MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Annual Report
December 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.
Statements and other information herein are as dated and are subject
to change.
<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
Bar graph depicting Type of Issues* as a percentage of net assets as
of December 31, 1995
US Government & Agency Obligations 0.06%
Financial Services 4.03%
Commercial Paper 4.24%
Foreign Government & Agency Obligations 5.80%
Sovereign Government Obligations 83.84%
<PAGE>
Pie graph depicting Geographic Diversification* as a percentage
of net assets as of December 31, 1995
United States 12.18%
Australia 4.36%
Japan 4.88%
Spain 14.26%
Denmark 4.75%
United Kingdom 5.12%
Italy 11.93%
Canada 9.11%
Germany 8.77%
Sweden 6.27%
New Zealand 1.22%
France 15.12%
Bar Graph depicting Maturity of Investments* as a percentage of net
assets as of December 31, 1995
5 yrs-10 yrs 36%
10yrs+ 17%
0-6 months 7%
6 months--5 yrs 38%
[FN]
*Percent of net assets may not equal 100%.
DEAR SHAREHOLDER
World growth continues to slow and inflation remains subdued,
although the US economy remains the most resilient, owing largely to
the substantial interest rate declines seen this year. The 4.2%
annualized increase in US third quarter gross domestic product,
while overstating the economy's underlying strength, suggests the
fourth quarter began at an above-trend pace. However, a decline in
October industrial production and retail sales without a rebound in
November brought this notion into question. Recent retail sales have
been disappointing, while the extended period of lower mortgage
rates seems to have relieved much of the demand backlog for housing.
<PAGE>
European growth continues to disappoint as demand has remained weak
with interest rate-sensitive spending not yet responding to this
year's decline in interest rates. German economic weakness clearly
can be seen in the drop in third quarter capacity utilization, the
sharp drop in fourth quarter industrial production and waning
business and consumer confidence. The Bundesbank has lowered
interest rates over 100 basis points (1.00%) in 1995, with its
latest reduction in December, but the continued softness suggests
more needs to be done. Meanwhile, France announced a very tough
fiscal reform package coupled with an immediate sharp hike in taxes,
ensuring growth will stay soft. The risks of a sharp inventory
correction in the United Kingdom have risen, posing a dilemma for
policymakers following the United Kingdom's relatively tight
November budget. Italy shows clear signs of slowing but interest
rate declines are unlikely while inflation stays high and political
stability remains uncertain as Prime Minister Dini's resignation at
year-end 1995 could lead to elections over the next few months. The
"no" vote on Quebec separatism has lifted a major cloud over the
Canadian market, while in Australia inflation drifts upward, albeit
against a slowdown in economic activity.
Investment Outlook & Portfolio Strategy
During the fourth quarter of 1995, ten-year bond yields continued to
fall, further extending the 1995 bull market. For the year 1995, the
US, Canadian and Australian dollar and European blocs were the best-
performing bond sectors, easily outdistancing Japan. During the
December quarter ten-year US yields dropped toward 5.5% from 6.18%
at September 30, 1995 as activity data remained soft and
inflationary pressures remained subdued. Expectations for a
constructive budget deal have faded but have not been dashed. With
the background of a poor holiday selling season and a weather-
induced weak start to the new year, a positive tone to the US market
is likely to persist over the very near term. European activity
remains below trend, which along with continued low inflation has
allowed many countries to lower interest rates.
Early in the December quarter, we chose to significantly raise the
Fund's European exposure, emphasizing the higher-yielding securities
while simultaneously extending the Fund's average maturity,
reflecting not only better value in Europe but our belief that a
positive bond environment and steady dollar would allow for European
outperformance. Specifically, the Fund closed the year at 66% of net
assets in Europe, 27% in the dollar bloc (9% in the United States)
and 5% in Japan, with an average portfolio maturity of 9.4 years as
compared to 6.6 years on September 30, 1995.
<PAGE>
The medium-term outlook for global bond prices remains positive
given sluggish world activity, falling inflation and/or inflationary
expectations and expanding liquidity. However, since these positive
factors are recognized globally there is little value to insulate
prices from adverse news regarding any of the aforementioned
factors. Value continues to be the best in Europe, and with budget
concerns in the United States we remain comfortable with our current
European emphasis. Our preference within the dollar bloc remains
with Canada, then New Zealand and Australia, while we continue to
underweight Japan given growing signs the economy has passed the
worst of its recession.
