MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Annual Report
December 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
<PAGE>
Merrill Lynch
Global Bond Fund
For Investment
And Retirement
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Global Bond Fund for Investment and Retirement
PORTFOLIO INFORMATION
Type of Issues*
As of December 31, 1997
Bar graph depicting Type of Issues* as a percentage of
net assets as of December 31, 1997
Industrials 8.95%
US Government Obligations 5.65%
Financial Services 63.63%
Commercial Paper 0.18%
Sovereign Government Obligations 19.01%
Geographical Diversification*
As of December 31, 1997
Pie graph depicting Geographical Diversification* as a
percentage of net assets as of December 31, 1997
Japan 3.13%
Spain 4.22%
Canada 3.25%
Denmark 10.65%
United Kingdom 17.00%
Thailand 3.06%
Italy 0.24%
Germany 16.85%
United States 39.02%
<PAGE>
Maturity of Investments*
As of December 31, 1997
Bar graph depicting Maturity of Investments* as a percentage
of net assets as of December 31, 1997
5 yrs-10 yrs 31.53%
10 yrs + 61.73%
0-6 months 4.58%
6 months-5 yrs 2.16%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
DEAR SHAREHOLDER
Economic Review
During the quarter ended December 31, 1997, Asia was the focus of
investor concern. What continues to unfold in Asia is a new kind of
global deflationary force: competitive deflationary currency
devaluation. When there is overcapacity in a group of economies
accustomed to fast growth in sales to industrialized nations--as is
currently the case in Asia--it triggers competitive currency
devaluation. Such devaluations lead to even faster growth in the
export of deflation to the industrial world.
When deflation gets out of control, banking systems feel pressure.
As a result, equity investors have devalued banking shares in this
region. In most cases, these banks were overextended in asset-based
lending. The value of the assets underlying these loans has eroded,
because of outright asset deflation (for example, real estate) or
the wrong kind of industrial capacity (as seen in South Korea, Japan
and Germany). With consumer demand declining for many products,
global consumers will have greater leverage in price and selection
as the competition for market share increases.
In Europe, the Bundesbank made good on its promise to raise base
rates by increasing short-term borrowing by 30 basis points (0.30%)
in early October. This move reflected not the strength of the
economy, but more of a support measure for the currency, which has
continued to weaken throughout the last three months. The Bundesbank
was very focused on the sense of imported inflation hampering the
transition into the European Monetary Union (EMU). We believe this
monetary policy tightening is a one-time event, and the German
central bank may not consider increasing base rates again until well
into 1998. Subsequent inflation data have reflected a lack of
inflationary pressure as a result of the weaker Deutschemark at the
manufacturing as well as the consumer level.
<PAGE>
The United Kingdom has continued to reinforce the independence of
the Bank of England. Base rates have increased by 50 basis points,
reflecting the continuation of the strong consumer spending habits
of the past two years. This has forced sterling to stronger levels
against both the US dollar and the Deutschemark. We believe that the
economy is beginning to show signs of slowing, and more rate hikes
will not materialize soon.
The Fund continues to have no exposure to the Japanese bond market
for a number of reasons. Current yield continues to be below 2% on
ten-year government issues. In addition, the yen continues to slide
toward an equilibrium point that seems to be at even weaker levels.
Finally, as of the date of this report, the financial rescue package
does not give us confidence that the Bank of Japan will be able to
make the necessary fiscal shifts needed for recovery. There have
been five long years of near depression-like conditions in Japan.
Portfolio Matters
During the quarter ended December 31, 1997, the most significant
shift within the portfolio was to establish a more market-neutral
position within the core European markets. This was accomplished by
reducing some of the dollar-bloc investments in favor of Germany and
Denmark. The interest rate spread was clearly in favor of the United
States for most of the early part of 1997. The yield spread between
Europe and US securities was at its maximum--120 basis points--in
early June. At this point we decided to shift assets toward the US
corporate sector. By late November, the spread had reduced to just
32 basis points. This reduction, along with genuinely favorable
inflation data out of Germany, has benefited Merrill Lynch Global
Bond Fund for Investment and Retirement's total return.
