UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-2857
Name of Fund: High Income Portfolio of Merrill Lynch Bond Fund, Inc.
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
High Income Portfolio of Merrill Lynch Bond Fund, Inc., 800 Scudders
Mill Road, Plainsboro, NJ, 08536. Mailing address: P.O. Box 9011,
Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 03/31/03
Date of reporting period: 10/01/02 - 3/31/03
Item 1 - Attach shareholder report
(BULL LOGO)
Merrill Lynch Investment Managers
Semi-Annual Report
March 31, 2003
High Income 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
HIGH INCOME PORTFOLIO
TO OUR SHAREHOLDERS
Effective April 14, 2003, the share class names for the Merrill
Lynch family of mutual funds were changed to be consistent with the
standard share classes of most other mutual fund families. As of
that date, all Class A Shares were redesignated Class I Shares. At
the same time, Class D Shares were redesignated Class A Shares.
There are no changes to the Class B or Class C share class labels.
Trading symbols have not changed nor have current eligibility rules
or pricing structures. This redesignation of share classes does not
impact your investment in any way. Although the redesignation took
effect just after the close of the Fund's period, we have provided
Fund performance as of March 31, 2003 to reflect the new share class
designations.
The High Yield Market Overview
The high yield market rebounded sharply during the six-month period
ended March 31, 2003, with a return of +13.23% as measured by the
unmanaged Credit Suisse First Boston (CSFB) High Yield Index. In
comparison, the unmanaged Standard & Poor's 500 (S&P 500) Index,
while also gaining some ground, returned +5.02% for the same period.
The high yield market in general exhibited strengthening
fundamentals, reflecting a stabilizing economy and improving
corporate earnings. In addition, the high yield market benefited as
investors began searching for yield and a healthy alternative to
lackluster equity markets. High yield securities continued to appear
reasonably valued, with an 825 basis point (8.25%) yield spread over
ten-year U.S. Treasury notes as of March 31, 2003, down from the
historically high levels reached in October 2002. As measured by
Moody's Investors Service, the default rate by high yield corporate
borrowers fell to 6.9% in March. This compared to 7.7% in February
and represented a significant drop from the peak of 10.7% in January
2002. This declining trend is expected to continue and is helping to
increase investment demand in the high yield sector.
While we view the market with caution given current geopolitical and
economic uncertainty, we note that optimistic signs have emerged in
the high yield marketplace as a whole. As an asset category, the
high yield market was a strong performer in the first quarter of
2003, posting a total return of +6.9% as measured by the CSFB High
Yield Index, and +2.66% in March. Although such positive news could
still be overwhelmed by adverse events, the market is demonstrating
the value potential available in high yield securities. We believe
that, in the longer term, this value will be realized.
Portfolio Matters
For the six-month period ended March 31, 2003, the Portfolio's Class
A, Class B, Class C and Class I Shares had total returns of +14.75%,
+14.46%, +14.43% and +14.89%, respectively. (Results shown do not
include sales charges and would be lower if sales charges were
included. Complete performance information can be found on pages 5
and 6 of this report to shareholders.) The Fund outperformed the
benchmark CSFB High Yield Index, which returned +13.23% for the same
period.
The six-month period ended March 31, 2003 led us on a remarkable
ride that began with the mid-October 2002 lows and ended with an
impressive rally in the first quarter of 2003. New-issue activity
began to pick up sharply during the final two months of 2002. We
participated in a number of transactions for securities that rose to
nice premiums and accelerated reconstruction activity, which helped
us make important progress in repositioning the portfolio. During
the first quarter of 2003, we continued to participate actively in
the new-issue calendar, which benefited the Portfolio's performance
over the six-month period. The market appetite for new issues has
been voracious as of late, pushing post-offering prices to several
point premiums. As of March 31, 2003, new issues in the high yield
market totaled about $24.5 billion in 79 transactions, with proceeds
used primarily for bank and other debt repayment. We believe the
calendar will continue to be heavy, particularly as investment
bankers and their clients seek to take advantage of the dramatic
improvement in the market and the large surge of funds committed to
high yield investing.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
The Portfolio experienced a relatively high turnover during the six-
month period. We reduced positions in certain seasoned issues that
rallied sharply since October and sold new issues that reached our
price objectives. The Portfolio also was well-positioned in the
utility, independent power producers and wireless telecommunications
sectors, which added incrementally to performance.
Investment Outlook
In our opinion, the high yield market outlook continues to be
favorable. We anticipate a lower level of defaults, although still
high by historical measures, and substantial net inflows of capital
into the high yield marketplace as investors seek to take advantage
of perceived total return opportunities. We expect a record level of
new issuance and refinancing activity, especially in the first half
of the year. However, the coming months also may bring continued
price volatility with a strong market bias to lower interest rates
(higher prices) and a reduction in spreads compared to Treasury
issues by 100 basis points - 200 basis points.
We seek to continue to reduce the Fund's cash position as
appropriate investment opportunities present themselves. We also
plan to participate in the new-issue calendar, although with
increasing caution given the reduced yields currently available. The
lower-quality sector of the high yield market has rallied sharply
but still offers good value in places. Our overall strategy is to
continue repositioning the portfolio and to move toward a more
conservative position, emphasizing manufacturing and service
industries. We believe the high yield market has the potential to
produce a double-digit total return for 2003 as it builds on the
performance of the first three months and earns its coupon.
In Conclusion
We appreciate your investment in High Income Portfolio of Merrill
Lynch Bond Fund, Inc., and we look forward to serving your financial
needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(B. Daniel Evans)
B. Daniel Evans
Vice President and Portfolio Manager
April 15, 2003
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
PORTFOLIO INFORMATION
As of March 31, 2003
Percent of
Ten Largest Corporate Holdings Net Assets
Orion Refining A new Reforming Unit was recently introduced at the Orion refinery in Norco, Louisiana. 2.1%
(formerly TransAmerican The expansion will allow higher volumes of gasoline to be produced while also providing
Refining Corporation) the refinery with an additional source of hydrogen, saving the company from having to
purchase hydrogen. In late January, Orion experienced a fire that idled the refinery's
Coker unit. Normal operations are expected to resume in the near future.
Adelphia Adelphia Communications and subsidiary Century Cable Holdings, LLC both filed for 1.9
Communications bankruptcy after the revelation of fraud and self-dealing by its controlling shareholders
Corporation and (the Rigas family). The time frame for exiting bankruptcy is unknown, but we still feel
Affiliates the asset coverage for the subsidiary bonds is in excess of the current distressed trading
levels.
Columbia/HCA HCA is the largest for-profit hospital company in the United States. It owns and operates 1.9
Healthcare Corp.* 179 acute care hospitals located primarily in urban and suburban markets. For the fiscal
year ended December 31, 2002, HCA generated revenue of $19.7 billion, EBITDA of $3.7
billion and free cash flow of $2.0 billion. With the resolution of most of the government
litigation, HCA is expected to be upgraded to investment-grade status in the next 12 - 18
months.
Millicom International Millicom International develops and operates cellular telephone systems worldwide. 1.7
Cellular SA The company has interest in 33 cellular systems in 20 countries, primarily in emerging
markets in Asia, Latin America and Africa.
Primedia, Inc. Primedia, a media company, provides specialized information in the consumer, business- 1.6
to-business and education markets. The company's products include specialty magazines,
technical and trade magazines, information products, supplemental education materials
and vocational networks.
NII Holdings Inc.* NII Holdings offers wireless service in Mexico, Brazil, Peru and Argentina. Similar to 1.6
Nextel Communications in the United States, the company offers a unique product in
that subscribers are able to use their phones for direct (that is, walkie-talkie)
connections.
Qwest Communications Qwest is a local and long-distance telecommunications provider, having acquired RBOC 1.4
International* US West in July 2000. It serves 11 million local lines, predominantly in the Western
and Mountain United States. Asset sales, debt reduction and new management have
helped this company rebound from poor transactions and former senior management
team direction.
