised of investment-
grade corporate bonds (rated BBB or better), mortgages and U.S.
Treasury and Government agency issues with at least one year to
maturity. 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 Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
PERFORMANCE DATA (continued)
Average Annual Total Return--Core Bond Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/02 +7.71% +3.40%
Five Years Ended 9/30/02 +6.41 +5.55
Ten Years Ended 9/30/02 +6.52 +6.08
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/02 +6.89% +2.89%
Five Years Ended 9/30/02 +5.60 +5.60
Ten Years Ended 9/30/02 +5.71 +5.71
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after four years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 9/30/02 +6.83% +5.83%
Five Years Ended 9/30/02 +5.55 +5.55
Inception (10/21/94)
through 9/30/02 +6.68 +6.68
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
One Year Ended 9/30/02 +7.44% +3.14%
Five Years Ended 9/30/02 +6.13 +5.27
Inception (10/21/94)
through 9/30/02 +7.28 +6.73
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Intermediate Term Portfolio
A line graph illustrating the growth of a $10,000 investment in
ML Bond Fund, Inc.'s Intermediate Term Portfolio++ Class A Shares*
compared to a similar investment in Lehman Brothers Aggregate
Bond Index++++. Values illustrated are as follows:
ML Bond Fund, Inc.'s Intermediate Term Portfolio++
Class A Shares*
Date Value
September 1992 $ 9,900.00
September 1993 $11,028.00
September 1994 $10,559.00
September 1995 $11,967.00
September 1996 $12,513.00
September 1997 $13,588.00
September 1998 $14,891.00
September 1999 $14,864.00
September 2000 $15,610.00
September 2001 $17,382.00
September 2002 $18,673.00
Lehman Brothers Aggregate Bond Index++++
Date Value
September 1992 $10,000.00
September 1993 $10,998.00
September 1994 $10,643.00
September 1995 $12,140.00
September 1996 $12,735.00
September 1997 $13,972.00
September 1998 $15,580.00
September 1999 $15,523.00
September 2000 $16,608.00
September 2001 $18,759.00
September 2002 $20,372.00
A line graph illustrating the growth of a $10,000 investment in
ML Bond Fund, Inc.'s Intermediate Term Portfolio++ Class B Shares*
compared to a similar investment in Lehman Brothers Aggregate
Bond Index++++. Values illustrated are as follows:
ML Bond Fund, Inc.'s Intermediate Term Portfolio++
Class B Shares*
Date Value
11/13/1992** $10,000.00
September 1993 $11,330.00
September 1994 $10,795.00
September 1995 $12,169.00
September 1996 $12,658.00
September 1997 $13,687.00
September 1998 $14,911.00
September 1999 $14,808.00
September 2000 $15,473.00
September 2001 $17,143.00
September 2002 $18,338.00
Lehman Brothers Aggregate Bond Index++++
Date Value
11/30/1992** $10,000.00
September 1993 $11,141.00
September 1994 $10,782.00
September 1995 $12,298.00
September 1996 $12,901.00
September 1997 $14,154.00
September 1998 $15,783.00
September 1999 $15,725.00
September 2000 $16,824.00
September 2001 $19,003.00
September 2002 $20,637.00
A line graph illustrating the growth of a $10,000 investment in
ML Bond Fund, Inc.'s Intermediate Term Portfolio++ Class C and
Class D Shares* compared to a similar investment in Lehman Brothers
Aggregate Bond Index++++. Values illustrated are as follows:
ML Bond Fund, Inc.'s Intermediate Term Portfolio++
Class C Shares*
Date Value
10/21/1994** $10,000.00
September 1995 $11,325.00
September 1996 $11,777.00
September 1997 $12,718.00
September 1998 $13,866.00
September 1999 $13,769.00
September 2000 $14,386.00
September 2001 $15,937.00
September 2002 $17,048.00
ML Bond Fund, Inc.'s Intermediate Term Portfolio++
Class D Shares*
Date Value
10/21/1994** $ 9,900.00
September 1995 $11,251.00
September 1996 $11,753.00
September 1997 $12,761.00
September 1998 $13,959.00
September 1999 $13,920.00
September 2000 $14,605.00
September 2001 $16,247.00
September 2002 $17,436.00
Lehman Brothers Aggregate Bond Index++++
Date Value
10/31/1994** $10,000.00
September 1995 $11,416.00
September 1996 $11,975.00
September 1997 $13,138.00
September 1998 $14,650.00
September 1999 $14,596.00
September 2000 $15,616.00
September 2001 $17,639.00
September 2002 $19,156.00
*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 an average
remaining maturity of three-to-ten years, depending on market
conditions.
++++This unmanaged market-weighted Index is comprised of investment-
grade corporate bonds (rated BBB or better), mortgages and U.S.
Treasury and Government agency issues with at least one year to
maturity. The starting date for the Index is from 11/30/92 in the
Class B Shares' graph and from 10/31/94 in the Class C & Class D
Shares' graph.
Past performance is not predictive of future performance.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
PERFORMANCE DATA (concluded)
Average Annual Total Return--Intermediate Term Portfolio
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 9/30/02 +7.43% +6.36%
Five Years Ended 9/30/02 +6.57 +6.35
Ten Years Ended 9/30/02 +6.55 +6.45
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 9/30/02 +6.97% +5.97%
Five Years Ended 9/30/02 +6.02 +6.02
Inception (11/13/92)
through 9/30/02 +6.33 +6.33
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 9/30/02 +6.97% +5.97%
Five Years Ended 9/30/02 +6.04 +6.04
Inception (10/21/94)
through 9/30/02 +6.94 +6.94
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
One Year Ended 9/30/02 +7.32% +6.25%
Five Years Ended 9/30/02 +6.44 +6.23
Inception (10/21/94)
through 9/30/02 +7.38 +7.25
*Maximum sales charge is 1%.
**Assuming maximum sales charge.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds Core Bond Portfolio
Asset-Backed AAA Aaa $ 8,000,000 Advanta Mortgage Loan Trust, 7.75% due
Securities** 10/25/2026 $ 8,278,125 $ 8,839,726
- --17.6% AAA Aaa 16,000,000 Banc of America Commercial Mortgage Inc.,
7.197% due 5/15/2010 16,207,188 18,699,326
NR* Aaa 11,133,520 Bank of America Mortgage Securities,
Series 2002-IA, Class 1B, 4.64% due 8/25/2032 11,244,676 11,220,501
AAA Aaa 9,466,000 CIT Equipment Collateral, Series 2002-VT1,
Class A2, 2.90% due 6/21/2004 9,465,496 9,528,757
AAA Aaa 4,516 Contimortgage Home Equity Loan Trust, 5.84%
due 5/15/2016 4,515 4,556
AAA Aaa 6,697,341 Countrywide Asset-Backed Certificates, 6.102%
due 8/25/2026 6,697,195 6,797,005
NR* Aaa 10,770,951 CountryWide Home Loan, Series 2001-24,
Class 1A6, 6% due 1/25/2032 10,824,241 11,067,368
NR* Aaa 8,798,744 EQCC Home Equity Loan Trust, Series 1999-1,
Class A3F, 5.915% due 11/20/2024 8,961,214 9,015,165
A A3 9,000,000 First Dominion Funding I, 2.60% due
7/10/2013 (a)(b) 8,966,133 8,302,500
NR* Aaa 9,000,000 First Union-Chase Commercial Mortgage,
Series 1999-C2, Class A2, 6.645% due 4/15/2009 8,533,828 10,184,654
AAA NR* 6,429,500 General Electric Capital Commercial Mortgage
Corporation, Series 2001-3, Class A2, 6.07% due
6/10/2038 6,493,885 7,093,009
AAA NR* 9,747,945 General Motors Acceptance Corporation,
Mortgage Corporation Loan Trust, 6.25% due
1/25/2032 9,864,039 9,975,365
AAA Aaa 12,125,000 Household Automotive Trust, Series 2002-1,
Class A2, 2.75% due 5/17/2005 12,124,037 12,229,012
AAA Aaa 10,729,445 Household Home Equity Loan Trust,
Series 2002-2, Class A, 2.098% due 4/20/2032 (a) 10,729,445 10,697,274
AAA Aaa 11,850,000 Ikon Receivables LLC, Series 2002-1, Class A2,
2.91% due 2/15/2005 11,849,972 11,897,290
AAA Aaa 10,500,000 LB-UBS Commercial Mortgage Trust,
Series 2002-C1, Class A3, 6.226% due 3/15/2026 10,551,553 11,711,687
A+ A2 4,777,895 MBNA Master Credit Card Trust, Series 1999-F,
Class B, 2.14% due 1/16/2007 (a) 4,786,753 4,778,373
AAA NR* 5,000,000 Nationslink Funding Corporation, Series 1999-2,
Class A3, 7.181% due 12/20/2006 4,920,508 5,634,520
AAA Aaa 11,528,266 Option One Mortgage Loan Trust, Series 2002-4,
Class A, 2.07% due 7/25/2032 (a) 11,528,266 11,478,516
AAA NR* 5,642,668 Residential Funding Mortgage Securities Inc.,
Series 2001-S23, Class 2A1, 5.50% due 10/25/2031 5,762,756 5,708,688
NR* Aaa 262,584 Saxon Asset Securities Trust, 6.265% due
7/25/2023 262,585 262,284
Security Life of Denver:
NR* NR* 23,000,000 0.33% due 10/01/2002 (d) 23,000,000 25,882,289
NR* NR* 27,000,000 0.44% due 3/31/2003 27,000,000 27,000,000
AAA Aaa 8,261,351 Structured Asset Securities Corporation,
Series 2002-9, Class A2, 2.114% due
10/25/2027 (a) 8,261,351 8,249,963
A A2 9,600,000 Superior Wholesale Inventory Financing Trust,
Series 2001-A7, 2.223% due 6/15/2006 (a) 9,612,825 9,601,248
AAA Aaa 6,100,000 Washington Mutual Inc., Series 2002-AR4,
Class A7, 5.59% due 4/25/2032 6,036,141 6,303,528
AAA Aaa 7,564,526 Wells Fargo Mortgage-Backed Securities Trust,
Series 2002-A, Class A2, 5.90% due 3/25/2032 7,693,864 7,666,708
-------------- --------------
259,660,591 269,829,312
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Core Bond Portfolio
Automotive BBB+ Baa1 $ 4,460,000 Ford Motor Company, 7.45% due 7/16/2031 $ 4,286,017 $ 3,670,607
& Equipment
- --0.2%
Canadian BBB- Baa3 475,000 Abitibi Consolidated Inc., 8.55% due
Corporates++ 8/01/2010 (2) 497,879 501,633
- --0.0%
Canadian Canada Government Bond (3):
Sovereigns++ AAA Aaa 400,000 6.375% due 11/30/2004 419,346 437,638
- --1.4% AAA Aaa 2,820,000 5.25% due 11/05/2008 2,870,014 3,141,243
Province of Ontario (3):
AA Aa2 4,440,000 3.50% due 9/17/2007 4,414,426 4,521,572
AA Aa2 3,750,000 5.50% due 10/01/2008 3,884,430 4,178,764
Province of Quebec (3):
A+ A1 2,520,000 5% due 7/17/2009 2,649,820 2,687,356
A+ A1 4,700,000 7.50% due 9/15/2029 5,248,697 6,081,494
A+ Aa3 750,000 Province of Saskatchewan, 8% due 7/15/2004 (3) 800,125 825,583
-------------- --------------
20,286,858 21,873,650
Chemicals BBB+ Baa1 1,805,000 Chevron Phillips Chemical Company, 5.375%
- --0.2% due 6/15/2007 1,796,155 1,909,490
BBB- Ba1 915,000 Methanex Corporation, 8.75% due 8/15/2012 915,000 947,025
-------------- --------------
2,711,155 2,856,515
Finance A- A2 2,015,000 AT&T Capital Corporation, 6.60% due 5/15/2005 1,993,447 2,085,781
