MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Annual Report
December 31, 1996
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 December 31, 1996
A bar chart illustrating the following percentages:
US Government Obligations 4.62%
Financial Services 27.38%
Sovereign Government Obligations 61.65%
Commercial Paper 4.65%
<PAGE>
Geographical Diversification*
As of December 31, 1996
A pie chart illustrating the following percentages:
Italy 9.12%
Denmark 10.76%
New Zealand 4.86%
Spain 4.25%
Sweden 5.57%
Australia 14.56%
Japan 5.24%
Germany 4.80%
United States 9.27%
Canada 9.14%
United Kingdom 20.73%
Maturity of Investments*
As of December 31, 1996
A bar chart depicting the following percentages:
5 yrs--10 yrs 59%
10 years+ 14%
0-6 months 5%
6 months--5 yrs 20%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
DEAR SHAREHOLDER
The US economy adjusted slightly during the fourth quarter of 1996.
While gross domestic product (GDP) declined from the frenetic pace
of the third quarter, it still developed a firm 2.0% plus rate of
growth. While this cannot be labeled strong growth, it does imply an
underlying theme of consistent ability to grow. Coupled with the
growth in US GDP, there has been a lack of inflationary pressure
anywhere within the production, wage or industrial sectors. We do
not expect the Federal Reserve Board to adopt a tightening bias
during the first quarter of 1997 based on the firm GDP numbers. Yet
as 1997 unfolds, we expect increased concerns that growth will
accelerate.
<PAGE>
Europe (with the exception of France) has shown surprisingly
consistent growth. We continue to forecast a more vigorous upturn in
the European economies, as well as in those of the Far East, as the
down-draft in interest rates takes effect. Outside the United
Kingdom there is little inflationary pressure, which should keep
interest rates contained, even as growth revives. The United Kingdom
is expected to raise base rates again early in 1997 as the economy
benefits from strong exports and continued consumer spending. The
convergence trades (the narrowing of yields) based on Italian,
Spanish and Swedish yield levels narrowing to Germany have already
made the major move. Our concern is that convergence also can take
place in a negative interest rate environment just as easily as in a
positive one.
Germany, the economic locomotive for the European continent, is
already turning the corner to more positive growth in early 1997.
However, a 1980s style acceleration is unlikely, given the fiscal
stringency needed to meet European Monetary Union (EMU) requirements
across the continent. Once again, the fiscal straitjacket should be
less tight in Britain, allowing the UK economy to continue to
outperform, even with a modestly tighter monetary stance.
Interest rates in Europe fell across the curve during the fourth
quarter of 1996. The following chart reflects the degree of decline
in ten-year interest rates in Europe and areas of the Far East over
the last three months.
Basis
Point
9/30/1996 12/31/1996 Change
United Kingdom 7.66% 7.51% - 15
Germany 6.09 5.78 - 31
Italy 7.43 6.47 - 96
Spain 7.95 6.84 -111
Sweden 7.38 6.71 - 67
Australia 7.79 7.36 - 43
New Zealand 8.06 7.20 - 86
The Reserve Bank of Australia lowered interest rates a total of 100
basis points (1.00%) in the last three months. While inflation in
Australia remained subdued and wage settlements are being contracted
at the lower end of expectations, the outlook may not be as interest
rate positive if GDP continues to rise. For the first time in many
years, the selection of a coalition government in New Zealand has
put a cloud over the country's financial markets. This, coupled with
a market with thin trading volume and a majority of offshore
investors, creates concern over the future prospects of the New
Zealand bond market.
<PAGE>
Canada turned in a disappointing economic performance during the
December quarter, with real GDP growth of just +1.4% for the year,
the weakest since 1992. Fiscal retrenchment was the primary cause,
shaving a full percentage point from the overall growth. The decline
in Canadian interest rates pushed through to the United States,
especially at the front end of the yield curve.
The best that can be said of Japan's economy is that the worst
appears to be over. Monetary stimulus will continue to provide
support, but fiscal policy is set to become much less growth
friendly. In particular, consumers face a sales tax hike in April
1997, which is likely to prompt a buying wave in the first quarter
of the fiscal year, followed by a bust in the second fiscal quarter.
Inflation is still near zero and banking sector woes persist. This
all signals little, if any, change in Bank of Japan policy. The rest
of Asia is moderating from the explosive growth of recent years.
Prospects in China have improved, with inflation and interest rates
falling.
