MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Quarterly Report
September 30, 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 September 30, 1995
A bar graph depicting the types of issues held in the portfolio as a
percentage of net assets:
Financial Services 4.11%
US Government & Agency Obligations 29.60%
Commercial Paper 8.25%
Sovereign Government Obligations 55.54%
Geographical Diversification*
As of September 30, 1995
A bar graph depicting the geographical diversification of the
portfolio as a percentage of net assets:
New Zealand 2.26%
Japan 9.71%
Spain 5.15%
Denmark 6.65%
United Kingdom 9.28%
Unites States 37.85%
Italy 3.01%
Canada 2.22%
Germany 15.70%
Sweden 0.86%
France 4.81%
<PAGE>
Maturity of Investments*
As of September 30, 1995
A bar graph depicting the maturity of the Fund's investments as a
percentage of net assets:
0-6 months 1%
6 months--5 yrs 23%
5 yrs--10 yrs 75%
10 yrs+ 1%
[FN]
*Percent of net assets may not equal 100%.
DEAR SHAREHOLDER
Economic momentum continues to slow in the major economies except
for the United States, where growth has stabilized. Leading economic
indicators for the Group of Seven countries continue to trend lower,
the growth rate for industrial production is falling, and the
unemployment rate is inching higher. The current US business cycle
is characterized by the strongest results in corporate investment
and the weakest trends in consumer spending for any upturn in the
postwar era. While recent data indicated that the first-half
slowdown was ending, there was no clear evidence that any potential
reacceleration would be strong enough to destabilize financial
markets. The Japanese economy slipped back into recession and debt
deflation is a major threat. Consumption is being undermined by
rising unemployment and declining income, while the rise in excess
capacity will mitigate any incentive to expand production. The
government has under-taken a massive reflation effort via injections
of liquidity and yen depreciation.
European economic conditions were far different than those existing
in Japan, but growth continued to slow. Germany's capital and
exports sectors both slowed sharply, while consumer demand appeared
unlikely to be an offsetting factor. France lagged behind Germany;
Italian growth turned sluggish following a period of monetary
tightening; and excess inventory led to lower-than-expected growth
in the United Kingdom.
<PAGE>
In Canada, October 30, 1995 was set as the date for Quebec's
referendum on separation. Possible sharp weakness in the financial
markets was averted with the narrow rejection of the referendum. In
Australia, slower growth allowed monetary policy to remain constant
and inflation to possibly stop its recent drift upwards.
During the three months ended September 30, 1995, ten-year yields
rose in the Dollar bloc countries of the United States, Canada, and
Australia, remained unchanged in Japan, and fell in Europe. The US
bond market backed up sharply in July following the release of
stronger-than-expected June activity data but recouped all losses
after softer-than-expected data was published. Increased sensitivity
to growth data will likely characterize the market for a few more
months.
In Europe, the Bundesbank set a positive tone for all markets by
cutting interest rates upon returning from its summer recess. Weak
activity and money supply data along with continued easing of
inflation allowed the Bundesbank to ease monetary policy without
jeopardizing credibility. With this back-ground, the higher-yielding
European markets substantially outperformed Germany. The US dollar
surged against the yen following an August 2, 1995 deregulation
package designed to strongly encourage increased foreign investments
and massive US dollar buying by the Bank of Japan. The falling of
the yen coupled with the Bundesbank's monetary easing and
intervention pushed the Deutschemark down. The US dollar retraced
one-half of its gain versus the Deutschemark on September 20, 1995
and Sep-tember 21, 1995 following Bundesbank comments suggesting
that the European Monetary Union (EMU) debate may need to be
reopened.
