MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Semi-Annual Report
June 30, 1998
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.
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
Bar graph depicting Type of Issues* as a percentage of net assets
as of June 30, 1998
US Government Obligations 0.41%
Financial Services 42.28%
Sovereign Government Obligations 36.22%
Industrials 13.74%
Commercial Paper 0.37%
Pie graph depicting Geographical Diversification* as a percentage
of net assets as of June 30, 1998
Denmark 12.01%
Thailand 4.16%
Germany 10.09%
United Kingdom 15.76%
Canada 3.63%
Greece 1.89%
Japan 11.60%
Finland 2.48%
Poland 1.73%
Italy 8.60%
United States 21.07%
Bar graph depicting Maturity of Investments* as a percentage of net
assets as of June 30, 1998
5 yrs--10 yrs 33.55%
10 yrs + 36.00%
6 months--5 yrs 30.45%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
DEAR SHAREHOLDER
During the quarter ended June 30, 1998, global Group of Seven
Industrialized Nation (G-7) bond markets maintained relatively
narrow trading ranges, despite experiencing stronger economic growth
and bottoming inflation in the United States and core European
economies. As global yields appeared to be moving higher,
instability in emerging markets and weakness in global stock markets
allowed core markets to maintain their demand. In addition,
narrowing interest rate differentials and the advent of a unified
Europe propelled European currencies higher relative to the US
dollar. Correspondingly, we kept a relatively neutral duration and
currency exposure as compared to our benchmark index.
In an environment characterized by continued turmoil in Southeast
Asia and Russia, a recession in Japan and an increase in risk
premiums in emerging markets, we upgraded the Fund's fixed-income
positions during the June quarter. We reduced our longer-term
corporate holdings in favor of more liquid positions; at the same
time, we retained our longer-maturity positions in markets that
possessed positive inflationary fundamentals. We believe the Asian
crisis is likely to negatively impact G-7 growth and improve
inflationary demographics. At June 30, 1998, we retained a slightly
overweighted position in the United States relative to Europe in
terms of duration.
Market Review
North America
US bonds remained in a narrow range in recent months. The bond
market continued to fluctuate between strong domestic data and
external factors related to the Asian financial crisis. First
calendar quarter of 1998 gross domestic product (GDP) surged to
4.8%, led by an extremely strong housing sector and strong consumer
demand. In addition, tight labor markets continued to be a concern,
since the employment cost index for the first quarter of 1998 was up
3.3% from the first quarter of 1997, while the unemployment rate in
April fell to a 28-year low of 4.3%. Inflationary reports have been
benign, helped by declining commodity and oil prices. We expect to
maintain the Fund's overweighted duration in the United States,
since we expect second-quarter GDP to have slowed dramatically
because of a large inventory build up in the first quarter and
moderating consumer demand. In addition, we believe the markets
should be supported by the reduction of Government debt issuance and
by reduced public spending. We will continue to monitor the US
economy closely for any evidence of reduced growth or an increase in
inflation.
In Canada, economic growth appeared to be moderating slightly with
first calendar quarter GDP falling to 3.7% from 3.9% in the fourth
quarter of 1997. The 50 basis point (0.50%) hike in short-term
interest rates to support the weak Canadian dollar, combined with
the fallout from the Asian financial crisis, has helped to moderate
economic growth. Retail sales levels fell to a more sustainable
4%--5% range. Even with inflationary numbers at or below the bottom
of the 1%--3% target band, the Bank of Canada expressed that it
would raise interest rates further if the Canadian dollar
experienced additional downward pressure. Once the currency
stabilizes, we expect to look to add to our Canadian exposure.