We continue to favor longer-duration exposure to most bond markets
and investing in the bond markets with the steepest yield curves
(that is, those markets in which longer-term yields are highest
relative to shorter-term yields). These markets have higher interest
rates priced into them, yet there is an increasing likelihood that
global deflationary trends will result in lower interest rates. The
countries with steep yield curves were Germany, Denmark and the
United States. Our long-duration positions in the United Kingdom
were profitable as these issues outperformed almost 40 basis points
more than the short end.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
Currency Outlook
Since most of the world's currencies have devalued so decisively
against the dollar in the past three months, it is likely that the
US trade deficit will progressively deteriorate over the next 18
months, unless the United States were to fall into recession and its
trading partners' economies strengthen. Since this development is
unlikely, it seems probable that a continuous weakening of the US
trade balance will slow the US economy. This would add to the
deflationary pressures on the prices of tradable goods and make
foreign dollar holders increasingly concerned about their exposure.
<PAGE>
Our strategy has been overwhelmingly pro-US dollar for some time,
with the bulk of the Fund's non-US dollar positions hedged back into
the US dollar. This has enhanced the Fund's yield, since short-term
interest rates are very low in Denmark, Canada and Germany. However,
as noted above, the outlook for the dollar currently is not as
clear. As of December month-end, the bulk of the Fund's assets in
non-dollar investments has been hedged back to dollars, while our
exposure to sterling has not been hedged. We have reduced some
hedges over the past few weeks as investors reassess the outlook for
the dollar. With recent economic indicators showing strength in the
United States and a possible weakening of the German economy, our
near-term expectations for the Deutschemark are for slightly
stronger levels of about DM1.82/US$1 but with little potential to
go much higher.
Fiscal Year in Review
During the year ended December 31, 1997, the Fund's total returns
were in line with the total return of the unmanaged JP Morgan Global
Government Bond Index. Enhancing the Fund's performance relative to
the Index were the long duration we maintained since the beginning
of the second quarter of 1997 along with our focus on US dollar-
denominated investments. However, even though the Fund had a greater-
than-index exposure to US dollar-denominated securities, we retained
some exposure to non-US dollar investments. With the US dollar's
substantial appreciation in 1997, these non-dollar positions limited
the Fund's total returns for the fiscal year. Given the Fund's
investment objective and policies, we do not believe it is
appropriate to heavily underweight--or overweight--US dollar-
denominated investments. The portfolio's composition of more global
corporate debt versus sovereign government positions also enhanced
total return, since corporate debt offered a higher current income
flow than generally available on government obligations.
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>
(Paolo Valle)
Paolo Valle
Portfolio Manager
February 2, 1998
Effective January 15, 1998, Paolo Valle became responsible for the
day-to-day management of the Fund. Mr. Valle has served as First
Vice President and Portfolio Manager of Merrill Lynch Asset
Management, L.P. since 1997 and as Vice President and Portfolio
Manager from 1992 to 1997.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Edward D. Zinbarg, Trustee
Terry K. Glenn, Executive Vice President
Joseph T. Monagle, Jr., Senior Vice President
Donald C. Burke, Vice President
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
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 4% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the payable date. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Dividends paid to each class of
shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
12/31/97 9/30/97 12/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares* $9.12 $9.18 $9.56 -4.60% -0.65%
Class B Shares* 9.12 9.19 9.56 -4.60 -0.76
Class C Shares* 9.12 9.18 9.56 -4.60 -0.65
Class D Shares* 9.11 9.18 9.55 -4.61 -0.76
Class A Shares--Total Return* +1.19(1) +0.95(2)
Class B Shares--Total Return* +0.41(3) +0.64(4)
Class C Shares--Total Return* +0.33(5) +0.74(6)
Class D Shares--Total Return* +0.94(7) +0.78(8)
Class A Shares--Standardized 30-day Yield 6.06%
Class B Shares--Standardized 30-day Yield 5.53%
Class C Shares--Standardized 30-day Yield 5.47%
Class D Shares--Standardized 30-day Yield 5.82%
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.537 per share ordinary
income dividends.
