MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Semi-Annual Report
June 30, 1997
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
Printed on post-consumer recycled paper
Merrill Lynch Global Bond Fund for Investment and Retirement
PORTFOLIO INFORMATION
Type of Issues*
As of June 30, 1997
A bar chart illustrating the following percentages:
US Government Obligations 7.64%
Financial Services 44.61%
Sovereign Government Obligations 43.48%
Commercial Paper 2.09%
<PAGE>
Geographical Diversification*
As of June 30, 1997
A pie chart illustrating the following percentages:
New Zealand 6.75%
Korea 6.24%
Japan 3.30%
United Kingdom 7.23%
Australia 11.99%
Italy 3.88%
Germany 6.73%
Sweden 9.95%
Canada 0.25%
Spain 4.58%
United States 36.92%
Maturity of Investments*
As of June 30, 1997
A bar chart depicting the following percentages:
5 yrs--10 yrs 48%
10 years+ 31%
6 months--5 yrs 21%
[FN]
*Percent of net assets may not equal 100%.
DEAR SHAREHOLDER
The Fund ended the June 30, 1997 quarter with its largest percentage
exposure to US assets during the past 24 months. With gross domestic
product growth in the third quarter of 1997 not expected to be at
the torrid pace of second quarter's 6.2% level, and with no
inflationary pressures in sight within the economy, US investments
are very attractive. Interest rates dropped across the yield curve
as the Federal Reserve Board (FRB) put on hold any additional
interest rate hikes. Our growing comfort with no FRB action between
now and year-end is reflected in the Fund's duration extension in
June. At June 30, 1997, the portfolio had an average life of 6.6
years, which is 28% longer than the unmanaged JP Morgan Global
Government Bond Index. Our strategy is to take advantage of the very
steep yield curve in the US market and invest in A-rated bank,
insurance and finance securities which trade at attractive yield
spreads over the Treasury curve.
<PAGE>
The US Government's surprise move to pay down additional debt as a
result of record revenue streams (higher taxes collected) twice in
the past three months, coupled with the unusually high amount of
maturity in corporate and Government securities, should propel
existing bonds to even higher price levels. Spreads of high-yield
bonds relative to Government securities have narrowed to historical
levels. With spreads this tight, even high-yielding assets are being
placed into Government securities as a temporary position.
By June 30, 1997, the Fund's three largest regional positions were:
United States, 37% of net assets; Australia, 12%; and Sweden, 10%.
These compare to the unmanaged JP Morgan Global Government Bond
Index weightings of 40%, 1%, and 2%, respectively.
The overweighting of Sweden represents the Fund's last emphasis on
high-yield Europe. The other two markets of Italy and Spain are at
index level weightings because of the significant narrowing each of
these markets achieved in their convergence to German interest rates
prior to the European Monetary Union. We believe that Sweden at 100
basis points (1.00%) over Germany still has enough room to narrow
because of its very attractive fundamental economic composition. Our
target is 60 basis points over Germany. Core Europe is essentially
not represented in the Fund because we believe the outlook for
German recovery is still difficult to discern.
Currency Outlook
We continue to expect the US dollar to trade higher against its
major trading partners. With our investments concentrated in the
dollar and dollar bloc economies, hedging becomes less of a concern.
Our sterling positions are unhedged as that currency strengthens
against the Deutschemark, which pulls sterling higher against the US
dollar as well. The Swedish krona is in a similar position.
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
quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Sean J. Casey)
Sean J. Casey
Vice President and Portfolio Manager
August 7, 1997
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 approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. 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).
