MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Annual Report
December 31, 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 December 31, 1998
Telecommunications 3.12%
US Government & Agency Obligations 7.32%
Special Purpose 1.79%
Financial Services 16.42%
Commercial Paper 1.25%
Industrials 12.71%
Sovereign Government Obligations 38.43%
Supranational 7.20%
Banking 10.65%
Pie graph depicting Geographical Diversification* as a percentage of net assets
As of December 31, 1998
Germany 8.03%
Finland 3.88%
Italy 10.09%
Greece 2.37%
Spain 1.73%
United Kingdom 13.08%
France 4.25%
Denmark 8.07%
Japan 14.56%
Canada 6.15%
United States 26.68%
Bar graph depicting Maturity of Investments* as a percentage of net assets
As of December 31, 1998
5 yrs-10 yrs 26.54%
10 yrs+ 40.04%
0-1 yr 0.22%
1 yr-5 yrs 33.20%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
DEAR SHAREHOLDER
Fiscal Year in Review
For the fiscal year ended December 31, 1998, Merrill Lynch Global
Bond Fund for Investment and Retirement's Class A, Class B, Class C
and Class D Shares had total returns of +11.99%, +11.13%, +11.07%
and +11.84%, respectively, compared to a +15.31% total return for
the unmanaged J.P. Morgan Global Government Bond Index.
The Fund's fiscal year began with global markets still feeling the
deflationary and recessionary impact of the Asian financial crisis.
At this time, most of the Fund's investments were in corporate
bonds, since we believed they would offer attractive total returns
relative to government securities. However, Fund performance was
negatively affected as corporate bond yields relative to government
issues widened during the flight to quality that began in August
when Russia devalued the ruble. Also, our investment in mortgage-
backed securities hurt performance. As interest rates declined, the
price of the securities would not appreciate beyond a certain point
as a result of mortgage refinancings and paydowns.
During the 12-month period, our Japanese currency exposure was
hedged back into US dollars, and our Japanese investments had a
lower duration relative to the unmanaged benchmark J.P. Morgan
Global Government Bond Index. We took this position because we
believed that the yen would weaken relative to the US dollar and
that Japanese interest rates could not decline much further. The
currency strategy worked in our favor for most of the fiscal year,
but hampered performance during the latter part of the year as the
yen strengthened relative to the US dollar. On the other hand, the
lower duration of our Japanese investments relative to the Index
benefited the Fund as interest rates rose by 100 basis points
(1.00%) or more in longer-dated securities during the fourth quarter
of 1998.
During the global financial crisis of August and September, we began
to improve the quality and liquidity of the Fund's holdings by
buying fewer corporate bonds and more sovereign debt. In addition,
as countries began to lower interest rates in September and October,
we extended the duration of the Fund in order to seek to enhance
returns.
The Fund's performance was enhanced through our overweighted
duration in the European Monetary Union (EMU) countries relative to
the benchmark index as interest rates declined prior to conversion
to the euro. For non-EMU countries, we believed the United Kingdom
possessed solid prospects for increased returns given the cuts in
British interest rates and its inverted yield curve. We were
confident that long-term interest rates would decline sharply given
the country's economic weakness. Our exposure was primarily in
securities with maturities under eight years, which rallied during
the final quarter of 1998. In addition, we determined that our
positions in variable rate securities in Greece would under-perform
in this lower interest rate environment. We traded these securities
for fixed-rate securities in the ten-year sector, which appreciated
as interest rates fell and the Greek withholding tax on these
securities was eliminated.
The Environment
The most significant development in global fixed-income markets
during 1998 was the "flight to quality" that began in August,
triggered by the financial crises in Russia and Brazil. Although
decisive fiscal and monetary policy moves worldwide helped stabilize
global markets and began to shrink risk premiums within a relatively
short time frame, bond markets had not returned to pre-August levels
by the end of the year. It was clear that reductions in interest
rates would continue as long as markets were in disarray and global
recessionary pressures persisted. In general, the market returned to
a more stable posture by year-end, but with some volatility prompted
by the exceptional strength of the US stock market, the ongoing
problems in Brazil and the US/UK air strikes in Iraq. On the plus
side, inflationary pressures were still non-existent as commodity
prices came down to historic lows and growth began to moderate and
taper off throughout the world. In this environment, we expect to
maintain a conservative strategy regarding quality, but we plan to
extend maturities because we believe interest rates will decline in
the coming months.