Europe
As 1998 has progressed, European economic growth continued
relatively unhindered, with real GDP in the European Union bloc
approximating 2.5%. However, the engine of growth shifted to include
the domestic demand sector, along with the export sector, with final
demand negligibly affected by the Asian economic crisis. Consumer
confidence continues to rise across Europe, which has been helped
regionwide by a decline in unemployment. Economic growth has not
adversely impacted the favorable inflation scenario, but a trough in
inflation may have been seen. As weak oil prices have played a large
role in reducing European inflation during 1997, stable-to-higher
oil prices may result in a modest inflation increase. Consequently,
European bond markets continued to trade firmly thus far in 1998,
with European Monetary Union (EMU) convergence trades still trending
toward the narrow end of respective trading ranges. We maintained
our positions in Italy since we expect interest rates to converge
further. Monetary policy in core European markets may rise modestly
while short-term interest rates in the peripheral economies may
continue to be reduced as the EMU convergence process continues.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
The first round entrants in the European Union were announced in
May. As expected, 11 countries will be included. We added positions
in Greece since we anticipate a Greek entry in the next round of EMU
entrants. With growth essential to a unified Europe, the economic
recovery that started in the smaller countries, especially the
Scandinavian countries, now appears to be spilling into the core
countries. In addition, since exchange rates are fixed, we believe
short-term interest rates should converge. The convergence should be
in the form of peripheral European bond markets converging to the
core at approximately 3.5%--4%. Relatively low nominal interest
rates, negligible effects from the Asian crisis and reduced fiscal
constraint should continue to provide growth for European economies.
Pacific Basin
As the Asian currency crisis persisted, both the New Zealand and the
Australian currencies remained under pressure. With economic growth
in both countries potentially negatively impacted by the deepening
recession in Asia, we purchased government bonds in New Zealand at a
100 basis point spread to comparable US Treasury securities, fully
hedged to the US dollar. Problems in Indonesia continued, with
social unrest forcing the resignation of President Suharto. It
appeared that the problems in Indonesia stabilized slightly when
Vice President Habibie replaced Suharto. However, we remain very
cautious of Indonesia and Southeast Asia in general.
In Japan, the yen continued to trade weaker against the US dollar as
it ended the period just below the YEN 140 level. The Japanese
government finally announced the long-awaited details of its latest
fiscal stimulus package of 16 trillion yen spread over two years.
The majority of the package focused on public works spending, which
the government believes will add approximately 3% to GDP. However,
investors were disappointed that no permanent tax cuts were
announced. Economic data in Japan are still deteriorating with
unemployment rising to a post World War II record high of 4.1%.
Japanese government bond yields hit new lows with consumer sentiment
deteriorated because of a rising level of bankruptcies and declining
employment prospects. We expect to remain exposed to Japanese bonds,
as the recession appears to be deepening.
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 with you again in our next report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paolo Valle)
Paolo Valle
Senior Vice President and Portfolio Manager
August 3, 1998
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" 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.
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/ Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 6/30/98
<S> <C> <C> <C> <C>
ML Global Bond Fund, Inc. Class A Shares +9.28% +2.60% +118.58% 4.46%
ML Global Bond Fund, Inc. Class B Shares +8.31 +2.40 +111.18 3.87
ML Global Bond Fund, Inc. Class C Shares +8.26 +2.28 + 21.96 3.82
ML Global Bond Fund, Inc. Class D Shares +8.89 +2.43 + 24.68 4.22
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/inception dates are: Class A Shares, 10/25/88; and
Class B Shares, ten years ended 6/30/98; and Class C and Class D