- --0.6% A+ A1 1,755,000 American General Finance, 5.375% due
9/01/2009 1,742,364 1,816,509
Capital One Bank:
BBB- Baa2 307,000 6.50% due 7/30/2004 305,019 290,638
BBB- Baa2 1,460,000 6.875% due 2/01/2006 1,450,382 1,371,584
A A2 2,155,000 Household Finance Corporation, 7% due
5/15/2012 2,110,542 2,076,183
AA Aa3 830,000 Texaco Capital Inc., 8.625% due 6/30/2010 954,679 1,062,963
-------------- --------------
8,556,433 8,703,658
Finance-- BB&T Corporation:
Banks--5.2% A- A2 4,765,000 6.50% due 8/01/2011 4,864,173 5,440,148
A- A2 900,000 4.75% due 10/01/2012 891,369 910,680
A- A1 2,050,000 Banc One Corp., 8% due 4/29/2027 2,257,840 2,570,212
A+ Aa2 2,340,000 Bank of America Corp., 4.875% due 9/15/2012 2,331,272 2,364,984
A+ Aa2 1,920,000 The Bank of New York, 5.20% due 7/01/2007 1,916,525 2,073,554
Bank One Corp.:
A Aa3 2,500,000 6.875% due 8/01/2006 2,586,660 2,818,967
A Aa3 1,215,000 4.125% due 9/01/2007 1,213,153 1,252,036
A+ Aa2 6,815,000 BankAmerica Corp., 5.875% due 2/15/2009 6,877,948 7,385,409
Citigroup Inc.:
AA- Aa1 2,200,000 5.70% due 2/06/2004 2,224,251 2,301,083
AA- Aa1 2,360,000 5.75% due 5/10/2006 2,533,565 2,557,098
AA- Aa1 3,424,000 6.50% due 1/18/2011 3,496,231 3,810,816
A+ Aa2 2,770,000 6.625% due 6/15/2032 2,732,633 2,887,780
A A1 4,600,000 FleetBoston Financial Corp., 7.25% due
9/15/2005 4,804,167 5,032,938
BB+ NR* 1,010,000 Hudson United Bancorp Inc., 8.20% due
9/15/2006 1,039,440 1,113,985
Inter-American Development Bank:
AAA Aaa 4,180,000 4.375% due 9/20/2012 4,161,608 4,247,181
AAA Aaa 6,743,000 6.80% due 10/15/2025 8,005,267 8,090,339
A+ Aa3 1,280,000 Marshall & Ilsley Bank, 4.125% due 9/04/2007 1,276,070 1,325,940
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Core Bond Portfolio
Finance-- A+ Aa3 $ 3,525,000 National City Bank of Indiana, 4% due
Banks 9/28/2007 $ 3,520,206 $ 3,632,629
(concluded) A Aa3 4,500,000 US Bancorp, 1.97% due 9/16/2005 (a) 4,500,000 4,496,593
A A1 2,240,000 Wachovia Corporation, 4.95% due 11/01/2006 2,354,636 2,392,490
BBB+ A3 2,300,000 Washington Mutual Inc., 7.50% due 8/15/2006 2,433,965 2,597,521
A+ Aa2 4,670,000 Wells Fargo Bank, 6.45% due 2/01/2011 5,028,545 5,266,233
Wells Fargo & Co.:
A+ Aa2 2,500,000 7.25% due 8/24/2005 2,619,142 2,794,765
A+ Aa2 2,750,000 5.125% due 2/15/2007 2,749,092 2,955,004
-------------- --------------
76,417,758 80,318,385
Finance-- A A2 2,415,000 American Honda Finance, 2% due
Other--6.5% 10/03/2005 (a)(b) 2,414,251 2,414,758
CIT Group Inc.:
A A2 900,000 5.625% due 5/17/2004 920,348 921,631
A A2 905,000 7.25% due 8/15/2005 874,925 955,037
A A2 800,000 6.50% due 2/07/2006 822,678 841,578
BBB Baa1 2,115,000 Cendant Corporation, 6.875% due 8/15/2006 2,096,494 2,126,876
Chrysler Financial Company LLC (a):
BBB+ A3 2,389,000 1.985% due 2/03/2003 2,385,838 2,385,170
BBB+ A3 2,389,000 1.99% due 3/06/2003 2,385,142 2,383,637
A A3 3,370,000 CountryWide Home Loan, 5.625% due 7/15/2009 3,352,779 3,535,079
Ford Motor Credit Company:
BBB+ A3 20,000,000 1.878% due 2/13/2003 (a) 19,918,080 19,774,080
BBB+ A3 4,240,000 7.25% due 10/25/2011 4,176,469 3,919,456
AAA Aaa 2,050,000 General Electric Capital Corporation, 6.75%
due 3/15/2032 2,091,682 2,198,730
General Motors Acceptance Corp.:
BBB+ A2 25,000,000 2.135% due 7/21/2003 (a) 24,881,504 24,692,575
BBB+ A2 4,550,000 7% due 2/01/2012 4,538,443 4,440,204
BBB+ A2 3,100,000 8% due 11/01/2031 3,065,962 3,004,743
A A1 3,000,000 Golden West Financial Corporation, 4.75% due
10/01/2012 2,978,970 3,016,383
A+ Aa3 2,050,000 Goldman Sachs Group, Inc., 7.625% due
8/17/2005 2,134,825 2,310,247
AA- A1 1,070,000 International Lease Finance Corporation,
5.625% due 6/01/2007 1,091,849 1,098,740
A A2 1,465,000 John Hancock Financial Services, 5.625% due
12/01/2008 1,460,927 1,544,901
Lehman Brothers Holdings, Inc.:
A A2 2,900,000 6.625% due 4/01/2004 2,934,284 3,062,093
A A2 500,000 7% due 2/01/2008 510,261 561,632
A A2 3,535,000 6.625% due 1/18/2012 3,725,035 3,873,459
BBB Baa2 2,920,000 MBNA Corporation, 6.25% due 1/17/2007 2,913,576 3,023,780
AA Aa3 2,020,000 Principal Life Global, 6.25% due 2/15/2012 (b) 1,994,609 2,174,172
A- A2 1,415,000 Regions Financial Corporation, 6.375% due
5/15/2012 1,411,392 1,596,612
A+ A1 2,965,000 Verizon Global Funding Corporation, 6.75%
due 12/01/2005 3,013,093 3,125,617
-------------- --------------
98,093,416 98,981,190
Food A+ A1 2,270,000 Archer-Daniels-Midland, 5.935% due
Distribution-- 10/01/2032 2,253,225 2,253,225
0.1%
Gas BBB Baa3 1,440,000 The Coastal Corporation, 6.50% due 6/01/2008 1,406,825 964,800
Transmission--
0.1%
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Core Bond Portfolio
Hotels--0.1% BBB- Ba1 $ 1,881,000 Starwood Hotels & Resorts, 7.375% due
5/01/2007 (b) $ 1,875,075 $ 1,824,570
Industrial-- BBB+ Baa2 5,010,000 Coors Brewing Company, 6.375% due 5/15/2012 5,375,260 5,669,511
Consumer A A1 4,346,000 Pepsi Bottling Holdings Inc., 5.625% due
Goods--0.9% 2/17/2009 (b) 4,527,257 4,729,765
BBB Baa3 2,670,000 Tyson Foods, Inc., 6.625% due 10/01/2004 2,665,007 2,836,691
-------------- --------------
12,567,524 13,235,967
Industrial-- BBB Baa2 1,175,000 Allete Inc., 7.80% due 2/15/2008 1,211,055 1,332,604
Energy--2.6% BBB+ Baa2 2,160,000 AmerenEnergy Generating, 7.95% due 6/01/2032 2,151,965 2,456,497
BBB+ Baa1 685,000 Anadarko Finance Company, 7.50% due
5/01/2031 703,841 812,967
BBB+ Baa1 1,037,000 Anadarko Petroleum Corporation, 5.375% due
3/01/2007 1,031,494 1,110,113
Apache Corporation:
A- A3 475,000 6.25% due 4/15/2012 471,618 535,321
A- A3 690,000 7.625% due 7/01/2019 720,492 818,719
A A2 1,920,000 Colonial Pipeline, 7.63% due 4/15/2032 (b) 1,919,482 2,271,706
Conoco Inc.:
A- A3 3,550,000 5.90% due 4/15/2004 3,615,666 3,725,537
A- A3 2,980,000 6.95% due 4/15/2029 3,353,390 3,366,378
Kinder Morgan Energy:
BBB+ Baa1 1,560,000 5.35% due 8/15/2007 (b) 1,558,939 1,622,832
BBB+ Baa1 1,600,000 6.75% due 3/15/2011 1,611,244 1,728,054
BBB Baa2 4,650,000 Kinder Morgan Inc., 6.50% due 9/01/2012 (b) 4,636,794 4,835,502
A+ A1 3,880,000 Motiva Enterprises LLC, 5.20% due 9/15/2012 (b) 3,867,817 3,937,571
A- Baa1 1,940,000 Murphy Oil Corporation, 6.375% due 5/01/2012 1,933,637 2,162,854
Ocean Energy Inc.:
BBB- Baa3 1,015,000 4.375% due 10/01/2007 1,012,351 1,028,798
BBB- Baa3 2,020,000 7.25% due 10/01/2011 2,072,455 2,312,876
BBB A3 4,035,000 Oncor Electric Delivery, 6.375% due
5/01/2012 (b) 4,026,244 4,385,750
A- Baa2 1,275,000 Transocean Sedco Forex, 6.50% due 4/15/2003 1,291,446 1,298,009
-------------- --------------
37,189,930 39,742,088
Industrial-- A A2 2,300,000 Alcoa Inc., 2.063% due 12/06/2004 (a) 2,300,000 2,299,432
Manu- A+ A3 990,000 Boeing Capital Corporation, 7.10% due 9/27/2005 1,029,740 1,080,529
facturing-- Daimler-Chrysler NA Holdings:
3.4% BBB+ A3 18,777,000 7.125% due 4/10/2003 19,153,760 19,130,984
BBB+ A3 2,600,000 6.40% due 5/15/2006 2,598,934 2,791,438
BBB- Baa3 475,000 Domtar Inc., 7.875% due 10/15/2011 511,785 544,973
A A2 625,000 Emerson Electric Company, 6% due 8/15/2032 614,594 632,802
A+ A1 3,330,000 First Data Corporation, 6.75% due 7/15/2005 3,380,911 3,652,900
BBB Baa2 1,900,000 Lockheed Martin Corporation, 8.50% due
12/01/2029 2,474,548 2,523,006
BBB Baa2 1,255,000 Martin Marietta Corp., 7.375% due 4/15/2013 1,206,821 1,501,308
BBB- Baa3 1,790,000 Noranda Inc., 7.25% due 7/15/2012 1,777,524 1,898,189
BBB- Baa3 9,524,000 Northrop Grumman Corporation, 7.125% due
2/15/2011 10,251,901 10,816,483
BBB+ A3 1,220,000 Praxair Inc., 6.375% due 4/01/2012 1,214,522 1,364,159
Raytheon Company:
BBB- Baa3 2,090,000 8.30% due 3/01/2010 2,353,548 2,456,469
BBB- Baa3 1,980,000 6.75% due 3/15/2018 1,679,738 2,057,562
-------------- --------------
50,548,326 52,750,234
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Core Bond Portfolio
Industrial-- BBB+ Baa1 $ 2,090,000 AOL Time Warner Inc., 6.875% due 5/01/2012 $ 1,774,614 $ 1,901,900
Services-- Aramark Services Inc.:
2.8% BBB- Baa3 2,475,000 6.75% due 8/01/2004 2,507,208 2,578,829
BBB- Baa3 2,105,000 6.375% due 2/15/2008 2,100,916 2,157,012
BB+ Ba2 4,700,000 Circus Circus Enterprises, Inc., 6.70% due
11/15/2096 4,689,519 4,716,022
Clear Channel Communications:
BBB- Baa3 1,755,000 7.875% due 6/15/2005 1,834,411 1,827,824
BBB- Baa3 935,000 7.65% due 9/15/2010 842,921 988,600
BBB- Ba1 2,880,000 HCA Inc., 6.30% due 10/01/2012 2,859,293 2,846,310
Kroger Company:
BBB- Baa3 1,680,000 6.20% due 6/15/2012 1,679,026 1,772,502
BBB- Baa3 1,845,000 7.50% due 4/01/2031 1,910,301 2,029,083
BBB- Baa3 2,775,000 Liberty Media Corporation, 7.875% due 7/15/2009 2,804,748 2,910,453
BBB Baa2 505,000 Safeway Inc., 6.50% due 3/01/2011 518,616 550,736
BBB Baa3 600,000 SuperValu Inc., 7.50% due 5/15/2012 614,913 637,496
Tele-Communications Inc.:
BBB+ Baa3 2,747,000 8.25% due 1/15/2003 2,754,781 2,735,204
BBB+ Baa3 2,355,000 9.80% due 2/01/2012 2,715,631 2,344,471
Tenet Healthcare Corporation:
BBB Baa3 1,395,000 5% due 7/01/2007 1,382,319 1,447,925
BBB Baa3 2,510,000 6.875% due 11/15/2031 (d) 2,328,452 2,645,676
BBB Ba1 5,350,000 USA Waste Services Inc., 6.50% due 12/15/2002 5,326,816 5,367,077
A- A3 2,230,000 Viacom Inc., 7.875% due 7/30/2030 2,418,084 2,684,585
-------------- --------------
41,062,569 42,141,705
Industrial-- AAA Aaa 1,425,000 Continental Airlines, 6.563% due 2/15/2012 1,425,000 1,536,319
Transporta- Southwest Airlines Co.:
tion--0.3% A Baa1 460,000 8% due 3/01/2005 466,268 512,788
A Baa1 1,880,000 7.875% due 9/01/2007 1,872,238 2,171,904
-------------- --------------
3,763,506 4,221,011
Real Estate BBB+ Baa1 4,550,000 EOP Operating LP, 7.375% due 11/15/2003 4,558,577 4,762,544
Investment BBB+ Baa2 610,000 Health Care Properties Inc., 7.48% due
Trust--1.1% 4/05/2004 635,536 648,241
Health Care Properties Investors Inc.:
BBB+ Baa2 1,430,000 6.50% due 2/15/2006 1,476,696 1,520,856
BBB+ Baa2 2,575,000 6.45% due 6/25/2012 2,567,326 2,715,662
BBB+ Baa1 6,675,000 Prologis Trust, 7% due 10/01/2003 6,740,331 6,909,346