El Paso Corporation* El Paso is in the midst of renewing key credit lines, restructuring energy trading 1.4
activities and selling assets to meet maturing debt obligations. With the recent
settlement of charges that El Paso manipulated California natural gas prices,
uncertainty over the company's ability to maintain liquidity while executing its
restructuring and refinancing plans have been reduced. Much work remains, but the
company thus far has been able to meet goals laid out by management.
Gazprom OAO Gazprom OAO is the world's largest natural gas company in terms of reserves, production 1.4
and transportation. It supplies substantially all of the natural gas consumed in Russia,
about 50% consumed in the six countries of the former Soviet Union and about 26%
consumed in Europe. The Russian Federation currently owns 38% of Gazprom OAO's
charter capital.
Asia Pulp & Paper Group APP is the largest vertically integrated pulp and paper producer in non-Japan Asia 1.3
(APP)* and one of the top-ten paper producers in the world. The company is headquartered in
Singapore and owned by the Sinar Mas Group. After excessive expansion in the 1990s
largely financed with debt, a deteriorating operating environment and an unfavorable
debt maturity profile forced the company to begin restructuring more than $13 billion of
debt in March 2001. Negotiations are progressing with global export credit agencies and
bondholders. Significant progress has been made recently in negotiations with creditors,
and a resolution is expected over the next several months.
*Includes combined holdings.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
PORTFOLIO INFORMATION (concluded)
As of March 31, 2003
Quality Ratings by Percent of
Standard & Poor's Market Value
BBB/Baa 4%
BB/Ba 18
B/B 48
CCC/Caa or lower 18
NR (Not Rated) 12
Percent of
Five Largest Industries Net Assets
Energy--Other 10.7%
Utility 7.7
Wireless 7.0
Gaming 4.9
Cable--U.S. 4.8
Percent of
Five Largest Foreign Countries* Net Assets
Canada 3.8%
Luxembourg 2.4
Brazil 1.7
Indonesia 1.6
Bahamas 1.5
*All holdings are denominated in U.S. dollars.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
PERFORMANCE DATA
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares.
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
* Effective December 1, 2002, Class B Shares are subject to a
maximum contingent deferred sales charge of 4%, declining to 0%
after six years. All Class B Shares purchased prior to December 1,
2002 will maintain the four-year schedule. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These classes of shares automatically
convert to Class A Shares after approximately ten years. (There is
no initial sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class I Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class I Shares are available only to eligible investors.
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
each of the following tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the payable
date. Investment return and principal value of shares will fluctuate
so that shares, when redeemed, may be worth more or less than their
original cost. Dividends paid to each class of shares will vary
because of the different levels of account maintenance, distribution
and transfer agency fees applicable to each class, which are
deducted from the income available to be paid to shareholders.
Recent Performance Results
Ten Year/
6-Month 12-Month Since Inception Standardized
As of March 31, 2003 Total Return Total Return Total Return 30-Day Yield
High Income Portfolio Class A Shares* +14.75% + 2.96% +39.56% 8.92%
High Income Portfolio Class B Shares* +14.46 + 2.43 +43.81 8.78
High Income Portfolio Class C Shares* +14.43 + 2.38 +33.07 8.74
High Income Portfolio Class I Shares* +14.89 + 3.22 +55.16 9.16
CSFB High Yield Index** +13.23 + 7.52 +87.86/+70.50 --
Merrill Lynch High Yield Master Index** +14.03 + 3.65 +86.29/+71.27 --
Ten-Year U.S. Treasury Securities*** + 1.50 +10.31 +87.96/+83.22 --
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten year/since inception periods are for ten years for Class
B & Class I Shares and from 10/21/94 for Class A & Class C Shares.
**Unmanaged. These market-weighted indexes mirror the high-yield
debt market of securities rated BBB or lower. Ten year/since
inception total returns for Merrill Lynch High Yield Master Index
are for ten years and from 10/31/94, respectively. Ten year/since
inception total returns for CSFB High Yield Index are for ten years
and from 10/31/94, respectively.
***Ten year/since inception total returns are for ten years for
Class B & Class I Shares and from 10/31/94 for Class A & Class C
Shares, respectively.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 3/31/03 +2.96% -1.16%
Five Years Ended 3/31/03 -1.54 -2.34
Inception (10/21/94) through 3/31/03 +4.03 +3.53
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 3/31/03 +2.43% -1.33%
Five Years Ended 3/31/03 -2.02 -2.26
Ten Years Ended 3/31/03 +3.70 +3.70
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 3/31/03 +2.38% +1.44%
Five Years Ended 3/31/03 -2.09 -2.09
Inception (10/21/94) through 3/31/03 +3.44 +3.44
*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 I Shares*
One Year Ended 3/31/03 +3.22% -0.91%
Five Years Ended 3/31/03 -1.27 -2.07
Ten Years Ended 3/31/03 +4.49 +4.06
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds
Aerospace & CCC+ Caa2 $20,625,000 Hexcel Corporation, 9.75% due 1/15/2009 $ 18,665,625
Defense--1.1%
Airlines--1.1% BB- B1 20,000,000 American Airlines, 7.80% due 10/01/2006 9,390,576
++Piedmont Aviation, Inc.:
D Ca 1,500,000 Series H, 10% due 11/08/2012 225,000
NR* NR* 1,304,000 Series J, 10.05% due 5/13/2005 195,600
D NR* 1,116,000 Series J, 10.10% due 5/13/2007 167,400
D NR* 3,767,000 Series J, 10.10% due 5/13/2009 565,050
D NR* 2,710,000 Series J, 10.15% due 5/13/2011 406,500
NR* NR* 2,226,000 Series K, 10% due 5/13/2004 333,900
NR* NR* 2,666,000 Series K, 10.10% due 5/13/2008 399,900
NR* NR* 2,550,000 Series K, 10.15% due 5/13/2010 382,500
++USAir Inc.:
NR* NR* 1,092,000 Series 88F, 10.70% due 1/01/2003 163,800
