MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Quarterly Report
March 31, 1998
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
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 of March 31, 1998
Commercial Paper 1.39%
Industrials 12.74%
Sovereign Government Obligations 34.65%
Financial Services 48.34%
US Government Obligations 0.43%
Pie graph depicting Geographical Diversification*
As of March 31, 1998
Germany 14.86%
Thailand 3.75%
Italy 11.25%
United States 22.43%
United Kingdom 15.42%
Japan 13.30%
Denmark 11.55%
Canada 4.99%
Bar graph depicting Maturity of Investments*
As of March 31, 1998
5 yrs-10 yrs 30.37%
10 yrs+ 37.01%
0-1 yr 11.59%
1 yr-5 yrs 12.03%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 1998
DEAR SHAREHOLDER
Since our December report to shareholders, dollar-bloc bond markets
have declined and have underperformed their counterpart markets in
Europe and Japan. In addition, the US dollar remained relatively
firm compared to levels maintained in late 1997. The strength of the
US economy and interest rate differentials in favor of the US fixed-
income market were significant fundamental factors holding the
dollar at higher levels against the majority of Group of Seven
Industrialized Nation (G-7) currencies. Correspondingly, we reduced
the Fund's duration exposure in the United States and continued to
hedge the portfolio into dollars as opportunities warranted.
Our fixed-income positions continue to emphasize a positive
inflationary outlook since we believe the Asian currency crisis is
likely to cap commodity and imported good prices in the major
industrialized economies. G-7 growth is also likely to be negatively
impacted since exports to the Asian region will reflect slower order
growth. Therefore, we established positions in longer-term
securities in markets that we expect to retain positive inflationary
demographics and steep yield curves. In addition, we recently
increased the duration of our investments in the United States as
yield spreads widened compared to Europe, unwinding an underweight
position from early 1998. Toward the end of the March quarter, we
began to increase our exposure to the United States as ten-year
yield spreads relative to Germany approached 75 basis points (0.75%)
compared to approximately 40 basis points earlier in the year. We
also established positions in the Japanese bond market. At March
quarter-end, the Fund's Japanese investments accounted for 13% of
net assets. With the Japanese economy continuing to worsen, fiscal
measures disappointing and the central bank's continued
accommodation, bond prices in Japan are likely to rise. Overall, we
continued to retain exposure to the corporate bond market although
at markedly reduced levels from those maintained in late 1997.
Market Review
North America
US bond prices were negatively affected during the March quarter on
reports that gross domestic product surged in the fourth quarter of
1997 to approximately 4.0%. In addition, the increase in the
employment cost index from 3.0% to 3.3% in the fourth quarter also
negatively impacted bonds. These factors pushed up bond yields 30
basis points from the lows in late 1997. In March the Federal
Reserve Board left interest rates unchanged, waiting for evidence of
a slowdown from Asia which has yet to materialize. On the positive
side, we believe that US markets are likely to be supported by
reduced US Government debt issuance and the drag of reduced public
spending on the economy. We will continue to monitor the US economy
for evidence of reduced growth domestically resulting from the Asian
currency crisis.
In Canada, the lack of price pressures did not restrain the Bank of
Canada from moving interest rates higher. With inflation remaining
below 2%, the central bank reacted to the economy growing at a 4%
rate year-on-year, with growth in new orders and shipments
continuing at a record pace. As the central bank moved interest
rates higher, it also warned investors of continuing tightening
moves if the currency depreciated further. We expect the Asian
crisis to markedly reduce Canada's commodity exports in the western
part of the country. We believe this situation may moderate the
central bank's interest rate stance.
Europe
Most European bond markets remained firm with long-term interest
rates declining as inflationary results continued to surprise on the
downside. We correctly overweighted the Fund's duration exposure in
favor of Europe over the United States. Throughout Europe, consumer
prices rose less than 2% on an annualized basis and allowed longer-
term bonds to remain firm. Similar inflationary results caused
monetary policy easing by the central banks of various countries,
where short-term borrowing rates were reduced. However, as we ended
the March quarter, European economies continued to show signs of
sustainable economic growth. In addition, signs of bottoming
inflationary cycles have been evident in various Scandinavian
countries, the United Kingdom and Germany. This prompted us to
reverse to an overweight US duration exposure over Europe. Any
evidence of inflation exceeding 2% in Germany, coupled with
continued weakness in the Deutschemark, would likely bring a prompt
response by the Bundesbank. Investor concerns also surround the
United Kingdom as growth continues to accelerate and inflation
remains at the upper end of the Bank of England's target range.
European Union (EU) Finance Ministers met in January to discuss
additional movement toward a single European currency. Since the
process still has solid political backing, formal EU members are
expected to be announced in the spring of 1998. We expect this
process to proceed without major problems, since various European
Monetary Union convergence reports for March were released without
any major negative issues. Italy and Belgium were criticized
regarding the sustainability of their respective budgetary
conditions; however, the go-ahead signal was given to the start of
the single currency with eleven countries as scheduled.