-------------- --------------
15,978,466 16,556,649
Supranational A A2 4,455,000 Corporacion Andina de Fomento, 6.875% due
- --0.3% 3/15/2012 4,405,817 4,762,707
Tobacco--0.1% BBB- Baa2 940,000 RJ Reynolds Tobacco Holdings, 6.50% due
6/01/2007 938,421 990,703
Utilities-- A A2 1,510,000 360 Communications Co., 7.50% due 3/01/2006 1,542,719 1,660,696
Communi- AT&T Corporation:
cations-- BBB+ Baa2 3,490,000 6% due 3/15/2009 3,304,331 3,141,000
1.3% BBB+ Baa2 935,000 7.30% due 11/15/2011 787,241 902,275
AT&T Wireless Services Inc.:
BBB Baa2 1,465,000 8.125% due 5/01/2012 1,281,945 1,128,050
BBB Baa2 835,000 8.75% due 3/01/2031 932,633 601,200
A A2 1,545,000 Alltel Corporation, 7% due 7/01/2012 1,538,897 1,716,563
BBB+ Baa2 1,130,000 CenturyTel Inc., 7.875% due 8/15/2012 (b) 1,122,983 1,236,949
BBB Baa2 780,000 Citizens Communications Company, 7.625%
due 8/15/2008 769,454 733,200
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (concluded) Core Bond Portfolio
Utilities-- A+ A2 $ 3,200,000 GTE Corporation, 6.84% due 4/15/2018 $ 3,200,037 $ 3,060,442
Communi- BBB- Baa3 5,920,000 Sprint Capital Corporation, 5.70% due
cations 11/15/2003 5,974,124 5,390,989
(concluded) A A2 150,000 Vodafone Group PLC, 7.75% due 2/15/2010 159,137 169,650
-------------- --------------
20,613,501 19,741,014
Utilities-- BBB+ A3 1,345,000 Alabama Power Capital Trust, 5.50% due
Electric 10/01/2042 (a) 1,342,001 1,342,001
& Gas-- BBB Baa1 4,950,000 Cincinnati Gas & Electric Company, 5.70% due
2.0% 9/15/2012 4,969,676 5,040,560
Commonwealth Edison Company:
A- A3 175,000 6.15% due 3/15/2012 (b) 175,153 195,839
BBB+ Baa1 1,970,000 6.95% due 7/15/2018 1,961,568 2,069,067
BBB Baa1 2,350,000 Conectiv Inc., 5.30% due 6/01/2005 (b) 2,349,364 2,415,986
A+ A1 985,000 Consolidated Edison Inc., 7.15% due 12/01/2009 1,064,458 1,153,848
BBB+ Baa1 3,475,000 Constellation Energy Group, 6.125% due
9/01/2009 3,469,475 3,510,817
Dominion Resources Inc.:
BBB+ Baa1 2,185,000 7.625% due 7/15/2005 2,227,262 2,399,097
BBB+ Baa1 785,000 8.125% due 6/15/2010 904,756 912,465
BBB+ Baa2 935,000 Exelon Corporation, 6.75% due 5/01/2011 978,235 1,033,740
A A1 1,970,000 Mississippi Power, 6.05% due 5/01/2003 1,997,846 2,007,530
BBB Baa1 1,350,000 PSEG Power, 6.95% due 6/01/2012 (b) 1,347,340 1,307,772
BBB Baa1 1,765,000 Pepco Holdings Inc., 6.45% due 8/15/2012 (b) 1,760,358 1,828,964
BBB+ Baa1 2,270,000 Southern Power Company, 6.25% due
7/15/2012 (b) 2,266,799 2,466,255
BBB A2 1,060,000 Tampa Electric, 6.375% due 8/15/2012 1,051,488 1,080,532
BBB- Baa2 2,000,000 Teco Energy Inc., 7% due 5/01/2012 1,997,800 1,792,980
-------------- --------------
29,863,579 30,557,453
Yankee A- A1 1,200,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 (1) 1,246,894 1,268,208
Corporates++ A- Baa1 4,910,000 British Telecom PLC, 8.375% due 12/15/2010 (2) 5,274,129 5,768,273
- --1.7% France Telecom (2):
BBB- Baa3 935,000 9.25% due 3/01/2011 930,877 1,019,960
BBB- Baa3 1,095,000 9.75% due 3/01/2031 1,155,972 1,210,900
A A1 2,495,000 HSBC Holding PLC, 7.50% due 7/15/2009 (1) 2,636,480 2,942,406
Morgan Stanley TRACERS (b)(1):
NR* A3 4,920,000 5.854% due 3/01/2007 (a) 5,058,374 5,129,690
NR* Baa1 4,920,000 6.726% due 6/15/2012 5,197,731 5,330,869
A A2 1,330,000 Norsk Hydro A/S, 6.36% due 1/15/2009 (2) 1,317,870 1,455,834
BBB- Baa1 2,500,000 Pemex Project Funding Master Trust, 9.125%
due 10/13/2010 (1) 2,559,681 2,662,500
-------------- --------------
25,378,008 26,788,640
Yankee Federal Republic of Brazil (3):
Sovereigns++ B+ B2 1,975,000 11.625% due 4/15/2004 1,941,953 1,545,437
- --1.3% B+ B2 3,545,000 14.50% due 10/15/2009 2,137,170 1,976,337
A- A3 2,300,000 Korea Development Bank, 7.125% due
4/22/2004 (1) 2,283,210 2,458,831
AAA Aaa 2,350,000 Republic of Finland, 5.875% due 2/27/2006 (3) 2,431,728 2,596,644
AA Aa2 6,800,000 Republic of Italy, 4.375% due 10/25/2006 (3) 6,629,848 7,209,129
BBB- Baa2 3,120,000 United Mexican States, 9.875% due
2/01/2010 (3) 3,586,035 3,541,200
-------------- --------------
19,009,944 19,327,578
Total Investments in Bonds--49.8% 737,364,823 762,593,294
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
U.S. Government & Agency Obligations Core Bond Portfolio
U.S. Fannie Mae:
Government & AAA Aaa $11,150,000 6% (c)** $ 11,553,981 $ 11,578,573
Agency AAA Aaa 80,600,000 6% (c)** 82,196,881 82,908,223
Obligations AAA Aaa 50,000,000 7.50% (c)** 52,670,388 52,688,600
- --58.0% AAA Aaa 15,000,000 8% (c)** 15,993,234 16,004,490
AAA Aaa 29,400,000 7% due 7/15/2005 31,515,903 32,989,034
AAA Aaa 17,890,000 5.25% due 6/15/2006 18,275,671 19,401,365
AAA Aaa 5,000,000 7.125% due 3/15/2007 5,475,391 5,847,705
AAA Aaa 10,800,000 6.375% due 6/15/2009 11,446,555 12,450,078
AAA Aaa 7,525,000 6% due 5/15/2011 7,748,644 8,461,486
AAA Aaa 13,689,581 6% due 6/01/2016** 13,638,244 14,229,622
AAA Aaa 6,230,735 6.50% due 7/01/2016** 6,281,360 6,528,830
AAA Aaa 1,834,656 6.50% due 8/01/2016** 1,843,829 1,922,430
AAA Aaa 5,374,361 6% due 2/01/2017** 5,418,361 5,586,375
AAA Aaa 7,581,693 6.50% due 4/01/2017** 7,773,693 7,944,420
AAA Aaa 4,187,318 7% due 11/18/2027** 4,084,107 4,258,861
AAA Aaa 12,450,000 7.125% due 1/15/2030 13,850,442 15,434,165
AAA Aaa 5,468,346 8% due 9/01/2030** 5,663,011 5,846,732
AAA Aaa 63,154,036 6.50% due 6/01/2031** 62,737,088 65,494,278
AAA Aaa 8,250,271 7% due 6/01/2031** 8,351,466 8,616,181
AAA Aaa 8,612,333 6.50% due 7/01/2031** 8,539,667 8,931,473
AAA Aaa 4,827,101 7% due 9/01/2031** 5,003,378 5,041,188
AAA Aaa 189,329 7% due 11/01/2031** 195,129 197,726
AAA Aaa 139,511 6% due 1/01/2032** 135,914 143,508
AAA Aaa 4,511,438 6% due 2/01/2032** 4,436,717 4,640,704
AAA Aaa 3,778,311 7% due 3/01/2032** 3,903,119 3,946,015
AAA Aaa 3,817,883 7% due 4/01/2032** 3,944,000 3,987,211
AAA Aaa 25,464,106 7% due 7/01/2032** 26,305,598 26,593,470
AAA Aaa 26,610,317 7% due 8/01/2032** 27,472,944 27,791,437
Freddie Mac:
AAA Aaa 36,400,000 6% (c)** 37,110,248 37,487,887
AAA Aaa 16,000,000 6.50% (c)** 16,706,458 16,748,496
AAA Aaa 56,943,328 6.50% (c)** 58,836,760 59,062,816
AAA Aaa 13,000,000 8% (c)** 13,858,921 13,843,154
AAA Aaa 24,700,000 7% due 7/15/2005 26,478,376 27,734,765
AAA Aaa 14,115,000 6.625% due 9/15/2009 15,146,511 16,523,344
AAA Aaa 5,699,655 5.57% due 7/15/2022** 5,816,754 5,774,942
AAA Aaa 26,243,112 Ginnie Mae, 6.50% due 5/15/2031** 26,193,906 27,397,549
U.S. Treasury Bonds & Notes:
AAA Aaa 8,600,000 7.50% due 2/15/2005 9,396,057 9,729,421
AAA Aaa 22,750,000 6.50% due 5/15/2005 24,223,586 25,417,801
AAA Aaa 2,680,000 5.75% due 11/15/2005 2,839,796 2,976,684
AAA Aaa 7,150,000 6.25% due 2/15/2007 7,656,734 8,266,351
AAA Aaa 54,768,000 3.25% due 8/15/2007 55,614,655 56,449,542
AAA Aaa 8,740,000 6.125% due 8/15/2007 9,390,663 10,127,475
AAA Aaa 6,240,000 4.75% due 11/15/2008 6,355,961 6,853,030
AAA Aaa 3,760,000 6.50% due 2/15/2010 4,226,764 4,537,557
AAA Aaa 5,380,000 5% due 2/15/2011 5,294,915 5,976,421
AAA Aaa 39,850,000 4.375% due 8/15/2012 41,829,440 42,371,748
AAA Aaa 6,130,000 7.50% due 11/15/2016 7,519,168 8,127,037
AAA Aaa 3,740,000 8.125% due 8/15/2019 4,835,598 5,285,087
AAA Aaa 13,030,000 7.25% due 8/15/2022 16,165,935 17,214,871
AAA Aaa 2,680,000 6.25% due 8/15/2023 2,961,314 3,195,900
AAA Aaa 2,680,000 6.625% due 2/15/2027 3,092,091 3,370,414
AAA Aaa 12,523,000 5.375% due 2/15/2031 13,829,767 13,916,184
Total Investments in U.S. Government &
Agency Obligations--58.0% 861,835,093 887,852,656
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (concluded)
Face
Industries Amount Issue Cost Value
Short-Term Securities Core Bond Portfolio
Commercial Paper***--12.0% Conoco Inc.:
$ 3,491,000 1.87% due 10/02/2002 $ 3,490,819 $ 3,490,819
25,000,000 1.86% due 10/15/2002 24,981,917 24,981,917
23,260,000 Forrestal Funding Master Trust, 1.78% due
11/05/2002 23,219,747 23,219,747
20,000,000 Morgan Stanley, 1.77% due 10/09/2002 19,992,133 19,992,133
19,000,000 Phillips Petroleum Co., 1.86% due 10/22/2002 18,979,385 18,979,385
Sears Roebuck Acceptance Corporation:
15,000,000 2% due 10/08/2002 14,994,167 14,994,167
8,293,000 2% due 10/11/2002 8,288,393 8,288,393
19,590,000 2% due 10/16/2002 19,573,675 19,573,675
Textron Financial Corporation
10,200,000 1.90% due 10/03/2002 10,198,923 10,198,923
4,797,000 1.92% due 10/09/2002 4,794,953 4,794,953
35,300,000 UBS Finance (Delaware) Inc., 1.97% due
10/01/2002 35,300,000 35,300,000
Total Investments in Short-Term
Securities--12.0% 183,814,112 183,814,112
Total Investments--119.8% 1,783,014,028 1,834,260,062
Nominal Value Premiums
Covered by Options Received
Options
Options Written--0.0% 73,000,000 Swaption, expiring 11/05/2002 (e) (153,300)
(149,650)
Total Options Written--0.0% (153,300) (149,650)
Total Investments, Net of Options Written--119.8% $1,782,860,728 1,834,110,412
==============
Liabilities in Excess of Other Assets--(19.8%) (303,753,728)
--------------
Net Assets--100.0% $1,530,356,684
==============
*Not Rated.
**Asset-Backed and Mortgage-Backed Obligations are subject to
principal paydowns as a result of prepayments or refinancings of the
underlying instruments. As a result, the average life may be
substantially less than the original maturity.
***Commercial Paper is traded on a discount basis; the interest
rates shown reflect the discount rates paid at the time of purchase
by the Portfolio.
++Corresponding industry groups for foreign securities:
(1)Financial Institution.
(2)Industrial.
(3)Government Entity.
+++Ratings of issues shown have not been audited by Deloitte &
Touche LLP.
(a) Floating rate note.
(b) The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(c) Represents a "to-be-announced" (TBA) transaction. The Portfolio
has committed to purchasing securities for which all specific
information is not available at this time.
(d) Restricted securities as to resale. The value of the Portfolio's
investments in restricted securities was approximately $28,528,000,
representing 1.9% of net assets.