Fiscal Year in Review
Merrill Lynch Global Bond Fund for Investment and Retirement was
able to outperform the unmanaged JP Morgan Global Bond Index during
the 12 months ended December 31, 1996, because of two important
themes held throughout the year. First, we had a significant
overexposure to the European bond markets, especially the high-
yielding economies of Italy, Spain and Sweden. In addition, we had a
firm belief in the appreciation value of those currencies against
the Deutschemark, even as the dollar strengthened. We shifted our
hedged positions in order to seek to take advantage of currency
movements and added incremental returns to performance. For example,
the Italian lira appreciated approximately 11% against the
Deutschemark, while against the US dollar the jump was only 3.6%
during the year. For most of 1996, we maintained a significant core
overexposure to these EMU positive markets. The narrowing of the
interest rate spread these economies must pay over Germany added to
the overall performance as well. During the early part of 1996,
Italy was paying interest rates almost 500 basis points greater than
Germany for the same time period. While a case could be made about
the relative value of each government's balance sheet, the reality
is that Italian lawmakers have shown a strong willingness to address
long-standing fiscal issues with speed and intention. This caused
the spread or difference in interest rates to decline to just over
170 basis points by year-end. Higher accruals coupled with
strengthening currencies supported outperformance.
<PAGE>
A similar story in Australia and New Zealand reinforced the concept
of diversification. We maintained a large, ongoing interest in these
markets as their currencies rose, reflecting huge Japanese investor
interest in the sub-Pacific region. Finally, Japanese assets in the
Fund were kept to an absolute minimum as both the bond market and
yen came under pressure for most of the year.
Portfolio Strategy and Positioning
Our exposure to high-yielding European issues has been tempered as
the yield spreads narrowed to new lows. While our confidence that
this trend will continue is high, our concern is that the narrowing
will take place in a negative interest rate environment. The biggest
concern is that world financial markets will continue to price in
the absence of growth, setting the markets up for potential
disappointment when growth does appear. Europe's race toward EMU,
the recent downshift in US markets, and of sluggishness in the Asian
"Tiger" countries (South Korea, People's Republic of China, Taiwan,
Hong Kong, the Philippines, Thailand, Malaysia, Singapore, Myanmar,
Indonesia and the Indochina countries--Vietnam, Cambodia and Laos)
have all been enough to convince investors that short-term interest
rates will remain at extraordinarily low levels. The basic
underpinning of these liquidity-driven markets remains very much in
place. There is rising risk that this assumption will be challenged
in 1997.
Global economic growth patterns are the key to bond market
performance in 1997, in our view. Global GDP has the potential to
rise to 3.5%--4% in 1997. We believe the risk is of stronger, not
weaker, growth as 1997 evolves. Studies have reflected growth of
2.8% in the industrial world, augmented by a 6% increase in the
developed world (4% in Latin America and 7% in non-Japan Asia).
Potentially, next year could mark the strongest increase in the
global economy since 1988. Within Europe as a whole, we see core
growth averaging 2.5%. On the inflation front, the wide gap that now
exists between trend and actual GDP and further efforts at cost
cutting by European corporations suggest that wage and price
increases will remain subdued on the continent during the year
ahead. As a consequence, we see inflation in the core European
economies increasing only slightly from 1.8% in 1996 to 2.0% in
1997. The absence of wage and price pressures in Europe, together
with decent growth prospects, suggests that Europe will outperform
the US markets in any sell-off. Thus, the soft decoupling between
the United States and Europe seen in some markets in early 1996 is
likely to resurface in early 1997.
<PAGE>
Against the JP Morgan Global Bond Index, our largest exposure is
within the UK Gilt market. Our interest reflects more of a currency
comfort than interest rate as the Bank of England has raised and
will continue to move short-term interest rates higher. The
positioning is at the shorter end of the curve and even though
overweight in terms of exposure, duration is very short. On the
continent, our huge overweighting of Sweden has been reduced as
yield spreads to Germany narrowed to less then 85 basis points over
Germany. Just six months ago the spread was in excess of 170 basis
points. We feel Italy has the highest potential for reducing
interest rates in early 1997 and therefore, we maintain an over-
weighted position.