Pacific Basin
As the Asian currency crisis continues to linger, both the New
Zealand and Australian currencies were under pressure as competitive
devaluation of currencies became prevalent in the region. Late in
the March quarter, comments suggesting interest rate cuts would not
be forthcoming in either country allowed some stabilization in
currencies and interest rates.
Although the US dollar traded off its highs against the yen, US
officials continued to express concern over the Japanese economy and
its trade imbalance. In fact, recent data underline the need for
government action to boost the economy and support the Asian region.
For example, the latest purchasing plans index for durable goods in
1997 fell to 40.9 compared to 44.4 during the third quarter of 1997.
This pessimism has been reinforced by a continued rising tide of
bankruptcies and deterioration in employment prospects. Late in
March, the Liberal Democratic Party's fifth stimulus package was
announced at 16 trillion yen. Even though this number was higher
than expected, no real details were given, which casts doubts as to
whether the package will be able to pull the worsening Japanese
economy out of recession. Without a solid economic stimulus package,
it is possible that the Japanese economy and the region as a whole
could reexperience unrest as in late 1997.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paolo Valle)
Paolo Valle
Portfolio Manager
May 7, 1998
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 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 "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.
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/98 +8.39% +4.06%
Five Years Ended 3/31/98 +4.95 +4.10
Inception (10/25/88)
through 3/31/98 +8.35 +7.88
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/98 +7.56% +3.56%
Five Years Ended 3/31/98 +4.16 +4.16
Ten Years Ended 3/31/98 +7.09 +7.09
[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 3/31/98 +7.49% +6.49%
Inception (10/21/94)
through 3/31/98 +5.25 +5.25
[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 3/31/98 +8.13% +3.80%
Inception (10/21/94)
through 3/31/98 +5.88 +4.63
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<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 3/31/98
<S> <C> <C> <C> <C>
ML Global Bond Fund Class A Shares +8.39% +2.15% +113.04% 4.74%
ML Global Bond Fund Class B Shares +7.56 +1.96 + 98.46 4.16
ML Global Bond Fund Class C Shares +7.49 +1.94 + 19.24 4.10
ML Global Bond Fund Class D Shares +8.13 +2.20 + 21.73 4.50
<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; Class
B Shares, ten years ended 3/31/98; and Class C and Class D Shares, 10/21/94.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
Canada
<S> <S> <C> <S> <C> <C> <C> <C>
Sovereign NZ$ 14,250,000 Canadian Government Bond 6.625% 10/03/2007 $7,423,401 3.42%
Government US$ 2,900,000 Hydro-Quebec 8.25 1/15/2027 3,407,500 1.57
Obligations
Total Investments in Canada
(Cost--$12,058,298) 10,830,901 4.99
Denmark
Financial US$ 8,250,000 Den Danske Bank A/S 7.40 6/15/2010 8,646,429 3.98
Services Dkr 44,104,000 Nykredit A/S 6.00 10/01/2026 6,198,816 2.86
Sovereign 70,000,000 Denmark Government Bonds 9.00 11/15/1998 10,224,284 4.71
Government
Obligations
Total Investments in Denmark
(Cost--$25,140,809) 25,069,529 11.55
Germany
Financial DM 13,250,000 Deutsche Ausgleichbank 6.00 7/04/2007 7,640,092 3.52
Services 13,250,000 Union Bank of Switzerland 5.75 3/12/2007 7,324,445 3.38
Sovereign 3,000,000 Bundes Obligations 5.25 2/21/2001 1,667,136 0.77
Government 6,400,000 Bundesrepublik Deutschland 6.25 4/26/2006 3,783,519 1.74
Obligations 6,100,000 Bundesrepublik Deutschland 6.00 7/04/2007 3,564,883 1.64
15,000,000 Land Baden-Wuerttemberg 5.75 1/19/2028 8,274,770 3.81
Total Investments in Germany
(Cost--$33,104,689) 32,254,845 14.86
Italy
Sovereign Lit 1,000,000,000 Buoni Poliennali Del Tesoro
Government (Italian Government Bond) 10.50 11/01/1998 565,710 0.26
Obligations 23,850,000,000 Buoni Poliennali Del Tesoro
(Italian Government Bond) 10.00 8/01/2003 16,188,535 7.46
YEN 900,000,000 Government of Italy 3.75 6/08/2005 7,662,444 3.53
Total Investments in Italy
(Cost--$25,065,585) 24,416,689 11.25
Japan
Financial YEN 990,000,000 African Development Bank 6.20 6/18/2002 8,871,168 4.09
Services US$ 4,400,000 Fuji Bank Limited 6.61875 3/29/2049 4,072,200 1.87
3,750,000 Fuji Bank Limited 7.30 3/29/2049 3,468,750 1.60
Sovereign YEN 832,000,000 Japanese Government Bond 4.80 12/20/2002 7,284,064 3.36
Government 581,000,000 Republic of Finland 6.00 1/29/2002 5,158,187 2.38
Obligations
Total Investments in Japan