<PAGE>
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +4.55% +0.37%
Five Years Ended 6/30/97 +5.27 +4.41
Inception (10/25/88)
through 6/30/97 +8.32 +7.81
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +3.86% -0.09%
Five Years Ended 6/30/97 +4.48 +4.48
Ten Years Ended 6/30/97 +8.01 +8.01
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
<PAGE>
Year Ended 6/30/97 +3.65% +2.66%
Inception (10/21/94)
through 6/30/97 +4.53 +4.53
[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 6/30/97 +4.29% +0.12%
Inception (10/21/94)
through 6/30/97 +5.16 +3.58
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<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 -- $0.251 + 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
1996 9.54 9.56 -- 0.564 + 6.42
1/1/97--6/30/97 9.56 9.02 -- 0.240 - 2.95
------ ------
Total $0.116 Total $7.902
Cumulative total return as of 6/30/97: +100.03%**
</TABLE>
<PAGE>
<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 +22.85
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
1996 9.54 9.56 -- 0.491 + 5.60
1/1/97--6/30/97 9.56 9.03 -- 0.207 - 3.21
------ ------
Total $0.498 Total $9.336
Cumulative total return as of 6/30/97: +142.25%***
</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
1996 9.54 9.56 -- 0.483 + 5.51
1/1/97--6/30/97 9.56 9.02 -- 0.203 - 3.36
------
Total $1.284
Cumulative total return as of 6/30/97: +12.66%***
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
***Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
<PAGE>
<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
1996 9.54 9.55 -- 0.541 + 6.05
1/1/97--6/30/97 9.55 9.02 -- 0.229 - 2.96
------
Total $1.433
Cumulative total return as of 6/30/97: +14.50%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
6/30/97 3/31/97 6/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.02 $8.99 $9.14 -1.31% +0.33%
Class B Shares* 9.03 8.99 9.14 -1.20 +0.44
Class C Shares* 9.02 8.99 9.14 -1.31 +0.33
Class D Shares* 9.02 8.99 9.14 -1.31 +0.33
Class A Shares--Total Return* +4.55(1) +1.77(2)
Class B Shares--Total Return* +3.86(3) +1.69(4)
Class C Shares--Total Return* +3.65(5) +1.55(6)
Class D Shares--Total Return* +4.29(7) +1.71(8)
Class A Shares--Standardized 30-day Yield 5.19%
Class B Shares--Standardized 30-day Yield 4.71%
Class C Shares--Standardized 30-day Yield 4.65%
Class D Shares--Standardized 30-day Yield 5.00%
<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 $0.533 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.128 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.462 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.110 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.453 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.108 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.510 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.122 per share ordinary
income dividends.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <S> <C> <C>
Australia
Sovereign A$ 15,300,000 Government of Australia 7.50 % 9/15/2009 $ 11,826,393 3.77%
Government 36,000,000 New South Wales Treasury Corp. 6.50 5/01/2006 25,785,348 8.22
Obligations
Total Investments in Australia (Cost--$37,466,489) 37,611,741 11.99
Canada
Sovereign C$ 1,000,000 Canadian Government Bond 7.25 6/01/2007 772,526 0.25
Government
Obligations
Total Investments in Canada (Cost--$759,848) 772,526 0.25
Germany
Financial US$ 15,500,000 Rheinsche Hypobank 6.875 6/18/2007 15,498,450 4.94
Services
Sovereign DM 3,000,000 Bundes Obligations 5.25 2/21/2001 1,779,238 0.57
Government 6,400,000 Bundesrepublik Deutschland 6.25 4/26/2006 3,833,904 1.22
Obligations
Total Investments in Germany (Cost--$21,646,427) 21,111,592 6.73
Italy
Sovereign Lit 1,000,000,000 Buoni Poliennali Del Tesoro
Government (Italian Government Bond) 10.50 11/01/1998 618,199 0.20
Obligations 15,000,000,000 Buoni Poliennali Del Tesoro
(Italian Government Bond) 9.50 2/01/2006 10,305,276 3.28
YEN 130,000,000 Government of Italy 3.75 6/08/2005 1,254,545 0.40
Total Investments in Italy (Cost--$12,639,086) 12,178,020 3.88
Japan
<PAGE>
Financial YEN 100,000,000 IBRD World Bank 4.50 6/20/2000 958,948 0.31
Services 225,000,000 World Bank 4.50 3/20/2003 2,230,344 0.71
Sovereign 690,000,000 Credit Local de France 6.00 10/31/2001 7,146,759 2.28
Government
Obligations
Total Investments in Japan (Cost--$9,805,053) 10,336,051 3.30
Korea
Financial KRW 19,500,000 Export-Import Bank of Korea 7.125 9/20/2001 19,587,750 6.24
Services
Total Investments in Korea (Cost--$19,617,000) 19,587,750 6.24
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <S> <C> <C>
New Zealand
Sovereign NZ$ 22,000,000 New Zealand Government Bond 8.00 % 4/15/2004 $ 15,745,940 5.02%
Government 7,500,000 New Zealand Government Bond 8.00 11/15/2006 5,437,202 1.73
Obligations
Total Investments in New Zealand (Cost--$21,192,047) 21,183,142 6.75
