MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Quarterly Report
March 31, 1995
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.
<PAGE>
Merrill Lynch
Global Bond Fund
For Investment
And Retirement
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Global Bond Fund for Investment and Retirement
PORTFOLIO INFORMATION
Type of Issues*
As of March 31, 1995
A bar chart illustrating the following percentages:
Financial Services 18.07%
US Government & Agency Obligations 29.08%
Sovereign Government Obligations 48.03%
<PAGE>
Geographical Diversification*
As of March 31, 1995
A pie chart illustrating the following percentages:
Belgium 2.72%
Spain 6.39%
Denmark 7.25%
United Kingdom 8.24%
United States 47.15%
Italy 3.47%
Germany 11.81%
France 4.07%
Australia 4.08%
Maturity of Investments*
As of March 31, 1995
A bar chart depicting the following percentages:
0-6 months 31%
6 months-5 yrs 21%
5 yrs-10yrs 47%
10 years + -1%
[FN]
* Percent of net assets may not equal 100%.
<PAGE>
DEAR SHAREHOLDER
Following a difficult 1994--one of the worst years in history for
global bond markets--the first three months of 1995 were marked by
bond market rallies. However, another trend of 1994, the declining
value of the US dollar relative to the Deutschemark and the yen, has
not been reversed.
So far, in 1995 the US dollar has plunged to new historical lows
versus both currencies. Despite evidence a "soft landing" may be
possible (a development that would be positive for the US dollar),
fears that the Federal Reserve Board has not acted quickly or
forcefully enough to prevent a cyclical rise in inflation helped
undermine the dollar.
Additional factors in 1995 that have placed tremendous pressure on
the US dollar include the continued painful economic repercussions
from the Mexican crisis and peso devaluation, investor anxiety over
political uncertainty in several European nations, which boosted the
Deutschemark's "safe haven" appeal, further reductions of foreign
reserves held in dollars, and significant repatriation of yen by
Japanese investors.
The US economy slowed from its torrid fourth quarter 1994 pace as
real gross domestic product rose 5.1%. However, this appears to be
only temporary. The negative impact from Mexico's recession is
apparently being concentrated in the first half of 1995, while
household spending is slowing, reflecting payback from the past
quarter's strength and delayed income tax refunds. Given solid
employment and income growth and the substantial decline in interest
rates and the dollar during the March quarter, growth is likely to
pick up again during the second half of the year. Stronger growth
along with building inflationary pressures should pressure the
Federal Reserve Board to resume its monetary tightening.
Outside of the United States, in Canada, economic activity should
surpass the United States', as it did last year. However, inflation
should be broadly similar as 1994's tax-related drop falls out of
yearly comparisons. In Australia, growth is cooling and could move
slightly below potential while inflation is set to rise above 3%.
The critical issue near term is the May 9, 1995 budget, which is set
against a mildly slowing economy and a deteriorating current account
deficit.
<PAGE>
European activity looks set to remain fairly strong this year
although some payback early in the year is expected after the fourth
quarter surge. The continent has embarked on a capital spending
boom, which should support growth throughout the year. Although
consumers remain hesitant, the positive effects from the corporate
sector's increased hiring should boost household spending.
Meanwhile, rapidly rising prices at the production level, which is
most pronounced in the countries with high-yielding bond markets,
and a surprisingly generous wage settlement in Germany have brought
inflation concerns quickly to the forefront. The unexpected
reduction in Germany's interest rates on March 30 greatly reduced
the anxiety level associated with the high-debtor countries,
possibly allowing some breathing room in their attempt to improve
their fiscal positions. This window of opportunity may prove to be
short-lived.
Japanese growth in 1994's last quarter was surprisingly weak, which
will probably lead to a third consecutive year of below-potential
growth. However, despite earthquake-related disruptions, it appears
that the cyclical upturn is intact. The Bank of Japan (BOJ) is under
significant pressure to lower official rates. Market rates are
already at record lows because of weakness in the equity market and
potential economic damage from the strong yen. Although the BOJ does
not see a decisive argument to lower interest rates, a cut in
interest rates does seem likely in the near term.
Investment Outlook & Portfolio Strategy
During the March quarter, all major markets recorded positive total
returns led by Japan, the Dollar bloc countries (the United States,
Canada, Australia and New Zealand) and Europe. The dollar set new
historical lows versus the Japanese yen and German Deutschemark.