Shifting to the Far East, the portfolio continues to be overweighted
in both the Australian and New Zealand bond markets. While both
currencies have strengthened against the US dollar, real rates of
return continue to reflect value. The only anticipated change would
be to take any opportunity to reduce duration. In Japan, exposure
was increased in early November to take advantage of a technical
squeeze into the bond market. As a result, ten-year interest rates
hit new lows reflecting ten-year cash yield levels close to 2.3%.
Currently, we are reducing our exposure once again in favor of the
United Kingdom.
Currency Outlook
By December 31, 1996, the portfolio was currently positioned for a
stronger US currency early in the first quarter of 1997. The process
of US dollar-strengthening is slow, but we are very active in
hedging the portfolio and recognizing currency opportunities such as
Australian and New Zealand dollars. Of concern is the lack of
positive movement in the US trade and budget deficits. Eventually
the US dollar will be negatively impacted as significant improvement
in the deficits will cause adverse reaction or if a lack of progress
is detected.
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
January 31, 1997
As of December 31, 1996, N. John Hewitt retired as Senior Vice
President of the Fund. His colleagues at Merrill Lynch Asset
Management, L.P. join the Fund's Board of Trustees in wishing Mr.
Hewitt well in his retirement.
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. 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
12/31/96 9/30/96 12/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.56 $9.35 $9.54 +0.21% +2.25%
Class B Shares* 9.56 9.35 9.54 +0.21 +2.25
Class C Shares* 9.56 9.35 9.54 +0.21 +2.25
Class D Shares* 9.55 9.35 9.54 +0.10 +2.14
Class A Shares--Total Return* +6.42(1) +3.78(2)
Class B Shares--Total Return* +5.60(3) +3.58(4)
Class C Shares--Total Return* +5.51(5) +3.55(6)
Class D Shares--Total Return* +6.05(7) +3.61(8)
Class A Shares--Standardized 30-day Yield 5.02%
Class B Shares--Standardized 30-day Yield 4.45%
Class C Shares--Standardized 30-day Yield 4.36%
Class D Shares--Standardized 30-day Yield 4.79%
<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 $0.564 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.161 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.491 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.140 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.483 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.138 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.541 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.155 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
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** 12/96
ML Global Bond Fund++-- $ 9,600 $19,785
Class A Shares*
JP Morgan Global Government
Bond Incex++++ $10,000 $20,462
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:
12/86 12/96
ML Global Bond Fund++-- $10,000 $24,080
Class B Shares*
JP Morgan Global Government
Bond Index++++ $10,000 $23,377
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** 12/96
ML Global Bond Fund++-- $10,000 $11,658
Class C Shares*
ML Global Bond Fund++-- $ 9,600 $11,329
Class D Shares*
JP Morgan Global Government
Bond Index++++ $10,000 $12,329
<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.
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +6.42% +2.16%
Five Years Ended 12/31/96 +6.89 +6.02
Inception (10/25/88)
through 12/31/96 +9.24 +8.70
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +5.60% +1.60%
Five Years Ended 12/31/96 +6.05 +6.05
Ten Years Ended 12/31/96 +9.19 +9.19
[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>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/96 +5.51% +4.51%
Inception (10/21/94)
through 12/31/96 +7.24 +7.24
[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 12/31/96 +6.05% +1.80%
Inception (10/21/94)
through 12/31/96 +7.83 +5.85
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<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
------ ------
Total $0.116 Total $7.662
Cumulative total return as of 12/31/96: +106.10%**
<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
include sales charge; results would be lower if sales charge was
included.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance--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
------ ------
Total $0.498 Total $9.129
Cumulative total return as of 12/31/96: +150.29%**
<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
1996 9.54 9.56 -- 0.483 + 5.51
------
Total $1.081
<PAGE>