Spain
Sovereign Pta 1,900,000,000 Government of Spain 8.00 5/30/2004 14,358,710 4.58
Government
Obligations
Total Investments in Spain (Cost--$14,686,177) 14,358,710 4.58
Sweden
<PAGE>
Sovereign Skr 244,000,000 Government of Sweden 5.50 4/12/2002 31,206,146 9.95
Government
Obligations
Total Investments in Sweden (Cost--$30,902,561) 31,206,146 9.95
United Kingdom
Financial Pound 9,700,000 Royal Bank of Scotland 7.875 12/07/2006 16,353,709 5.22
Services Sterling
Sovereign 3,700,000 United Kingdom Gilt 7.50 12/07/2006 6,314,619 2.01
Government
Obligations
Total Investments in the United Kingdom (Cost--$22,203,638) 22,668,328 7.23
United States
Financial US$ 16,250,000 American Express Company 6.75 6/23/2004 16,116,425 5.14
Services 7,500,000 Aon Capital Trust A 8.205 1/01/2027 7,690,350 2.45
16,700,000 Bankers Trust 8.09 12/01/2026 16,193,489 5.16
12,500,000 Banque Nationale de Paris New York 7.20 1/15/2007 12,426,250 3.96
7,450,000 JP Morgan Capital Trust II 7.95 2/01/2027 7,457,599 2.38
20,100,000 Mellon Capital II 7.995 1/15/2027 20,075,880 6.40
5,250,000 PNC Institution Capital Bank 8.315 5/15/2027 5,312,160 1.70
US Government 16,000,000 United States Treasury Notes 6.25 6/30/2002 15,904,960 5.07
Obligations 8,000,000 United States Treasury Notes 6.625 5/15/2007 8,066,240 2.57
Total Investments in the United States (Cost--$109,456,082) 109,243,353 34.83
Total Investments in Long-Term Obligations
(Cost--$300,374,408) 300,257,359 95.73
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Short-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <S> <C> <C>
Commercial US$ 6,561,000 General Motors Acceptance Corp. 6.25% 7/01/1997 $ 6,561,000 2.09%
Paper*
Total Investments in Short-Term Obligations
(Cost--$6,561,000) 6,561,000 2.09
Total Investments (Cost--$306,935,408) 306,818,359 97.82
Unrealized Depreciation on Forward Foreign Exchange Contracts** (561,090) (0.18)
<PAGE>
Variation Margin on Financial Futures Contracts++ -- --
Other Assets Less Liabilities 7,391,829 2.36
------------ -------
Net Assets $313,649,098 100.00%
============ =======
<FN>
*Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
**Forward foreign exchange contracts as of June 30, 1997 are as
follows:
Unrealized
Appreciation
Expiration (Depreciation)
Foreign Currency Sold Date (Note 1b)
A$ 61,500,000 July 1997 $ 234,150
DM 81,381,000 July 1997 336,638
Pound 22,500,000 July 1997 (379,567)
Sterling
Lit 17,750,000,000 July 1997 75,126
NZ$ 30,920,571 July 1997 164,321
Skr 186,540,675 July 1997 62,303
Total (US$ Commitment--$186,240,162) 492,971
----------
Foreign Currency Purchased
A$ 31,500,000 July 1997 18,746
DM 143,837,600 July 1997 (913,536)
Pound 15,000,000 July 1997 (56,797)
Sterling
Skr 186,540,675 July 1997 (102,474)
Total (US$ Commitment--$156,322,454) (1,054,061)
----------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (561,090)
==========
<FN>
++Financial futures contracts sold as of June 30, 1997 are as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1b)
<PAGE>
225 US Treasury Bonds CBOT September 1997 $24,989,063
(Total Contract Price--$24,989,063) $24,989,063
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of June 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$306,935,408) (Note 1a) $ 306,818,359
Cash 3,219
Foreign cash (Note 1c) 8,506,064
Receivables:
Securities sold $ 17,028,180
Interest 5,908,607
Beneficial interest sold 95,418
Forward foreign exchange contracts (Note 1b) 4,877 23,037,082
-------------
Prepaid registration fees and other assets (Note 1f) 64,382
-------------
Total assets 338,429,106
-------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts
(Note 1b) 561,090
Payables:
Securities purchased 21,662,955
Beneficial interest redeemed 1,222,009
Dividends to shareholders (Note 1g) 491,588
Forward foreign exchange contracts (Note 1b) 158,656
Investment adviser (Note 2) 152,300
Distributor (Note 2) 146,249 23,833,757
-------------
Accrued expenses and other liabilities 385,161
-------------
Total liabilities 24,780,008
-------------
Net Assets: Net assets $ 313,649,098
=============
<PAGE>
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 425,185
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 2,422,531
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 42,552
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 584,580
Paid-in capital in excess of par 365,508,742
Accumulated realized capital losses on investments and
foreign currency transactions--net (Note 6) (54,589,634)
Unrealized depreciation on investments and foreign currency
transactions--net (744,858)
-------------
Net assets $ 313,649,098
=============
Net Asset Value: Class A--Based on net assets of $38,371,380 and 4,251,847
shares of beneficial interest outstanding $ 9.02
=============
Class B--Based on net assets of $218,688,652 and 24,225,309