Acquisition
Issue Date Cost Value
Security Life of Denver,
0.33% due 10/01/2002 3/28/2002 $23,000,000 $ 25,882,289
Tenet Healthcare Corporation,
6.875% due 11/15/2031 10/30/2001 2,328,452 2,645,676
----------- -------------
Total $25,328,452 $ 28,527,965
=========== =============
(e) This European style swaption, which can be exercised only on the
expiration date, represents a standby commitment whereby the
Portfolio is obligated to enter into a predetermined interest rate
swap contract upon exercise of the swaption.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds Intermediate Term Portfolio
Asset-Backed AAA Aaa $ 4,000,000 Advanta Mortgage Loan Trust, 7.75% due
Securities** 10/25/2026 $ 4,139,063 $ 4,419,863
- --18.3% NR* Aaa 3,711,173 Bank of America Mortgage Securities,
Series 2002-IA, Class 1B, 4.64% due 8/25/2032 3,748,225 3,740,167
AAA Aaa 3,018,000 CIT Equipment Collateral, Series 2002-VT1,
Class A2, 2.90% due 6/21/2004 3,017,839 3,038,008
NR* Aaa 3,590,317 CountryWide Home Loan, Series 2001-24,
Class 1A6, 6% due 1/25/2032 3,608,080 3,689,123
AAA Aaa 2,838,305 EQCC Home Equity Loan Trust, Series 1999-1,
Class A3F, 5.915% due 11/20/2024 2,890,714 2,908,118
AAA NR* 3,249,315 General Motors Acceptance Corporation,
Mortgage Corporation Loan Trust, 6.25%
due 1/25/2032 3,288,013 3,325,121
AAA Aaa 3,900,000 Household Automotive Trust, Series 2002-1,
Class A2, 2.75% due 5/17/2005 3,899,690 3,933,455
AAA Aaa 3,440,666 Household Home Equity Loan Trust,
Series 2002-2, Class A, 2.12% due 4/20/2032 (c) 3,440,666 3,430,349
AAA Aaa 3,800,000 Ikon Receivables LLC, Series 2002-1, Class A2,
2.91% due 2/15/2005 3,799,991 3,815,165
AAA Aaa 3,250,000 LB-UBS Commercial Mortgage Trust,
Series 2002-C1, Class A3, 6.226% due 3/15/2026 3,265,957 3,625,046
A+ A2 1,515,955 MBNA Master Credit Card Trust, Series 1999-F,
Class B, 2.14% due 1/16/2007 (c) 1,518,766 1,516,107
AAA NR* 10,000,000 Nationslink Funding Corporation, Series 1999-2,
Class A3, 7.181% due 12/20/2006 10,000,000 11,269,039
AAA Aaa 3,696,828 Option One Mortgage Loan Trust, Series 2002-4,
Class A, 2.07% due 7/25/2032 (c) 3,696,828 3,680,874
AAA NR* 1,796,496 Residential Funding Mortgage Securities Inc.,
Series 2001-S23, Class 2A1, 5.50% due 10/25/2031 1,834,729 1,817,515
Security Life of Denver:
NR* NR* 9,000,000 0.33% due 10/01/2002 (d) 9,000,000 10,127,852
NR* NR* 10,000,000 0.44% due 3/31/2003 10,000,000 10,000,000
AAA Aaa 2,618,399 Structured Asset Securities Corporation,
Series 2002-9, Class A2, 2.114% due
10/25/2027 (c) 2,618,399 2,614,790
A A2 3,025,000 Superior Wholesale Inventory Financing Trust,
Series 2001-A7, 2.205% due 6/15/2006 (c) 3,029,042 3,025,393
AAA Aaa 6,900,000 Washington Mutual Inc., Series 2002-AR4,
Class A7, 5.59% due 4/25/2032 6,827,766 7,130,221
AAA Aaa 2,410,499 Wells Fargo Mortgage-Backed Securities Trust,
Series 2002-A, Class A-2, 5.90% due 3/25/2032 2,451,713 2,443,060
-------------- --------------
86,075,481 89,549,266
Automotive BBB+ Baa1 1,250,000 Ford Motor Company, 7.45% due 7/16/2031 1,200,125 1,028,758
& Equipment
- --0.2%
Canadian BBB- Baa3 150,000 Abitibi Consolidated Inc., 8.55% due
Corporates++ 8/01/2010 (2) 157,225 158,410
- --0.0%
Canadian AAA Aaa 900,000 Canada Government Bond, 6.375% due
Sovereigns++ 11/30/2004 (3) 943,529 984,686
- --1.3% Province of Ontario (3):
AA Aa2 1,455,000 3.50% due 9/17/2007 1,446,619 1,481,731
AA Aa2 950,000 5.50% due 10/01/2008 991,953 1,058,620
Province of Quebec (3):
A+ A1 1,080,000 5% due 7/17/2009 1,135,637 1,151,724
A+ A1 1,250,000 7.50% due 9/15/2029 1,404,173 1,617,419
A+ Aa3 210,000 Province of Saskatchewan, 8% due 7/15/2004 (3) 225,041 231,163
-------------- --------------
6,146,952 6,525,343
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Intermediate Term Portfolio
Chemicals BBB+ Baa1 $ 570,000 Chevron Phillips Chemical Company, 5.375%
- --0.2% due 6/15/2007 $ 567,207 $ 602,997
BBB- Ba1 295,000 Methanex Corporation, 8.75% due 8/15/2012 295,000 305,325
-------------- --------------
862,207 908,322
Finance--0.6% A A2 670,000 AT&T Capital Corporation, 6.60% due 5/15/2005 662,833 693,535
A+ A1 575,000 American General Finance, 5.375% due
9/01/2009 570,860 595,153
Capital One Bank:
BBB- Baa2 105,000 6.50% due 7/30/2004 104,322 99,404
BBB- Baa2 490,000 6.875% due 2/01/2006 486,678 460,326
A A2 700,000 Household Finance Corporation, 7% due
5/15/2012 685,559 674,398
AA Aa3 330,000 Texaco Capital Inc., 8.625% due 6/30/2010 379,571 422,624
-------------- --------------
2,889,823 2,945,440
Finance-- BB&T Corporation:
Banks--5.4% A- A2 755,000 6.50% due 8/01/2011 773,780 861,975
A- A1 1,100,000 4.75% due 10/01/2012 1,089,451 1,113,054
A- A1 700,000 Banc One Corp., 8% due 4/29/2027 770,970 877,633
A+ Aa2 755,000 Bank of America Corp., 4.875% due 9/15/2012 752,184 763,061
A+ Aa2 640,000 The Bank of New York, 5.20% due 7/01/2007 638,842 691,185
Bank One Corp.:
A Aa3 800,000 6.875% due 8/01/2006 827,731 902,070
A Aa3 380,000 4.125% due 9/01/2007 379,422 391,583
A+ Aa2 2,370,000 BankAmerica Corp., 5.875% due 2/15/2009 2,387,828 2,568,367
Citigroup Inc.:
AA- Aa1 730,000 5.70% due 2/06/2004 749,450 763,541
AA- Aa1 770,000 5.75% due 5/10/2006 826,629 834,307
AA- Aa1 1,200,000 6.50% due 1/18/2011 1,224,593 1,335,566
A+ Aa2 925,000 6.625% due 6/15/2032 912,522 964,331
A A1 1,600,000 FleetBoston Financial Corp., 7.25% due
9/15/2005 1,598,144 1,750,587
BB+ NR* 335,000 Hudson United Bancorp Inc., 8.20% due
9/15/2006 344,766 369,490
Inter-American Development Bank:
AAA Aaa 920,000 4.375% due 9/20/2012 915,952 934,786
AAA Aaa 2,590,000 6.80% due 10/15/2025 3,074,734 3,107,516
A+ Aa3 450,000 Marshall & Ilsley Bank, 4.125% due 9/04/2007 448,619 466,151
A+ Aa3 1,150,000 National City Bank of Indiana, 4% due 9/28/2007 1,148,436 1,185,113
A Aa3 1,475,000 US Bancorp, 1.97% due 9/16/2005 (c) 1,475,000 1,473,883
A A1 735,000 Wachovia Corporation, 4.95% due 11/01/2006 772,615 785,036
BBB+ A3 800,000 Washington Mutual Inc., 7.50% due 8/15/2006 794,840 903,486
A+ Aa2 1,510,000 Wells Fargo Bank, 6.45% due 2/01/2011 1,625,932 1,702,786
Wells Fargo & Co.:
A+ Aa2 800,000 7.25% due 8/24/2005 838,125 894,325
A+ Aa2 950,000 5.125% due 2/15/2007 949,687 1,020,820
-------------- --------------
25,320,252 26,660,652
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Intermediate Term Portfolio
Finance-- A+ A2 $ 785,000 American Honda Finance, 2.032% due
Other--6.8% 10/03/2005 (a)(c) $ 784,757 $ 784,921
CIT Group Inc.:
A A2 245,000 5.625% due 5/17/2004 250,539 250,889
A A2 295,000 7.25% due 8/15/2005 285,197 311,310
A A2 300,000 6.50% due 2/07/2006 308,504 315,592
Chrysler Financial Company LLC (c):
BBB+ A3 758,000 1.985% due 2/03/2003 756,997 756,785
BBB+ A3 758,000 1.99% due 3/06/2003 756,776 756,298
A A3 1,105,000 CountryWide Home Loan, 5.625% due 7/15/2009 1,099,353 1,159,128
Ford Motor Credit Company:
BBB+ A3 6,500,000 2.55% due 4/17/2003 (c) 6,480,606 6,419,550
BBB+ A3 1,665,000 7.25% due 10/25/2011 1,641,009 1,539,126
AAA Aaa 660,000 General Electric Capital Corporation, 6.75%
due 3/15/2032 673,420 707,884
General Motors Acceptance Corp.:
BBB+ A2 9,500,000 3.31% due 10/16/2003 (c) 9,551,619 9,453,469
BBB+ A2 305,000 6.85% due 6/17/2004 311,332 315,926
BBB+ A2 807,000 7.75% due 1/19/2010 855,721 835,566
BBB+ A2 1,309,000 8% due 11/01/2031 1,294,627 1,268,777
A A1 980,000 Golden West Financial Corporation, 4.75% due
10/01/2012 973,130 985,352
A+ Aa3 675,000 Goldman Sachs Group, Inc., 7.625% due
8/17/2005 702,930 760,691
AA- A1 410,000 International Lease Finance Corporation,
5.625% due 6/01/2007 418,372 421,013
A A2 480,000 John Hancock Financial Services, 5.625% due
12/01/2008 478,666 506,179
Lehman Brothers Holdings, Inc.:
A A2 1,000,000 6.625% due 4/01/2004 1,011,822 1,055,894
A A2 90,000 7% due 2/01/2008 90,798 101,094
A A2 1,155,000 6.625% due 1/18/2012 1,217,091 1,265,585
BBB Baa2 945,000 MBNA Corporation, 6.25% due 1/17/2007 942,921 978,586
AA Aa3 760,000 Principal Life Global, 6.25% due 2/15/2012 (a) 750,447 818,005
A- A2 470,000 Regions Financial Corporation, 6.375% due
5/15/2012 468,802 530,324
A+ A1 1,130,000 Verizon Global Funding Corporation, 6.75% due
12/01/2005 1,148,329 1,191,213
-------------- --------------
33,253,765 33,489,157
Food A+ A1 745,000 Archer-Daniels-Midland, 5.935% due 10/01/2032 739,495 739,494
Distribution
- --0.2%
Gas BBB Baa3 500,000 The Coastal Corporation, 6.50% due 6/01/2008 488,481 335,000
Transmission
- --0.1%
Hotels--0.1% BBB- Ba1 626,000 Starwood Hotels & Resorts, 7.375% due
5/01/2007 (a) 624,028 607,220
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Intermediate Term Portfolio
Industrial-- A A2 $ 660,000 Coca-Cola Enterprises, 6.125% due 8/15/2011 $ 670,344 $ 742,284
Consumer BBB+ Baa2 1,645,000 Coors Brewing Company, 6.375% due 5/15/2012 1,764,352 1,861,546
Goods--1.1% A A1 1,455,000 Pepsi Bottling Holdings Inc., 5.625% due
2/17/2009 (a) 1,519,265 1,583,481
BBB Baa3 910,000 Tyson Foods, Inc., 6.625% due 10/01/2004 908,298 966,812
-------------- --------------
4,862,259 5,154,123
Industrial-- BBB Baa2 470,000 Allete Inc., 7.80% due 2/15/2008 484,422 533,042
Energy--2.8% BBB+ Baa2 705,000 AmerenEnergy Generating, 7.95% due
6/01/2032 702,377 801,773
Anadarko Finance Company:
BBB+ Baa1 285,000 6.75% due 5/01/2011 287,273 320,082
BBB+ Baa1 250,000 7.50% due 5/01/2031 256,876 296,703
Apache Corporation:
A- A3 105,000 6.25% due 4/15/2012 104,252 118,334
A- A3 275,000 7.625% due 7/01/2019 287,153 326,301
A A2 800,000 Colonial Pipeline, 7.63% due 4/15/2032 (a) 799,784 946,544
Conoco Inc.:
A- A3 1,170,000 5.90% due 4/15/2004 1,192,277 1,227,853
A- A3 950,000 6.95% due 4/15/2029 1,069,034 1,073,174
Kinder Morgan Energy:
BBB+ Baa1 510,000 5.35% due 8/15/2007 (a) 509,653 530,541
BBB+ Baa1 815,000 6.75% due 3/15/2011 824,467 880,228
BBB Baa2 1,520,000 Kinder Morgan Inc., 6.50% due 9/01/2012 (a) 1,515,683 1,580,637
A+ A1 1,265,000 Motiva Enterprises LLC, 5.20% due
9/15/2012 (a) 1,261,028 1,283,770
A- Baa1 648,000 Murphy Oil Corporation, 6.375% due 5/01/2012 645,875 722,438
Ocean Energy Inc.:
BBB- Baa3 330,000 4.375% due 10/01/2007 329,139 334,486
BBB- Baa3 690,000 7.25% due 10/01/2011 707,918 790,042
BBB A3 1,470,000 Oncor Electric Delivery, 6.375% due
5/01/2012 (a) 1,466,810 1,597,783
A- Baa2 485,000 Transocean Sedco Forex, 6.50% due 4/15/2003 491,256 493,752
-------------- --------------
12,935,277 13,857,483
Industrial-- A A2 775,000 Alcoa Inc., 2.063% due 12/06/2004 (c) 775,000 774,809
Manu- A+ A3 330,000 Boeing Capital Corporation, 7.10% due
facturing 9/27/2005 343,247 360,176
- --3.6% Daimler-Chrysler NA Holdings:
BBB+ A3 6,001,000 7.125% due 4/10/2003 6,121,410 6,114,131
BBB+ A3 900,000 6.40% due 5/15/2006 899,631 966,267
BBB- Baa3 155,000 Domtar Inc., 7.875% due 10/15/2011 167,004 177,833
A A2 205,000 Emerson Electric Company, 6% due 8/15/2032 201,587 207,559
A+ A1 1,090,000 First Data Corporation, 6.75% due 7/15/2005 1,136,647 1,195,694