Investment Outlook & Portfolio Strategy
Of the three major blocs in which the Fund invests (Dollar, Europe
and Japan), we modestly adjusted our investment allocation from 46%,
46% and 8% to 43%, 46% and 10%, respectively, while raising the
average maturity from 6.4 years to 7 years during the three months
ended September 30, 1995. Within the Dollar bloc countries we
initiated a position in Canada. We funded the purchase by reducing
the Fund's Denmark position. In addition, we used cash to add to our
Japan exposure. In Europe, we added to our holdings in Italy and
initiated a new exposure in Sweden. The Fund's neutral currency
position with respect to the US dollar penalized its performance as
the US dollar surged versus the yen. US bond prices are attractive
but potentially vulnerable as investors appear to be very
comfortable with the view of modest growth, subdued inflation, and a
Federal Reserve Board that is poised to ease monetary policy if
needed. Of the three factors, stronger growth appears to be the
<PAGE>
larger risk for bond prices. The outlook for European interest rates
continued to remain positive given the Bundesbank's move to ease
monetary policy and signs of stabilization in inflation in the weak
currency countries of Italy, Spain and Sweden. However, given the
relative outperformance of these higher-yielding bond markets, along
with recent comments about the appropriate pace of the EMU, the
outlook dimmed for these weak countries. Japanese bond prices are
expensive, but meaningful downside potential seems low given the
positive liquidity and cyclical backdrop. Canada remained volatile
ahead of the October 30, 1995 referendum, while the main risk in
Australia appeared to be the rising pace of inflation, especially
regarding wages.
From a currency perspective, the US dollar's inability to move above
major barriers given the clear shift in Japanese and German policy
is somewhat disconcerting. It now appears appreciation beyond the
highs reached in mid-September will likely require renewed monetary
tightening by the Federal Reserve Board, especially given the
renewed doubts about EMU.
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
November 2, 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 "Average Annual Total Return" and "Performance
Summary" 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 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 September 30, 1995
and for Class C and Class D Shares for the since inception and 3-
month periods ended September 30, 1995. All data in this table
assume imposition of the actual total expenses incurred by each
class of shares during the relevant period.
<PAGE>
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.
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
9/30/95 6/30/95 9/30/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.19 $9.42 $9.12 +0.77% -2.44%
Class B Shares* 9.20 9.42 9.12 +0.88 -2.34
Class C Shares* 9.19 9.42 9.21 -0.22 -2.44
Class D Shares* 9.20 9.42 9.21 -0.11 -2.34
Class A Shares--Total Return* +7.18(1) -0.94(2)
Class B Shares--Total Return* +6.48(3) -1.03(4)
Class C Shares--Total Return* +4.91(5) -1.16(6)
Class D Shares--Total Return* +5.59(7) -1.01(8)
Class A Shares--Standardized 30-day Yield 5.51%
Class B Shares--Standardized 30-day Yield 5.02%
Class C Shares--Standardized 30-day Yield 4.93%
Class D Shares--Standardized 30-day Yield 5.31%
<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 $0.568 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.140 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.497 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.451 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.120 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.500 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.134 per share ordinary
income dividends.
</TABLE>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/95 +7.18% +2.90%
Five Years Ended 9/30/95 +8.96 +8.07
Inception (10/25/88)
through 9/30/95 +9.16 +8.52