shares of beneficial interest outstanding $ 9.03
=============
Class C--Based on net assets of $3,839,969 and 425,521
shares of beneficial interest outstanding $ 9.02
=============
Class D--Based on net assets of $52,749,097 and 5,845,804
shares of beneficial interest outstanding $ 9.02
=============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Six Months Ended June 30, 1997
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $62,467 foreign withholding tax) $ 12,815,669
(Notes 1d & 1e):
Expenses: Investment advisory fees (Note 2) $ 1,147,831
Account maintenance and distribution fees--Class B (Note 2) 1,007,381
Transfer agent fees--Class B (Note 2) 323,408
Accounting services (Note 2) 86,828
Printing and shareholder reports 79,365
Custodian fees 66,009
Transfer agent fees--Class A (Note 2) 62,152
Account maintenance fees--Class D (Note 2) 60,599
Registration fees (Note 1f) 52,245
Transfer agent fees--Class D (Note 2) 51,642
Professional fees 40,383
Account maintenance and distribution fees--Class C (Note 2) 24,554
Trustees' fees and expenses 20,615
Transfer agent fees--Class C (Note 2) 8,627
Other 6,572
--------------
Total expenses 3,038,211
--------------
Investment income--net 9,777,458
--------------
<PAGE>
Realized & Realized loss from:
Unrealized Gain Investments--net (10,653,197)
(Loss) on Foreign currency transactions--net (14,020,697) (24,673,894)
Investments & Change in unrealized appreciation/depreciation on:
Foreign Currency Investments--net (1,212,815)
Transactions--Net Foreign currency transactions--net 924 (1,211,891)
(Notes 1b, 1c, -------------- --------------
1e & 3): Net realized and unrealized loss on investments and foreign
currency transactions (25,885,785)
--------------
Net Decrease in Net Assets Resulting from Operations $ (16,108,327)
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 9,777,458 $ 29,868,062
Realized gain (loss) on investments and foreign currency
transactions--net (24,673,894) 1,371,690
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (1,211,891) (4,014,426)
------------- -------------
Net increase (decrease) in net assets resulting from operations (16,108,327) 27,225,326
------------- -------------
Dividends to Investment income--net:
Shareholders Class A (1,693,922) (4,866,475)
(Note 1g): Class B (6,610,449) (23,481,682)
Class C (148,000) (505,409)
Class D (1,325,087) (1,014,496)
------------- -------------
Net decrease in net assets resulting from dividends to
shareholders (9,777,458) (29,868,062)
------------- -------------
<PAGE>
Beneficial Interest Net decrease in net assets derived from beneficial interest
Transactions transactions (135,905,722) (162,547,147)
(Note 4): ------------- -------------
Net Assets: Total decrease in net assets (161,791,507) (165,189,883)
Beginning of period 475,440,605 640,630,488
------------- -------------
End of period $ 313,649,098 $ 475,440,605
============= =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .26 .56 .59 .55 .70
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.54) .02 .58 (1.07) .56
--------- --------- --------- --------- ---------
Total from investment operations (.28) .58 1.17 (.52) 1.26
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.26) (.56) (.39) (.24) (.67)
Realized gain on investments--net -- -- -- -- (.30)
Return of capital--net -- -- (.20) (.28) --
In excess of realized gain on
investments--net -- -- -- (.03) (.05)
--------- --------- --------- --------- ---------
Total dividends and distributions (.26) (.56) (.59) (.55) (1.02)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.02 $ 9.56 $ 9.54 $ 8.96 $ 10.03
========= ========= ========= ========= =========
<PAGE>
Total Investment Based on net asset value per share (2.95%)+++ 6.42% 13.39% (5.29%) 13.21%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .99%* .87% .86% .84% .82%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.71%* 6.02% 6.31% 5.84% 6.44%
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 38,371 $ 72,876 $ 85,610 $ 90,823 $ 108,241
========= ========= ========= ========= =========
Portfolio turnover 436.29% 1234.05% 512.75% 405.00% 419.99%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .22 .49 .51 .47 .60
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.53) .02 .58 (1.07) .58
--------- --------- --------- --------- ---------
Total from investment operations (.31) .51 1.09 (.60) 1.18
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.22) (.49) (.34) (.20) (.59)
Realized gain on investments--net -- -- -- -- (.30)
Return of capital--net -- -- (.17) (.24) --
In excess of realized gain on
investments--net -- -- -- (.03) (.05)
--------- --------- --------- --------- ---------
Total dividends and distributions (.22) (.49) (.51) (.47) (.94)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.03 $ 9.56 $ 9.54 $ 8.96 $ 10.03