The rally in the Dollar bloc countries was initially led by the
United States following January data suggesting a cooling in the
economic activity pace. The main catalyst was the December retail
sales report which showed broad-based weakness, followed by Federal
Reserve Board Chairman Greenspan's comments at his Humphrey-Hawkins
testimony, which suggested strongly that the Federal Reserve Board
may be "on hold," instead of raising interest rates, during the next
few months. The Canadian market slightly outperformed (in local
currency terms) US markets because of a credible budget presented in
late February and a stable currency. Australia was hindered by a
sharp drop in its currency and some concern that the upcoming budget
may not be sufficiently restrictive. European markets were fairly
quiet up until mid-February when a surging Deutschemark along with a
much worse-than-expected inflation figure in Italy caused havoc in
the high-yield markets of Italy, Spain and Sweden. As Italian ten-
year interest rates rose 100 basis points, the lira weakened sharply
and the peseta devalued 7%.
<PAGE>
In the three months ended March 31, 1995, we reduced the Fund's
European exposure from 55% to 45% of net assets, while lengthening
the average maturity and adding to the Dollar bloc. Within Europe,
the Dutch, Irish and European Currency Unit positions were sold,
while we increased our exposure to Germany and the United Kingdom,
and initiated a position in Belgium. From a currency perspective, we
substantially changed the Fund's exposure to European currency
movements given the dollar's reversal during the quarter. In
addition, we established a market-weight position in Japanese yen,
and removed the hedges on the Australian dollar following its sharp
drop from late December 1994 to late March 1995.
While we remain fairly confident the first quarter 1995 rally in
global bonds is a bear market rally, the current pervasive positive
sentiment may be difficult to shake. Current prices reflect the
pause in activity we have witnessed since December, thus it may take
only a modest pickup in activity to rattle the US market. In
addition, the rapid buildup in inflationary pressures are likely to
appear soon, in our view. The major European markets should follow
the US market movements while the smaller European countries are
expected to continue to underperform given inflation rises this year
coupled with delayed action on fiscal progress. In Japan, the modest
recovery should underpin bonds but substantial increase in new bond
issuance should cap the upside.
The US dollar's outlook is precarious given its inability to rally
following a substantial change in policy from the Bundesbank. While
monetary policy somewhat favors the dollar, the structural long-term
positions amidst a deteriorating current deficit is likely to
substantially limit any potential cyclical rise this year.
In Conclusion
We thank you for your continued investment in Merrill Lynch Global
Bond Fund for Investment and Retirement, and we look forward to
reviewing our outlook and strategy with you again in our next report
to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Parish)
Robert J. Parish
Vice President and Portfolio Manager
April 12, 1995
<PAGE>
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 10 years.
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary" and "Average Annual Total
Return" tables on pages 5 and 6. "Aggregate Total Return" tables for
Class C and Class D Shares are also presented on page 5. Data for
all of the Fund's shares, including Class C and Class D Shares, are
presented in the "Recent Performance Results" table on page 5.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended March 31, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended March 31, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should 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. 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.
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
3/31/95 12/31/94 3/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.27 $8.96 $9.55 -2.93% +3.46%
Class B Shares* 9.27 8.96 9.55 -2.93 +3.46
Class C Shares* 9.27 8.96 9.21 +0.65 +3.46
Class D Shares* 9.27 8.96 9.21 +0.65 +3.46
Class A Shares--Total Return* +3.20(1) +5.19(2)
Class B Shares--Total Return* +2.39(3) +4.90(4)
Class C Shares--Total Return* +3.07(5) +4.89(6)
Class D Shares--Total Return* +3.43(7) +5.14(8)
Class A Shares--Standardized 30-day Yield 6.13%