Cumulative total return as of 12/31/96: +16.58%**
<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
1996 9.54 9.55 -- 0.541 + 6.05
------
Total $1.204
Cumulative total return as of 12/31/96: +18.00%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the payable date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <S> <C> <C>
Australia
Sovereign A$ 29,000,000 Government of Australia 6.75 % 11/15/2006 $ 22,040,972 4.64%
Government 11,500,000 New South Wales Treasury Corp. 7.00 4/01/2004 8,890,354 1.87
Obligations 18,400,000 Queensland Treasury Corp. 8.00 5/14/2003 15,098,733 3.17
28,500,000 Queensland Treasury Corp. 8.00 9/14/2007 23,201,926 4.88
<PAGE>
Total Investments in Australia
(Cost--$70,884,756) 69,231,985 14.56
Canada
Sovereign C$ 19,000,000 Canadian Government Bond 8.00 6/01/2023 15,477,372 3.25
Government 32,000,000 Province of Quebec 9.375 1/16/2023 27,994,161 5.89
Obligations
Total Investments in Canada
(Cost--$45,131,568) 43,471,533 9.14
Denmark
Financial Dkr 138,471,000 Nykredit 6.00 10/01/2026 20,404,396 4.29
Services
Sovereign 164,600,000 Danish Government Bond 8.00 3/15/2006 30,748,068 6.47
Government
Obligations
Total Investments in Denmark
(Cost--$50,388,482) 51,152,464 10.76
Germany
Financial DM 8,000,000 KFW International Finance Inc. 6.25 10/15/2003 5,423,464 1.14
Services 8,000,000 KFW International Finance Inc. 6.75 6/20/2005 5,497,823 1.16
Sovereign 3,000,000 Bundes Obligations 5.25 2/21/2001 2,005,915 0.42
Government 6,400,000 Bundesrepublik Deutschland 6.25 4/26/2006 4,299,669 0.90
Obligations 8,000,000 Deutschland Republic 6.75 4/22/2003 5,605,460 1.18
Total Investments in Germany
(Cost--$22,729,460) 22,832,331 4.80
Italy
<PAGE>
Sovereign Lit 1,000,000,000 Buoni Poliennali Del Tesoro
Government (Italian Government Bond) 10.50 11/01/1998 704,034 0.15
Obligations 15,000,000,000 Buoni Poliennali Del Tesoro
(Italian Government Bond) 9.50 2/01/2006 11,212,580 2.36
21,000,000,000 Buoni Poliennali Del Tesoro
(Italian Government Bond) 8.75 7/01/2006 15,071,036 3.17
18,000,000,000 Government of Italy 9.50 4/15/1999 12,647,719 2.66
400,000,000 Government of Italy 3.75 6/08/2005 3,715,026 0.78
Total Investments in Italy
(Cost--$42,528,482) 43,350,395 9.12
</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>
Japan
Financial YEN 850,000,000 Export Import Bank Japan 4.375% 10/01/2003 $ 8,268,782 1.74%
Services 1,120,000,000 IBRD World Bank 4.75 12/20/2004 11,244,490 2.36
550,000,000 World Bank 4.50 3/20/2003 5,405,959 1.14
Total Investments in Japan
(Cost--$25,892,835) 24,919,231 5.24
New Zealand
Sovereign NZ$ 31,600,000 New Zealand Government Bond 8.00 2/15/2001 23,119,735 4.86
Government
Obligations
Total Investments in New Zealand
(Cost--$23,054,367) 23,119,735 4.86
Spain
Sovereign Pta 2,418,000,000 Government of Spain 8.00 5/30/2004 20,191,892 4.25
Government
Obligations
Total Investments in Spain
(Cost--$19,458,244) 20,191,892 4.25
<PAGE>
Sweden
Sovereign Skr 186,000,000 Government of Sweden 6.00 2/09/2005 26,460,308 5.57
Government
Obligations
Total Investments in Sweden
(Cost--$25,903,013) 26,460,308 5.57
United Kingdom
Financial Pound 9,900,000 Abbey National PLC 8.00 4/02/2003 17,121,532 3.60
Services Sterling 9,200,000 Beneficial Bank 5.914 6/17/1998 15,718,899 3.31
16,000,000 Depfa Bank 7.75 12/27/2001 27,400,173 5.76
8,000,000 Swedish Export Credit Corp. 7.625 12/27/2001 13,705,561 2.88
Sovereign 14,400,000 United Kingdom Gilt 7.50 12/07/2006 24,604,726 5.18
Government
Obligations
Total Investments in the United
Kingdom (Cost--$95,513,272) 98,550,891 20.73
United States
US US$ 18,400,000 United States Treasury Note 6.50 10/15/2006 18,500,648 3.89
Government
Obligations
Total Investments in the
United States (Cost--$18,693,250) 18,500,648 3.89
Total Investments in Long-Term
Obligations (Cost--$440,177,729) 441,781,413 92.92
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Short-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <S> <C> <C>
Commercial US$ 22,128,000 General Motors Acceptance Corp. 7.50% 1/02/1997 $ 22,128,000 4.65%
Paper*
<PAGE>
US Government 3,500,000 United States Treasury Bill (a) 5.27 3/13/1997 3,466,190 0.73
Obligations*
Total Investments in Short-Term
Obligations (Cost--$25,592,135) 25,594,190 5.38
Total Investments (Cost--$465,769,864) 467,375,603 98.30
Unrealized Depreciation on Forward Foreign Exchange Contracts** (652,308) (0.13)
Variation Margin on Financial Futures Contracts*** (89,189) (0.02)
Other Assets Less Liabilities 8,806,499 1.85
------------ -------
Net Assets $475,440,605 100.00%
============ =======
<FN>
(a)Security held as collateral in connection with open financial
futures contracts.