========= ========= ========= ========= =========
<PAGE>
Total Investment Based on net asset value per share (3.21%)+++ 5.60% 12.52% (6.01%) 12.36%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.77%* 1.65% 1.64% 1.61% 1.58%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.92%* 5.25% 5.56% 5.06% 5.72%
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 218,689 $ 347,529 $ 540,887 $ 700,995 $ 897,150
========= ========= ========= ========= =========
Portfolio turnover 436.29% 1234.05% 512.75% 405.00% 419.99%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year 1994++ to
June 30, Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.56 $ 9.54 $ 8.96 $ 9.21
Operating -------- -------- -------- --------
Performance: Investment income--net .22 .48 .51 .09
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (.54) .02 .58 (.25)
-------- -------- -------- --------
Total from investment operations (.32) .50 1.09 (.16)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.22) (.48) (.34) (.03)
Return of capital--net -- -- (.17) (.05)
In excess of realized gain on investments--net -- -- -- (.01)
-------- -------- -------- --------
Total dividends and distributions (.22) (.48) (.51) (.09)
-------- -------- -------- --------
Net asset value, end of period $ 9.02 $ 9.56 $ 9.54 $ 8.96
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share (3.36%)+++ 5.51% 12.44% (1.73%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.86%* 1.73% 1.71% 1.69%*
Net Assets: ======== ======== ======== ========
Investment income--net 4.82%* 5.16% 5.44% 5.20%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 3,840 $ 9,351 $ 8,468 $ 3,614
Data: ======== ======== ======== ========
Portfolio turnover 436.29% 1234.05% 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>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year 1994++ to
June 30, Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.55 $ 9.54 $ 8.96 $ 9.21
Operating -------- -------- -------- --------
Performance: Investment income--net .24 .54 .56 .10
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net (.53) .01 .58 (.25)
-------- -------- -------- --------
Total from investment operations (.29) .55 1.14 (.15)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.54) (.37) (.04)
Return of capital--net -- -- (.19) (.05)
In excess of realized gain on investments--net -- -- -- (.01)
-------- -------- -------- --------
Total dividends and distributions (.24) (.54) (.56) (.10)
-------- -------- -------- --------
Net asset value, end of period $ 9.02 $ 9.55 $ 9.54 $ 8.96
======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share (2.96%)+++ 6.05% 13.11% (1.62%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 1.25%* 1.08% 1.11% 1.12%*
Net Assets: ======== ======== ======== ========
Investment income--net 5.47%* 5.74% 6.07% 5.81%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 52,749 $ 45,685 $ 5,665 $ 1,755
Data: ======== ======== ======== ========
Portfolio turnover 436.29% 1234.05% 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
<PAGE>
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. These
unaudited financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal recurring nature. The 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.
(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 counterparty 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.
<PAGE>
* Foreign 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 trans-actions 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.
* 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.
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 curren-
cies 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.
<PAGE>
(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.
(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.
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.
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:
<PAGE>
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.
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended June 30, 1997, MLFD earned underwriting
discounts 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 $150 $1,556
Class D $557 $5,783
For the six months ended June 30, 1997, MLPF&S received contingent
deferred sales charges of $445,999 and $1,802 relating to
transactions in Class B and Class C Shares, respectively.
During the six months ended June 30, 1997, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $61 for
security price quotations to compute the net asset value of the
Fund.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
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 MLAM, PSI, MLFD, MLFDS, and/or ML & Co.
<PAGE>
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1997 were $1,594,042,196 and
$1,708,764,289, respectively.