BBB Baa2 620,000 Lockheed Martin Corporation, 8.50% due
12/01/2029 807,484 823,297
BBB Baa2 530,000 Martin Marietta Corp., 7.375% due 4/15/2013 578,131 634,018
BBB- Baa3 685,000 Noranda Inc., 7.25% due 7/15/2012 680,226 726,402
BBB- Baa3 3,070,000 Northrop Grumman Corporation, 7.125% due
2/15/2011 3,306,073 3,486,624
BBB+ A3 395,000 Praxair Inc., 6.375% due 4/01/2012 393,227 441,674
Raytheon Company:
BBB- Baa3 675,000 8.30% due 3/01/2010 760,117 793,357
BBB- Baa3 660,000 6.75% due 3/15/2018 660,788 685,854
-------------- --------------
16,830,572 17,387,695
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (continued) Intermediate Term Portfolio
Industrial BBB+ Baa1 $ 675,000 AOL Time Warner Inc., 6.875% due 5/01/2012 $ 573,141 $ 614,250
- --Services Aramark Services Inc.:
- --2.6% BBB- Baa3 825,000 6.75% due 8/01/2004 835,736 859,610
BBB- Baa3 690,000 6.375% due 2/15/2008 688,661 707,049
BBB Baa1 785,000 Cendant Corporation, 6.875% due 8/15/2006 778,131 789,408
BB+ Ba2 1,570,000 Circus Circus Enterprises, Inc., 6.70% due
11/15/2096 1,540,845 1,575,352
Clear Channel Communications:
BBB- Baa3 570,000 7.875% due 6/15/2005 594,302 593,652
BBB- Baa3 300,000 7.65% due 9/15/2010 270,456 317,198
BBB- Ba1 940,000 HCA Inc., 6.30% due 10/01/2012 933,241 929,004
Kroger Company:
BBB- Baa3 550,000 6.20% due 6/15/2012 549,681 580,284
BBB- Baa3 580,000 7.50% due 4/01/2031 601,642 637,869
BBB- Baa3 900,000 Liberty Media Corporation, 7.875% due
7/15/2009 909,648 943,931
BBB Baa2 185,000 Safeway Inc., 6.50% due 3/01/2011 189,988 201,755
BBB Baa3 200,000 SuperValu Inc., 7.50% due 5/15/2012 204,971 212,499
Tele-Communications Inc.:
BBB+ Baa3 920,000 8.25% due 1/15/2003 922,606 916,050
BBB+ Baa3 785,000 9.80% due 2/01/2012 905,210 781,490
Tenet Healthcare Corporation:
BBB Baa3 425,000 5% due 7/01/2007 421,137 441,124
BBB Baa3 840,000 6.875% due 11/15/2031 (d) 779,243 885,405
Viacom Inc.:
A- A3 45,000 5.625% due 8/15/2012 44,933 47,132
A- A3 710,000 7.875% due 7/30/2030 771,679 854,734
-------------- --------------
12,515,251 12,887,796
Industrial-- AAA Aaa 475,000 Continental Airlines, 6.563% due 2/15/2012 475,000 512,106
Transporta- Southwest Airlines Co.:
tion--0.3% A Baa1 110,000 8% due 3/01/2005 109,407 122,623
A Baa1 630,000 7.875% due 9/01/2007 634,441 727,819
-------------- --------------
1,218,848 1,362,548
Real Estate BBB+ Baa1 1,320,000 EOP Operating LP, 7.375% due 11/15/2003 1,318,706 1,381,661
Investment BBB+ Baa2 195,000 Health Care Properties Inc., 7.48% due
Trust--1.1% 4/05/2004 203,163 207,225
Health Care Properties Investors Inc.:
BBB+ Baa2 465,000 6.50% due 2/15/2006 480,184 494,544
BBB+ Baa2 840,000 6.45% due 6/25/2012 837,497 885,886
BBB+ Baa1 2,500,000 Prologis Trust, 7% due 10/01/2003 2,536,736 2,587,770
-------------- --------------
5,376,286 5,557,086
Supranational A A2 1,485,000 Corporacion Andina de Fomento, 6.875% due
- --0.3% 3/15/2012 1,468,606 1,587,569
Tobacco BBB- Baa2 315,000 RJ Reynolds Tobacco Holdings, 6.50% due
- --0.1% 6/01/2007 314,471 331,991
Utilities-- A A2 500,000 360 Communications Co., 7.50% due 3/01/2006 510,834 549,900
Communica- AT&T Corporation:
tions--1.2% BBB+ Baa2 1,160,000 6% due 3/15/2009 1,096,093 1,044,000
BBB+ Baa2 300,000 7.30% due 11/15/2011 252,591 289,500
AT&T Wireless Services Inc.:
BBB Baa2 395,000 8.125% due 5/01/2012 336,578 304,150
BBB Baa2 372,000 8.75% due 3/01/2031 415,496 267,840
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Bonds (concluded) Intermediate Term Portfolio
Utilities-- A A2 $ 510,000 Alltel Corporation, 7% due 7/01/2012 $ 507,986 $ 566,632
Communi- BBB+ Baa2 365,000 CenturyTel Inc., 7.875% due 8/15/2012 (a) 362,733 399,545
cations BBB Baa2 240,000 Citizens Communications Company, 7.625%
(concluded) due 8/15/2008 238,824 225,600
A+ A2 1,010,000 GTE Corporation, 6.84% due 4/15/2018 1,012,271 965,952
BBB- Baa3 1,400,000 Sprint Capital Corporation, 5.70% due
11/15/2003 1,361,364 1,274,896
-------------- --------------
6,094,770 5,888,015
Utilities-- BBB+ A3 420,000 Alabama Power Capital Trust, 5.50% due
Electric 10/01/2042 (c) 419,063 419,063
& Gas-- BBB Baa1 1,685,000 Cincinnati Gas & Electric Company, 5.70% due
2.0% 9/15/2012 1,691,863 1,715,827
BBB+ Baa1 660,000 Commonwealth Edison Company, 6.95% due
7/15/2018 666,925 693,190
BBB Baa1 775,000 Conectiv Inc., 5.30% due 6/01/2005 (a) 774,809 796,761
A+ A1 330,000 Consolidated Edison Inc., 7.15% due 12/01/2009 356,621 386,568
BBB+ Baa1 1,135,000 Constellation Energy Group, 6.125% due
9/01/2009 1,133,195 1,146,698
Dominion Resources Inc.:
BBB+ Baa1 740,000 7.625% due 7/15/2005 749,074 812,509
BBB+ Baa1 160,000 8.125% due 6/15/2010 186,244 185,980
BBB+ Baa2 300,000 Exelon Corporation, 6.75% due 5/01/2011 313,872 331,681
A A1 660,000 Mississippi Power, 6.05% due 5/01/2003 670,381 672,574
BBB Baa1 440,000 PSEG Power, 6.95% due 6/01/2012 (a) 439,133 426,237
BBB Baa1 575,000 Pepco Holdings Inc., 6.45% due 8/15/2012 (a) 573,488 595,838
BBB+ Baa1 740,000 Southern Power Company, 6.25% due
7/15/2012 (a) 738,957 803,977
BBB A2 350,000 Tampa Electric, 6.375% due 8/15/2012 347,190 356,780
BBB- Baa2 670,000 Teco Energy Inc., 7% due 5/01/2012 669,263 600,648
-------------- --------------
9,730,078 9,944,331
Yankee A- A1 400,000 BSCH Issuances Ltd., 7.625% due 9/14/2010 (1) 415,631 422,736
Corporates++ A- Baa1 1,780,000 British Telecom PLC, 8.375% due 12/15/2010 (2) 1,907,140 2,091,146
- --1.9% France Telecom (2):
BBB- Baa3 300,000 9.25% due 3/01/2011 298,677 327,260
BBB- Baa3 400,000 9.75% due 3/01/2031 422,314 442,338
A A1 915,000 HSBC Holding PLC, 7.50% due 7/15/2009 (1) 966,722 1,079,079
Morgan Stanley TRACERS (a)(1):
NR* A3 1,620,000 5.854% due 3/01/2007 (c) 1,665,562 1,689,044
NR* Baa1 1,620,000 6.726% due 6/15/2012 1,711,448 1,755,286
A A2 340,000 Norsk Hydro A/S, 6.36% due 1/15/2009 (2) 336,899 372,168
BBB- Baa1 855,000 Pemex Project Funding Master Trust, 9.125%
due 10/13/2010 (1) 875,411 910,575
-------------- --------------
8,599,804 9,089,632
Yankee Federal Republic of Brazil (3):
Sovereigns++ B+ B2 775,000 11.625% due 4/15/2004 762,032 606,437
- --1.4% B+ B2 1,375,000 14.50% due 10/15/2009 828,939 766,562
A- A3 800,000 Korea Development Bank, 7.125% due
4/22/2004 (1) 818,290 855,246
AAA Aaa 700,000 Republic of Finland, 5.875% due 2/27/2006 (3) 724,344 773,469
AA Aa2 2,380,000 Republic of Italy, 4.375% due 10/25/2006 (3) 2,322,797 2,523,195
BBB- Baa2 1,020,000 United Mexican States, 9.875% due 2/01/2010 (3) 1,172,358 1,157,700
-------------- --------------
6,628,760 6,682,609
Total Investments in Bonds--51.6% 244,332,816 252,677,940
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
U.S. Government & Agency Obligations Intermediate Term Portfolio
U.S. Fannie Mae:
Government & AAA Aaa $ 3,000,000 6% (b)** $ 3,108,694 $ 3,115,311
Agency AAA Aaa 16,900,000 6% (b)** 17,235,735 17,383,982
Obligations AAA Aaa 29,500,000 6.50% (b)** 30,464,136 30,570,319
- --54.9% AAA Aaa 17,300,000 7.50% (b)** 18,223,954 18,230,256
AAA Aaa 3,600,000 8% (b)** 3,838,376 3,841,078
AAA Aaa 10,000,000 7% due 7/15/2005** 10,719,695 11,220,760
AAA Aaa 5,950,000 5.25% due 6/15/2006 6,078,270 6,452,662
AAA Aaa 1,660,000 7.125% due 3/15/2007 1,817,830 1,941,438
AAA Aaa 3,590,000 6.375% due 6/15/2009 3,804,920 4,138,498
AAA Aaa 2,500,000 6% due 5/15/2011 2,574,300 2,811,125
AAA Aaa 2,986,287 6% due 5/01/2016** 2,975,089 3,104,094
AAA Aaa 1,008,253 6% due 6/01/2016** 1,004,472 1,048,028
AAA Aaa 3,178,291 6% due 2/01/2017** 3,204,312 3,303,672
AAA Aaa 5,898,377 6.50% due 4/01/2017** 6,047,749 6,180,570
AAA Aaa 2,057,583 7% due 11/18/2027** 2,006,866 2,092,738
AAA Aaa 4,140,000 7.125% due 1/15/2030 4,617,194 5,132,325
AAA Aaa 1,134,447 8% due 9/01/2030** 1,174,862 1,212,946
AAA Aaa 7,099,345 7% due 2/01/2031** 7,333,886 7,415,478
AAA Aaa 6,249,648 6.50% due 6/01/2031** 6,205,216 6,481,235
AAA Aaa 13,677,195 7% due 9/01/2031** 14,176,662 14,283,795
AAA Aaa 1,765,345 6% due 2/01/2032** 1,736,107 1,815,928
AAA Aaa 2,290,731 7% due 4/01/2032** 2,366,401 2,392,327
Freddie Mac:
AAA Aaa 9,000,000 6% (b)** 9,179,951 9,268,983
AAA Aaa 3,000,000 6.50% (b)** 3,132,461 3,140,343
AAA Aaa 8,000,000 6.50% (b)** 8,262,444 8,297,768
AAA Aaa 5,000,000 8% (b)** 5,330,354 5,324,290
AAA Aaa 8,000,000 7% due 7/15/2005 8,575,992 8,982,920
AAA Aaa 4,690,000 6.625% due 9/15/2009 5,032,741 5,490,222
AAA Aaa 1,810,319 5.57% due 7/15/2022** 1,847,512 1,834,232
AAA Aaa 2,963,815 6% due 6/01/2032** 2,919,821 3,052,443
AAA Aaa 9,372,871 Ginnie Mae, 6.50% due 4/15/2032** 9,355,297 9,784,008
U.S. Treasury Bonds & Notes:
AAA Aaa 2,810,000 7.50% due 2/15/2005 3,070,107 3,179,032
AAA Aaa 7,400,000 6.50% due 5/15/2005 7,879,320 8,267,768
AAA Aaa 880,000 5.75% due 11/15/2005 932,470 977,419
AAA Aaa 2,340,000 6.25% due 2/15/2007 2,505,840 2,705,351
AAA Aaa 5,069,000 3.25% due 8/15/2007 5,153,151 5,224,634
AAA Aaa 2,960,000 6.125% due 8/15/2007 3,180,072 3,429,900
AAA Aaa 2,040,000 4.75% due 11/15/2008 2,086,993 2,240,414
AAA Aaa 1,220,000 6.50% due 2/15/2010 1,371,450 1,472,292
AAA Aaa 1,755,000 5% due 2/15/2011 1,727,135 1,949,558
AAA Aaa 12,425,000 4.375% due 8/15/2012 13,042,069 13,211,266
AAA Aaa 2,000,000 7.50% due 11/15/2016 2,453,236 2,651,562
AAA Aaa 1,220,000 8.125% due 8/15/2019 1,606,554 1,724,012
AAA Aaa 4,250,000 7.25% due 8/15/2022 5,272,917 5,614,981
AAA Aaa 880,000 6.25% due 8/15/2023 972,372 1,049,400
AAA Aaa 880,000 6.625% due 2/15/2027 1,020,990 1,106,703
AAA Aaa 4,430,000 5.375% due 2/15/2031 4,889,062 4,922,837
Total Investments in U.S. Government &
Agency Obligations--54.9% 261,515,037 269,070,903
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
SCHEDULE OF INVESTMENTS (concluded)
S&P Moody's Face
Industries Rating+++ Rating+++ Amount Issue Cost Value
Short-Term Securities Intermediate Term Portfolio
Commercial Paper***--15.6% Clipper Receivables Corp.:
$11,720,000 1.77% due 10/17/2002 $ 11,710,780 $ 11,710,780
6,700,000 1.77% due 10/22/2002 6,693,082 6,693,082
10,150,000 Conoco Inc., 1.86% due 10/15/2002 10,142,658 10,142,658
13,690,000 Morgan Stanley, 1.77% due 10/03/2002 13,688,654 13,688,654
4,300,000 Sears Roebuck Acceptance Corporation, 2%
due 10/16/2002 4,296,417 4,296,417
12,430,000 Textron Inc., 1.89% due 10/10/2002 12,424,127 12,424,127
17,480,000 UBS Finance (Delaware) Inc., 1.97% due
10/01/2002 17,480,000 17,480,000
Total Investments in Short-Term
Securities--15.6% 76,435,718 76,435,718
Total Investments--122.1% 582,283,571 598,184,561
Nominal Value Premium
Covered by Options Received
Options
Options Written--0.0% 23,000,000 Swaption, expiring 11/05/2002 (e) (48,300) (47,150)
Total Options Written--0.0% (48,300) (47,150)
Total Investments, Net of Options Written--122.1% $ 582,235,271 598,137,411
==============
Liabilities in Excess of Other Assets--(22.1%) (108,435,729)
--------------
Net Assets--100.0% $ 489,701,682
==============
*Not Rated.