Shares, 10/21/94.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/98 +9.28% +4.90%
Five Years Ended 6/30/98 +4.96 +4.11
Inception (10/25/88)
through 6/30/98 +8.41 +7.96
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/98 +8.31% +4.31%
Five Years Ended 6/30/98 +4.13 +4.13
Ten Years Ended 6/30/98 +7.76 +7.76
[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*
Year Ended 6/30/98 +8.26% +7.26%
Inception (10/21/94)
through 6/30/98 +5.53 +5.53
[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 6/30/98 +8.89% +4.53%
Inception (10/21/94)
through 6/30/98 +6.16 +4.99
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
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
Paolo Valle, Senior Vice President
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Lawrence A. Rogers, Secretary
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
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
Canada
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign NZ$ 14,250,000 Canadian Government Bond 6.625% 10/03/2007 $ 7,239,013 3.63%
Government
Obligations
Total Investments in Canada
(Cost--$8,602,745) 7,239,013 3.63
Denmark
Financial US$ 8,250,000 Den Danske Bank A/S (b) 7.40 6/15/2010 8,787,339 4.41
Services Dkr 43,297,000 Nykredit A/S 6.00 10/01/2026 6,280,679 3.15
Sovereign 60,000,000 Denmark Government Bonds 9.00 11/15/1998 8,874,727 4.45
Government
Obligations
Total Investments in Denmark
(Cost--$23,534,211 ) 23,942,745 12.01
Finland
Sovereign YEN 581,000,000 Republic of Finland 6.00 1/29/2002 4,934,957 2.48
Government
Obligations
Total Investments in Finland
(Cost--$5,413,832) 4,934,957 2.48
Germany
Financial DM 13,250,000 Deutsche Ausgleichbank 6.00 7/04/2007 7,796,449 3.91
Services
Sovereign 6,100,000 Bundesrepublik Deutschland 6.00 7/04/2007 3,679,193 1.84
Government 15,000,000 Land Baden-Wuerttemberg 5.75 1/19/2028 8,653,335 4.34
Obligations
Total Investments in Germany
(Cost--$19,407,374) 20,128,977 10.09
Greece
Sovereign GRD 1,106,500,000 Hellenic Republic 13.30 12/27/2002 3,759,510 1.89
Government
Obligations
Total Investments in Greece
(Cost--$3,810,478) 3,759,510 1.89
Italy
Sovereign Lit 1,000,000,000 Buoni Poliennali Del Tesoro
Government (Italian Government Bond) 10.50 11/01/1998 572,088 0.29
Obligations 23,850,000,000 Buoni Poliennali Del Tesoro
(Italian Government Bond) 10.00 8/01/2003 16,571,965 8.31
Total Investments in Italy
(Cost--$17,023,706) 17,144,053 8.60
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
Japan
<S> <S> <C> <S> <C> <C> <C> <C>
Financial YEN 990,000,000 African Development Bank 6.20% 6/18/2002 $ 8,661,875 4.34%
Services
Sovereign 1,720,000,000 Japanese Government Bond 5.00 9/20/2002 14,474,215 7.26
Government
Obligations
Total Investments in Japan
(Cost--$24,205,484) 23,136,090 11.60
Poland
Sovereign PLN 14,000,000 Poland Government Bonds 12.00 6/12/2003 3,445,258 1.73
Government
Obligations
Total Investments in Poland
(Cost--$3,423,581) 3,445,258 1.73
Thailand
Industrials US$ 9,550,000 PTTEP International Limited (b) 7.625 10/01/2006 8,285,418 4.16
Total Investments in Thailand
(Cost--$9,741,865) 8,285,418 4.16
United Kingdom
Financial Pound 8,300,000 Friends Professional Finance PLC 9.125 ++ 15,190,474 7.62
Services Sterling
DM 13,250,000 Union Bank of Switzerland 5.75 3/12/2007 7,510,193 3.77
Industrials 1,000,000 BOC Group PLC 7.25 6/07/2002 1,665,363 0.84
3,000,000 British Airways PLC 7.875 2/10/2007 5,349,378 2.68
1,000,000 Vodafone Group PLC 7.875 11/06/2001 1,698,852 0.85
Total Investments in the United Kingdom
(Cost--$30,141,312) 31,414,260 15.76
United States
Financial US$ 3,000,000 Associates Corp. of North America 7.375 6/11/2007 3,195,000 1.60
Services 8,500,000 Comerica Bank 7.875 9/15/2026 9,729,695 4.88
DM 10,600,000 Ford Motor Credit Co. 5.25 6/16/2008 5,845,502 2.93
US$ 5,000,000 Mellon Capital II 7.995 1/15/2027 5,431,650 2.72
5,250,000 PNC Institution Capital Bank (b) 8.315 5/15/2027 5,886,982 2.95
Industrials 10,000,000 Phelps Dodge Corporation 7.125 11/01/2027 10,378,300 5.21
Total Investments in the United States
(Cost--$38,534,363) 40,467,129 20.29
Total Investments in Long-Term Obligations
(Cost--$183,838,951) 183,897,410 92.24
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Short-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Commercial US$ 730,000 General Motors Acceptance Corp. 6.50 % 7/01/1998 $ 730,000 0.37%
Paper*