From a currency perspective, the dollar is likely to remain within a
broad range given the easier policy stances of the Bank of Japan and
the Bundesbank, while set against a background of what appears to be
much slower fourth quarter growth relative to the third quarter in
the United States. The performance of the European economies over
the next year will be critical in determining the continued
adherence to the current monetary union timetable. Failure to
maintain the present timetable could cause undue volatility within
European markets.
Fiscal Year in Review
Merrill Lynch Global Bond Fund's Class A, Class B, Class C and Class
D Shares registered solid +13.4%, 12.5%, 12.4% and 13.1% total
returns, respectively, for the fiscal year ended December 31, 1995
as the bond debacle of 1994 reversed course. The rally in the global
markets largely occurred because inflation failed to rise to the
levels priced into bond yields as 1994 came to a close. (Results
shown do not reflect sales charges and would be lower if sales
charges were included. For complete performance information, see
pages 4--7 of this report to shareholders.)
The Fund underperformed its benchmark for the fiscal year ended
December 31, 1995 largely because of its defensive average portfolio
maturity and its overweighted dollar exposure entering the year.
This posture reflected our belief that solid growth in the United
States would continue in the first half of the year as would the
dollar rally which had begun in October 1994. The first major event
impacting the Fund was the Mexican peso devaluation in late December
1994. This cast an extremely negative light on all high-deficit
countries, thereby causing massive "safe haven" capital flows from
the high-yielding European countries into the Deutschemark and Swiss
Franc. The dollar also depreciated sharply versus the yen following
suggestions by senior US officials that a stronger yen may be the
most desired way to correct the US-Japan trade imbalance. As 1995
progressed, it became clearer to investors the world economy was
slowing, inflation was unlikely to rise significantly and central
banks were biased to lower interest rates if needed. Accordingly, we
adjusted our investment posture which allowed us to outperform our
benchmark over the second half of 1995.
<PAGE>
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
February 2, 1996
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after 10 years.
<PAGE>
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. 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.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.54 $9.19 $8.96 + 6.47% +3.81%
Class B Shares* 9.54 9.20 8.96 + 6.47 +3.70
Class C Shares* 9.54 9.19 8.96 + 6.47 +3.81
Class D Shares* 9.54 9.20 8.96 + 6.47 +3.70
Class A Shares--Total Return* +13.39(1) +5.46(2)
Class B Shares--Total Return* +12.52(3) +5.23(4)
Class C Shares--Total Return* +12.44(5) +5.32(6)
Class D Shares--Total Return* +13.11(7) +5.38(8)
Class A Shares--Standardized 30-day Yield 6.06%
Class B Shares--Standardized 30-day Yield 5.53%
Class C Shares--Standardized 30-day Yield 5.46%
Class D Shares--Standardized 30-day Yield 5.82%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.585 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.169 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.514 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.149 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.507 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.147 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.562 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.163 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class A and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the JP Morgan
Global Government Bond Index. Beginning and ending values are:
10/25/88** 12/95
ML Global Bond Fund++--
Class A Shares* $ 9,600 $18,592
JP Morgan Global Government
Bond Index++++ $10,000 $19,600
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the JP Morgan
Global Government Bond Index. Beginning and ending values are:
8/29/86** 12/95
ML Global Bond Fund++--
Class B Shares* $10,000 $23,697
JP Morgan Global
Government Bond Index++++ $10,000 $22,370
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Global Bond Fund invests in a global portfolio of debt
instruments denominated in various currencies and multinational
currency units.
++++This unmanaged Index is comprised of government bonds in the 13
largest bond markets, including the United States.
Past performance is not predictive of future performance.
Average Annual Total Return--Class A and Class B Shares
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +13.39% +8.85%
Five Years Ended 12/31/95 + 8.75 +7.86
Inception (10/25/88)
through 12/31/95 + 9.63 +9.01
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 +12.52% +8.52%
Five Years Ended 12/31/95 + 7.92 +7.92
Inception (8/29/86)
through 12/31/95 + 9.67 +9.67
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class C and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C and Class D Shares compared to growth of an investment in
the JP Morgan Global Government Bond Index. Beginning and ending
values are:
10/21/94** 12/95
Ml Global Bond Fund++--
Class C Shares* $10,000 $11,049
ML Global Bond Fund++--
Class D Shares* $ 9,600 $10,682
JP Morgan Global Government
Bond Index++++ $10,000 $11,809
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++ML Global Bond Fund invests in a global portfolio of debt
instruments denominated in various currencies and multinational
currency units.
++++This unmanaged Index is comprised of government bonds in the 13
largest bond markets, includng the United States.