NR* NR* 1,092,000 Series 88G, 10.70% due 1/01/2003 163,800
NR* NR* 1,092,000 Series 88H, 10.70% due 1/01/2003 163,800
NR* NR* 1,092,000 Series 88I, 10.70% due 1/01/2003 163,800
D Caa3 2,728,273 Series 89A1, 9.33% due 1/01/2006+++ 600,220
D Ca 25,000,000 Series 93A3, 10.375% due 3/01/2013 5,750,000
D Caa3 1,432,000 Series A, 10.70% due 1/15/2007 214,800
D Caa3 1,815,000 Series C, 10.70% due 1/15/2007 272,250
D Caa3 1,107,000 Series E, 10.70% due 1/15/2007 166,050
NR* NR* 1,985,000 Series E, 10.30% due 3/28/2007 297,750
NR* Ca 1,950,000 Series F, 10.35% due 3/28/2011 292,500
--------------
20,315,196
Automotive--0.7% NR* NR* 2,486,819 ++Federal-Mogul Corporation, 7.375% due 1/15/2006 323,286
B B3 10,800,000 Metaldyne Corporation, 11% due 6/15/2012 8,505,000
++Venture Holdings Trust:
D Caa3 20,000,000 11% due 6/01/2007 3,950,000
D Ca 8,000,000 12% due 6/01/2009 120,000
--------------
12,898,286
Broadcasting-- NR* NR* 2,311,000 Acme Intermediate Holdings/Finance, 12% due 9/30/2005 2,368,775
1.6% CCC+ NR* 3,000,000 Acme Television/Finance, 10.875% due 9/30/2004 3,090,000
B- B1 5,000,000 CanWest Media Inc., 7.625% due 4/15/2013 (f) 5,000,000
B- B3 1,875,000 Entravision Communications Corporation, 8.125% due
3/15/2009 1,926,562
D Ca 25,000,000 ++Globo Comunicacoes e Participacoes, Ltd., 10.50%
due 12/20/2006 (f) 6,750,000
B- B3 8,000,000 Nextmedia Operating Inc., 10.75% due 7/01/2011 8,700,000
--------------
27,835,337
Cable-- D Ca 13,000,000 ++Cable Satisfaction International, 12.75% due 3/01/2010 3,201,250
International-- D Ca 15,000,000 ++Cablevision SA, 13.75% due 5/01/2009 3,300,000
1.5% C Caa2 23,175,000 Comcast UK Cable Partners Ltd., 11.20% due 11/15/2007 17,149,500
D Ca 35,000,000 ++United Pan-Europe Communications, 13.75% due
2/01/2010 (e) 2,187,500
--------------
25,838,250
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds (continued)
Cable--U.S.-- ++Adelphia Communications Corporation:
4.8% NR* NR* $ 3,225,000 9.25% (d) $ 1,306,125
NR* NR* 5,000,000 7.875% due 5/01/2009 2,000,000
NR* NR* 5,675,000 9.375% due 11/15/2009 2,326,750
NR* NR* 750,000 10.875% due 10/01/2010 303,750
NR* NR* 3,975,000 10.25% due 6/15/2011 1,649,625
B+ B2 5,000,000 CSC Holdings Inc., 10.50% due 5/15/2016 5,462,500
NR* NR* 20,000,000 ++Century Communications Corporation, 9.50% due 3/01/2005 7,200,000
Charter Communications Holdings:
CCC- Ca 4,668,333 8.625% due 4/01/2009 2,159,104
CCC- Ca 14,650,000 10.75% due 10/01/2009 6,775,625
B B1 13,200,000 DirecTV Holdings, 8.375% due 3/15/2013 (f) 14,553,000
B- Caa1 7,850,000 Insight Communications, 13.48% due 2/15/2011 (e) 5,573,500
B+ B2 8,350,000 Insight Midwest, LP, 9.75% due 10/01/2009 (f) 8,621,375
NR* NR* 22,000,000 ++Olympus Communications LP/Capital Corp., 10.625% due
11/15/2006 19,360,000
B- Ba3 8,000,000 Panamsat Corporation, 8.50% due 2/01/2012 8,240,000
--------------
85,531,354
Chemicals-- B- Caa1 2,000,000 Huntsman ICI Chemicals, 10.125% due 7/01/2009 1,895,000
4.8% B+ Ba3 4,425,000 IMC Global Inc., 7.625% due 11/01/2005 4,469,250
BB- B2 20,000,000 ISP ChemCo., 10.25% due 7/01/2011 21,550,000
BB- Ba3 20,000,000 MacDermid, Inc., 9.125% due 7/15/2011 22,000,000
BB+ Ba1 18,000,000 Millennium America Inc., 9.25% due 6/15/2008 19,440,000
NR* NR* 8,000,000 Noveon International Inc., 13% due 8/31/2011++++ 8,000,000
B Caa3 8,475,000 Terra Industries, 10.50% due 6/15/2005 7,203,750
--------------
84,558,000
Consumer BB+ Ba3 8,425,000 American Greetings, 11.75% due 7/15/2008 9,562,375
Products--3.0% BB+ Ba1 5,000,000 Briggs & Stratton Corporation, 8.875% due 3/15/2011 5,400,000
NR* NR* 25,000,000 ++Corning Consumer Products, 9.625% due 5/01/2008 1,250,000
NR* NR* 25,000,000 ++Galey & Lord, Inc., 9.125% due 3/01/2008 437,500
++Polysindo International Finance Company BV:
NR* NR* 7,500,000 8.719% (c) 450,000
NR* NR* 49,225,000 11.375% due 6/15/2006 2,584,312
NR* NR* 22,350,000 9.375% due 7/30/2007 1,173,375
B- B2 8,275,000 Remington Arms Company, 10.50% due 2/01/2011 (f) 8,854,250
BB B1 3,050,000 Russell Corporation, 9.25% due 5/01/2010 3,294,000
B- B3 4,600,000 United Industries Corporation, 9.875% due 4/01/2009 (f) 4,795,500
B- B2 15,375,000 Universal City Development, 11.75% due 4/01/2010 (f) 15,471,094
--------------
53,272,406
Diversified Houghton Mifflin Company (f):
Media--1.3% B B2 5,175,000 8.25% due 2/01/2011 5,537,250
B B3 2,275,000 9.875% due 2/01/2013 2,457,000
B B2 6,075,000 PEI Holdings Inc., 11% due 3/15/2010 (f) 6,363,562
BBB Baa2 9,200,000 World Color Press Inc., 7.75% due 2/15/2009 9,472,348
--------------
23,830,160
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds (continued)
Energy-- B B2 $ 6,675,000 Encore Acquisition Company, 8.375% due 6/15/2012 $ 6,992,062
Exploration & B+ NR* 23,375,000 Gazprom OAO, 9.625% due 3/01/2013 (f) 24,105,469
Production-- B B2 6,250,000 Plains E&P Company, 8.75% due 7/01/2012 6,500,000
2.1% --------------
37,597,531
Energy-- B+ Ba3 12,150,000 Citgo Petroleum Corporation, 11.375% due 2/01/2011 (f) 12,727,125
Other--10.7% B B2 11,100,000 Clark R & M, Inc., 8.875% due 11/15/2007 10,878,000
El Paso Corporation:
B Caa1 7,600,000 7% due 5/15/2011 6,004,000
B Caa1 2,250,000 7.75% due 1/15/2032 1,608,750
B Caa1 13,300,000 El Paso Energy Corporation, 6.75% due 5/15/2009 10,706,500
CCC- Caa3 25,000,000 Energy Corp. of America, 9.50% due 5/15/2007 15,625,000
Giant Industries, Inc.:
B- B3 4,950,000 9% due 9/01/2007 4,281,750
B- B3 1,750,000 11% due 5/15/2012 1,548,750
B+ B2 5,175,000 Hanover Equipment Trust, 8.75% due 9/01/2011 5,019,750
CCC B3 22,500,000 Ocean Rig Norway AS, 10.25% due 6/01/2008 19,800,000
B+ B1 6,825,000 Parker Drilling Company, 10.125% due 11/15/2009 7,166,250
B B3 19,000,000 Star Gas Partners, LP, 10.25% due 2/15/2013 (f) 18,810,000
B B3 17,575,000 Tesoro Petroleum Corp., 9% due 7/01/2008 15,026,625
NR* NR* 36,000,000 TransAmerican Refining Corporation, 13% due 12/15/2003 36,000,000
B B2 11,225,000 Trico Marine Services, 8.875% due 5/15/2012 10,439,250
B- B3 17,500,000 United Refining Co., 10.75% due 6/15/2007 14,350,000
--------------
189,991,750
Financial--0.3% NR* NR* 14,850,000 Finova Group Inc., 7.50% due 11/15/2009 5,234,625