US Government 100,000 United States Treasury Bill (a) 4.93 9/24/1998 98,857 0.05
Obligations* 730,000 United States Treasury Bill (a) 4.95 9/24/1998 721,656 0.36
Total Investments in Short-Term Obligations
(Cost--$1,550,304) 1,550,513 0.78
Currency Call Options Written
<CAPTION>
Nominal Value
Covered by Options Issue
<C> <S> <C> <C>
10,000,000 Deutschemark, expiring July 1998 at DM1.79 (7,000) 0.00
10,900,000 Japanese Yen, expiring July 1998 at YEN 135 (9,265) (0.01)
Total Currency Call Options Written
(Premiums Received--$12,720) (16,265) (0.01)
Total Investments, Net of Options Written (Cost--$185,376,535) 185,431,658 93.01
Unrealized Appreciation on Forward Foreign Exchange Contracts** 138,002 0.07
Variation Margin on Financial Futures Contracts*** (5,331) 0.00
Other Assets Less Liabilities 13,812,499 6.92
------------ -------
Net Assets $199,376,828 100.00%
============ =======
<FN>
(a)Portion of securities held as collateral in connection with open
financial futures contracts.
(b)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
++The security is a perpetual bond and has no stated maturity date.
*Commercial Paper and certain USGovernment 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 June 30, 1998 were as
follows:
Unrealized
Appreciation
Expiration (Depreciation)
Foreign Currency Sold Date (Note 1b)
DM 25,024,186 July 1998 $ 26,561
Pound 6,126,328 July 1998 13,814
Sterling
NZ$ 13,554,107 July 1998 (116,701)
YEN 1,533,000,000 July 1998 (127,803)
Total (US$ Commitment--$42,010,561) (204,129)
------------
Foreign Currency Purchased
DM 14,300,097 July 1998 205
NZ$ 13,447,069 July 1998 61,319
YEN 1,528,800,000 July 1998 280,607
Total (US$ Commitment--$25,629,544) 342,131
------------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $ 138,002
============
***Financial futures contracts sold as of June 30, 1998 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Note 1b)
29 UK Gilt LIFFE September 1998 $ 5,258,645
56 US Treasury Bonds CBT September 1998 6,921,250
Total Financial Futures Contracts Sold
(Total Contract Price--$12,106,943) $12,179,895
===========
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$185,389,255) (Note 1a) $ 185,447,923
Unrealized appreciation on forward foreign exchange contracts
(Note 1b) 138,002
Cash 282,311
Foreign cash (Note 1c) 5,978,917
Receivables:
Interest $ 4,874,050
Securities sold 4,268,684
Beneficial interest sold 119,449
Options written 8,720 9,270,903
-------------
Prepaid registration fees and other assets (Note 1f) 61,012
-------------
Total assets 201,179,068
-------------
Liabilities: Options written, at value (premiums received--$12,720)
(Notes 1a & 1b) 16,265
Payables:
Beneficial interest redeemed 961,479
Dividends to shareholders (Note 1g) 337,155
Investment adviser (Note 2) 100,252
Distributor (Note 2) 89,876
Variation margin (Note 1b) 5,331 1,494,093
-------------
Accrued expenses and other liabilities 291,882
-------------
Total liabilities 1,802,240
-------------
Net Assets: Net assets $ 199,376,828
=============
Net Assets Class A Shares of beneficial interest, $0.10 par value, unlimited number
Consist of: of shares authorized $ 270,321
Class B Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 1,335,707
Class C Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 18,423
Class D Shares of beneficial interest, $0.10 par value, unlimited number
of shares authorized 520,130
Paid-in capital in excess of par 232,170,989
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (35,167,961)
Unrealized appreciation on investments and foreign currency
transactions--net 229,219
-------------
Net assets $ 199,376,828
-------------
Net Asset Value: Class A--Based on net assets of $25,127,178 and 2,703,207 shares
of beneficial interest outstanding $ 9.30
=============
Class B--Based on net assets of $124,195,969 and 13,357,070 shares
of beneficial interest outstanding $ 9.30
=============
Class C--Based on net assets of $1,712,206 and 184,226 shares
of beneficial interest outstanding $ 9.29
=============
Class D--Based on net assets of $48,341,475 and 5,201,301 shares
of beneficial interest outstanding $ 9.29
=============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended June 30, 1998
<S> <S> <C> <C>
Investment Income Interest and discount earned $ 7,149,025
(Notes 1d & 1e):
Expenses: Investment advisory fees (Note 2) $ 651,332
Account maintenance and distribution fees--Class B (Note 2) 526,026
Transfer agent fees--Class B (Note 2) 132,084