Past performance is not predictive of future performance.
Average Annual Total Return--Class C and Class D Shares
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 +12.44% +11.44%
Inception (10/21/94)
through 12/31/95 + 8.71 + 8.71
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +13.11% +8.58%
Inception (10/21/94)
through 12/31/95 + 9.36 +5.68
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Performance Summary--Class A Shares
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 -- $0.251 + 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
1995 8.96 9.54 -- 0.585 +13.39
------ ------
Total $0.116 Total $7.098
Cumulative total return as of 12/31/95: +93.66%**
<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>
PERFORMANCE DATA (concluded)
<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 + 3.82
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
1995 8.96 9.54 -- 0.514 +12.52
------ ------
Total $0.498 Total $8.638
Cumulative total return as of 12/31/95: +136.97%**
<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>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.21 $8.96 -- $0.091 - 1.73%
1995 8.96 9.54 -- 0.507 +12.44
------
Total $0.598
Cumulative total return as of 12/31/95: +10.49%**
<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>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.21 $8.96 -- $0.101 - 1.62%
1995 8.96 9.54 -- 0.562 +13.11
------
Total $0.663
Cumulative total return as of 12/31/95: +11.27%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
Australia
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign A$ 39,250,000 Australian Government Bond 7.50% 7/15/2005 $ 27,907,940 4.36%
Government
Obligations
Total Investments in Australia (Cost--$27,889,135) 27,907,940 4.36
Canada
<PAGE>
Sovereign C$ 71,250,000 Canadian Government Bond 8.75 12/01/2005 58,360,973 9.11
Government
Obligations
Total Investments in Canada (Cost--$57,171,531) 58,360,973 9.11
Denmark
Sovereign Dkr 48,000,000 Denmark Government Bond 6.00 12/10/1999 8,729,713 1.36
Government 135,000,000 Denmark Government Bond 7.00 11/10/2024 21,695,472 3.39
Obligations
Total Investments in Denmark (Cost--$29,838,454) 30,425,185 4.75
France
Sovereign Frf 64,000,000 French Government BTAN 7.25 8/12/1997 13,512,245 2.11
Government 207,000,000 French Government BTAN 5.75 3/12/1998 43,005,458 6.71
Obligations 105,000,000 French Government BTAN 7.75 4/12/2000 23,027,407 3.60
690,000,000 French Oat STRIPS** 7.99 (b) 4/25/2023 17,322,642 2.70
Total Investments in France (Cost--$95,248,606) 96,867,752 15.12
Germany
Sovereign DM 16,500,000 Deutschland Republic 7.25 10/21/2002 12,568,355 1.96
Government 67,000,000 Deutschland Republic 6.25 1/04/2024 43,597,974 6.81
Obligations
Total Investments in Germany (Cost--$55,190,121) 56,166,329 8.77
Italy
Sovereign Lit 64,000,000,000 Buoni Poliennali Del Tesoro (Italian
Government Government Bonds) 10.50 11/01/2000 40,701,578 6.35
Obligations 21,500,000,000 Buoni Poliennali Del Tesoro (Italian
Government Bonds) 10.50 4/01/2005 13,476,498 2.11
35,000,000,000 Government of Italy 10.50 4/01/2000 22,249,842 3.47
Total Investments in Italy (Cost--$73,351,885) 76,427,918 11.93
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Japan
Financial YEN 1,160,000,000 World Bank 4.50 % 3/20/2003 $ 12,507,865 1.95%
Services
Sovereign 1,560,000,000 Japanese Government Bond 4.10 12/22/2003 16,290,093 2.55
Government 225,000,000 Japanese Government Bond 4.60 9/20/2004 2,435,204 0.38
Obligations
Total Investments in Japan (Cost--$34,432,424) 31,233,162 4.88
New Zealand
Sovereign NZ$ 12,400,000 New Zealand Government Bond 6.50 2/15/2000 7,844,025 1.22
Government
Obligations
Total Investments in New Zealand (Cost--$7,897,116) 7,844,025 1.22
Spain
Sovereign Pta 6,900,000,000 Government of Spain 9.90 10/31/1998 57,897,402 9.04
Government 4,000,000,000 Government of Spain 10.00 2/28/2005 33,454,845 5.22
Obligations
Total Investments in Spain (Cost--$90,126,163) 91,352,247 14.26
Sweden
Sovereign Skr 157,000,000 Government of Sweden 11.00 1/21/1999 25,460,292 3.97
Government 88,500,000 Government of Sweden 10.25 5/05/2003 14,716,392 2.30
Obligations
Total Investments in Sweden (Cost--$39,080,045) 40,176,684 6.27
United Kingdom
<PAGE>
Sovereign Pound 14,600,000 United Kingdom Gilt 9.75 8/27/2002 25,749,834 4.02
Government Sterling 4,200,000 United Kingdom Gilt 8.50 7/16/2007 7,042,820 1.10
Obligations
Total Investments in the United Kingdom (Cost--$32,282,943) 32,792,654 5.12