Food & Drug-- NR* NR* 10,000,000 ++Ameriserve Food Distributors, 8.875% due 10/15/2006 100,000
0.0%
Food/Tobacco-- B B3 5,725,000 American Seafood Group LLC, 10.125% due 4/15/2010 6,054,188
1.4% NR* NR* 20,000,000 ++DGS International Finance Company BV, 10% due 6/01/2007 (f) 400,000
B- B2 5,825,000 Doane Pet Care Company, 10.75% due 3/01/2010 (f) 5,970,625
B+ B2 9,125,000 Dole Foods Company, 8.875% due 3/15/2011 (f) 9,490,000
BB+ Ba2 2,000,000 Smithfield Foods Inc., 8% due 10/15/2009 2,040,000
--------------
23,954,813
Gaming--4.7% NR* NR* 25,390,000 GB Property Funding Corp., 11% due 9/29/2005 16,757,400
BB- Ba3 12,000,000 Mandalay Resort Group, 10.25% due 8/01/2007 12,975,000
B+ B2 12,250,000 Sun International Hotels, 8.875% due 8/15/2011 12,586,875
B- B3 19,800,000 Trump Holdings & Funding, 11.625% due 3/15/2010 (f) 18,958,500
B- B3 14,850,000 Venetian Casino, 11% due 6/15/2010 15,536,813
CCC+ B3 5,650,000 Wynn Las Vegas LLC, 12% due 11/01/2010 5,904,250
--------------
82,718,838
Government-- B+ B2 15,000,000 Banco Nacional de Desenvolvimiento Economico e Social,
Foreign--1.8% 20.369% due 6/16/2008 (a)(g) 14,550,000
B+ B2 10,000,000 Federal Republic of Brazil, 12% due 4/15/2010 9,075,000
B- B1 10,000,000 Republic of Turkey, 11.875% due 1/15/2030 8,900,000
--------------
32,525,000
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds (continued)
Health Care-- B- Caa1 $ 8,800,000 ALARIS Medical Systems, Inc., 9.75% due 12/01/2006 $ 9,064,000
4.0% Columbia/HCA Healthcare Corp.:
BBB- Ba1 14,150,000 8.70% due 2/10/2010 16,053,783
BBB- Ba1 15,000,000 8.36% due 4/15/2024 16,280,220
B+ B2 2,625,000 Fisher Scientific International, 8.125% due 5/01/2012 2,795,625
BB- Ba2 16,869,000 Fresenius Medical Capital Trust II, 7.875% due
2/01/2008 17,375,070
B+ NR* 4,775,000 ICN Pharmaceuticals Inc., 6.50% due 7/15/2008 (Convertible) 4,034,875
B- B3 675,000 Kinetic Concepts, Inc., 9.625% due 11/01/2007 702,000
BB- Ba3 4,000,000 Ventas Realty LP, 9% due 5/01/2012 4,280,000
--------------
70,585,573
Housing--1.3% B B2 4,750,000 Building Materials Corporation, 8.625% due 12/15/2006 4,073,125
B- B2 5,800,000 Champion Home Builders, 11.25% due 4/15/2007 4,951,750
BB- Ba3 13,813,000 Forest City Enterprises Inc., 8.50% due 3/15/2008 14,089,260
--------------
23,114,135
Information B B1 13,000,000 Amkor Technology Inc., 9.25% due 2/15/2008 12,740,000
Technology--1.7% CCC+ Caa1 17,550,000 On Semiconductor Corporation, 13% due 5/15/2008 16,584,750
--------------
29,324,750
Leisure--3.3% B+ Ba3 20,000,000 HMH Properties, Inc., 7.875% due 8/01/2008 18,800,000
BBB- Ba1 8,000,000 Hilton Hotels Corporation, 8.25% due 2/15/2011 8,260,000
B+ B1 5,000,000 Intrawest Corporation, 10.50% due 2/01/2010 5,362,500
B B2 6,800,000 John Q. Hammons Hotels, 8.875% due 5/15/2012 6,630,000
Meristar Hospitality Corp.:
B- B2 5,775,000 9% due 1/15/2008 4,937,625
B- B2 5,525,000 10.50% due 6/15/2009 4,944,875
B B2 10,000,000 Vail Resorts Inc., 8.75% due 5/15/2009 10,300,000
--------------
59,235,000
Manufacturing-- B- Caa1 18,600,000 Eagle-Picher Industries, 9.375% due 3/01/2008 15,159,000
3.8% International Wire Group, Inc.:
CCC- Caa1 5,575,000 11.75% due 6/01/2005 3,623,750
CCC- Caa1 15,150,000 Series B, 11.75% due 6/01/2005 9,847,500
B- B3 2,150,000 Rexnord Corporation, 10.125% due 12/15/2012 (f) 2,284,375
D Ca 13,500,000 ++Thermadyne Manufacturing, 9.875% due 6/01/2008 1,350,000
CCC+ B3 21,300,000 Trench Electric SA and Trench Inc., 10.25% due 12/15/2007 15,975,000
B B3 5,250,000 Trimas Corporation, 9.875% due 6/15/2012 5,302,500
Tyco International Group SA:
BBB- Ba2 4,000,000 6.375% due 2/15/2006 3,900,000
BBB- Ba2 7,700,000 6.375% due 10/15/2011 7,199,500
BBB- Ba2 3,400,000 2.75% due 1/15/2018 (Convertible)(f) 3,145,000
--------------
67,786,625
Metal-- B- B2 14,000,000 Freeport-McMoran C & G, 10.125% due 2/01/2010 14,507,500
Other--1.2% NR* NR* 30,000,000 ++Kaiser Aluminum & Chemical Corp., 12.75% due 2/01/2003 1,200,000
NR* NR* 17,000,000 Ormet Corporation, 11% due 8/15/2008 (f) 5,950,000
--------------
21,657,500
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds (continued)
Multi-Sector NR* B3 $20,000,000 JP Morgan, 9.70% due 11/15/2007 $ 20,750,000
Holdings--1.2%
Packaging--3.1% B+ B2 13,250,000 Anchor Glass Container, 11% due 2/15/2013 (f) 13,713,750
Crown Euro Holdings SA (f):
B+ B1 6,825,000 9.50% due 3/01/2011 6,816,469
B B2 7,600,000 10.875% due 3/01/2013 7,685,500
BB B2 6,150,000 Owens-Brockway Glass Container, 8.875% due 2/15/2009 6,349,875
B+ B3 13,850,000 Owens-Illinois Inc., 7.15% due 5/15/2005 13,711,500
B- Caa1 8,000,000 Pliant Corporation, 13% due 6/01/2010 7,280,000
--------------
55,557,094
Paper--4.7% D C 21,000,000 ++APP Financial II Mauritius Ltd., 12% (d) 210,000
D Ca 35,000,000 ++APP International Finance, 11.75% due 10/01/2005 11,112,500
Ainsworth Lumber Company:
B- B3 9,250,000 12.50% due 7/15/2007++++ 9,978,438
B- B3 5,000,000 13.875% due 7/15/2007 5,475,000
D Ca 42,000,000 ++Doman Industries Limited, 8.75% due 3/15/2004 6,090,000
BB+ Ba2 20,000,000 Georgia Pacific Corporation, 9.375% due 2/01/2013 (f) 21,100,000
D Ca 14,500,000 ++Indah Kiat International Finance, 12.50% due 6/15/2006 5,075,000
B B2 16,000,000 MDP Acquisitions PLC, 9.625% due 10/01/2012 (f) 16,860,000
D Ca 27,500,000 ++Tjiwi Kimia Finance Mauritius, 10% due 8/01/2004 6,737,500
--------------
82,638,438
Service--3.2% BB- Ba3 20,000,000 Allied Waste North America, 7.625% due 1/01/2006 20,275,000
B- B3 8,850,000 Kindercare Learning Centers, Inc., 9.50% due 2/15/2009 8,628,750
CCC+ Caa3 17,950,000 Protection One Alarm Monitoring, 8.125% due 1/15/2009 13,642,000
BB Ba2 13,925,000 Shaw Group Inc., 10.75% due 3/15/2010 (f) 13,785,750
--------------
56,331,500
Steel--1.4% B B3 16,450,000 UCAR Finance Inc., 10.25% due 2/15/2012 14,640,500
CCC+ Caa2 26,075,000 WCI Steel Inc., 10% due 12/01/2004 7,822,500
CCC- Caa3 15,950,000 Weirton Steel Corporation, 0.50% due 4/01/2008 (a) 1,595,000
NR* NR* 43,000,000 ++Wheeling Pittsburgh Corp., 9.25% due 11/15/2007 215,000
--------------
24,273,000
Telecommuni- NR* NR* 15,000,000 ++Energis PLC, 9.75% due 6/15/2009 75,000