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 +6.48% +2.48%
Five Years Ended 9/30/95 +8.13 +8.13
Inception (8/29/86) through 9/30/95 +9.34 +9.34
[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 9/30/95 +4.91% +3.91%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 9/30/95 +5.59% +1.37%
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/25/88-12/31/88 $10.22 $10.24 -- $0.251 + 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
1/1/95-9/30/95 8.96 9.19 -- 0.416 + 7.52
------ ------
Total $0.116 Total $6.929
Cumulative total return as of 9/30/95: +83.64%**
<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>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <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 + 3.82
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
1/1/95-9/30/95 8.96 9.20 -- 0.365 + 6.93
------ ------
Total $0.498 Total $8.489
Cumulative total return as of 9/30/95: +125.19%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
Canada
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign C$ 20,000,000 Canadian Government Bond 8.50% 4/01/2002 $ 15,574,380 2.22%
Government
Obligations
Total Investments in Canada
(Cost--$15,057,522) 15,574,380 2.22
<PAGE>
Denmark
Sovereign Dkr 131,000,000 Denmark Government Bond 9.00 11/15/2000 25,317,066 3.61
Government 76,000,000 Denmark Government Bond 8.00 11/15/2001 14,022,130 2.00
Obligations 40,000,000 Denmark Government Bond 8.00 5/15/2003 7,284,195 1.04
Total Investments in Denmark
(Cost--$44,580,431) 46,623,391 6.65
France
Sovereign Frf 80,000,000 French Government BTAN 8.00 5/12/1998 16,856,644 2.41
Government 80,000,000 French Government BTAN 7.75 4/12/2000 16,840,395 2.40
Obligations
Total Investments in France
(Cost--$33,347,410) 33,697,039 4.81
Germany
Financial DM 21,000,000 European Investment Banking Trust 7.75 1/26/2005 15,559,639 2.22
Services
Sovereign 40,000,000 Deutschland Republic 7.25 10/21/2002 29,399,412 4.19
Government 50,000,000 Landesbank Rheinland 7.25 4/20/2005 35,548,789 5.07
Obligations 40,000,000 Treuhandanstalt 7.50 9/09/2004 29,539,409 4.22
Total Investments in Germany
(Cost--$111,151,530) 110,047,249 15.70
Italy
Sovereign Lit 35,000,000,000 Government of Italy 10.50 4/01/2000 21,112,763 3.01
Government
Obligations
Total Investments in Italy
(Cost--$20,990,224) 21,112,763 3.01
<PAGE>
Japan
Financial YEN 1,160,000,000 World Bank 4.50 3/20/2003 13,226,344 1.89
Services
Sovereign 1,600,000,000 Japanese Government Bond 4.80 12/20/2002 18,412,606 2.63
Government 3,300,000,000 Japanese Government Bond 4.00 6/20/2005 36,364,667 5.19
Obligations
Total Investments in Japan
(Cost--$77,455,142) 68,003,617 9.71
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
New Zealand
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign NZ$ 12,000,000 New Zealand Government Bond 10.00 % 7/15/1997 $ 8,099,922 1.16%
Government 12,400,000 New Zealand Government Bond 6.50 2/15/2000 7,701,924 1.10
Obligations
Total Investments in New Zealand
(Cost--$16,239,713) 15,801,846 2.26
Spain
Sovereign Pta 2,500,000,000 Government of Spain 11.45 8/30/1998 20,749,029 2.96
Government 2,000,000,000 Government of Spain 10.00 2/28/2005 15,312,399 2.19
Obligations
Total Investments in Spain
(Cost--$36,192,459) 36,061,428 5.15
<PAGE>
Sweden
Sovereign Sek 40,000,000 Government of Sweden 10.25 5/05/2000 5,995,701 0.86
Government
Obligations
Total Investments in Sweden
(Cost--$5,536,468) 5,995,701 0.86
United Kingdom
Sovereign Pound 26,300,000 United Kingdom Gilt 7.00 11/06/2001 39,839,515 5.68
Government Sterling 14,600,000 United Kingdom Gilt 9.75 8/27/2002 25,216,976 3.60
Obligations
Total Investments in the
United Kingdom (Cost--$64,946,324) 65,056,491 9.28
United States
US Govern- US$ 45,500,000 Federal National Mortgage Association 8.55 12/10/2004 47,419,645 6.77
ment & Agency 8,000,000 Federal National Mortgage Association 6.85 9/12/2005 7,946,768 1.13
Obligations 88,000,000 United States Treasury Notes 7.875 11/15/2004 97,858,640 13.96