United States
Financial US$ 13,500,000 Associates Corp. of North America
Services Financial Services 6.00 12/01/2002 13,340,160 2.08
Foreign 20,000,000 Republic of Italy 6.875 9/27/2023 19,531,000 3.05
Government
& Agency
Obligations
Total Investments in the United States (Cost--$32,669,250) 32,871,160 5.13
Total Investments in Long-Term Obligations
(Cost--$575,177,673) 582,426,029 90.92
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
United States (concluded)
<S> <S> <C> <S> <C> <C> <C> <C>
Commercial US$ 27,198,000 National Australia Funding
Paper* (Delaware) Inc. 5.73 % 1/04/1996 $ 27,189,342 4.24%
Total Investments in Commercial Paper (Cost--$27,189,342) 27,189,342 4.24
Foreign 28,000,000 New Zealand Treasury Bill 8.34 6/19/1996 17,599,617 2.75
Government
Obligations*
Total Investments in Foreign Government
Obligations (Cost-- $17,576,765) 17,599,617 2.75
US Government 400,000 United States Treasury Bills (a) 5.045 3/28/1996 395,205 0.06
Obligations*
Total Investments in US Government Obligations
(Cost--$395,131) 395,205 0.06
<PAGE>
Total Investments in Short-Term Obligations
(Cost--$45,161,238) 45,184,164 7.05
Total Investments (Cost--$620,338,911) 627,610,193 97.97
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (2,464,002) (0.38)
Variation Margin on Future Contracts++ (30,447) (0.01)
Other Assets Less Liabilities 15,514,744 2.42
------------ -------
Net Assets $640,630,488 100.00%
============ =======
(a)Security held as collateral in connection with open financial
futures contracts.
(b)Represents a zero coupon bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
*Commercial Paper and certain Foreign and US Government Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
**STRIPS--Separate Trading of Registered Interest and Principal of
Securities.
***Forward foreign exchange contracts as of December 31, 1995
were as follows:
Unrealized
Appreciation
Expiration (Depreciation)
Foreign Currency Purchased Date (Note 1b)
Dkr 116,981,667 January 1996 $ 110,872
Total (US$ Commitment--$20,994,556) 110,872
-----------
Foreign Currency Sold
Dkr 222,692,000 January 1996 (410,892)
DM 189,283,898 January 1996 (724,226)
Frf 345,445,730 January 1996 (1,234,085)
Pound 19,600,000 January 1996 (325,674)
Sterling
Lit 32,320,499,200 January 1996 (215,735)
YEN 4,977,320,000 January 1996 335,738
<PAGE>
Total (US$ Commitment--$339,531,046) (2,574,874)
-----------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $(2,464,002)
===========
++Financial futures contracts sold as of December 31, 1995 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Note 1a)
110 Italian BTP LIFFE March 1996 $14,990,536
(Total Contract Price--$14,724,328) $14,990,536
===========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$620,338,911) (Note 1a) $ 627,610,193
Cash 56
Foreign cash (Note 1c) 2,621,469
Receivables:
Securities sold $ 86,245,637
Interest 17,983,799
Beneficial interest sold 389,945
Forward foreign exchange contracts (Note 1b) 78,985 104,698,366
-------------
Prepaid registration fees and other assets (Note 1f) 73,956
-------------
Total assets 735,004,040
-------------
<PAGE>
Liabilities: Unrealized depreciation on forward foreign exchange contracts
(Notes 1b) 2,464,002
Payables:
Securities purchased 87,222,751
Beneficial interest redeemed 1,793,567
Dividends to shareholders (Note 1g) 1,750,293
Distributor (Note 2) 364,296
Investment adviser (Note 2) 337,632
Variation margin (Note 1b) 30,447 91,498,986
-------------
Accrued expenses and other liabilities 410,564
-------------
Total liabilities 94,373,552
-------------
Net Assets: Net assets $ 640,630,488
=============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number
Consist of: of shares authorized $ 897,729
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 5,670,603
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 88,797
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 59,388
Paid-in capital in excess of par 667,319,939
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (37,887,426)
Unrealized appreciation on investments and foreign currency
transactions--net 4,481,458
-------------
Net assets $ 640,630,488
=============
Net Asset Value: Class A--Based on net assets of $85,610,463 and 8,977,290 shares
of beneficial interest outstanding $ 9.54
=============
Class B--Based on net assets of $540,886,555 and 56,706,027 shares
of beneficial interest outstanding $ 9.54