cations--1.8% CCC+ Caa2 9,750,000 Qwest Capital Funding, 5.875% due 8/03/2004 8,823,750
CCC+ NR* 15,300,000 Qwest Services Corporation, 13.50% due 12/15/2010 (f) 16,141,500
++WorldCom, Inc.:
NR* NR* 6,400,000 7.875% due 5/15/2003 1,712,000
NR* NR* 8,000,000 6.25% due 8/15/2003 2,140,000
NR* NR* 10,400,000 7.50% due 5/15/2011 2,782,000
--------------
31,674,250
Transportation-- B+ B1 14,450,000 General Maritime Corporation, 10% due 3/15/2013 (f) 14,739,000
2.5% BB- Ba3 1,550,000 Stena AB, 9.625% due 12/01/2012 1,604,250
B+ B1 15,000,000 TFM, SA de CV, 11.75% due 6/15/2009 13,800,000
BB- Ba2 13,375,000 Teekay Shipping Corporation, 8.875% due 7/15/2011 14,327,969
--------------
44,471,219
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
S&P Moody's Face
Industries Rating Rating Amount Issue Value
Bonds (concluded)
Utility--7.7% The AES Corporation:
B- Caa1 $ 775,000 8.375% due 8/15/2007 $ 519,250
B- B3 16,075,000 9.375% due 9/15/2010 13,503,000
B- B3 8,300,000 8.875% due 2/15/2011 6,806,000
B+ B1 5,000,000 ANR Pipeline Company, 8.875% due 3/15/2010 (f) 5,300,000
B+ B3 19,000,000 CMS Energy Corporation, 8.50% due 4/15/2011 16,150,000
B+ B1 17,650,000 Calpine Canada Energy Finance, 8.50% due 5/01/2008 10,148,750
Calpine Corporation:
B+ B1 2,300,000 4% due 12/26/2006 (Convertible)(f) 1,506,500
B+ B1 9,825,000 8.50% due 2/15/2011 5,502,000
BB Ba1 9,600,000 ESI Tractebel Acquisition Corp., 7.99% due 12/30/2011 9,432,192
B B3 11,500,000 Illinois Power Corporation, 11.50% due 12/15/2010 (f) 12,132,500
BB B3 12,800,000 Mirant Americas Generation Inc., 8.30% due 5/01/2011 6,528,000
BB B3 3,750,000 Mirant Americas Generation LLC, 7.625% due 5/01/2006 2,268,750
B- B3 20,000,000 Mission Energy Holdings, 13.50% due 7/15/2008 7,300,000
BB Ba2 10,000,000 Nevada Power Co., 10.875% due 10/15/2009 (f) 10,350,000
B+ B3 500,000 Northwest Pipeline Corporation, 8.125% due 3/01/2010 (f) 522,500
B+ B1 2,025,000 Southern Natural Gas, 8.875% due 3/15/2010 (f) 2,136,375
NR* NR* 13,249,234 Sunflower Electric Power Corp., 8% due 12/31/2016+++ 11,626,203
BB- Ba2 6,900,000 Western Resources Inc., 9.75% due 5/01/2007 7,365,750
B Caa1 8,725,000 Williams Companies Inc., 7.125% due 9/01/2011 7,503,500
--------------
136,601,270
Wireless--5.1% CCC B3 3,600,000 American Tower Escrow, 12.25% due 8/01/2008 (e) 2,376,000
CCC Caa1 20,350,000 American Tower Systems Corporation, 9.375% due 2/01/2009 18,315,000
CCC+ Caa1 14,530,000 Loral Cyberstar Inc., 10% due 7/15/2006 5,957,300
C Caa3 41,075,000 Millicom International Cellular SA, 13.50% due 6/01/2006 28,341,750
NR* NR* 14,530,247 NII Holdings Inc., 19.13% due 11/01/2009 (e)(f) 11,188,290
CCC+ Caa1 23,275,000 Nextel Partners Inc., 13.75% due 2/01/2009 (e) 21,413,000
Telesystem International Wireless:
CCC+ Ca 2,268,000 14% due 12/30/2003 2,109,240
CCC+ NR* 1,021,000 14% due 12/30/2003 (f) 949,530
--------------
90,650,110
Total Investments in Bonds
(Cost--$2,139,118,790)--86.9% 1,539,517,635
Shares
Held
Preferred Stocks
Cable--International--0.0% 142 NTL Europe, Inc. 462
Cable--U.S.--0.0% 8,000 CSC Holdings Inc.++++ 818,000
Diversified Media--1.6% 45,000 Primedia, Inc. (Series D) 3,645,000
322,500 Primedia, Inc. (Series H) 24,510,000
--------------
28,155,000
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (continued) (in U.S.dollars)
Shares
Industries Held Issue Value
Preferred Stocks (concluded)
Food & Drug--0.0% 297,038 Nebco Evans Holding Co.++++ $ 2,970
Steel--0.0% 261,000 Weirton Steel Corporation (Convertible) 522,000
Wireless--0.9% 5,212 Crown Castle International Corporation++++ 4,221,720
7,179 Nextel Communications, Inc. (Series E)++++ 7,537,950
10,121 Rural Cellular Corp. (Series B)++++ 3,441,140
--------------
15,200,810
Total Investments in Preferred Stocks
(Cost--$85,481,660)--2.5% 44,699,242
Common Stocks
Cable--International--0.1% 101,126 ++NTL Europe, Inc. 4,551
166,921 ++NTL Incorporated 1,478,920
--------------
1,483,471
Energy--Other--0.0% 3,599 ++Orion Refining 4
Gaming--0.2% 1,240,697 ++GB Holdings Inc. 3,337,475
Health Care--0.0% 12,894 ++MEDIQ Incorporated 0
Information Technology--0.1% 232,931 ++Dictaphone Corporation 1,048,189
20,500,000 ++LLC Dictaphone 205
--------------
1,048,394
Metal--Other--0.1% 1,200,000 ++Metals USA, Inc. 2,940,000
Steel--0.0% 25,000,000 ++Murrin Murrin LTC 250
Wireless--1.0% 685,960 ++NII Holdings Inc. (Class B) 17,567,435
Total Investments in Common Stocks
(Cost--$82,666,217)--1.5% 26,377,029
Warrants (b)
Cable--International--0.0% 10,000 Cable Satisfaction 100
117,980 NTL Incorporated 17,697
45,000 UIH Australia/Pacific 450
--------------
18,247
Information Technology--0.0% 210,284 Dictaphone Corporation 26,286
Steel--0.0% 20,000 Republic Technologies 200
Wireless--0.0% 53,472 Comunicacion Celular SA (f) 53
158,265 Loral Space & Communications 1,583
--------------
1,636
Total Investments in Warrants
(Cost--$4,974,703)--0.0% 46,369
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
SCHEDULE OF INVESTMENTS (concluded) (in U.S.dollars)
Beneficial
Interest Issue Value
Short-Term Securities
$148,818,418 Merrill Lynch Liquidity Series, LLC Cash Sweep
Series I (h) $ 148,818,418
Total Investments in Short-Term Securities
(Cost--$148,818,418)--8.4% 148,818,418
Total Investments (Cost--$2,461,059,788)--99.3% 1,759,458,693
Other Assets Less Liabilities--0.7% 11,742,670
--------------
Net Assets--100.0% $1,771,201,363
==============
*Not Rated.
++Non-income producing security.
++++Represents a pay-in-kind security which may pay
interest/dividends in additional face/shares.
+++Subject to principal paydowns.
(a)Floating rate note.
(b)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
(c)Maturity of this security is pending as a result of bankruptcy
proceedings.
(d)The security is a perpetual bond and has no definite maturity
date.
(e)Represents a zero coupon or step bond; the interest rate shown
reflects the effective yield at the time of purchase by the
Portfolio.
(f)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(g)Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was $14,550,000, representing
0.8% of net assets.