**Asset-Backed and Mortgage-Backed Obligations are subject to
principal paydowns as a result of prepayments or refinancings of the
underlying instruments. As a result, the average life may be
substantially less than the original maturity.
***Commercial Paper is traded on a discount basis; the interest
rates shown reflect the discount rates paid at the time of purchase
by the Portfolio.
++Corresponding industry groups for foreign securities:
(1)Financial Institution.
(2)Industrial.
(3)Government Entity.
+++Ratings of issues shown have not been audited by Deloitte &
Touche LLP.
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(b)Represents a "to-be-announced" (TBA) transaction. The Portfolio
has committed to purchasing securities for which all specific
information is not available at this time.
(c)Floating rate note.
(d)Restricted securities as to resale. The value of the Portfolio's
investments in restricted securities was approximately $11,013,000,
representing 2.2% of net assets.
Acquisition
Issue Date Cost Value
Security Life of Denver,
0.33% due 10/01/2002 3/28/2002 $ 9,000,000 $10,127,852
Tenet Healthcare Corporation,
6.875% due 11/15/2031 10/30/2001 779,243 885,405
------------ -----------
Total $ 9,779,243 $11,013,257
============ ===========
(e)This European style swaption, which can be exercised only on the
expiration date, represents a standby commitment whereby the
Portfolio is obligated to enter into a predetermined interest rate
swap contract upon exercise of the swaption.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION
Statements of Assets and Liabilities as of September 30, 2002
Core Bond Intermediate
Portfolio Term Portfolio
Assets: Investments, at value* (including securities loaned of $0 and
$1,054,170, respectively) $1,834,260,062 $ 598,184,561
Investments held as collateral for loaned securities, at value -- 1,110,001
Cash -- 802,157
Receivables: Securities sold 196,694,134 76,210,216
Interest 13,793,529 4,499,885
Capital shares sold 3,203,304 2,003,614
Principal paydowns 650,636 --
Loaned securities -- 10,134
Prepaid registration fees and other assets 42,888 28,598
-------------- --------------
Total assets 2,048,644,553 682,849,166
-------------- --------------
Liabilities: Collateral on securities loaned, at value -- 1,110,001
Options written, at value** 149,650 47,150
Payables: Securities purchased 506,653,898 184,589,262
Capital shares redeemed 5,162,882 6,489,806
Custodian bank 2,817,464 --
Dividends to shareholders 1,780,109 580,378
Investment adviser 426,508 138,276
Distributor 400,777 68,492
Accrued expenses and other liabilities 896,581 124,119
-------------- --------------
Total liabilities 518,287,869 193,147,484
-------------- --------------
Net Assets: Net assets $1,530,356,684 $ 489,701,682
============== ==============
Net Assets Class A Common Stock, $.10 par value++ $ 5,607,895 $ 1,660,535
Consist of: Class B Common Stock, $.10 par value++++ 4,235,332 1,205,873
Class C Common Stock, $.10 par value++++++ 955,413 106,442
Class D Common Stock, $.10 par value++++++++ 2,488,194 1,186,105
Paid-in capital in excess of par 1,543,756,689 487,027,661
-------------- --------------
Undistributed (accumulated) investment income (loss)--net 454,769 (26,579)
Accumulated realized capital losses on investments--net (78,391,292) (17,360,495)
Unrealized appreciation on investments--net 51,249,684 15,902,140
-------------- --------------
Total accumulated losses--net (26,686,839) (1,484,934)
-------------- --------------
Net assets $1,530,356,684 $ 489,701,682
============== ==============
Net Class A: Net assets $ 645,819,715 $ 195,514,503
Asset ============== ==============
Value: Shares outstanding 56,078,952 16,605,347
============== ==============
Net asset value and redemption price per share $ 11.52 $ 11.77
============== ==============
Class B: Net assets $ 487,745,970 $ 141,992,517
============== ==============
Shares outstanding 42,353,322 12,058,733
============== ==============
Net asset value and redemption price per share $ 11.52 $ 11.78
============== ==============
Class C: Net assets $ 110,065,164 $ 12,535,315
============== ==============
Shares outstanding 9,554,130 1,064,421
============== ==============
Net asset value and redemption price per share $ 11.52 $ 11.78
============== ==============
Class D: Net assets $ 286,725,835 $ 139,659,347
============== ==============
Shares outstanding 24,881,940 11,861,048
============== ==============
Net asset value and redemption price per share $ 11.52 $ 11.77
============== ==============
*Identified cost $1,783,014,028 $ 582,283,571
============== ==============
**Premiums received 153,300 48,300
============== ==============
++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 Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Statements of Operations for the Year Ended September 30, 2002
Core Intermediate
Bond Term
Portfolio Portfolio
Investment Interest $ 73,826,882 $ 23,507,509
Income: Securities lending--net 2,960 2,731
-------------- --------------
Total income 73,829,842 23,510,240
-------------- --------------
Expenses: Investment advisory fees 5,161,476 1,658,740
Account maintenance and distribution fees--Class B 3,701,867 641,565
Transfer agent fees--Class A 923,105 399,239
Transfer agent fees--Class B 894,552 297,972
Account maintenance and distribution fees--Class C 756,676 29,907
Account maintenance fees--Class D 609,421 131,603
Transfer agent fees--Class D 397,157 286,359
Accounting services 417,686 134,284
Transfer agent fees--Class C 175,566 13,162
Registration fees 108,589 50,772
Custodian fees 83,567 38,350
Printing and shareholder reports 80,943 21,196
Professional fees 67,062 32,591
Pricing fees 24,382 19,936
Directors' fees and expenses 20,069 6,728
Other 46,696 25,236
-------------- --------------
Total expenses 13,468,814 3,787,640
-------------- --------------
Investment income--net 60,361,028 19,722,600
-------------- --------------
Realized & Realized gain on investments--net 17,898,677 7,001,082
Unrealized Change in unrealized appreciation on investments--net 23,126,185 5,553,942
Gain on -------------- --------------
Investments--Net: Total realized and unrealized gain on investments--net 41,024,862 12,555,024
-------------- --------------
Net Increase in Net Assets Resulting from Operations $ 101,385,890 $ 32,277,624
============== ==============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets Core Bond Portfolio
For the Year
Ended September 30,
Increase (Decrease) in Net Assets: 2002 2001
Operations: Investment income--net $ 60,361,028 $ 68,261,340
Realized gain on investments--net 17,898,677 5,256,133
Change in unrealized appreciation/depreciation on
investments--net 23,126,185 53,516,793
-------------- --------------
Net increase in net assets resulting from operations 101,385,890 127,034,266
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (26,610,817) (30,082,991)
Class B (19,459,138) (25,158,749)
Class C (3,656,190) (3,346,835)
Class D (10,820,648) (9,672,765)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (60,546,793) (68,261,340)
-------------- --------------
Capital Share Net increase in net assets derived from capital
Transactions: share transactions 180,304,214 100,721,161
-------------- --------------
Net Assets: Total increase in net assets 221,143,311 159,494,087
Beginning of year 1,309,213,373 1,149,719,286
-------------- --------------
End of year* $1,530,356,684 $1,309,213,373
============== ==============
*Undistributed investment income--net $ 454,769 --
============== ==============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets (concluded) Intermediate Term Portfolio
For the Year
Ended September 30,
Increase (Decrease) in Net Assets: 2002 2001
Operations: Investment income--net $ 19,722,600 $ 23,743,317
Realized gain on investments--net 7,001,082 5,280,415
Change in unrealized appreciation/depreciation on investments--net 5,553,942 14,347,388
-------------- --------------
Net increase in net assets resulting from operations 32,277,624 43,371,120
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (8,421,184) (9,163,958)
Class B (5,229,775) (6,799,706)
Class C (241,533) (202,103)
Class D (5,907,394) (7,577,550)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (19,799,886) (23,743,317)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions: transactions 36,757,309 24,888,072
-------------- --------------
Net Assets: Total increase in net assets 49,235,047 44,515,875
Beginning of year 440,466,635 395,950,760
-------------- --------------
End of year* $ 489,701,682 $ 440,466,635
============== ==============
*Accumulated investment loss--net $ (26,579) --
============== ==============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Financial Highlights Core Bond Portfolio
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.21 $ 10.68 $ 10.88 $ 11.78 $ 11.40
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .53 .66 .72 .70 .73
Realized and unrealized gain (loss) on
investments--net .31 .53 (.20) (.90) .38
--------- --------- --------- --------- ---------
Total from investment operations .84 1.19 .52 (.20) 1.11
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.53) (.66) (.72) (.70) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.52 $ 11.21 $ 10.68 $ 10.88 $ 11.78
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 7.71% 11.44% 5.09% (1.70%) 10.05%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .59% .61% .57% .57% .58%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.68% 6.03% 6.79% 6.22% 6.32%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 645,820 $ 519,815 $ 489,778 $ 535,188 $ 600,655
Data: ========= ========= ========= ========= =========
Portfolio turnover 281.67% 262.47% 94.67% 79.06% 149.41%
========= ========= ========= ========= =========
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.21 $ 10.68 $ 10.88 $ 11.78 $ 11.40
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .44 .57 .64 .61 .64
Realized and unrealized gain (loss) on
investments--net .31 .53 (.20) (.90) .38
--------- --------- --------- --------- ---------
Total from investment operations .75 1.10 .44 (.29) 1.02
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.44) (.57) (.64) (.61) (.64)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.52 $ 11.21 $ 10.68 $ 10.88 $ 11.78
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 6.89% 10.59% 4.29% (2.45%) 9.21%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.36% 1.38% 1.34% 1.33% 1.34%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 3.93% 5.25% 6.02% 5.46% 5.56%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 487,746 $ 511,166 $ 455,162 $ 636,115 $ 685,345
Data: ========= ========= ========= ========= =========
Portfolio turnover 281.67% 262.47% 94.67% 79.06% 149.41%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Financial Highlights (continued) Core Bond Portfolio
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.21 $ 10.68 $ 10.88 $ 11.79 $ 11.40
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .43 .57 .64 .61 .63
Realized and unrealized gain (loss) on
investments--net .31 .53 (.20) (.91) .39
--------- --------- --------- --------- ---------
Total from investment operations .74 1.10 .44 (.30) 1.02
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.43) (.57) (.64) (.61) (.63)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.52 $ 11.21 $ 10.68 $ 10.88 $ 11.79
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 6.83% 10.53% 4.23% (2.58%) 9.25%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.42% 1.44% 1.39% 1.38% 1.40%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 3.85% 5.16% 5.96% 5.41% 5.50%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 110,065 $ 76,963 $ 55,889 $ 79,581 $ 77,464
Data: ========= ========= ========= ========= =========
Portfolio turnover 281.67% 262.47% 94.67% 79.06% 149.41%
========= ========= ========= ========= =========
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.21 $ 10.68 $ 10.88 $ 11.79 $ 11.41
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .50 .63 .70 .67 .70
Realized and unrealized gain (loss) on
investments--net .31 .53 (.20) (.91) .38
--------- --------- --------- --------- ---------
Total from investment operations .81 1.16 .50 (.24) 1.08
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.50) (.63) (.70) (.67) (.70)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.52 $ 11.21 $ 10.68 $ 10.88 $ 11.79
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 7.44% 11.16% 4.83% (2.03%) 9.77%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .84% .86% .82% .82% .82%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.43% 5.75% 6.55% 5.98% 6.07%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 286,726 $ 201,269 $ 148,890 $ 135,401 $ 123,202
Data: ========= ========= ========= ========= =========
Portfolio turnover 281.67% 262.47% 94.67% 79.06% 149.41%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (continued)
Financial Highlights (continued) Intermediate Term Portfolio
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.47 $ 10.93 $ 11.11 $ 11.83 $ 11.49
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .52 .67 .71 .70 .73
Realized and unrealized gain (loss) on
investments--net .30 .54 (.18) (.72) .34
--------- --------- --------- --------- ---------
Total from investment operations .82 1.21 .53 (.02) 1.07
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.52) (.67) (.71) (.70) (.73)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.77 $ 11.47 $ 10.93 $ 11.11 $ 11.83
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 7.43% 11.35% 5.02% (.18%) 9.59%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .66% .84% .78% .73% .67%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.57% 5.94% 6.51% 6.09% 6.27%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 195,515 $ 176,589 $ 144,352 $ 161,113 $ 200,679
Data: ========= ========= ========= ========= =========
Portfolio turnover 314.59% 259.80% 143.77% 113.52% 111.03%
========= ========= ========= ========= =========
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.47 $ 10.93 $ 11.11 $ 11.83 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .46 .61 .66 .64 .67
Realized and unrealized gain (loss) on
investments--net .31 .54 (.18) (.72) .33
--------- --------- --------- --------- ---------
Total from investment operations .77 1.15 .48 (.08) 1.00
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.46) (.61) (.66) (.64) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.78 $ 11.47 $ 10.93 $ 11.11 $ 11.83
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 6.97% 10.79% 4.49% (.69%) 8.94%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.17% 1.35% 1.30% 1.24% 1.18%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.06% 5.46% 5.98% 5.58% 5.75%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 141,993 $ 129,162 $ 120,250 $ 162,211 $ 178,464
Data: ========= ========= ========= ========= =========
Portfolio turnover 314.59% 259.80% 143.77% 113.52% 111.03%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded) Intermediate Term Portfolio
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.47 $ 10.93 $ 11.11 $ 11.83 $ 11.49
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .46 .61 .65 .64 .67
Realized and unrealized gain (loss) on
investments--net .31 .54 (.18) (.72) .34
--------- --------- --------- --------- ---------
Total from investment operations .77 1.15 .47 (.08) 1.01
--------- --------- --------- --------- ---------
Less dividends from investment
income--net (.46) (.61) (.65) (.64) (.67)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.78 $ 11.47 $ 10.93 $ 11.11 $ 11.83
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 6.97% 10.78% 4.48% (.70%) 9.03%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.16% 1.36% 1.30% 1.24% 1.20%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.02% 5.41% 5.97% 5.57% 5.70%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 12,535 $ 4,600 $ 2,859 $ 3,904 $ 4,832
Data: ========= ========= ========= ========= =========
Portfolio turnover 314.59% 259.80% 143.77% 113.52% 111.03%
========= ========= ========= ========= =========
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2002 2001 2000 1999 1998
Per Share Net asset value, beginning of year $ 11.47 $ 10.93 $ 11.11 $ 11.83 $ 11.50
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .51 .66 .70 .69 .71
Realized and unrealized gain (loss) on
investments--net .30 .54 (.18) (.72) .33
--------- --------- --------- --------- ---------
Total from investment operations .81 1.20 .52 (.03) 1.04
--------- --------- --------- --------- ---------
Less dividends from investment income--net (.51) (.66) (.70) (.69) (.71)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 11.77 $ 11.47 $ 10.93 $ 11.11 $ 11.83
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 7.32% 11.24% 4.92% (.28%) 9.39%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .76% .94% .88% .83% .77%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.47% 5.88% 6.41% 6.01% 6.16%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 139,659 $ 130,116 $ 128,490 $ 136,467 $ 106,294
Data: ========= ========= ========= ========= =========
Portfolio turnover 314.59% 259.80% 143.77% 113.52% 111.03%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
The Core Bond Portfolio and the Intermediate Term Portfolio
("Portfolio" or "Portfolios") are two of the three portfolios in
Merrill Lynch Bond Fund, Inc. (the "Fund"), which is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Portfolios' financial statements
are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use
of management accruals and estimates. Each Portfolio offers four
classes of shares under the Merrill Lynch Select Pricing SM 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. Income, expenses (other than expenses
attributable to a specific class) and realized and unrealized gains
and losses on investments are allocated daily to each class based on
its relative net assets. The following is a summary of significant
accounting policies followed by the Portfolios.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more dealers that
make markets in the securities. Portfolio securities that are traded
both in the over-the-counter market and on a stock exchange are
valued according to the broadest and most representative market, and
it is expected that for debt securities this ordinarily will be the
over-the-counter market. Short-term securities are valued at
amortized cost, which approximates market value.