Accounting services (Note 2) 88,051
Account maintenance fees--Class D (Note 2) 61,394
Printing and shareholder reports 51,155
Professional fees 39,340
Transfer agent fees--Class D (Note 2) 39,132
Registration fees (Note 1f) 33,841
Transfer agent fees--Class A (Note 2) 20,538
Custodian fees 19,864
Trustees' fees and expenses 19,824
Account maintenance and distribution fees--Class C (Note 2) 7,937
Transfer agent fees--Class C (Note 2) 1,902
Pricing services 390
Other 3,216
-------------
Total expenses 1,696,026
-------------
Investment income--net 5,452,999
-------------
Realized & Realized gain from:
Unrealized Gain Investments--net 3,295,802
(Loss) on Foreign currency transactions--net 2,353,438 5,649,240
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (258,253)
(Notes 1b, 1c, Foreign currency transactions--net (881,722) (1,139,975)
1e & 3): ------------- -------------
Net realized and unrealized gain on investments and
foreign currency transactions 4,509,265
-------------
Net Increase in Net Assets Resulting from Operations $ 9,962,264
=============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
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: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 5,452,999 $ 17,327,991
Realized gain (loss) on investments and foreign currency
transactions--net 5,649,240 (23,718,229)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (1,139,975) 902,161
------------- -------------
Net increase (decrease) in net assets resulting from operations 9,962,264 (5,488,077)
------------- -------------
Dividends and Investment income--net:
Distributions to Class A (719,229) (695,428)
Shareholders Class B (3,375,728) (3,018,723)
(Note 1g): Class C (47,177) (56,943)
Class D (1,310,865) (740,128)
Return of capital--net:
Class A -- (1,975,770)
Class B -- (8,576,451)
Class C -- (161,780)
Class D -- (2,102,768)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (5,452,999) (17,327,991)
------------- -------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (45,322,503) (212,434,471)
Transactions ------------- -------------
(Note 4):
Net Assets: Total decrease in net assets (40,813,238) (235,250,539)
Beginning of period 240,190,066 475,440,605
------------- -------------
End of period $ 199,376,828 $ 240,190,066
============= =============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
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: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .26 .54 .56 .59 .55
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .18 (.44) .02 .58 (1.07)
--------- --------- --------- --------- ---------
Total from investment operations .44 .10 .58 1.17 (.52)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.26) (.14) (.56) (.39) (.24)
Return of capital--net -- (.40) -- (.20) (.28)
In excess of realized gain on
investments--net -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total dividends and distributions (.26) (.54) (.56) (.59) (.55)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.30 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.81%+++ 1.19% 6.42% 13.39% (5.29%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses .99%* .96% .87% .86% .84%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.59%* 5.83% 6.02% 6.31% 5.84%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 25,127 $ 27,522 $ 72,876 $ 85,610 $ 90,823
Data: ========= ========= ========= ========= =========
Portfolio turnover 72.49% 699.63% 1234.05% 512.75% 405.00%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
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: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .22 .47 .49 .51 .47
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .18 (.44) .02 .58 (1.07)
--------- --------- --------- --------- ---------
Total from investment operations .40 .03 .51 1.09 (.60)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.22) (.13) (.49) (.34) (.20)
Return of capital--net -- (.34) -- (.17) (.24)
In excess of realized gain on
investments--net -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total dividends and distributions (.22) (.47) (.49) (.51) (.47)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.30 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.41%+++ .41% 5.60% 12.52% (6.01%)
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.77%* 1.73% 1.65% 1.64% 1.61%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.81%* 5.07% 5.25% 5.56% 5.06%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 124,196 $ 160,571 $ 347,529 $ 540,887 $ 700,995