Acquisition
Issue Dates Cost Value
Banco Nacional de Desenvolvimiento
Economico e Social, 20.369% due 6/18/2002-
6/16/2008 6/21/2002 $ 12,570,717 $ 14,550,000
------------ ------------
Total $ 12,570,717 $ 14,550,000
============ ============
(h)Investments in companies considered to be an affiliate of the
Portfolio (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Net Interest
Affiliate Activity Income
Merrill Lynch Liquidity Series,
LLC Cash Sweep Series I $ 148,818,418 $ 670,155
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of March 31, 2003
Assets: Investments, at value (identified cost--$2,461,059,788) $ 1,759,458,693
Receivables:
Interest $ 46,970,632
Securities sold 13,914,830
Securities lending--net 2,889,304
Capital shares sold 1,781,624
Dividends 717,641 66,274,031
---------------
Prepaid registration fees and other assets 46,259
---------------
Total assets 1,825,778,983
---------------
Liabilities: Payables:
Securities purchased 45,960,770
Dividends to shareholders 4,224,781
Capital shares redeemed 2,367,785
Distributor 677,116
Investment adviser 579,929 53,810,381
---------------
Accrued expenses and other liabilities 767,239
---------------
Total liabilities 54,577,620
---------------
Net Assets: Net assets $ 1,771,201,363
===============
Net Assets Class A Common Stock, $.10 par value, 500,000,000 shares authorized $ 7,250,147
Consist of: Class B Common Stock, $.10 par value, 1,500,000,000 shares authorized 19,600,115
Class C Common Stock, $.10 par value, 200,000,000 shares authorized 3,576,843
Class I Common Stock, $.10 par value, 500,000,000 shares authorized 9,475,647
Paid-in capital in excess of par 4,087,947,014
Undistributed investment income--net $ 18,661,450
Accumulated realized capital losses on investments--net (1,673,708,758)
Unrealized depreciation on investments--net (701,601,095)
---------------
Total accumulated losses--net (2,356,648,403)
---------------
Net assets $ 1,771,201,363
===============
Net Asset Class A--Based on $321,921,791 and 72,501,465 shares outstanding $ 4.44
Value: ===============
Class B--Based on $869,932,781 and 196,001,147 shares outstanding $ 4.44
===============
Class C--Based on $158,869,672 and 35,768,434 shares outstanding $ 4.44
===============
Class I--Based on $420,477,119 and 94,756,469 shares outstanding $ 4.44
===============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (continued)
Statement of Operations for the Six Months Ended March 31, 2003
Investment Interest $ 80,901,600
Income: Dividends 4,464,062
Other 82,080
---------------
Total income 85,447,742
---------------
Expenses: Investment advisory fees $ 3,552,338
Account maintenance and distribution fees--Class B 3,246,688
Transfer agent fees--Class B 756,409
Account maintenance and distribution fees--Class C 592,893
Account maintenance fees--Class A 362,360
Transfer agent fees--Class I 291,603
Accounting services 252,897
Transfer agent fees--Class A 216,691
Transfer agent fees--Class C 129,337
Professional fees 70,852
Printing and shareholder reports 54,575
Custodian fees 37,930
Registration fees 33,283
Directors' fees and expenses 14,605
Pricing fees 7,305
Other 30,986
---------------
Total expenses 9,650,752
---------------
Investment income--net 75,796,990
---------------
Realized & Realized loss on investments--net (391,374,487)
Unrealized Gain Change in unrealized depreciation on investments--net 547,441,477
(Loss) on ---------------
Investments--Net: Total realized and unrealized gain on investments--net 156,066,990
---------------
Net Increase in Net Assets Resulting from Operations $ 231,863,980
===============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
March 31, September 30,
Increase (Decrease) in Net Assets: 2003 2002
Operations: Investment income--net $ 75,796,990 $ 203,234,836
Realized loss on investments--net (391,374,487) (576,110,410)
Change in unrealized depreciation on investments--net 547,441,477 274,551,059
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 231,863,980 (98,324,515)
--------------- ---------------
Dividends to Investment income--net:
Shareholders: Class A (13,385,105) (28,412,688)
Class B (37,948,402) (113,787,188)
Class C (6,434,847) (16,540,592)
Class I (18,439,123) (44,055,500)
--------------- ---------------
Net decrease in net assets resulting from dividends to shareholders (76,207,477) (202,795,968)
--------------- ---------------
Capital Share Net decrease in net assets derived from capital share transactions (77,396,536) (277,713,470)
Transactions: --------------- ---------------
Net Assets: Total increase (decrease) in net assets 78,259,967 (578,833,953)
Beginning of period 1,692,941,396 2,271,775,349
--------------- ---------------
End of period* $ 1,771,201,363 $ 1,692,941,396
=============== ===============
*Undistributed investment income--net $ 18,661,450 $ 19,071,937
=============== ===============
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights
The following per share data and ratios Class A+++++
have been derived from information For the Six
provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 4.05 $ 4.74 $ 6.04 $ 6.59 $ 7.05
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .19++ .46 .61 .70 .70
Realized and unrealized gain (loss)
on investments--net .41 (.69) (1.30) (.55) (.31)
---------- ---------- ---------- ---------- ----------
Total from investment operations .60 (.23) (.69) .15 .39
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.21) (.46) (.61) (.70) (.70)
Realized gain on investments--net -- -- -- -- (.01)
In excess of realized gain on
investments--net -- -- -- -- (.14)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.21) (.46) (.61) (.70) (.85)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 4.44 $ 4.05 $ 4.74 $ 6.04 $ 6.59
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.75%+++ (5.60%) (12.10%) 2.22% 5.64%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses .88%* .86% .86% .77% .76%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net 9.19%* 9.93% 11.23% 10.83% 10.15%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 321,922 $ 274,069 $ 268,633 $ 265,500 $ 359,435
Data: ========== ========== ========== ========== ==========
Portfolio turnover 43.79% 46.18% 23.24% 14.44% 19.74%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Effective April 14, 2003, Class D Shares were redesignated
Class A Shares.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
The following per share data and ratios Class B
have been derived from information For the Six
provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 4.05 $ 4.74 $ 6.04 $ 6.59 $ 7.05
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .18++ .43 .58 .66 .67
Realized and unrealized gain (loss)
on investments--net .41 (.69) (1.30) (.55) (.31)
---------- ---------- ---------- ---------- ----------
Total from investment operations .59 (.26) (.72) .11 .36
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.20) (.43) (.58) (.66) (.67)
Realized gain on investments--net -- -- -- -- (.01)
In excess of realized gain on
investments--net -- -- -- -- (.14)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.20) (.43) (.58) (.66) (.82)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 4.44 $ 4.05 $ 4.74 $ 6.04 $ 6.59
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.46%+++ (6.09%) (12.56%) 1.70% 5.10%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses 1.40%* 1.39% 1.37% 1.29% 1.28%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net 8.72%* 9.52% 10.78% 10.30% 9.66%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 869,933 $ 894,051 $1,387,523 $2,115,413 $3,290,248
Data: ========== ========== ========== ========== ==========
Portfolio turnover 43.79% 46.18% 23.24% 14.44% 19.74%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
The following per share data and ratios Class C
have been derived from information For the Six
provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 4.05 $ 4.74 $ 6.04 $ 6.60 $ 7.06
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .18++ .43 .58 .66 .66
Realized and unrealized gain (loss)
on investments--net .40 (.69) (1.30) (.56) (.31)
---------- ---------- ---------- ---------- ----------
Total from investment operations .58 (.26) (.72) .10 .35
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.19) (.43) (.58) (.66) (.66)
Realized gain on investments--net -- -- -- -- (.01)
In excess of realized gain on
investments--net -- -- -- -- (.14)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.19) (.43) (.58) (.66) (.81)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 4.44 $ 4.05 $ 4.74 $ 6.04 $ 6.60
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.43%+++ (6.14%) (12.60%) 1.49% 5.06%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses 1.45%* 1.44% 1.43% 1.34% 1.33%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net 8.63%* 9.37% 10.69% 10.25% 9.62%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 158,869 $ 147,198 $ 177,236 $ 227,274 $ 361,606
Data: ========== ========== ========== ========== ==========
Portfolio turnover 43.79% 46.18% 23.24% 14.44% 19.74%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
The following per share data and ratios Class I+++++
have been derived from information For the Six
provided in the financial statements. Months Ended
March 31, For the Year Ended September 30,
Increase (Decrease) in Net Asset Value: 2003 2002 2001 2000 1999
Per Share Net asset value, beginning of period $ 4.05 $ 4.73 $ 6.03 $ 6.59 $ 7.05
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .20++ .47 .62 .71 .72
Realized and unrealized gain (loss)
on investments--net .40 (.68) (1.30) (.56) (.31)
---------- ---------- ---------- ---------- ----------
Total from investment operations .60 (.21) (.68) .15 .41
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.21) (.47) (.62) (.71) (.72)
Realized gain on investments--net -- -- -- -- (.01)
In excess of realized gain on
investments--net -- -- -- -- (.14)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.21) (.47) (.62) (.71) (.87)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 4.44 $ 4.05 $ 4.73 $ 6.03 $ 6.59
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.89%+++ (5.16%) (11.92%) 2.31% 5.90%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses .63%* .62% .61% .52% .51%
Average ========== ========== ========== ========== ==========
Net Assets: Investment income--net 9.46%* 10.21% 11.52% 11.07% 10.40%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 420,477 $ 377,623 $ 438,383 $ 545,425 $ 807,942
Data: ========== ========== ========== ========== ==========
Portfolio turnover 43.79% 46.18% 23.24% 14.44% 19.74%
========== ========== ========== ========== ==========
*Annualized.
**Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
+++Aggregate total investment return.
+++++Effective April 14, 2003, Class A Shares were redesignated
Class I Shares.
See Notes to Financial Statements.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
High Income Portfolio (the "Portfolio") is one of 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 Portfolio's financial statements
are prepared in conformity with accounting principles generally
accepted in the United States of America, which may require the use
of management accruals and estimates. These unaudited financial
statements reflect all adjustments, which are, in the opinion of
management, necessary to a fair statement of the results for the
interim period presented. All such adjustments are of a normal,
recurring nature. The Portfolio offers multiple classes of shares.
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares. Shares
of Class A and Class I 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 A, Class B and Class C 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 Portfolio.
(a) Valuation of investments--Portfolio securities that are traded
on stock exchanges are valued at the last sale price as of the close
of business on the day the securities are being valued, or lacking
any sales, at the mean between closing bid and asked prices.
Securities traded in the over-the-counter market are valued at the
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. The Fund employs certain pricing services to provide
securities prices for the Fund. 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.
Occasionally, events affecting the values of securities and other
assets may occur between the times at which valuations of such
securities are determined (that is, close of the market on which
such security trades) and the close of business on the NYSE. If
events (for example, company announcement, natural disasters, market
volatility) occur during such periods that are expected to
materially affect the value for such securities, those securities
may be valued at their fair market value as determined in good faith
by the Fund's Board of Directors or by the investment adviser using
a pricing service and/or procedures approved by the Board of
Directors of the Fund.
(b) Derivative financial instruments--The Portfolio may engage in
various portfolio investment strategies to increase or decrease the
level of risk to which the Portfolio is exposed more quickly and
efficiently than transactions in other types of instruments. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Portfolio may purchase or sell
financial futures contracts and options on such futures contracts
for the purpose of hedging the market risk on existing securities or
the intended purchase of securities. Futures contracts are contracts
for delayed delivery of securities at a specific future date and at
a specific price or yield. Upon entering into a contract, the
Portfolio deposits and maintains as collateral such initial margin
as required by the exchange on which the transaction is effected.
Pursuant to the contract, the Portfolio agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Portfolio as unrealized
gains or losses. When the contract is closed, the Portfolio records
a realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
* Options--The Portfolio is authorized to purchase and write call
and put options. When the Portfolio writes an option, an amount
equal to the premium received by the Portfolio is reflected as an
asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Portfolio enters into a closing transaction), the
Portfolio realizes a gain or loss on the option to the extent of the
premiums received or paid (or loss or gain to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Income taxes--It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis. The Portfolio amortizes all
premiums and discounts on debt securities.
(e) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(f) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
(g) 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.
(h) Securities lending--The Portfolio 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. The market value of
the loaned securities is determined at the close of business of the
Portfolio and any additional required collateral is delivered to the
Portfolio on the next business day. Where the Portfolio receives
securities as collateral for the loaned securities, it collects a
fee from the borrower. The Portfolio typically receives the income
on the loaned securities but does not receive the income on the
collateral. Where the Portfolio receives 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 Portfolio 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 Portfolio could experience delays and costs in gaining
access to the collateral. The Portfolio 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.
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 has entered into a Sub-Advisory Agreement with
Merrill Lynch Asset Management U.K. Limited ("MLAM U.K."), an
affiliate of FAM, pursuant to which MLAM U.K. provides investment
advisory services to FAM with respect to the Fund. There is no
increase in the aggregate fees paid by the Fund for these services.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
NOTES TO FINANCIAL STATEMENTS (continued)
FAM is responsible for the management of the Fund's Portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee with respect to the Portfolio
based upon the aggregate average daily value of the Fund's net
assets at the following annual rates: .55% of the Fund's average
daily net assets not exceeding $250 million; .50% of average daily
net assets in excess of $250 million but not exceeding $500 million;
..45% of average daily net assets in excess of $500 million but not
exceeding $750 million; and .40% of average daily net assets in
excess of $750 million. For the six months ended March 31, 2003, the
aggregate average daily net assets of the Fund, including the Fund's
Core Bond Portfolio and Intermediate Term Portfolio, was
approximately $3,814,786,000.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares of the
Portfolio as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .50%
Class C .25% .55%
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 A, Class B and Class C 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 six months ended March 31, 2003, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Portfolio's Class A and Class I Shares
as follows:
FAMD MLPF&S
Class A $5,035 $54,561
Class I $1,426 $10,447
For the six months ended March 31, 2003, MLPF&S received contingent
deferred sales charges of $286,621 and $13,368 relating to
transactions in Class B and Class C Shares of the Portfolio,
respectively.
The Portfolio 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 Portfolio
also has retained Merrill Lynch Investment Managers, LLC ("MLIM,
LLC"), an affiliate of FAM, as the securities lending agent for a
fee based on a share of the returns on investment of cash
collateral. MLIM, LLC may, on behalf of the Portfolio, invest cash
collateral received by the Portfolio for such loans, among other
things, in a private investment company managed by MLIM, LLC or in
registered money market funds advised by FAM or its affiliates.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
For the six months ended March 31, 2003, the Portfolio reimbursed
FAM $19,403 for certain accounting services.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLAM U.K., FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended March 31, 2003 were $678,085,471 and
$807,643,010, respectively.