Class B Shares--Standardized 30-day Yield 5.62%
Class C Shares--Standardized 30-day Yield 5.54%
Class D Shares--Standardized 30-day Yield 5.89%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.572 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.132 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.500 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.117 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.206 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.115 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.228 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.127 per share ordinary
income dividends.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/95 + 3.20% -0.93%
Five Years Ended 3/31/95 +10.59 +9.69
Inception (10/25/88)
through 3/31/95 + 9.54 +8.84
<PAGE>
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/95 +2.39% -1.49%
Five Years Ended 3/31/95 +9.75 +9.75
Inception (8/29/86) through 3/31/95 +9.66 +9.66
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 3/31/95 +3.07% +2.07%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 3/31/95 +3.43% -0.70%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/25/88--12/31/88 $10.22 $10.24 -- $0.250 + 2.66%
1989 10.24 9.77 -- 1.131 + 7.27
1990 9.77 9.93 -- 1.266 +15.64
1991 9.93 10.38 -- 1.045 +16.00
1992 10.38 9.79 $0.096 1.276 + 7.83
1993 9.79 10.03 0.020 0.998 +13.21
1994 10.03 8.96 -- 0.546 - 5.29
1/1/95--3/31/95 8.96 9.27 -- 0.132 + 5.19
------ ------
Total $0.116 Total $6.644
Cumulative total return as of 3/31/95: +79.67%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
8/29/86--12/31/86 $10.00 $10.16 -- $0.194 + 3.93%
1987 10.16 10.68 $0.382 1.303 +22.82
1988 10.68 10.24 -- 0.817 + 3.81
1989 10.24 9.77 -- 1.057 + 6.45
1990 9.77 9.93 -- 1.191 +14.76
1991 9.93 10.39 -- 0.969 +15.23
1992 10.39 9.79 0.096 1.197 + 6.91
1993 9.79 10.03 0.020 0.921 +12.36
1994 10.03 8.96 -- 0.475 - 6.01
1/1/95--3/31/95 8.96 9.27 -- 0.117 + 4.90
------ ------
Total $0.498 Total $8.241
Cumulative total return as of 3/31/95: +120.91%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Percent of
Amount Issue Rate Date Value Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Australia
Long-Term A$ 9,000,000 Australian Government Bond (2) 12.50% 9/15/1997 $ 7,070,964 0.91%
Obligations 31,000,000 Australian Government Bond (2) 12.00 7/15/1999 24,701,284 3.17
Total Investments in Australia
(Cost--$32,099,752) 31,772,248 4.08
Belgium
Long-Term Bf 200,000,000 Belgium Government Bond (2) 10.00 8/02/2000 7,908,929 1.02
Obligations 20,000,000 Kingdom of Belgium (2) 6.25 10/06/2003 13,275,986 1.70
Total Investments in Belgium
(Cost--$20,750,499) 21,184,915 2.72
Denmark
Long-Term Dkr 271,000,000 Denmark Government Bond (2) 9.00 11/15/2000 50,678,407 6.51
Obligations 33,000,000 Denmark Government Bond (2) 8.00 5/15/2003 5,759,841 0.74
Total Investments in Denmark
(Cost--$53,056,585) 56,438,248 7.25
<PAGE>
France
Long-Term ECU 151,000,000 French Government "B-TAN" (2) 7.75 4/12/2000 31,659,394 4.07
Obligations
Total Investments in France
(Cost--$29,959,054) 31,659,394 4.07
Germany
Long-Term DM 40,000,000 Treuhandanstalt (2) 6.75 5/13/2004 27,784,946 3.57
Obligations 88,000,000 Treuhandanstalt (2) 7.50 9/09/2004 64,186,380 8.24
Total Investments in Germany
(Cost--$91,263,172) 91,971,326 11.81
Italy
Long-Term Lit 54,000,000,000 Buoni Poliennali del Tesoro (Italian
Obligations Government Bonds)(2) 8.50 8/01/1999 27,054,032 3.47
Total Investments in Italy
(Cost--$29,296,017) 27,054,032 3.47
Spain
Long-Term Pta 7,400,000,000 Bonos del Estado (Spanish Government
Obligations Bonds) (2) 7.40 7/30/1999 49,770,118 6.39
Total Investments in Spain
(Cost--$49,293,057) 49,770,118 6.39
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Percent of
Amount Issue Rate Date Value Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
United
Kingdom
Long-Term Pound 8,500,000 United Kingdom Gilt (2) 7.25 % 3/30/1998 $ 13,413,162 1.72%
Obligations Sterling 25,100,000 United Kingdom Gilt (2) 9.00 3/03/2000 41,551,230 5.33
5,900,000 United Kingdom Gilt (2) 8.00 12/07/2015 9,244,642 1.19
Total Investments in the United Kingdom
(Cost--$62,924,631) 64,209,034 8.24
United
States
Long-Term US$ 7,000,000 Federal National Mortgage Association (3) 8.625 11/10/2004 7,269,062 0.93
Obligations 14,500,000 Federal National Mortgage Association (3) 8.55 12/10/2004 14,826,250 1.90
4,000,000 Federal National Mortgage Association,
Floating Rate Notes (Indexed to Lit