(2)Percent change includes reinvestment of $0.165 per share ordinary
income dividends.
(3)Percent change includes reinvestment of $0.466 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.145 per share ordinary
income dividends.
(5)Percent change includes reinvestment of $0.459 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.143 per share ordinary
income dividends.
(7)Percent change includes reinvestment of $0.514 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.159 per share ordinary
income dividends.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
<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** 12/97
ML Global Bond Fund++--
Class A Shares* $ 9,600 $20,020
JP Morgan Global Government
Bond Index++++ $10,000 $20,747
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:
12/87 12/97
ML Global Bond Fund++--
Class B Shares* $10,000 $19,686
JP Morgan Global Government
Bond Index++++ $10,000 $20,830
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** 12/97
ML Global Bond Fund++--
Class C Shares* $10,000 $11,696
ML Global Bond Fund++--
Class D Shares* $ 9,600 $11,435
JP Morgan Global Government
Bond Index++++ $10,000 $12,501
<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.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
PERFORMANCE DATA (continued)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +1.19% -2.86%
Five Years Ended 12/31/97 +5.54 +4.68
Inception (10/25/88)
through 12/31/97 +8.33 +7.85
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +0.41% -3.41%
Five Years Ended 12/31/97 +4.73 +4.73
Ten Years Ended 12/31/97 +7.01 +7.01
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/97 +0.33% -0.62%
Inception (10/21/94)
through 12/31/97 +5.03 +5.03
[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 12/31/97 +0.94% -3.10%
Inception (10/21/94)
through 12/31/97 +5.63 +4.28
[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**
<C> <C> <C> <C> <C> <C>
10/25/88--12/31/88 $10.22 $10.24 -- $0.251 + 2.66%
1989 10.24 9.77 -- 1.131 + 7.27
1990 9.77 9.93 -- 1.266 +15.64
1991 9.93 10.38 -- 1.045 +16.00
1992 10.38 9.79 $0.096 1.276 + 7.83
1993 9.79 10.03 0.020 0.998 +13.21
1994 10.03 8.96 -- 0.546 - 5.29
1995 8.96 9.54 -- 0.585 +13.39
1996 9.54 9.56 -- 0.564 + 6.42
1997 9.56 9.12 -- 0.537 + 1.19
------ ------
Total $0.116 Total $8.199
Cumulative total return as of 12/31/97: +108.55%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/29/86--12/31/86 $10.00 $10.16 -- $0.194 + 3.93%
1987 10.16 10.68 $0.382 1.303 +22.85
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
1997 9.56 9.12 -- 0.466 + 0.41
------ ------
Total $0.498 Total $9.595
Cumulative total return as of 12/31/97: +151.31%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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**
<C> <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
1997 9.56 9.12 -- 0.459 + 0.33
------
Total $1.540
Cumulative total return as of 12/31/97: +16.96%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<PAGE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <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
1997 9.55 9.11 -- 0.514 + 0.94
------
Total $1.718
Cumulative total return as of 12/31/97: +19.11%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
Canada
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign NZ$ 14,250,000 Canadian Government Bond 6.625% 10/03/2007 $ 7,811,984 3.25%
Government
Obligations
Total Investments in Canada (Cost--$8,602,745) 7,811,984 3.25
Denmark