Net realized and unrealized gains (losses) as of June 30, 1997 were
as follows:
Realized Unrealized
Gains (Losses) Losses
Investments:
Long-term $ (8,967,441) $ (117,049)
Short-term 711 --
Financial futures (1,686,467) --
------------ ------------
Total investments (10,653,197) (117,049)
------------ ------------
Currency transactions:
Foreign currency
transactions (18,947,477) (66,719)
Forward foreign exchange
contracts 4,926,780 (561,090)
------------ ------------
Total currency transactions (14,020,697) (627,809)
------------ ------------
Total $(24,673,894) $ (744,858)
============ ============
As of June 30, 1997, net unrealized depreciation for Federal income
tax purposes aggregated $117,049 of which $2,269,693 related to
appreciated securities and $2,386,742 related to depreciated
securities. The aggregate cost of investments at June 30, 1997 for
Federal income tax purposes was $306,935,408.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $135,905,722 and $162,547,147 for the six months
ended June 30, 1997 and the year ended December 31, 1996,
respectively.
Transactions in shares of beneficial interest for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
Shares sold 3,379,270 $ 30,814,408
Shares issued to shareholders
in reinvestment of dividends 117,758 1,064,970
------------ ------------
Total issued 3,497,028 31,879,378
Shares redeemed (6,872,066) (62,404,903)
------------ ------------
Net decrease (3,375,038) $(30,525,525)
============ ============
Class A Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 2,910,360 $ 27,329,155
Shares issued to shareholders
in reinvestment of dividends 403,800 3,774,617
------------ ------------
Total issued 3,314,160 31,103,772
Shares redeemed (4,664,565) (43,674,353)
------------ ------------
Net decrease (1,350,405) $(12,570,581)
============ ============
Class B Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 647,815 $ 5,849,536
Shares issued to shareholders
in reinvestment of dividends 416,725 3,770,261
------------- -------------
Total issued 1,064,540 9,619,797
Automatic conversion
of shares (1,928,422) (17,858,358)
Shares redeemed (11,273,177) (101,847,897)
------------- -------------
Net decrease (12,137,059) $(110,086,458)
============= =============
Class B Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 3,714,398 $ 34,748,286
Shares issued to shareholders
in reinvestment of dividends 1,569,779 14,672,504
------------- -------------
Total issued 5,284,177 49,420,790
Automatic conversion
of shares (4,849,489) (41,935,909)
Shares redeemed (20,778,347) (197,284,755)
------------- -------------
Net decrease (20,343,659) $(189,799,874)
============= =============
<PAGE>
Class C Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 197,168 $ 1,787,157
Shares issued to shareholders
in reinvestment of dividends 10,842 98,273
------------ ------------
Total issued 208,010 1,885,430
Shares redeemed (761,084) (6,874,490)
------------ ------------
Net decrease (553,074) $ (4,989,060)
============ ============
Class C Shares for the Year Dollar
Ended December 31, 1996 Shares Amount
Shares sold 601,459 $ 5,622,361
Shares issued to shareholders
in reinvestment of dividends 42,299 395,340
------------ ------------
Total issued 643,758 6,017,701
Shares redeemed (553,137) (5,161,461)
------------ ------------
Net increase 90,621 $ 856,240
============ ============
Class D Shares for the Six Months Dollar
Ended June 30, 1997 Shares Amount
Shares sold 135,241 $ 1,228,300
Shares issued to shareholders
in reinvestment of dividends 93,341 842,791
Automatic conversion
of shares 1,964,583 17,858,358
------------ ------------
Total issued 2,193,165 19,929,449
Shares redeemed (1,129,494) (10,234,128)
------------ ------------
Net increase 1,063,671 $ 9,695,321
============ ============
<PAGE>
Class D Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
Shares sold 1,000,673 $ 9,338,179
Shares issued to shareholders
in reinvestment of dividends 82,130 775,174
Automatic conversion
of shares 4,503,683 41,935,909
------------ ------------
Total issued 5,586,486 52,049,262
Shares redeemed (1,398,232) (13,082,194)
------------ ------------
Net increase 4,188,254 $ 38,967,068
============ ============
5. Commitments:
On June 30, 1997, the Fund had entered into foreign exchange
contracts, in addition to the contracts listed on the Schedule of
Investments, under which it had agreed to purchase and sell foreign
currency with the approximate value of $5,565,000 and $862,000,
respectively.
6. Capital Loss Carryforward:
At December 31, 1996, the Fund had a net capital loss carryforward
of approximately $27,693,000, all of which expires in 2002. This
amount will be available to offset like amounts of any future
taxable gains.
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
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Sean J. Casey, Vice President
Robert J. Parish, Vice President
Gerald M. Richard, Treasurer
Lawrence A. Rogers, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
225 Franklin Street
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