/Sfr) (a)(3) 12.28++ 2/18/1999 2,990,000 0.38
4,000,000 Federal National Mortgage Association,
Floating Rate Notes (Indexed to Pta/Sfr)
(a)(3) 11.18++ 3/24/1999 2,970,000 0.38
123,000,000 United States Treasury Notes (3) 7.875 11/15/2004 128,342,874 16.48
Total Investments in Long-Term Obliga-
tions (Cost--$156,617,656) 156,398,186 20.07
Short-Term US$ 10,000,000 ANZ (Delaware), Inc., Commercial Paper*
Obligations (1) 5.95 4/28/1995 9,958,681 1.28
15,000,000 Corporate Asset Funding Co.,
Commercial Paper* (1) 5.95 4/05/1995 14,995,042 1.93
10,000,000 du Pont (E.I.) de Nemours & Company,
Commercial Paper* (1) 5.95 4/19/1995 9,973,556 1.28
30,000,000 Federal Home Loan Bank* (3) 5.91 4/07/1995 29,980,300 3.85
25,000,000 Federal Home Loan Bank* (3) 5.91 4/24/1995 24,913,813 3.20
40,975,000 General Electric Capital Corp.,
Commercial Paper* (1) 6.25 4/03/1995 40,975,000 5.26
5,000,000 International Nederlanden (US) Funding
Corp., Commercial Paper* (1) 6.00 4/18/1995 4,987,500 0.64
40,000,000 Paribas Finance Inc., Commercial Paper*
(1) 6.04 4/28/1995 39,832,222 5.11
20,000,000 Penney (J.C.) Co., Commercial Paper* (1) 5.95 4/03/1995 20,000,000 2.57
14,500,000 Student Loan Marketing Association (3) 5.85 8/10/1995 14,500,000 1.86
400,000 United States Treasury Bills* (3) 5.70 6/01/1995 396,180 0.05
100,000 United States Treasury Bills* (3) 5.71 6/01/1995 99,045 0.01
350,000 United States Treasury Bills* (3) 5.898 6/01/1995 346,658 0.04
<PAGE>
Total Investments in Short-Term Obliga-
tions (Cost--$210,958,148) 210,957,997 27.08
Total Investments in the United States
(Cost--$367,575,804) 367,356,183 47.15
<CAPTION>
Par Strike Expiration
Value Price Date
<S> <C> <S> <C> <C> <C> <C>
Currency Put Options Purchased
DM 16,466,552 German Mark $ 1.457 4/04/1995 0 0.00
16,219,504 German Mark 1.479 4/04/1995 0 0.00
Total Currency Put Options Purchased
(Cost--$224,183) 0 0.00
Total Investments (Cost--$736,442,754) 741,415,498 95.18
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Par Strike Expiration Percent of
Value Issue Price Date Value Net Assets
<S> <C> <S> <C> <C> <C> <C>
Currency Put Options Written
DM 16,842,105 German Mark $ 1.425 4/04/1995 $ (602,947) (0.08)%
16,783,217 German Mark 1.430 4/04/1995 (657,902) (0.08)
Total Currency Call Options Written
(Premiums Received--$224,183) (1,260,849) (0.16)
Total Investments, Net of Options Written (Cost--$736,218,571) 740,154,649 95.02
Unrealized Appreciation on Forward Foreign Exchange Contracts++++ 2,303,347 0.30
Other Assets Less Liabilities 36,468,348 4.68
------------ -------
Net Assets $778,926,344 100.00%
============ =======
<PAGE>
Net Asset Value: Class A--Based on net assets of $85,720,295 and 9,248,205 shares outstanding $ 9.27
============
Class B--Based on net assets of $682,685,360 and 73,637,097 shares outstanding $ 9.27
============
Class C--Based on net assets of $7,347,591 and 792,618 shares outstanding $ 9.27
============
Class D--Based on net assets of $3,173,098 and 342,249 shares outstanding $ 9.27
============
<FN>
Corresponding industry groups for foreign securities (percent of net
assets):
(1)Financial Services--18.07%
(2)Sovereign Government Obligations--48.03%
(3)US Government & Agency Obligations--29.08%
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rate shown is the discount
rate paid at the time of purchase by the Fund.
(a)Indexed instrument for which the principal amount due at maturity
is affected by the relative value of the foreign currencies
indicated.
++Interest rates on Floating Rate Notes are adjusted periodically
based on appropriate indexes. The interest rate shown is the rate in
effect at March 31, 1995.
++++Forward foreign exchange contracts as of March 31, 1995 are as
follows:
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Depreciation)
A$ 15,846,852 April 1995 $ 116,742
DM 135,839,974 April 1995 (72,641)
DM 17,994,444 May 1995 (84,916)
Dkr 81,375,425 April 1995 471,857
YEN 11,243,702,400 April 1995 5,228,968
Total (US$ Commitment--$260,470,457) 5,660,010
-----------
Foreign Currency Sold
Bf 110,000,000 April 1995 (109,380)
Dkr 124,930,278 April 1995 (710,128)
Pta 5,751,060,066 April 1995 (360,809)
Lit 42,681,350,600 April 1995 43,056
YEN 6,459,760,000 April 1995 (2,219,402)
Total (US$ Commitment--$175,914,503) (3,356,663)
-----------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $ 2,303,347
===========
</TABLE>
<PAGE>
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Robert J. Parish, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