(Cost--$30,840,500) 28,854,369 13.30
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
Thailand
<S> <S> <C> <S> <C> <C> <C> <C>
Industrials US$ 9,550,000 PTTEP International Limited 7.625% 10/01/2006 $ 8,131,233 3.75%
Total Investments in Thailand
(Cost--$9,741,865) 8,131,233 3.75
United
Kingdom
Financial Pound 8,300,000 Friends Professional
Services Sterling Finance PLC 9.125 11/29/2049 15,392,300 7.09
6,200,000 Royal Bank of Scotland 9.50 ++ 12,670,770 5.84
Industrials 3,000,000 British Airways PLC 7.875 2/10/2007 5,398,614 2.49
Total Investments in the
United Kingdom(Cost--$31,213,859) 33,461,684 15.42
United
States
Financial US$ 3,000,000 Associates Corp. of
Services North America 7.375 6/11/2007 3,190,500 1.47
8,500,000 Comerica Bank 7.875 9/15/2026 9,454,125 4.36
5,000,000 Mellon Capital II 7.995 1/15/2027 5,300,700 2.44
5,250,000 PNC Institution Capital Bank 8.315 5/15/2027 5,673,838 2.62
6,600,000 Wells Fargo Capital I 7.96 12/15/2026 6,985,704 3.22
Industrials 3,700,000 Chrysler Corporation 7.45 3/01/2027 3,971,728 1.83
10,000,000 Phelps Dodge Corporation 7.125 11/01/2027 10,141,000 4.67
Total Investments in the United States
(Cost--$43,046,529) 44,717,595 20.61
Total Investments in Long-Term Obligations
(Cost--$210,212,134) 207,736,845 95.73
Short-Term Obligations
Commercial US$ 3,010,000 General Motors Acceptance
Paper* Corp. 6.13 4/01/1998 3,010,000 1.39
US Government 100,000 United States Treasury Bill 4.99 4/02/1998 99,986 0.04
Obligations*(a) 200,000 United States Treasury Bill 5.00 4/02/1998 199,972 0.09
350,000 United States Treasury Bill 5.02 4/02/1998 349,951 0.16
150,000 United States Treasury Bill 5.03 4/02/1998 149,979 0.07
150,000 United States Treasury Bill 5.07 4/02/1998 149,979 0.07
Total Investments in Short-Term Obligations
(Cost--$3,959,867) 3,959,867 1.82
Nominal Value
Covered by Options Issue
Currency Put Options Purchased
11,600,000 United Kingdom Pound, expiring
April 1998 at Pound Sterling 1.6 16,240 0.01
Total Currency Put Options Purchased
(Premiums Paid--$18,560) 16,240 0.01
Total Investments (Cost--$214,190,561) 211,712,952 97.56
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
March 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Nominal Value Percent of
Covered by Options Issue Value Net Assets
Currency Call Options Written
<S> <C> <S> <C> <C>
11,600,000 Japanese Yen, expiring April 1998 at YEN 129 $ (8,120) 0.00%
Total Currency Call Options Written
(Premiums Received--$16,240) (8,120) 0.00
Total Investments, Net of Options Written (Cost--$214,174,321) 211,704,832 97.56
Unrealized Appreciation on Forward Foreign Exchange Contracts** 663,424 0.31
Variation Margin on Financial Futures Contracts*** 15,807 0.01
Other Assets Less Liabilities 4,608,969 2.12
------------ -------
Net Assets $216,993,032 100.00%
============ =======
Net Asset Value: Class A--Based on net assets of $25,620,631 and 2,788,874 shares of
beneficial interest outstanding $ 9.19
============
Class B--Based on net assets of $140,513,977 and 15,290,586 shares of
beneficial interest outstanding $ 9.19
============
Class C--Based on net assets of $1,991,044 and 216,714 shares of
beneficial interest outstanding $ 9.19
============
Class D--Based on net assets of $48,867,380 and 5,320,028 shares of
beneficial interest outstanding $ 9.19
============
<FN>
(a)Portion of securities held as collateral in connection with open
financial futures contracts.
++The security is a perpetual bond and has no definite maturity
date.
*Commercial Paper and certain US Government Obligations are traded
on a discount basis; the interest rates shown are the discount rates
paid at the time of purchase by the Fund.
**Forward foreign exchange contracts as of March 31, 1998 were as
follows:
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Depreciation)
Chf 21,209,630 April 1998 $ 313,900
DM 8,263,126 April 1998 51,685
Pound Sterling 9,976,575 April 1998 54,187
YEN 967,995,642 April 1998 487,824
Total (US$ Commitment--$43,309,307) 907,596
------------
Foreign Currency Purchased
DM 8,058,468 April 1998 $ (47,952)
Pound Sterling 2,695,963 April 1998 (21,757)
YEN 1,032,018,000 April 1998 (174,463)
Total (US$ Commitment--$16,914,841) (244,172)
------------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net $ 663,424
============
***Financial futures contracts sold as of March 31, 1998 were
as follows:
Number of Expiration
Contracts Issue Exchange Date Value
118 DEM Bunds LIFFE June 1998 $17,137,791
58 UK Gilt LIFFE June 1998 5,258,345
-----------
Total Financial Futures Contracts Sold
(Total Contract Price--$22,342,772) $22,396,136
===========
</TABLE>