Merrill Lynch Bond Fund, Inc., High Income Portfolio,March 31, 2003
Net realized losses for the six months ended March 31, 2003 and net
unrealized losses as of March 31, 2003 were as follows:
Realized Unrealized
Losses Losses
Long-term investments $ (391,374,487) $ (701,601,095)
--------------- ---------------
Total $ (391,374,487) $ (701,601,095)
=============== ===============
As of March 31, 2003, net unrealized depreciation for Federal income
tax purposes aggregated $703,488,088, of which $75,453,974 related
to appreciated securities and $778,942,062 related to depreciated
securities. The aggregate cost of investments at March 31, 2003 for
Federal income tax purposes was $2,462,946,781.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $77,396,536 and $277,713,470 for the six months ended March 31,
2003 and the year ended September 30, 2002, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Dollar
Months Ended March 31, 2003++ Shares Amount
Shares sold 4,957,936 $ 20,958,590
Automatic conversion of shares 7,635,830 32,226,751
Shares issued to shareholders
in reinvestment of dividends 1,608,997 6,740,204
--------------- ---------------
Total issued 14,202,763 59,925,545
Shares redeemed (9,360,217) (39,167,638)
--------------- ---------------
Net increase 4,842,546 $ 20,757,907
=============== ===============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class A Shares for the Year Dollar
Ended September 30, 2002++ Shares Amount
Shares sold 12,633,217 $ 58,540,414
Automatic conversion of shares 16,181,996 73,978,183
Shares issued to shareholders
in reinvestment of dividends 2,880,907 13,181,241
--------------- ---------------
Total issued 31,696,120 145,699,838
Shares redeemed (20,737,072) (94,803,890)
--------------- ---------------
Net increase 10,959,048 $ 50,895,948
=============== ===============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class B Shares for the Six Dollar
Months Ended March 31, 2003 Shares Amount
Shares sold 7,953,879 $ 33,581,372
Shares issued to shareholders
in reinvestment of dividends 3,848,507 16,086,903
--------------- ---------------
Total issued 11,802,386 49,668,275
Automatic conversion of shares (7,641,650) (32,226,751)
Shares redeemed (28,962,970) (120,474,156)
--------------- ---------------
Net decrease (24,802,234) $ (103,032,632)
=============== ===============
Class B Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 19,870,558 $ 92,571,052
Shares issued to shareholders
in reinvestment of dividends 10,223,848 47,114,368
--------------- ---------------
Total issued 30,094,406 139,685,420
Automatic conversion of shares (16,181,996) (73,978,183)
Shares redeemed (86,086,679) (395,562,828)
--------------- ---------------
Net decrease (72,174,269) $ (329,855,591)
=============== ===============
Class C Shares for the Six Dollar
Months Ended March 31, 2003 Shares Amount
Shares sold 3,623,041 $ 15,403,723
Shares issued to shareholders
in reinvestment of dividends 766,258 3,207,327
--------------- ---------------
Total issued 4,389,299 18,611,050
Shares redeemed (4,947,028) (20,571,275)
--------------- ---------------
Net decrease (557,729) $ (1,960,225)
=============== ===============
Class C Shares for the Year Dollar
Ended September 30, 2002 Shares Amount
Shares sold 9,671,405 $ 45,496,504
Shares issued to shareholders
in reinvestment of dividends 1,800,828 8,283,792
--------------- ---------------
Total issued 11,472,233 53,780,296
Shares redeemed (12,544,238) (57,104,165)
--------------- ---------------
Net decrease (1,072,005) $ (3,323,869)
=============== ===============
Class I Shares for the Six Dollar
Months Ended March 31, 2003++ Shares Amount
Shares sold 12,467,550 $ 52,683,054
Shares issued to shareholders
in reinvestment of dividends 1,659,840 6,941,136
--------------- ---------------
Total issued 14,127,390 59,624,190
Shares redeemed (12,650,947) (52,785,776)
--------------- ---------------
Net increase 1,476,443 $ 6,838,414
=============== ===============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
NOTES TO FINANCIAL STATEMENTS (concluded)
Class I Shares for the Year Dollar
Ended September 30, 2002++ Shares Amount
Shares sold 25,797,905 $ 119,554,859
Shares issued to shareholders
in reinvestment of dividends 3,532,626 16,200,807
--------------- ---------------
Total issued 29,330,531 135,755,666
Shares redeemed (28,636,652) (131,185,624)
--------------- ---------------
Net increase 693,879 $ 4,570,042
=============== ===============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
5. Short-Term Borrowings:
The Portfolio, along with certain other funds managed by FAM and its
affiliates, is a party to a $500,000,000 credit agreement with Bank
One, N.A. and certain other lenders. The Portfolio may borrow under
the credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Portfolio may borrow up
to the maximum amount allowable under the Portfolio's current
prospectus and statement of additional information, subject to
various other legal, regulatory or contractual limits. The Portfolio
pays a commitment fee of .09% per annum based on the Portfolio's pro
rata share of the unused portion of the 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 29, 2002, the
credit agreement was renewed for one year under the same terms,
except that the total commitment was reduced from $1,000,000,000 to
$500,000,000. The Portfolio did not borrow under the credit
agreement during the six months ended March 31, 2003.
6. Capital Loss Carryforward:
On September 30, 2002, the Portfolio had a net capital loss
carryforward of $710,521,470, of which $74,968,568 expires in 2007,
$60,400,417 expires in 2008, $387,766,347 expires in 2009 and
$187,386,138 expires in 2010. This amount will be available to
offset like amounts of any future taxable gains.
Merrill Lynch Bond Fund, Inc., High Income Portfolio, March 31, 2003
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Edward D. Zinbarg, Director
B. Daniel Evans, Vice President
Donald C. Burke, Vice President and Treasurer
Bradley J. Lucido, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Item 2 - Did registrant adopt a code of ethics, as of the end of the
period covered by this report, that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by
the registrant or a third party? If not, why not? Briefly describe
any amendments or waivers that occurred during the period. State
here if code of ethics/amendments/waivers are on website and give
website address-. State here if fund will send code of ethics to
shareholders without charge upon request--N/A (not answered until
July 15, 2003 and only annually for funds)
Item 3 - Did the registrant's board of directors determine that the
registrant either: (i) has at least one audit committee financial
expert serving on its audit committee; or (ii) does not have an
audit committee financial expert serving on its audit committee? If
yes, disclose name of financial expert and whether he/she is
"independent," (fund may, but is not required, to disclose
name/independence of more than one financial expert) If no, explain
why not. -N/A (not answered until July 15, 2003 and only annually
for funds)
Item 4 - Disclose annually only (not answered until December 15,
2003)
(a) Audit Fees - Disclose aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements
for those fiscal years. N/A.
(b) Audit-Related Fees - Disclose aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item. Registrants shall
describe the nature of the services comprising the fees disclosed
under this category. N/A.
(c) Tax Fees - Disclose aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning.
Registrants shall describe the nature of the services comprising the
fees disclosed under this category. N/A.
(d) All Other Fees - Disclose aggregate fees billed in each of the
last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs
(a) through (c) of this Item. Registrants shall describe the nature
of the services comprising the fees disclosed under this category.
N/A.
(e)(1) Disclose the audit committee's pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of Regulation
S-X. N/A.
(e)(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the
audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X. N/A.
(f) If greater than 50%, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's
financial statements for the most recent fiscal year that were
attributed to work performed by persons other than the principal
accountant's full-time, permanent employees. N/A.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to
the registrant's investment adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the adviser
that provides ongoing services to the registrant for each of the
last two fiscal years of the registrant. N/A.
(h) Disclose whether the registrant's audit committee has considered
whether the provision of non-audit services that were rendered to
the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted
with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence. N/A.
Item 5 - If the registrant is a listed issuer as defined in Rule 10A-
3 under the Exchange Act, state whether or not the registrant has a
separately-designated standing audit committee established in
accordance with Section 3(a)(58)(A) of the Exchange Act. If the
registrant has such a committee, however designated, identify each
committee member. If the entire board of directors is acting as the
registrant's audit committee in Section 3(a)(58)(B) of the Exchange
Act, so state.
If applicable, provide the disclosure required by Rule 10A-3(d)
under the Exchange Act regarding an exemption from the listing
standards for audit committees.
(Listed issuers must be in compliance with the new listing rules by
the earlier of their first annual shareholders meeting after January
2004, or October 31, 2004 (annual requirement))
Item 6 - Reserved
Item 7 - For closed-end funds that contain voting securities in
their portfolio, describe the policies and procedures that it uses
to determine how to vote proxies relating to those portfolio
securities. N/A (not answered until July 1, 2003)
Item 8--Reserved
Item 9(a) - Disclose the conclusions of the registrant's principal
executive officer or officers and principal financial officer or
officers, or persons performing similar functions, about the
effectiveness of the registrant's disclosure controls and procedures
(as defined in Rule 30a-2(c) under the Act (17 CFR 270.30a-2(c)))
based on their evaluation of these controls and procedures as of a
date within 90 days of the filing date of the report that includes
the disclosure required by this paragraph. N/A (not answered until
July 15, 2003 and only annually for funds)
Item 9(b)--There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits
10(a) - Attach code of ethics or amendments/waivers, unless code of
ethics or amendments/waivers is on website or offered to
shareholders upon request without charge. N/A.
10(b) - Attach certifications pursuant to Section 302 of the
Sarbanes-Oxley Act. Attached hereto.
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
High Income Portfolio of Merrill Lynch Bond Fund, Inc.
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
High Income Portfolio of Merrill Lynch Bond Fund, Inc.
Date: May 21, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
High Income Portfolio of Merrill Lynch Bond Fund, Inc.
Date: May 21, 2003
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
High Income Portfolio of Merrill Lynch Bond Fund, Inc.
Date: May 21, 2003
Attached hereto as an exhibit are the certifications pursuant to
Section 906 of the Sarbanes-Oxley Act.