*Commercial Paper and certain 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.
**Forward foreign exchange contracts as of December 31, 1996 were as
follows:
Unrealized
Expiration Depreciation
Foreign Currency Sold Date (Note 1b)
Dkr 248,000,000 January 1997 $ (409,259)
DM 40,000,000 January 1997 (32,052)
Lit 31,000,000 January 1997 (169,587)
Skr 85,000,000 January 1997 (30,504)
YEN 4,020,000,000 January 1997 (10,906)
Total Unrealized Depreciation on
Forward Foreign Exchange Contracts
(US$ Commitment--$167,756,863) $ (652,308)
============
***Financial futures contracts sold as of December 31, 1996 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1b)
75 Italian BTP LIFFE March 1997 $ 12,784,456
530 UK Gilts LIFFE March 1997 49,841,485
(Total Contract Price--($62,115,968) $ 62,625,941
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$465,769,864)
(Note 1a) $ 467,375,603
Cash 10,632
Foreign cash (Note 1c) 2,455,159
Receivables:
Securities sold $ 17,124,878
Interest 11,172,347
Beneficial interest sold 1,487,899
Forward foreign exchange contracts (Note 1b) 1,051,735 30,836,859
--------------
Prepaid registration fees and other assets (Note 1f) 64,381
--------------
Total assets 500,742,634
--------------
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1b) 652,308
Payables:
Securities purchased 18,956,107
Beneficial interest redeemed 3,750,105
Dividends to shareholders (Note 1g) 984,100
Investment adviser (Note 2) 244,458
Distributor (Note 2) 240,485
Variation margin (Note 1b) 89,189 24,264,444
--------------
Accrued expenses and other liabilities 385,277
--------------
Total liabilities 25,302,029
--------------
Net Assets: Net assets $ 475,440,605
==============
<PAGE>
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 762,688
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 3,636,237
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 97,860
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 478,213
Paid-in capital in excess of par 499,914,314
Accumulated realized capital losses on investments and
foreign currency transactions--net (Note 6) (29,915,740)
Unrealized appreciation on investments and foreign
currency transactions--net 467,033
--------------
Net assets $ 475,440,605
==============
Net Asset Value: Class A--Based on net assets of $72,875,535 and 7,626,885
shares of beneficial interest outstanding $ 9.56
==============
Class B--Based on net assets of $347,529,477 and
36,362,368 shares of beneficial interest
outstanding $ 9.56
==============
Class C--Based on net assets of $9,350,823 and 978,595
shares of beneficial interest outstanding $ 9.56
==============
Class D--Based on net assets of $45,684,770 and 4,782,133
shares of beneficial interest outstanding $ 9.55
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Year Ended December 31, 1996
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $513,941 foreign
(Notes 1d & 1e): withholding tax) $ 38,314,878
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 3,344,107
Investment advisory fees (Note 2) 3,323,159
Transfer agent fees--Class B (Note 2) 807,954
Custodian fees 193,902
Accounting services (Note 2) 140,282
Printing and shareholder reports 130,927
Transfer agent fees--Class A (Note 2) 121,896
Registration fees (Note 1f) 99,499
Account maintenance and distribution fees--Class C (Note 2) 78,131
Professional fees 72,697
Account maintenance fees--Class D (Note 2) 44,099
Trustees' fees and expenses 38,298
Transfer agent fees--Class D (Note 2) 22,768
Transfer agent fees--Class C (Note 2) 20,966
Other 8,131
--------------
Total expenses 8,446,816
--------------
Investment income--net 29,868,062
--------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 8,171,550
(Loss) on Foreign currency transactions--net (6,799,860) 1,371,690
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (5,909,310)
(Notes 1b, 1c, Foreign currency transactions--net 1,894,884 (4,014,426)
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and
foreign currency transactions (2,642,736)
--------------
Net Increase in Net Assets Resulting from Operations $ 27,225,326
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 29,868,062 $ 42,003,844
Realized gain on investments and foreign currency
transactions--net 1,371,690 18,709,618
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (4,014,426) 25,169,899
-------------- --------------
Net increase in net assets resulting from operations 27,225,326 85,883,361
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (4,866,475) (3,973,225)
Shareholders Class B (23,481,682) (23,553,473)
(Note 1f): Class C (505,409) (302,479)
Class D (1,014,496) (159,774)
Return of capital--net:
Class A -- (1,989,511)