46,500,000 United States Treasury Notes 6.50 5/15/2005 47,568,105 6.79
Total Investments in the
United States (Cost--$194,000,703) 200,793,158 28.65
Investments in Long-Term Obligations
(Cost--$619,497,926) 618,767,063 88.30
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
United States
<S> <S> <C> <S> <C> <C> <C> <C>
Commercial US$ 20,000,000 du Pont (E.I.) de Nemours & Co. 5.69% 10/24/1995 $ 19,930,456 2.84%
Paper* 29,143,000 General Electric Capital Corp. 6.45 10/02/1995 29,143,000 4.16
8,731,000 National Fleet Funding Corp. 5.75 10/11/1995 8,718,449 1.25
Total Investments in Commercial
Paper (Cost--$57,791,905) 57,791,905 8.25
US Government 6,500,000 Student Loan Marketing Association 5.44 11/09/1995 6,497,972 0.93
& Agency 175,000 United States Treasury Bills 5.26 12/14/1995 173,101 0.02
Obligations*
Total Investments in US Government &
Agency Obligations (Cost--$6,673,133) 6,671,073 0.95
Total Investments in Short-Term
Obligations (Cost--$64,465,038) 64,462,978 9.20
Par Strike Expiration
Value Issue Price Date
Currency Put Options Purchased
C$ 5,923,293 Canadian Dollar $ 1.350 10/27/1995 29,889 0.00
8,858,049 Canadian Dollar 1.354 10/27/1995 35,406 0.01
YEN 48,117,647 Japanese Yen 103.000 11/16/1995 334,754 0.05
24,000,000 Japanese Yen 103.000 12/13/1995 240,048 0.03
Total Currency Put Options Purchased
(Premiums Paid--$1,596,832) 640,097 0.09
Total Investments (Cost--$685,559,796) 683,870,138 97.59
Currency Call Options Written
C$ 5,992,509 Canadian Dollar 1.335 10/27/1995 (30,825) (0.00)
8,988,764 Canadian Dollar 1.335 10/27/1995 (44,045) (0.01)
YEN 32,000,000 Japanese Yen 92.000 11/22/1995 (156,800) (0.02)
24,000,000 Japanese Yen 98.000 12/13/1995 (653,160) (0.09)
<PAGE>
Total Currency Call Options Written
(Premiums Received--$976,030) (884,830) (0.12)
Call Options Written
US$ 20,000,000 United States Treasury Stock 112.000 1/02/1996 (203,120) (0.03)
Total Call Options Written
(Premiums Received--$379,687) (203,120) (0.03)
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Par Strike Expiration Percent of
Value Issue Price Date Value Net Assets
Currency Put Options Written
<S> <C> <S> <C> <C> <C> <C>
YEN 32,000,000 Japanese Yen $ 102.000 11/22/1995 $ (409,600) (0.06)%
24,000,000 Japanese Yen 108.550 12/13/1995 (56,136) (0.01)
Total Currency Put Options Written
(Premiums Received--$397,600) (465,736) (0.07)
Total Options Written (Premiums Received--$1,753,317) (1,553,686) (0.22)
Total Investments, Net of Options Written (Cost--$683,806,479) 682,316,452 97.37
Unrealized Depreciation on Forward Foreign Exchange Contracts** (1,618,458) (0.23)
Other Assets Less Liabilities 20,059,884 2.86
------------ -------
Net Assets $700,757,878 100.00%
============ =======
Net Asset Class A--Based on net assets of $93,894,503 and 10,212,635
Value: shares outstanding $ 9.19
============
Class B--Based on net assets of $592,119,185 and 64,387,209
shares outstanding $ 9.20
============
Class C--Based on net assets of $10,205,638 and 1,109,997
shares outstanding $ 9.19
============
Class D--Based on net assets of $4,538,552 and 493,502 shares
outstanding $ 9.20
============
<PAGE>
<FN>
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
**Forward foreign exchange contracts as of September 30, 1995 were
as follows:
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Depreciation)
DM 92,060,615 October 1995 $ 526,801
Total (US$ Commitment--$63,969,195) 526,801
------------
Foreign Currency Sold
Chf 32,149,040 November 1995 107,980
DM 205,077,986 October 1995 (420,096)
Dkr 222,692,000 October 1995 (136,979)
Pta 903,982,650 October 1995 (205,915)
Frf 53,791,500 October 1995 (424,350)
Pound 11,874,437 October 1995 (119,231)
Sterling
YEN 2,449,320,000 November 1995 (946,668)
Total (US$ Commitment--$271,494,584) (2,145,259)
------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (1,618,458)
============
</TABLE>
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
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
225 Franklin Street
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