Financial US$ 8,250,000 Den Danske Bank A/S (a) 7.40 6/15/2010 8,607,753 3.58
Services Dkr 119,404,000 Nykredit A/S 6.00 10/01/2026 16,985,256 7.07
Total Investments in Denmark (Cost--$25,181,075) 25,593,009 10.65
Germany
<PAGE>
Financial DM 24,300,000 DePfa Bank 5.50 2/12/2008 13,333,389 5.55
Services
Sovereign 3,000,000 Bundes Obligations 5.25 2/21/2001 1,700,800 0.71
Government 6,400,000 Bundesrepublik Deutschland 6.25 4/26/2006 3,790,972 1.58
Obligations 43,000,000 Bundesrepublik Deutschland 5.595* 7/04/2007 14,534,134 6.05
12,200,000 Deutschland Republic 6.00 7/04/2007 7,111,241 2.96
Total Investments in Germany (Cost--$41,955,921) 40,470,536 16.85
Italy
Sovereign Lit 1,000,000,000 Buoni Poliennali Del Tesoro
Government (Italian Government Bond) 10.50 11/01/1998 588,345 0.24
Obligations
Total Investments in Italy (Cost--$680,733) 588,345 0.24
Japan
Financial US$ 4,400,000 Fuji Bank Limited 6.743 3/29/2049 4,026,000 1.68
Services 3,750,000 Fuji Bank Limited 7.30 3/29/2049 3,496,875 1.45
Total Investments in Japan (Cost--$8,208,700) 7,522,875 3.13
Spain
Sovereign Pta 1,350,000,000 Government of Spain 8.00 5/30/2004 10,124,337 4.22
Government
Obligations
Total Investments in Spain (Cost--$10,434,915) 10,124,337 4.22
Thailand
Industrials US$ 9,550,000 PTTEP International
Limited (a) 7.625 10/01/2006 7,349,164 3.06
Total Investments in Thailand (Cost--$9,741,865) 7,349,164 3.06
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
United Kingdom
<S> <S> <C> <S> <C> <C> <C> <C>
Financial Pound 12,500,000 Friends Professional
Services Sterling Finance PLC 9.125% 11/29/2049 $ 22,625,438 9.42%
9,200,000 Royal Bank of Scotland 9.50 8/29/2049 18,189,866 7.58
Total Investments in the United Kingdom (Cost--$38,802,168) 40,815,304 17.00
United States
Financial US$ 3,000,000 Associates Corp. of
Services North America 7.375 6/11/2007 3,187,500 1.33
16,700,000 BT Institutional Capital
Trust A (a) 8.09 12/01/2026 17,528,721 7.30
4,800,000 Bank of New York (a) 7.78 12/01/2026 4,980,576 2.07
8,500,000 Comerica Bank 7.875 9/15/2026 9,579,330 3.99
10,000,000 Mellon Capital II 7.995 1/15/2027 10,736,200 4.47
5,250,000 PNC Institution Capital
Bank (a) 8.315 5/15/2027 5,661,679 2.36
13,200,000 Wells Fargo Capital I 7.96 12/15/2026 13,878,612 5.78
Industrials 3,700,000 Chrysler Corporation 7.45 3/01/2027 3,955,522 1.65
10,000,000 Phelps Dodge Corporation 7.125 11/01/2027 10,197,100 4.24
US Government 12,905,000 United States Treasury Notes 6.125 8/15/2007 13,261,952 5.52
Obligations
Total Investments in the United States (Cost--$89,390,655) 92,967,192 38.71
Total Investments in Long-Term Obligations
(Cost--$232,998,777) 233,242,746 97.11
Short-Term Obligations
Commercial US$ 429,000 General Motors Acceptance
Paper** Corp. 6.75 1/02/1998 429,000 0.18
US Government 125,000 United States Treasury Bill 4.95 1/29/1998 124,536 0.05
Obligations** 165,000 United States Treasury Bill 4.98 1/29/1998 164,384 0.07
30,000 United States Treasury Bill 5.00 1/29/1998 29,887 0.01
Total Investments in Short-Term Obligations (Cost--$747,807) 747,807 0.31
Total Investments (Cost--$233,746,584) 233,990,553 97.42
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 1,229,003 0.51
Other Assets Less Liabilities 4,970,510 2.07
------------ -------
Net Assets $240,190,066 100.00%
============ =======
<PAGE>
<FN>
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
*Represents a zero coupon; the interest rate shown is the effective
yield at the time of purchase by the Fund.