Data: ========= ========= ========= ========= =========
Portfolio turnover 72.49% 699.63% 1234.05% 512.75% 405.00%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the
For the Period
The following per share data and ratios have been derived Six Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
June 30, For the Year Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 9.21
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .22 .46 .48 .51 .09
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .17 (.44) .02 .58 (.25)
--------- --------- --------- --------- ---------
Total from investment operations .39 .02 .50 1.09 (.16)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.22) (.12) (.48) (.34) (.03)
Return of capital--net -- (.34) -- (.17) (.05)
In excess of realized gain on
investments--net -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.22) (.46) (.48) (.51) (.09)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.29 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.27%+++ .33% 5.51% 12.44% (1.73%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.83%* 1.82% 1.73% 1.71% 1.69%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.75%* 4.94% 5.16% 5.44% 5.20%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 1,712 $ 2,284 $ 9,351 $ 8,468 $ 3,614
Data: ========= ========= ========= ========= =========
Portfolio turnover 72.49% 699.63% 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>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
For the Period
The following per share data and ratios have been derived Six Months Oct. 21,
from information provided in the financial statements. Ended 1994++ to
June 30, For the Year Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1998 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.11 $ 9.55 $ 9.54 $ 8.96 $ 9.21
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .24 .51 .54 .56 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .18 (.44) .01 .58 (.25)
--------- --------- --------- --------- ---------
Total from investment operations .42 .07 .55 1.14 (.15)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.24) (.13) (.54) (.37) (.04)
Return of capital--net -- (.38) -- (.19) (.05)
In excess of realized gain on
investments--net -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.24) (.51) (.54) (.56) (.10)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.29 $ 9.11 $ 9.55 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 4.68%+++ .94% 6.05% 13.11% (1.62%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.24%* 1.19% 1.08% 1.11% 1.12%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.34%* 5.66% 5.74% 6.07% 5.81%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 48,342 $ 49,813 $ 45,685 $ 5,665 $ 1,755
Data: ========= ========= ========= ========= =========
Portfolio turnover 72.49% 699.63% 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>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
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. 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.
* 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.
* 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.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
* 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 currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various
rates.
(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 year ended
December 31, 1997 is characterized as a return of capital.
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 ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), 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 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.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended June 30, 1998, MLFD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class D Shares as
follows:
MLFD MLPF&S
Class A $ 1 $ 11
Class D $235 $2,609
For the six months ended June 30, 1998, MLPF&S received contingent
deferred sales charges of $88,656 and $10 relating to transactions
in Class B and Class C Shares, respectively.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
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, PFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended June 30, 1998 were $144,981,568 and
$194,935,545, respectively.