Class B -- (11,793,918)
Class C -- (151,461)
Class D -- (80,003)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (29,868,062) (42,003,844)
-------------- --------------
<PAGE>
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (162,547,147) (200,436,449)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (165,189,883) (156,556,932)
Beginning of year 640,630,488 797,187,420
-------------- --------------
End of year $ 475,440,605 $ 640,630,488
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.54 $ 8.96 $ 10.03 $ 9.79 $ 10.38
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .56 .59 .55 .70 .77
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .02 .58 (1.07) .56 .01
--------- --------- --------- --------- ---------
Total from investment operations .58 1.17 (.52) 1.26 .78
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.56) (.39) (.24) (.67) (1.14)
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 (.56) (.59) (.55) (1.02) (1.37)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
========= ========= ========= ========= =========
<PAGE>
Total Investment Based on net asset value per share 6.42% 13.39% (5.29%) 13.21% 7.83%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .87% .86% .84% .82% .84%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 6.02% 6.31% 5.84% 6.44% 12.24%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 72,876 $ 85,610 $ 90,823 $ 108,241 $ 61,131
Data: ========= ========= ========= ========= =========
Portfolio turnover 1234.05% 512.75% 405.00% 419.99% 235.11%
========= ========= ========= ========= =========
<FN>
*Total investment returns exclude the effects of sales
loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.54 $ 8.96 $ 10.03 $ 9.79 $ 10.39
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .49 .51 .47 .60 .70
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .02 .58 (1.07) .58 (.01)
--------- --------- --------- --------- ---------
Total from investment operations .51 1.09 (.60) 1.18 .69
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.49) (.34) (.20) (.59) (1.06)
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 (.49) (.51) (.47) (.94) (1.29)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
========= ========= ========= ========= =========
<PAGE>
Total Investment Based on net asset value per share 5.60% 12.52% (6.01%) 12.36% 6.91%
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.65% 1.64% 1.61% 1.58% 1.61%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.25% 5.56% 5.06% 5.72% 11.67%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 347,529 $ 540,887 $ 700,995 $ 897,150 $ 637,834
Data: ========= ========= ========= ========= =========
Portfolio turnover 1234.05% 512.75% 405.00% 419.99% 235.11%
========= ========= ========= ========= =========
<FN>
*Total investment returns exclude the effects 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
The following per share data and ratios have Period Period
been derived from information provided in the Oct. 21, Oct. 21,
financial statements. For the Year 1994++ to For the Year 1994++ to
Ended December 31, Dec. 31, Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 9.54 $ 8.96 $ 9.21 $ 9.54 $ 8.96 $ 9.21
Performance: -------- -------- -------- -------- -------- --------
Investmentincome--net .48 .51 .09 .54 .56 .10
Realized and unrealized gain
(loss) on investments and
foreign currency transactions
--net .02 .58 (.25) .01 .58 (.25)
-------- -------- -------- -------- -------- --------
Total from investment
operations .50 1.09 (.16) .55 1.14 (.15)
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment income--net (.48) (.34) (.03) (.54) (.37) (.04)
Return of capital--net -- (.17) (.05) -- (.19) (.05)
In excess of realized
gain on investments--net -- -- (.01) -- -- (.01)
-------- -------- -------- -------- -------- --------
Total dividends and
distributions (.48) (.51) (.09) (.54) (.56) (.10)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 9.56 $ 9.54 $ 8.96 $ 9.55 $ 9.54 $ 8.96
======== ======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value
Return:** per share 5.51% 12.44% (1.73%)+++ 6.05% 13.11% (1.62%)+++
======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.73% 1.71% 1.69%* 1.08% 1.11% 1.12%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 5.16% 5.44% 5.20%* 5.74% 6.07% 5.81%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 9,351 $ 8,468 $ 3,614 $ 45,685 $ 5,665 $ 1,755
======== ======== ======== ======== ======== ========
Portfolio turnover 1234.05% 512.75% 405.00% 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
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 mar-
kets. 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.