**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.
See Notes to Financial Statements.
***Forward foreign exchange contracts as of December 31, 1997 were
as follows:
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Note 1b)
Dkr 115,000,000 January 1998 $ 278,053
DM 66,700,000 January 1998 840,192
Pound Sterling 9,000,000 January 1998 89,109
NZ$ 16,024,207 January 1998 21,649
Total Unrealized Appreciation on
Forward Foreign Exchange Contracts
(US$ Commitment--$79,171,834) $ 1,229,003
============
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$233,746,584) (Note 1a) $ 233,990,553
Unrealized appreciation on forward exchange contracts (Note 1b) 1,229,003
Cash 849
Foreign cash (Note 1c) 2,324,364
Receivables:
Interest $ 4,008,862
Beneficial interest sold 1,164,980
Forward foreign exchange contracts (Note 1b) 850,154
Securities sold 88,305 6,112,301
--------------
Prepaid registration fees and other assets (Note 1f) 61,012
--------------
Total assets 243,718,082
--------------
<PAGE>
Liabilities: Payables:
Beneficial interest redeemed 2,376,729
Dividends to shareholders (Note 1g) 657,133
Investment adviser (Note 2) 129,118
Distributor (Note 2) 120,499 3,283,479
--------------
Accrued expenses and other liabilities 244,537
--------------
Total liabilities 3,528,016
--------------
Net Assets: Net assets $ 240,190,066
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 301,915
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,760,863
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 25,050
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 546,507
Paid-in capital in excess of par 277,003,737
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (40,817,200)
Unrealized appreciation on investments and foreign currency
transactions--net 1,369,194
--------------
Net assets $ 240,190,066
==============
Net Asset Value: Class A--Based on net assets of $27,522,417 and 3,019,152 shares
of beneficial interest outstanding $ 9.12
==============
Class B--Based on net assets of $160,570,635 and 17,608,631 shares
of beneficial interest outstanding $ 9.12
==============
Class C--Based on net assets of $2,283,767 and 250,500 shares
of beneficial interest outstanding $ 9.12
==============
Class D--Based on net assets of $49,813,247 and 5,465,063 shares
of beneficial interest outstanding $ 9.11
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended December 31, 1997
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $62,467
(Notes 1d & 1e): foreign withholding tax) $ 22,401,713
Expenses: Investment advisory fees (Note 2) $ 1,974,565
Account maintenance and distribution fees--Class B (Note 2) 1,714,613
Transfer agent fees--Class B (Note 2) 486,327
Accounting services (Note 2) 157,648
Account maintenance fees--Class D (Note 2) 125,665
Printing and shareholder reports 118,667
Custodian fees 90,441
Transfer agent fees--Class D (Note 2) 88,643
Transfer agent fees--Class A (Note 2) 84,993
Professional fees 72,807
Registration fees (Note 1f) 65,906
Account maintenance and distribution fees--Class C (Note 2) 35,397
Trustees' fees and expenses 32,134
Transfer agent fees--Class C (Note 2) 11,083
Other 14,833
--------------
Total expenses 5,073,722
--------------
Investment income--net 17,327,991
--------------
Realized & Realized loss from:
Unrealized Gain Investments--net (11,255,058)
(Loss) on Foreign currency transactions--net (12,463,171) (23,718,229)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (851,797)
(Notes 1b, 1c, Foreign currency transactions--net 1,753,958 902,161
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and
foreign currency transactions (22,816,068)
--------------
Net Decrease in Net Assets Resulting from Operations $ (5,488,077)
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 17,327,991 $ 29,868,062
Realized gain (loss) on investments and foreign currency
transactions--net (23,718,229) 1,371,690
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 902,161 (4,014,426)
-------------- --------------
Net increase (decrease) in net assets resulting from operations (5,488,077) 27,225,326
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (695,428) (4,866,475)
Shareholders Class B (3,018,723) (23,481,682)
(Note 1g): Class C (56,943) (505,409)
Class D (740,128) (1,014,496)
Return of capital:
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 (17,327,991) (29,868,062)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (212,434,471) (162,547,147)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (235,250,539) (165,189,883)
Beginning of year 475,440,605 640,630,488
-------------- --------------
End of year $ 240,190,066 $ 475,440,605
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .54 .56 .59 .55 .70
Realized and unrealized
gain (loss) on investments
and foreign currency
transactions--net (.44) .02 .58 (1.07) .56
---------- ---------- ---------- ---------- ----------