Net realized gains (losses) for the six months ended June 30, 1998
and net unrealized gains (losses) as of June 30, 1998 were as
follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ 2,169,228 $ 58,459
Short-term (29) 209
Financial futures 1,126,603 (72,952)
------------ ------------
Total investments 3,295,802 (14,284)
------------ ------------
Currency transactions:
Options written (735,814) (3,545)
Options purchased (55,680) --
Foreign currency
transactions (1,069,259) 109,046
Forward foreign exchange
contracts 4,214,191 138,002
------------ ------------
Total currency transactions 2,353,438 243,503
------------ ------------
Total $ 5,649,240 $ 229,219
============ ============
Transactions in call options written for the six months ended June
30, 1998 were as follows:
Nominal Value
Covered by Premiums
Written Options Received
Outstanding call options
written, beginning of period -- --
Options written 488,140,000 $ 399,580
Options exercised (70,900,000) (65,100)
Options closed (9,000,000) --
Options expired (387,340,000) (321,760)
------------ ------------
Outstanding call options
written at end of period 20,900,000 $ 12,720
============ ============
Transactions in put options written for the six months ended June
30, 1998 were as follows:
Nominal Value
Covered by Premiums
Written Options Received
Outstanding put options
written, beginning of period -- --
Options written 297,394,250 $ 214,391
Options exercised (54,511,371) (43,039)
Options expired (242,882,879) (171,352)
------------ ------------
Outstanding put options
written at end of period -- $ --
============ ============
As of June 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $58,668, of which $4,773,822 related to
appreciated securities and $4,715,154 related to depreciated
securities. The aggregate cost of investments at June 30, 1998 for
Federal income tax purposes was $185,389,255.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $45,322,503 and $212,434,471 for the six months
ended June 30, 1998 and for the year ended December 31, 1997,
respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the Six Dollar
Months Ended June 30, 1998 Shares Amount
Shares sold 243,321 $ 2,256,703
Shares issued to shareholders
in reinvestment of dividends 38,879 360,824
------------ -------------
Total issued 282,200 2,617,527
Shares redeemed (598,145) (5,531,295)
------------ -------------
Net decrease (315,945) $ (2,913,768)
============ =============
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1998
Class A Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 3,694,319 $ 33,685,367
Shares issued to shareholders
in reinvestment of dividends 180,724 1,638,796
------------ -------------
Total issued 3,875,043 35,324,163
Shares redeemed (8,482,776) (77,078,971)
------------ -------------
Net decrease (4,607,733) $ (41,754,808)
============ =============
Class B Shares for the Six Dollar
Months Ended June 30, 1998 Shares Amount
Shares sold 304,441 $ 2,817,723
Shares issued to shareholders
in reinvestment of dividends 199,800 1,854,858
------------ -------------
Total issued 504,241 4,672,581
Automatic conversion of
shares (592,961) (5,488,705)
Shares redeemed (4,162,841) (38,536,403)
------------ -------------
Net decrease (4,251,561) $ (39,352,527)
============ =============
Class B Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 897,547 $ 8,127,728
Shares issued to shareholders
in reinvestment of dividends 761,712 6,915,601
------------ -------------
Total issued 1,659,259 15,043,329
Automatic conversion of
shares (2,417,865) (22,283,071)
Shares redeemed (17,995,131) (163,058,496)
------------ -------------
Net decrease (18,753,737) $(170,298,238)
============ =============
Class C Shares for the Six Months Dollar
Ended June 30, 1998 Shares Amount
Shares sold 159,332 $ 1,480,615
Shares issued to shareholders
in reinvestment of dividends 3,438 31,911
------------ -------------
Total issued 162,770 1,512,526
Shares redeemed (229,044) (2,125,427)
------------ -------------
Net decrease (66,274) $ (612,901)
============ =============
Class C Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 411,159 $ 3,761,283
Shares issued to shareholders
in reinvestment of dividends 16,571 150,469
------------ -------------
Total issued 427,730 3,911,752
Shares redeemed (1,155,825) (10,491,575)
------------ -------------
Net decrease (728,095) $ (6,579,823)
============ =============
Class D Shares for the Six Dollar
Months Ended June 30, 1998 Shares Amount
Shares sold 37,571 $ 347,020
Automatic conversion of
shares 593,092 5,488,705
Shares issued to shareholders
in reinvestment of dividends 87,872 815,559
------------ -------------
Total issued 718,535 6,651,284
Shares redeemed (982,297) (9,094,591)
------------ -------------
Net decrease (263,762) $ (2,443,307)
============ =============
Class D Shares for the Year Dollar
Ended December 31, 1997 Shares Amount
Shares sold 350,683 $ 3,202,335
Automatic conversion of
shares 2,454,027 22,283,071
Shares issued to shareholders
in reinvestment of dividends 209,279 1,899,301
------------ -------------
Total issued 3,013,989 27,384,707
Shares redeemed (2,331,059) (21,186,309)
------------ -------------
Net increase 682,930 $ 6,198,398
============ =============
5. Capital Loss Carryforward:
At December 31, 1997, the Fund had a net capital loss carryforward
of approximately $36,799,000, of which $26,285,000 expires in 2002
and $10,514,000 expires in 2005. This amount will be available to
offset like amounts of any future taxable gains.