Options written or purchased are valued at the last sale price in
the case of exchange-traded options. In the case of options traded
in the over-the-counter market, valuation is the last asked price
(options written) or the last bid price (options purchased).
Financial futures contracts and options thereon, which are traded on
exchanges, are valued at their closing price at the close of such
exchanges. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund, including valuations furnished by a pricing service retained
by the Fund which may use a matrix system for valuations.
(b) Repurchase agreements--The Portfolios invest in U.S. government
securities pursuant to repurchase agreements. Under such agreements,
the counterparty agrees to repurchase the security at a mutually
agreed upon time and price. The Portfolios take possession of the
underlying securities, mark to market such securities and, if
necessary, receive additions to such securities daily to ensure that
the contract is fully collateralized. If the counterparty defaults
and the fair value of the collateral declines, liquidation of the
collateral by the Portfolios may be delayed or limited.
(c) Derivative financial instruments--Each Portfolio may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which each Portfolio is exposed more quickly and
efficiently than transactions in other types of instruments. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Portfolios may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, each
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, each Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by each Portfolio as unrealized
gains or losses. When the contract is closed, each Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Portfolios are authorized to purchase and write call
and put options. When each Portfolio writes an option, an amount
equal to the premium received by each Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or each Portfolio enters into a closing transaction), each
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* Interest rate swaps--The Portfolios are authorized to enter into
swap agreements for the purpose of hedging the market risk on
existing securities. In an interest rate swap, the Portfolios
exchange with another party their respective commitments to pay or
receive interest on a specified notional principal amount. When the
swap agreement is closed, the Portfolios record a realized gain or
loss equal to the difference between the value of the swap agreement
at the time it was entered into and the value at the time it was
closed.
(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). Realized gains and losses on security
transactions are determined on the identified cost basis. Interest
income is recognized on the accrual basis. As required, effective
October 1, 2001, the Fund has adopted the provisions of the AICPA
Audit and Accounting Guide for Investment Companies and began
amortizing all premiums and discounts on debt securities. The
cumulative effect of this accounting change had no impact on total
net assets of the Fund's Portfolios, but resulted in a reduction in
cost of securities (which in return results in a corresponding
increase in net unrealized appreciation and a corresponding increase
in accumulated net investment loss), based on securities held by the
Fund's Portfolios as of September 30, 2001 as follows:
Corresponding
Corresponding Increase to
Increase Accumulated
to Net Net
Decrease Unrealized Investment
Portfolio to Cost Appreciation Loss
Core Bond $(1,565,139) $1,565,139 $(1,565,139)
Intermediate Term $ (682,097) $ 682,097 $ (682,097)
The effect of this change for the year ended September 30, 2002 was
as follows:
Increase
Increase (Decrease) Increase
Net Net Net
Investment Unrealized Realized
Portfolio Loss Appreciation Gains
Core Bond $(168,625) $(126,088) $1,859,852
Intermediate Term $ (77,286) $ 26,571 $ 732,812
The statements of changes in net assets and financial highlights for
prior periods have not been restated to reflect this change in
presentation.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
(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.
(h) Expenses--Certain expenses have been allocated to the individual
Portfolios in the Fund on a pro rata basis based upon the respective
aggregate net asset value of each Portfolio included in the Fund.
(i) Securities lending--The Portfolios may lend securities to
financial institutions that provide cash or securities issued or
guaranteed by the U.S. government as collateral, which will be
maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Where the Portfolios
receive securities as collateral for the loaned securities, it
collects a fee from the borrower. The Portfolios typically receive
the income on the loaned securities but do not receive the income on
the collateral. Where the Portfolios receive cash collateral, it may
invest such collateral and retain the amount earned on such
investment, net of any amount rebated to the borrower. Loans of
securities are terminable at any time and the borrower, after
notice, is required to return borrowed securities within five
business days. The Portfolios may pay reasonable finder's, lending
agent, administrative and custodial fees in connection with its
loans. In the event that the borrower defaults on its obligation to
return borrowed securities because of insolvency or for any other
reason, the Portfolios could experience delays and costs in gaining
access to the collateral. The Portfolios also could suffer a loss
where the value of the collateral falls below the market value of
the borrowed securities, in the event of borrower default or in the
event of losses on investments made with cash collateral.
(j) Custodian bank--The Core Bond Portfolio recorded an amount
payable to the custodian bank reflecting an overnight overdraft,
which resulted from a failed trade that settled the next day.
(k) Reclassification--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax difference on the Core Bond Portfolio of
$2,205,674 has been reclassified between accumulated net realized
capital losses and undistributed net investment income.
In addition, the current year's permanent book/tax difference on the
Intermediate Term Portfolio of $732,804 has been reclassified
between accumulated net realized capital losses and undistributed
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 Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with FAM Distributors, Inc. ("FAMD"
or the "Distributor"), which is a wholly-owned subsidiary of Merrill
Lynch Group, Inc.
FAM is responsible for the management of the Fund's Portfolios and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, FAM receives at the end of each month a fee with respect
to each Portfolio at the annual rates set forth below which are
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .50% of the Fund's average
daily net assets not exceeding $250 million; .45% of the average
daily net assets in excess of $250 million but not exceeding $500
million; .40% of average daily net assets in excess of $500 million
but not exceeding $750 million; and .35% of average daily net assets
in excess of $750 million. For the year ended September 30, 2002,
the aggregate average daily net assets of the Fund, including the
Fund's High Income Portfolio, was approximately $3,942,079,000.
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:
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
Account Distribution
Maintenance Fees Fees
Portfolio Class B Class C Class D Class B Class C
Core .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.
For the year ended September 30, 2002, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of each Portfolio's Class A and Class D Shares
as follows:
FAMD MLPF&S
Portfolio Class A Class D Class A Class D
Core Bond $1,694 $9,668 $17,045 $112,477
Intermediate Term $ 177 $ 768 $ 2,340 $ 8,818
For the year ended September 30, 2002, MLPF&S received contingent
deferred sales charges of $917,512 relating to transactions in Class
B Shares, amounting to $862,622 and $54,890 in the Core Bond
Portfolio and Intermediate Term Portfolio, respectively, and $49,249
relating to transactions in Class C Shares, amounting to $48,419 and
$830 in the Core Bond Portfolio and Intermediate Term Portfolio,
respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $1,402 relating to transactions subject to front-end
sales charge waivers in Class D Shares in the Core Bond Portfolio.
The Fund has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
MLPF&S or its affiliates. Pursuant to that order, the Fund also has
retained QA Advisors, LLC ("QA Advisors"), an affiliate of FAM, as
the securities lending agent for a fee based on a share of the
returns on investment of cash collateral. QA Advisors may, on behalf
of the Fund, invest cash collateral received by the Fund for such
loans, among other things, in a private investment company managed
by QA Advisors or in registered money market funds advised by FAM or
its affiliates. As of September 30, 2002, cash collateral of
$499,501 was invested in the Money Market Series of the Merrill
Lynch Liquidity Series, LLC and $610,500 was invested in the Merrill
Lynch Premier Institutional Fund for the Intermediate Term
Portfolio. For the year ended September 30, 2002, QA Advisors
received $869 and $1,196 in securities lending agent fees for the
Core Bond 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, 2002, the Portfolios paid
Merrill Lynch Security Pricing Service, an affiliate of MLPF&S,
$16,546 for security price quotations to compute the net asset
values of the Portfolios.
For the year ended September 30, 2002, the Portfolios reimbursed FAM
$56,431 for certain accounting services.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended September 30, 2002 were as follows:
Intermediate
Core Bond Term
Portfolio Portfolio
Purchases $ 4,420,342,894 $ 1,543,855,615
--------------- ---------------
Sales $ 4,044,525,844 $ 1,461,505,963
=============== ===============
Net realized gains (losses) for the year ended September 30, 2002
and net unrealized gains as of September 30, 2002 were as follows:
Realized Unrealized
Core Bond Portfolio Gains (Losses) Gains
Long-term investments $ 20,265,264 $ 51,246,034
Short-term investments (124) --
Options written -- 3,650
Financial futures contracts (2,366,463) --
------------ --------------
Total $ 17,898,677 $ 51,249,684
============ ==============
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
NOTES TO FINANCIAL STATEMENTS (continued)
Realized Unrealized
Intermediate Term Portfolio Gains (Losses) Gains
Long-term investments $ 7,452,657 $ 15,900,990
Short-term investments 452 --
Options written -- 1,150
Financial futures contracts (452,027) --
------------ --------------
Total $ 7,001,082 $ 15,902,140
============ ==============
As of September 30, 2002, net unrealized
appreciation for Federal income tax purposes
was as follows:
Intermediate
Core Bond Term
Portfolio Portfolio
Gross unrealized
appreciation $ 56,613,270 $ 17,394,498
Gross unrealized
depreciation (5,827,365) (1,647,172)
------------ --------------
Net unrealized
appreciation $ 50,785,905 $ 15,747,326
============ ==============
The aggregate cost of investments, net of options written, at
September 30, 2002 for Federal income tax purposes was
$1,783,324,507 for the Core Bond Portfolio and $582,390,085 for the
Intermediate Term Portfolio.
Transactions in call options written for the year ended September
30, 2002 were as follows:
Nominal Value Premiums
Core Bond Portfolio Covered Received
Outstanding call options
written, beginning of year -- --
Options written 103,000,000 $ 274,003
Options expired (30,000,000) (120,703)
------------ --------------
Outstanding call options
written, end of year 73,000,000 $ 153,300
============ ==============
Nominal Value Premiums
Intermediate Term Portfolio Covered Received
Outstanding call options
written, beginning of year -- --
Options written 32,600,000 $ 86,925
Options expired (9,600,000) (38,625)
------------ --------------
Outstanding call options
written, end of year 23,000,000 $ 48,300
============ ==============
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
for the year ended September 30, 2002 was $180,304,214 for the Core
Bond Portfolio and $36,757,309 for the Intermediate Term Portfolio.
Net increase in net assets derived from capital share transactions
for the year ended September 30, 2001 was $100,721,161 for the Core
Bond Portfolio and $24,888,072 for the Intermediate Term Portfolio.