Total from investment
operations .10 .58 1.17 (.52) 1.26
---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.14) (.56) (.39) (.24) (.67)
Realized gain on
investments--net -- -- -- -- (.30)
Return of capital--net (.40) -- (.20) (.28) --
In excess of realized
gain on investments--net -- -- -- (.03) (.05)
---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.54) (.56) (.59) (.55) (1.02)
---------- ---------- ---------- ---------- ----------
Net asset value,
end of year $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
========== ========== ========== ========== ==========
Total Investment Based on net asset value
Return:* per share 1.19% 6.42% 13.39% (5.29%) 13.21%
========== ========== ========== ========== ==========
<PAGE>
Ratios to Average Expenses .96% .87% .86% .84% .82%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 5.83% 6.02% 6.31% 5.84% 6.44%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 27,522 $ 72,876 $ 85,610 $ 90,823 $ 108,241
========== ========== ========== ========== ==========
Portfolio turnover 699.63% 1234.05% 512.75% 405.00% 419.99%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<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: 1997 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value,
Operating beginning of year $ 9.56 $ 9.54 $ 8.96 $ 10.03 $ 9.79
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .47 .49 .51 .47 .60
Realized and unrealized
gain (loss) on investments
and foreign currency
transactions--net (.44) .02 .58 (1.07) .58
---------- ---------- ---------- ---------- ----------
Total from investment
operations .03 .51 1.09 (.60) 1.18
---------- ---------- ---------- ---------- ----------
Less dividends and
distributions:
Investment income--net (.13) (.49) (.34) (.20) (.59)
Realized gain on
investments--net -- -- -- -- (.30)
Return of capital--net (.34) -- (.17) (.24) --
In excess of realized
gain on investments--net -- -- -- (.03) (.05)
---------- ---------- ---------- ---------- ----------
Total dividends and
distributions (.47) (.49) (.51) (.47) (.94)
---------- ---------- ---------- ---------- ----------
Net asset value,
end of year $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value
Return:* per share .41% 5.60% 12.52% (6.01%) 12.36%
========== ========== ========== ========== ==========
Ratios to Average Expenses 1.73% 1.65% 1.64% 1.61% 1.58%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 5.07% 5.25% 5.56% 5.06% 5.72%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 160,571 $ 347,529 $ 540,887 $ 700,995 $ 897,150
========== ========== ========== ========== ==========
Portfolio turnover 699.63% 1234.05% 512.75% 405.00% 419.99%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.56 $ 9.54 $ 8.96 $ 9.21
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .46 .48 .51 .09
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.44) .02 .58 (.25)
---------- ---------- ---------- ----------
Total from investment operations .02 .50 1.09 (.16)
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.12) (.48) (.34) (.03)
Return of capital--net (.34) -- (.17) (.05)
In excess of realized gain on
investments--net -- -- -- (.01)
---------- ---------- ---------- ----------
Total dividends and distributions (.46) (.48) (.51) (.09)
---------- ---------- ---------- ----------
Net asset value, end of period $ 9.12 $ 9.56 $ 9.54 $ 8.96
========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value per share .33% 5.51% 12.44% (1.73%)+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.82% 1.73% 1.71% 1.69%*
Net Assets: ========== ========== ========== ==========
Investment income--net 4.94% 5.16% 5.44% 5.20%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 2,284 $ 9,351 $ 8,468 $ 3,614
Data: ========== ========== ========== ==========
Portfolio turnover 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
December 31, 1997
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. 1994++ to
For the Year Ended December 31, Dec. 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1994
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.55 $ 9.54 $ 8.96 $ 9.21
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .51 .54 .56 .10
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.44) .01 .58 (.25)
---------- ---------- ---------- ----------
Total from investment operations .07 .55 1.14 (.15)
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.13) (.54) (.37) (.04)
Return of capital--net (.38) -- (.19) (.05)
In excess of realized gain on
investments--net -- -- -- (.01)
---------- ---------- ---------- ----------
Total dividends and distributions (.51) (.54) (.56) (.10)
---------- ---------- ---------- ----------
Net asset value, end of period $ 9.11 $ 9.55 $ 9.54 $ 8.96
========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value per share .94% 6.05% 13.11% (1.62%)+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.19% 1.08% 1.11% 1.12%*