=============
Class C--Based on net assets of $8,468,384 and 887,974 shares
of beneficial interest outstanding $ 9.54
=============
Class D--Based on net assets of $5,665,086 and 593,879 shares
of beneficial interest outstanding $ 9.54
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations fo the Year Ended December 31, 1995
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $384,142 foreign
(Notes 1d & 1e): withholding tax) $ 53,423,990
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 4,768,772
Investment advisory fees (Note 2) 4,455,344
Transfer agent fees--Class B (Note 2) 1,038,312
Custodian fees 277,384
Printing and shareholder reports 185,607
Accounting services (Note 2) 160,161
Professional fees 132,489
Transfer agent fees--Class A (Note 2) 129,600
Registration fees (Note 1f) 77,110
Account maintenance and distribution fees--Class C (Note 2) 66,780
Trustees' fees and expenses 39,334
Transfer agent fees--Class C (Note 2) 15,670
Account maintenance fees--Class D (Note 2) 9,868
Transfer agent fees--Class D (Note 2) 5,329
Other 58,386
-------------
Total expenses 11,420,146
-------------
Investment income--net 42,003,844
-------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 30,362,462
(Loss) on Foreign currency transactions--net (11,652,844) 18,709,618
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 21,540,662
(Notes 1b, 1c, Foreign currency transactions--net 3,629,237 25,169,899
1e & 3): ------------- -------------
Net realized and unrealized gain on investments and
foreign currency transactions 43,879,517
-------------
Net Increase in Net Assets Resulting from Operations $ 85,883,361
=============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<PAGE>
<TABLE>
Statement of Changes in Net Assets
<CAPTION>
For the Year Ended December 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 42,003,844 $ 46,679,221
Realized gain (loss) on investments and foreign currency
transactions--net 18,709,618 (88,234,663)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 25,169,899 (16,633,511)
------------- -------------
Net increase (decrease) in net assets resulting from operations 85,883,361 (58,188,953)
------------- -------------
Dividends & Investment income--net:
Distributions to Class A (3,973,225) (2,646,477)
Shareholders Class B (23,553,473) (17,852,973)
(Note 1f): Class C (302,479) (7,735)
Class D (159,774) (4,087)
Return of capital--net:
Class A (1,989,511) (3,059,329)
Class B (11,793,918) (20,638,053)
Class C (151,461) (8,942)
Class D (80,003) (4,725)
In excess of realized gain on investments--net:
Class A -- (317,003)
Class B -- (2,138,481)
Class C -- (926)
Class D -- (490)
------------- -------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (42,003,844) (46,679,221)
------------- -------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (200,436,449) (103,334,766)
Transactions ------------- -------------
(Note 4):
Net Assets: Total decrease in net assets (156,556,932) (208,202,940)
Beginning of year 797,187,420 1,005,390,360
------------- -------------
End of year $ 640,630,488 $ 797,187,420
============= =============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 8.96 $ 10.03 $ 9.79 $ 10.38 $ 9.93
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .59 .55 .70 .77 .95
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .58 (1.07) .56 .01 .55
--------- --------- --------- --------- ---------
Total from investment operations 1.17 (.52) 1.26 .78 1.50
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.39) (.24) (.67) (1.14) (1.05)
Realized gain on investments--net -- -- (.30) (.23) --
Return of capital--net (.20) (.28) -- -- --
In excess of realized gain on
investments--net -- (.03) (.05) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.59) (.55) (1.02) (1.37) (1.05)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.54 $ 8.96 $ 10.03 $ 9.79 $ 10.38
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 13.39% (5.29%) 13.21% 7.83% 16.00%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .86% .84% .82% .84% .99%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.31% 5.84% 6.44% 12.24% 8.02%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 85,610 $ 90,823 $ 108,241 $ 61,131 $ 21,211
Data: ========= ========= ========= ========= =========
Portfolio turnover 512.75% 405.00% 419.99% 235.11% 67.76%
========= ========= ========= ========= =========
<FN>
*Total investment returns exclude the effects of sales loads.