* 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 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.
<PAGE>
* 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. A portion of the
ordinary income distributions paid by the Fund during the fiscal
year ended December 31, 1995 is characterized as a return of
capital.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$6,599,997 have been reclassified between accumulated net realized
capital losses and 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.
<PAGE>
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:
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 year ended December 31, 1996, 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 $ 656 $ 5,677
Class D $2,761 $30,467
<PAGE>
For the year ended December 31, 1996, MLPF&S received contingent
deferred sales charges of $877,464 and $5,199 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$786 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
During the year ended December 31, 1996, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $212 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 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, 1996 were $6,431,445,070 and
$6,581,083,032, respectively.
Net realized and unrealized gains (losses) as of December 31, 1996
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ 15,022,553 $ 1,603,684
Short-term 55,223 2,055
Financial futures (6,906,226) (509,973)
------------ ------------
Total investments 8,171,550 1,095,766
------------ ------------
Currency transactions:
Foreign currency
transactions (4,816,159) 23,575
Forward foreign exchange
contracts (1,983,701) (652,308)
------------ ------------
Total currency transactions (6,799,860) (628,733)
------------ ------------
Total $ 1,371,690 $ 467,033
============ ============
<PAGE>
As of December 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $948,836 of which $6,431,120 related
to appreciated securities and $5,482,284 related to depreciated
securities. The aggregate cost of investments at December 31, 1996
for Federal income tax purposes was $466,426,767.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $162,547,147 and $200,436,449 for the years ended
December 31, 1996 and December 31, 1995, respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
Shares sold 2,910,360 $ 27,329,155
Shares issued to share-
holdersin 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 A Shares for the
Year Ended Dollar
December 31, 1995 Shares Amount
Shares sold 6,380,202 $ 59,357,067
Shares issued to shareholders
in reinvestment of dividends
and distributions 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)
============ ============
Class B Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
<PAGE>
Shares sold 3,714,398 $ 34,748,286
Shares issued to share-
holders 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)
============= =============
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
and distributions 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 C Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
Shares sold 601,459 $ 5,622,361
Shares issued to share-
holders 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 C Shares for the
Year Ended Dollar
December 31, 1995 Shares Amount
<PAGE>
Shares sold 1,343,650 $ 12,395,671
Shares issued to shareholders
in reinvestment of dividends
and distributions 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 D Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
Shares sold 1,000,673 $ 9,338,179
Automatic conversion
of shares 4,503,683 41,935,909
Shares issued to shareholders
in reinvestment of dividends 82,130 775,174
------------ ------------
Total issued 5,586,486 52,049,262
Shares redeemed (1,398,232) (13,082,194)
------------ ------------
Net increase 4,188,254 $ 38,967,068
============ ============
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
and distributions 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
============ ============
5. Commitments:
On December 31, 1996, 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 sell foreign currency with
the approximate value of $15,956,000.
<PAGE>
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.
<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,
1996, 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.
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, 1996, 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, 1996, 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.
<PAGE>
Deloitte & Touche LLP
Princeton, New Jersey
February 3, 1997
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
During the 1996 calendar year, a portion of the ordinary income for
Merrill Lynch Global Bond Fund for Investment and Retirement was
derived from foreign sources. The foreign source income has taxes
associated with it that were paid by the Fund to various foreign
jurisdictions. The Fund has qualified to "pass-through" the foreign
taxes to its shareholders. Accordingly, you may elect to deduct your
portion of the taxes in computing your individual taxable income.
Alternatively, it may be beneficial for you to elect to forego the
deduction and to take a credit against your tax liability. These
deductions or credits may be subject to limitations under the tax
law; please consult your tax adviser regarding the appropriate
treatment of foreign taxes paid.
Of the monthly cash distributions paid by the Fund during its
taxable year ended December 31, 1996, 77.9% represents income from
foreign sources. Additionally, 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 1.7207%
multiplied by the cash distributions paid from January through
December.
There were no long-term capital gains distributed during the 1996
calendar year.
Please retain this information for your records.
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
Sean J. Casey, Vice President
Robert J. Parish, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
State Street Bank and Trust Company
P.O. Box 351
225 Franklin Street
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