Net Assets: ========== ========== ========== ==========
Investment income--net 5.66% 5.74% 6.07% 5.81%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $ 49,813 $ 45,685 $ 5,665 $ 1,755
Data: ========== ========== ========== ==========
Portfolio turnover 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
December 31, 1997
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. Securities traded in the over-the-counter market are
valued at the last available bid price prior to the time of
valuation. 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.
<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.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
* 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 trans-action), 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.
<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 share-holders. 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.
(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
$12,816,769 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.
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.
<PAGE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
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.
For the year ended December 31, 1997, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 158 $1,650
Class D $ 843 $9,242
For the year ended December 31, 1997, MLPF&S received contingent
deferred sales charges of $624,201 and $1,854 relating to
transactions in Class B and Class C Shares, respectively.
During the year ended December 31, 1997, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $250 for security
price quotations to compute the net asset value of the Fund.
<PAGE>
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLAM, PSI, MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 1997 were $2,215,920,371 and
$2,396,179,134, respectively.
Net realized and unrealized gains (losses) as of December 31, 1997
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ (8,376,003) $ 243,969
Short-term 666 --
Financial futures (2,879,721) --
------------ ------------
Total investments (11,255,058) 243,969
------------ ------------
Currency transactions:
Foreign currency
transactions (21,340,898) (103,778)
Forward foreign exchange
contracts 8,877,727 1,229,003
------------ ------------
Total currency transactions (12,463,171) 1,125,225
------------ ------------
Total $(23,718,229) $ 1,369,194
============ ============
As of December 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $190,692, of which $6,001,608 related
to appreciated securities and $5,810,916 related to depreciated
securities. The aggregate cost of investments at December 31, 1997
for Federal income tax purposes was $233,799,861.
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $212,434,471 and $162,547,147 for the years ended
December 31, 1997 and December 31, 1996, respectively.
Transactions in shares of capital for each class were as follows:
<PAGE>
Class A Shares for the
Year Ended Dollar
December 31, 1997 Shares Amount
Shares sold 3,694,319 $ 33,685,367
Shares issued to share-
holders 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)
============ ============
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
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-
holders in reinvestment of
dividends 403,800 3,774,617
------------ -------------
Total issued 3,314,160 31,103,772
Shares redeemed (4,664,565) (43,674,353)
------------ -------------
Net decrease (1,350,405) $ (12,570,581)
============ =============
Class B Shares for the
Year Ended Dollar
December 31, 1997 Shares Amount
Shares sold 897,547 $ 8,127,728
Shares issued to share-
holders 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)
============ =============
<PAGE>
Class B Shares for the
Year Ended Dollar
December 31, 1996 Shares Amount
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 C Shares for the
Year Ended Dollar
December 31, 1997 Shares Amount
Shares sold 411,159 $ 3,761,283
Shares issued to share-
holders 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 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
============ ============
<PAGE>
Class D Shares for the
Year Ended Dollar
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
============ ============
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 share-
holders 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
============ ============
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.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1997
<PAGE>
<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,
1997, 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, 1997, 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, 1997, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
February 5, 1998
</AUDIT-REPORT>