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 8.96 $ 10.03 $ 9.79 $ 10.39 $ 9.93
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .51 .47 .60 .70 .85
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .58 (1.07) .58 (.01) .58
--------- --------- --------- --------- ---------
Total from investment operations 1.09 (.60) 1.18 .69 1.43
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.34) (.20) (.59) (1.06) (.97)
Realized gain on investments--net -- -- (.30) (.23) --
Return of capital--net (.17) (.24) -- -- --
In excess of realized gain on
investments--net -- (.03) (.05) -- --
--------- --------- --------- --------- ---------
Total dividends and distributions (.51) (.47) (.94) (1.29) (.97)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.54 $ 8.96 $ 10.03 $ 9.79 $ 10.39
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 12.52% (6.01%) 12.36% 6.91% 15.23%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses, excluding account
Net Assets: maintenance and distribution fees .89% .86% .83% .86% 1.02%
========= ========= ========= ========= =========
Expenses 1.64% 1.61% 1.58% 1.61% 1.77%
========= ========= ========= ========= =========
Investment income--net 5.56% 5.06% 5.72% 11.67% 7.76%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 540,887 $ 700,995 $ 897,150 $ 637,834 $ 380,749
Data: ========= ========= ========= ========= =========
Portfolio turnover 512.75% 405.00% 419.99% 235.11% 67.76%
========= ========= ========= ========= =========
<PAGE>
<FN>
*Total investment returns exclude the effect of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.96 $ 9.21 $ 8.96 $ 9.21
Operating --------- --------- --------- ---------
Performance: Investment income--net .51 .09 .56 .10
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .58 (.25) .58 (.25)
--------- --------- --------- ---------
Total from investment operations 1.09 (.16) 1.14 (.15)
--------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.34) (.03) (.37) (.04)
Return of capital--net (.17) (.05) (.19) (.05)
In excess of realized gain on investments--net -- (.01) -- (.01)
--------- --------- --------- ---------
Total dividends and distributions (.51) (.09) (.56) (.10)
--------- --------- --------- ---------
Net asset value, end of period $ 9.54 $ 8.96 $ 9.54 $ 8.96
========= ========= ========= =========
Total Investment Based on net asset value per share 12.44% (1.73%)+++ 13.11% (1.62%)+++
Return:** ========= ========= ========= =========
<PAGE>
Ratios to Average Expenses, excluding account maintenance and
Net Assets: distribution fees .91% .89%* .86% .87%*
========= ========= ========= =========
Expenses 1.71% 1.69%* 1.11% 1.12%*
========= ========= ========= =========
Investment income--net 5.44% 5.20%* 6.07% 5.81%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 8,468 $ 3,614 $ 5,665 $ 1,755
Data: ========= ========= ========= =========
Portfolio turnover 512.75% 405.00% 512.75% 405.00%
========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Bond Fund for Investment and Retirement (the
"Fund") is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. The Fund
offers four classes of shares under the Merrill Lynch Select
Pricing SM System. Shares of Class A and Class D are sold with a
front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have
identical voting, dividend, liquidation and other rights and the
same terms and conditions, except that Class B, Class C and Class D
Shares bear certain expenses related to the account maintenance of
such shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares. Each class has
exclusive voting rights with respect to matters relating to its
account maintenance and distribution expenditures. The following is
a summary of significant accounting policies followed by the Fund.
<PAGE>
(a) Valuation of securities--Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. Portfolio securities which are traded on
stock exchanges are valued at the last sale price on the exchange on
which such securities are traded, as of the close of business on the
day the securities are being valued or, lacking any sales, at the
last available bid price. In cases where securities are traded on
more than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Trustees of the
primary market. Options written are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last asked price. Options
purchased are valued at the last sale price in the case of exchange-
traded options or, in the case of options traded in the over-the-
counter market, the last bid price. Other investments, including
futures contracts and related options, are stated at market value or
otherwise at the fair value at which it is expected they may be
resold, as determined in good faith by or under the direction of the
Board of Trustees. 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 Fund's
Board of Trustees.
(b) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterpart does not perform under the contract.
* Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Forward currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts as
a hedge against adverse changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a
security, respectively, for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
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 Fund
as unrealized gains or losses. When the contract is closed, the Fund
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.
<PAGE>
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund 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.
NOTES TO FINANCIAL STATEMENTS (continued)
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss 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) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various
rates.