Transactions in capital shares for each class were as follows:
Core Bond Portfolio
Class A Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 22,329,750 $ 250,091,666
Shares issued to shareholders
in reinvestment of dividends 621,812 6,939,302
------------ --------------
Total issued 22,951,562 257,030,968
Shares redeemed (13,254,009) (148,214,506)
------------ --------------
Net increase 9,697,553 $ 108,816,462
============ ==============
Core Bond Portfolio
Class A Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 12,164,635 $ 133,485,683
Shares issued resulting from
reorganization 3,325 36,469
Shares issued to shareholders
in reinvestment of dividends 434,363 4,759,193
------------ --------------
Total issued 12,602,323 138,281,345
Shares redeemed (12,099,127) (132,360,014)
------------ --------------
Net increase 503,196 $ 5,921,331
============ ==============
Core Bond Portfolio
Class B Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 13,231,420 $ 148,085,296
Shares issued to shareholders
in reinvestment of dividends 1,085,140 12,096,134
------------ --------------
Total issued 14,316,560 160,181,430
Automatic conversion
of shares (2,052,254) (22,932,960)
Shares redeemed (15,519,910) (173,196,566)
------------ --------------
Net decrease (3,255,604) $ (35,948,096)
============ ==============
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
Core Bond Portfolio
Class B Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 15,196,397 $ 166,702,376
Shares issued resulting from
reorganization 692,835 7,599,924
Shares issued to shareholders
in reinvestment of dividends 1,209,395 13,248,556
------------ --------------
Total issued 17,098,627 187,550,856
Automatic conversion
of shares (1,491,340) (16,360,136)
Shares redeemed (12,633,216) (138,208,375)
------------ --------------
Net increase 2,974,071 $ 32,982,345
============ ==============
Core Bond Portfolio
Class C Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 4,655,739 $ 51,997,577
Shares issued to shareholders
in reinvestment of dividends 211,715 2,362,338
------------ --------------
Total issued 4,867,454 54,359,915
Shares redeemed (2,177,960) (24,354,570)
------------ --------------
Net increase 2,689,494 $ 30,005,345
============ ==============
Core Bond Portfolio
Class C Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 2,723,779 $ 29,948,729
Shares issued resulting from
reorganization 303,906 3,334,855
Shares issued to shareholders
in reinvestment of dividends 195,095 2,138,486
------------ --------------
Total issued 3,222,780 35,422,070
Shares redeemed (1,591,360) (17,413,040)
------------ --------------
Net increase 1,631,420 $ 18,009,030
============ ==============
Core Bond Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 10,754,653 $ 120,080,117
Automatic conversion
of shares 2,051,406 22,932,960
Shares issued to shareholders
in reinvestment of dividends 679,532 7,588,372
------------ --------------
Total issued 13,485,591 150,601,449
Shares redeemed (6,550,329) (73,170,946)
------------ --------------
Net increase 6,935,262 $ 77,430,503
============ ==============
Core Bond Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 7,569,027 $ 82,986,487
Automatic conversion
of shares 1,490,152 16,360,136
Shares issued resulting from
reorganization 41,484 455,320
Shares issued to shareholders
in reinvestment of dividends 457,543 5,021,327
------------ --------------
Total issued 9,558,206 104,823,270
Shares redeemed (5,550,006) (61,014,815)
------------ --------------
Net increase 4,008,200 $ 43,808,455
============ ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 6,989,331 $ 79,900,318
Shares issued to shareholders
in reinvestment of dividends 176,296 2,008,174
------------ --------------
Total issued 7,165,627 81,908,492
Shares redeemed (5,959,413) (68,085,582)
------------ --------------
Net increase 1,206,214 $ 13,822,910
============ ==============
Intermediate Term Portfolio
Class A Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 6,791,319 $ 76,190,646
Shares issued to shareholders
in reinvestment of dividends 218,863 2,450,488
------------ --------------
Total issued 7,010,182 78,641,134
Shares redeemed (4,815,089) (53,778,401)
------------ --------------
Net increase 2,195,093 $ 24,862,733
============ ==============
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 4,821,326 $ 55,263,074
Shares issued to shareholders
in reinvestment of dividends 326,275 3,721,914
------------ --------------
Total issued 5,147,601 58,984,988
Automatic conversion
of shares (491,794) (5,626,588)
Shares redeemed (3,859,531) (44,001,785)
------------ --------------
Net increase 796,276 $ 9,356,615
============ ==============
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
NOTES TO FINANCIAL STATEMENTS (concluded)
Intermediate Term Portfolio
Class B Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 4,132,716 $ 46,326,155
Shares issued to shareholders
in reinvestment of dividends 268,441 3,009,963
------------ --------------
Total issued 4,401,157 49,336,118
Automatic conversion of shares (504,530) (5,657,718)
Shares redeemed (3,632,706) (40,657,509)
------------ --------------
Net increase 263,921 $ 3,020,891
============ ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 878,088 $ 10,147,486
Shares issued to shareholders
in reinvestment of dividends 12,245 140,123
------------ --------------
Total issue 890,333 10,287,609
Shares redeemed (226,962) (2,584,460)
------------ --------------
Net increase 663,371 $ 7,703,149
============ ==============
Intermediate Term Portfolio
Class C Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 329,668 $ 3,690,415
Shares issued to shareholders
in reinvestment of dividends 11,519 129,194
------------ --------------
Total issue 341,187 3,819,609
Shares redeemed (201,641) (2,248,628)
------------ --------------
Net increase 139,546 $ 1,570,981
============ ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 5,113,073 $ 58,478,637
Automatic conversion of shares 491,794 5,626,588
Shares issued to shareholders
in reinvestment of dividends 130,728 1,491,286
------------ --------------
Total issued 5,735,595 65,596,511
Shares redeemed (5,220,812) (59,721,876)
------------ --------------
Net increase 514,783 $ 5,874,635
============ ==============
Intermediate Term Portfolio
Class D Shares for the Year Dollar
Ended September 30, 2001 Shares Amount
Shares sold 4,622,934 $ 51,827,764
Automatic conversion of shares 504,530 5,657,718
Shares issued to shareholders
in reinvestment of dividends 115,319 1,292,278
------------ --------------
Total issued 5,242,783 58,777,760
Shares redeemed (5,648,611) (63,344,293)
------------ --------------
Net decrease (405,828) $ (4,566,533)
============ ==============
5. Short-Term Borrowings:
The Portfolios, along with certain other funds managed by FAM and
its affiliates, are a party to a $1,000,000,000 credit agreement
with Bank One, N.A. and certain other lenders. The Portfolios may
borrow under the credit agreement to fund shareholder redemptions
and for other lawful purposes other than for leverage. The
Portfolios may borrow up to the maximum amount allowable under the
Portfolios' current prospectus and statement of additional
information, subject to various other legal, regulatory or
contractual limits. The Portfolios pay a commitment fee of .09% per
annum based on the Portfolios' pro rata share of the unused portion
of the credit agreement. Amounts borrowed under the credit agreement
bear interest at a rate equal to, at each fund's election, the
Federal Funds rate plus .50% or a base rate as determined by Bank
One, N.A. On November 30, 2001, the credit agreement was renewed for
one year under the same terms. The Portfolios did not borrow under
the credit agreement during the year ended September 30, 2002.
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended September 30, 2002 and September 30, 2001 was as follows:
Core Bond Portfolio 9/30/2002 9/30/2001
Distributions paid from:
Ordinary income $ 60,546,793 $ 68,261,340
------------- -------------
Total taxable distributions $ 60,546,793 $ 68,261,340
============= =============
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
Intermediate Term Portfolio 9/30/2002 9/30/2001
Distributions paid from:
Ordinary income $ 19,799,886 $ 23,743,317
------------- -------------
Total taxable distributions $ 19,799,886 $ 23,743,317
============= =============
As of September 30, 2002, the components of accumulated losses on a
tax basis were as follows:
Core Intermediate
Bond Term
Portfolio Portfolio
Undistributed ordinary
income--net $ 3,210,970 $ 1,127,844
Undistributed long-term
capital gains--net -- --
------------- -------------
Total undistributed
earnings--net 3,210,970 1,127,844
Capital loss carryforward (71,958,304)* (16,564,635)*
Unrealized gains--net 42,060,495** 13,951,857**
------------- -------------
Total accumulated
losses--net $(26,686,839) $ (1,484,934)
============= =============
*On September 30, 2002, the Fund had a net capital loss carryforward
of $71,958,304 in the Core Bond Portfolio, of which $8,081,540
expires in 2003, $2,604,196 expires in 2005, $305,137 expires in
2007, $28,409,262 expires in 2008, and $32,558,169 expires in 2009
and $16,564,635 in the Intermediate Term Portfolio, of which
$518,233 expires in 2003, $275,942 expires in 2005, $7,450,661
expires in 2008, and $8,319,799 expires in 2009. These amounts will
be available to offset like amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized
losses is attributable primarily to the tax deferral of losses on
wash sales, the tax deferral of losses on straddles, the difference
between book and tax amortization methods for premiums and discounts
on fixed income securities, book/tax differences in the accrual of
income on contingent debt obligations and the deferral of post-
October capital losses for tax purposes (Core Bond Portfolio only).
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Bond Fund, Inc.:
We have audited the accompanying statements of assets and
liabilities, including the schedules of investments, of Core Bond
and Intermediate Term Portfolios of Merrill Lynch Bond Fund, Inc. as
of September 30, 2002, 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 presented. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at September 30, 2002 by
correspondence with the custodian and brokers; where replies were
not received, 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
Core Bond and Intermediate Term Portfolios of Merrill Lynch Bond
Fund, Inc. as of September 30, 2002, the results of their
operations, the changes in their net assets, and the financial
highlights for the respective stated periods in conformity with
accounting principles generally accepted in the United States of
America.
Deloitte & Touche LLP
New York, New York
November 14, 2002
IMPORTANT TAX INFORMATION (unaudited)
Of the ordinary income dividends paid monthly to shareholders from
Core Bond and Intermediate Term Portfolios of Merrill Lynch Bond
Fund, Inc. during the fiscal year ended September 30, 2002, 10.25%
and 10.04%, respectively, were attributable to Federal obligations.
In calculating the foregoing percentages, expenses of the Portfolios
have been allocated on a pro rata basis.
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.
Please retain this information for your records.
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
OFFICERS AND DIRECTORS
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Director Director
Interested Director
Terry K. Glenn* President 1999 to Chairman, Americas Region since 2001, 118 Funds None
P.O. Box 9011 and present and Executive Vice President since 1983 of 169
Princeton, Director and 1985 Fund Asset Management, L.P. ("FAM") and Portfolios
NJ 08543-9011 to present Merrill Lynch Investment Managers, L.P.
Age: 62 ("MLIM"); President of Merrill Lynch Mutual
Funds since 1999; President of FAM Distributors,
Inc. ("FAMD") since 1986 and Director thereof
since 1991; Executive Vice President and
Director of Princeton Services, Inc. ("Princeton
Services") since 1993; President of Princeton
Administrators, L.P. since 1988; Director of
Financial Data Services, Inc. since 1985.
*Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which FAM or MLIM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of the Fund based on his
positions as Chairman (Americas Region) and Executive Vice President
of FAM and MLIM; President of FAMD; Executive Vice President of
Princeton Services; and President of Princeton Administrators, L.P.
The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72. As Fund President, Mr. Glenn serves at the
pleasure of the Board of Directors.
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Director Director
Independent Directors
Ronald W. Forbes Director 1978 to Professor Emeritus of Finance, School of 45 Funds None
P.O. Box 9011 present Business, State University of New York at Albany 54
Princeton, since 2000; and Professor thereof from 1989 Portfolios
Age: 62 to 2000.
NJ 08543-9011
Cynthia A. Director 1994 to Professor, Harvard Business School since 1989. 45 Funds Unum-
Montgomery present 54 Provident
P.O. Box 9011 Portfolios Corpora-
Princeton, tion;
NJ 08543-9011 Newell
Age: 50 Rubber-
maid Inc.
Charles C. Reilly Director 1990 to Self-employed financial consultant since 1990. 45 Funds None
P.O. Box 9011 present 54
Princeton, Portfolios
NJ 08543-9011
Age: 71
Kevin A. Ryan Director 1992 to Founder and currently Director Emeritus of The 45 Funds None
P.O. Box 9011 present Boston University Center for the Advancement 54
Princeton, of Ethics and Character and Director thereof Portfolios
NJ 08543-9011 from 1989 to 1999; Professor from 1982 to 1999
Age: 69 at Boston University.
Roscoe S. Suddarth Director 2000 to President, Middle East Institute from 1995 to 45 Funds None
P.O. Box 9011 present 2001. 54
Princeton, Portfolios
NJ 08543-9011
Age: 67
Merrill Lynch Bond Fund, Inc.,
Core Bond Portfolio & Intermediate Term Portfolio
September 30, 2002
OFFICERS AND DIRECTORS (concluded)
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Director Director
Independent Directors (concluded)
Richard R. West Director 1978 to Dean Emeritus of New York University, Leonard 45 Funds Bowne &
P.O. Box 9011 present N. Stern School of Business Administration 54 Co., Inc.;
Princeton, NJ 08543-9011 since 1994. Portfolios Vornado
Age: 63 Realty
Trust;
Alexander's
Inc.
Edward D. Zinbarg Director 2000 to Self-employed financial consultant since 1994. 45 Funds None
P.O. Box 9011 present 54
Princeton, Portfolios
NJ 08543-9011
Age: 67
*The Director's term is unlimited. Directors serve until their
resignation, removal or death, or until December 31 of the year in
which they turn 72.
Position(s) Length
Held of Time
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years
Fund Officers
Donald C. Burke Vice 1993 to First Vice President of FAM and MLIM since 1997 and Treasurer thereof
P.O. Box 9011 President present since 1999; Senior Vice President and Treasurer of Princeton Services
Princeton, and and 1999 since 1999; Vice President of FAMD since 1999; Vice President of FAM and
NJ 08543-9011 Treasurer to present MLIM from 1990 to 1997; Director of Taxation of MLIM since 1990.
Age: 42
Patrick Maldari Vice 2002 to Managing Director of Americas Fixed Income for MLIM since 2000;
P.O. Box 9011 President present Director of Fixed Income Institutional Business from 1997 to 2000.
Princeton, and
NJ 08543-9011 Portfolio
Age: 40 Manager
James J. Pagano Vice 2002 to Senior Fixed Income Analyst since 1998; Risk Manager from 1997 to 1998.
P.O. Box 9011 President present
Princeton, and
NJ 08543-9011 Portfolio
Age: 39 Manager
Bradley J. Lucido Secretary 2002 to Director (Legal Advisory) of MLIM since 2002; Vice President of MLIM
P.O. Box 9011 present from 1999 to 2002; Attorney associated with MLIM since 1995.
Princeton,
NJ 08543-9011
Age: 36
*Officers of the Fund serve at the pleasure of the Board of Directors.
Further information about the Fund's Officers and Directors is
available in the Fund's Statement of Additional Information, which
can be obtained without charge by calling 1-800-MER-FUND.
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