<PAGE>
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. Distributions in excess
of realized capital gains are due primarily to differing tax
treatments for futures transactions and post-October losses. A
portion of the ordinary income distributions paid by the Fund during
the fiscal years ended December 31, 1994 and December 31, 1995 are
characterized as a return of capital.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $14,061,891 have been reclassified from accumulated net realized
capital losses to paid-in capital in excess of par. These
reclassifications have no effect on net assets or net asset values
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM 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 of 0.60%, on an annual basis,
of the average daily value of the Fund's net assets. The most
restrictive annual expense limitation requires that MLAM reimburse
the Fund to the extent the Fund's expenses (excluding interest
rates, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the Fund's next $70 million of
average daily net assets, and 1.5% of the average daily net assets
in excess thereof. MLAM's obligation to reimburse the Fund is
limited to the amount of the investment advisory fee. No fee payment
will be made to MLAM during any fiscal year which will cause such
expenses to exceed the most restrictive expense limitation at the
time of such payment.
<PAGE>
Pursuant to the distribution plans ("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 as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended December 31, 1995, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D Shares as
follows:
MLFD MLPF&S
Class A $1,671 $14,373
Class D $5,004 $49,941
For the year ended December 31, 1995, MLPF&S received contingent
deferred sales charges of $1,787,977 and $5,943 relating to
transactions in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
<PAGE>
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLPF&S, PSI, MLFD, MLAM, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 1995 were $ 3,089,851,077 and
$3,236,654,089, respectively.
Net realized and unrealized gains (losses) as of December 31, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ 33,906,140 $ 7,248,356
Short-term (2,688) 22,926
Financial futures (2,796,270) (266,208)
Options written (756,250) --
------------ ------------
Total investments 30,350,932 7,005,074
------------ ------------
Currency transactions:
Options purchased (2,212,169) --
Options written 706,296 --
Foreign currency
transactions 15,242,756 (59,614)
Forward foreign exchange
contracts (25,378,197) (2,464,002)
------------ ------------
Total currency transactions (11,641,314) (2,523,616)
------------ ------------
Total $ 18,709,618 $ 4,481,458
============ ============
Transactions in call options written for the year ended December 31,
1995 were as follows:
Number of Premiums
Call Options Written Contracts Received
Outstanding call options
written, beginning of year 7 $ 697,119
Options written 27 4,294,103
Options expired (17) (1,906,305)
Options closed (11) (2,289,870)
Options exercised (6) (795,047)
------------ ------------
Outstanding put options
written, end of year -- $ --
============ ============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in put options written for the year ended December 31,
1995 were as follows:
Number of Premiums
Put Options Written Contracts Received
Outstanding put options
written, beginning of year -- --
Options written 14 $ 1,360,566
Options expired (14) (1,360,566)
------------ ------------
Outstanding put options
written, end of year -- $ --
------------ ------------
As of December 31, 1995, net unrealized appreciation for Federal
income tax purposes aggregated $7,081,479 of which $10,715,730
related to appreciated securities and $3,634,251 related to
depreciated securities. The aggregate cost of investments at
December 31, 1995 for Federal income tax purposes was $620,528,714.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $200,436,449 and $103,334,766 for the years ended
December 31, 1995 and December 31, 1994, respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the Year Dollar
Ended December 31, 1995 Shares Amount
Shares sold 6,380,202 $ 59,357,067
Shares issued to shareholders
in reinvestment of dividends 478,488 4,434,234
----------- -------------
Total issued 6,858,690 63,791,301
Shares redeemed (8,019,897) (73,711,712)
----------- -------------
Net decrease (1,161,207) $ (9,920,411)
=========== =============
<PAGE>
Class A Shares for the Year Dollar
Ended December 31, 1994 Shares Amount
Shares sold 4,384,679 $ 40,711,428
Shares issued to shareholders
in reinvestment of dividends
and distributions 396,034 4,528,178
----------- -------------
Total issued 4,780,713 45,239,606
Shares redeemed (5,434,215) (50,793,461)
----------- -------------
Net decrease (653,502) $ (5,553,855)
=========== =============
Class B Shares for the
Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 8,688,182 $ 80,200,982
Shares issued to shareholders
in reinvestment of dividends 2,401,329 22,257,416
----------- -------------
Total issued 11,089,511 102,458,398
Automatic conversion of
shares (99,679) (930,011)
Shares redeemed (32,517,042) (300,199,532)
----------- -------------
Net decrease (21,527,210) $(198,671,145)
=========== =============
Class B Shares for the
Year Ended Dollar
December 31, 1994 Shares Amount
Shares sold 17,716,789 $ 166,930,180
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,712,869 25,310,189
----------- -------------
Total issued 20,429,658 192,240,369
Shares redeemed (31,626,761) (295,457,890)
----------- -------------
Net decrease (11,197,103) $(103,217,521)
=========== =============
<PAGE>
Class C Shares for the
Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 1,343,650 $ 12,395,671
Shares issued to shareholders
in reinvestment of dividends 40,142 372,733
----------- -------------
Total issued 1,383,792 12,768,404
Shares redeemed (899,232) (8,300,388)
----------- -------------
Net increase 484,560 $ 4,468,016
=========== =============
Class C Shares for the
Period October 21, 1994++ to Dollar
December 31, 1994 Shares Amount
Shares sold 417,769 $ 3,791,175
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,634 14,657
----------- -------------
Total issued 419,403 3,805,832
Shares redeemed (15,989) (145,912)
----------- -------------
Net increase 403,414 $ 3,659,920
=========== =============
[FN]
++Commencement of Operations.
Class D Shares for the Year Dollar
Ended December 31, 1995 Shares Amount
Shares sold 1,149,953 $ 10,597,667
Automatic conversion of
shares 99,678 930,011
Shares issued to shareholders
in reinvestment of dividends 21,410 199,176
----------- -------------
Total issued 1,271,041 11,726,854
Shares redeemed (873,032) (8,039,763)
----------- -------------
Net increase 398,009 $ 3,687,091
=========== =============
<PAGE>
Class D Shares for the Period Dollar
Oct. 21, 1994++ to Dec. 31, 1994 Shares Amount
Shares sold 200,576 $ 1,819,651
Shares issued to shareholders
in reinvestment of dividends
and distributions 699 6,275
----------- -------------
Total issued 201,275 1,825,926
Shares redeemed (5,405) (49,236)
----------- -------------
Net increase 195,870 $ 1,776,690
=========== =============
[FN]
++Commencement of Operations.
5. Capital Loss Carryforward:
At December 31, 1995, the Fund had a net capital loss carryforward
of approximately $35,682,000, all of which expires in 2002. This
amount will be available to offset like amounts of any future
taxable gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders,
Merrill Lynch Global Bond Fund for Investment
and Retirement:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Global Bond Fund for Investment and Retirement as of December 31,
1995, the related statements of operations for the year then ended
and changes in net assets for each of the years in the two-year
period then ended, and the financial highlights for each of the
years in the five-year period then ended. These financial statements
and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our
audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December
31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global Bond Fund for Investment and Retirement as of
December 31, 1995, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 2, 1996
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
Of the monthly cash distributions paid by Merrill Lynch Global Bond
Fund for Investment and Retirement during its taxable year ended
December 31, 1995, 33.37% are characterized as return of capital
distributions. The tax reporting treatment of a return of capital is
different from that of a taxable distribution. Rather than being
included in your current taxable income, a return of capital is non-
taxable and will reduce the cost basis in your shares of the Fund.
Additionally, 57.67% of the monthly cash distributions paid during
the Fund's taxable year ended December 31, 1995 represents income
from foreign sources.
The Fund incurred foreign taxes which it has elected to pass through
to its shareholders. Your share of the Fund's total foreign taxes
paid or withheld is 0.9145% multiplied by the cash distributions
paid from January through December.
The foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included as foreign source taxable
income with an offsetting deduction from gross income or as a credit
for taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
<PAGE>
Finally, during its taxable year ended December 31, 1995 the Fund
invested in Federal obligations. The law varies in each state as to
whether and what percentage of dividend income attributable to
Federal obligations is exempt from state income tax. We recommend
that you consult your tax adviser to determine if any portion of the
dividends you received is exempt from state income tax.
Listed below are the percentages of total assets of the Fund
invested in Federal obligations as of the end of each quarter of the
fiscal year:
Percentage of
Quarter Ended Federal Obligations*
March 31, 1995 15.76%
June 30, 1995 15.70%
September 30, 1995 19.24%
December 31, 1995 0.05%
Of the monthly cash distributions paid by the Fund during its
taxable year ended December 31, 1995, 8.96% was attributable to
Federal obligations. In calculating the foregoing percentage, Fund
expenses have been allocated on a pro rata basis.
Please retain this information for your records.
[FN]
*For purposes of this calculation, Federal obligations include US
Treasury Notes, US Treasury Bills, and US Treasury Bonds. Also,
included are obligations issued by the following agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Lands
Banks, Federal Home Loan Banks, and the Student Loan Marketing
Association. Repurchase agreements are not included in this
calculation.
<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
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