Market Review
During the six months ended December 31, 1998, US Government bond
prices appreciated dramatically. The long-term bond yields traded
down from 5.70% in May to 5.10% by December. However, this decline
in interest rates was very volatile. Third-quarter gross domestic
product (GDP) growth was 3.9%, displaying that growth in the United
States was still robust, but at a lower GDP rate than the 4.8% in
the first quarter of 1998. Lower interest rates were making housing
more affordable and unemployment was subdued as well. Commodity
prices were reaching historic lows, especially for oil, which traded
below $10 per barrel.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
As of December 31, 1998, our US investments had an average duration
of 9.4 years, since we expected the global recession to impact the
US economy by the first half of 1999. We also believe that
additional flights to quality could occur prompted by events in
Brazil or in other emerging markets. In this environment, we believe
it is important to focus on good-quality investments that offer a
high degree of liquidity. Currently, we are not concerned about
inflation, and there is no evidence that the global deflationary
forces will subside in the near term.
In Canada, GDP growth was lower than expected in the third quarter
of 1998, signifying that the economy was continuing to slow. The
Bank of Canada raised interest rates 100 basis points in August to
support the declining Canadian dollar, but this further dampened the
domestic demand. In September, the central bank reversed its
position somewhat and eased interest rates by 25 basis points, and
also cut interest rates in October and November. If this trend
continues, Canadian interest rates could decline at least another
100 basis points over the next six months.
The dominant story in Europe was the EMU and the 11 countries
converging their currencies and interest rates as of January 1,
1999. The convergence rate was posted at 3.30%, and countries were
working toward that rate during the latter part of 1998. Along the
way, some countries voiced the need to lower the target rate in
order to stimulate demand and growth in their respective economies
and to raise employment. The resulting interest rate cuts reflected
concerns among central banks that the global economy may be headed
for a recession.
During the six-month period ended December 31, 1998, we maintained
our position in Greece, a country that is expected to enter the EMU
in the next round. Greece has managed its economy with responsible
fiscal measures, and we anticipate lower interest rates there. We
are also positive toward the United Kingdom and its prospect for
entering the EMU. The inverted shape of the UK yield curve and high
level of unemployment dictate taking positions with maturities of
ten years or less.
Over the six months ended December 31, 1998, New Zealand and
Australian currencies were hurt by falling commodity prices and
Japan's recession. Since both countries are net exporters of
commodities, the decline in prices hurt their economies. However, as
the crisis subsided in early October, these currencies began to
rally. As of December 31, 1998, we held an unhedged position in New
Zealand.
In Japan, the yen started the six-month period by getting
progressively weaker, hitting a low of YEN 147.26/US dollar on
August 11, 1998. The yen then proceeded to appreciate and reached
its strongest point in October after the announcement that a banking
reform bill had passed. By December 31, 1998, the yen had reached
YEN 112.75/US dollar. Looking ahead, we do not expect to see
interest rates falling much further in Japan, but the economy is
still resistant to improvement. We are underweighted in Japan
relative to the benchmark index, and our position is hedged given
our expectation that the yen will resume its weakening trend
relative to the US dollar level over the next six months.
In Conclusion
We thank you for your continued investment in Merrill Lynch Global
Bond Fund for Investment and Retire-ment, and we look forward to
reviewing our outlook with you again in our next report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Harry Escobar)
Harry Escobar
Portfolio Manager
February 8, 1999
Harry Escobar has assumed the responsibilities for the day-to-day
management of Merrill Lynch Global Bond Fund for Investment and
Retirement. Mr. Escobar has been a Director (Global Fixed Income) of
Merrill Lynch Asset Management, L.P. since August 1998. Previously,
he was a senior vice president in the Fixed Income Group at Lehman
Brothers, Inc. from 1991 to 1998.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 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 "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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/98 +11.99% +7.51%
Five Years Ended 12/31/98 + 5.31 +4.45
Ten Years Ended 12/31/98 + 8.57 +8.13
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 +11.13% +7.13%
Five Years Ended 12/31/98 + 4.50 +4.50
Ten Years Ended 12/31/98 + 7.74 +7.74
[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 12/31/98 +11.07% +10.07%
Inception (10/21/94)
through 12/31/98 + 6.44 + 6.44
[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 12/31/98 +11.84% +7.36%
Inception (10/21/94)
through 12/31/98 + 7.07 +6.04
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
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 and Class B Shares compared to growth of an investment in the
JP Morgan Global Government Bond Index. Beginning and ending values are:
12/88 12/98
ML Global Bond Fund++--
Class A Shares* $ 9,600 $21,840
ML Global Bond Fund++--
Class B Shares* $10,000 $21,072
JP Morgan Global Government
Bond Index++++ $10,000 $23,858
A line graph depicting the growth of an investment in the Fund's Class C
Shares and Class D Shares compared to growth of an investment in the
JP Morgan Global Government Bond Index. Beginning and ending values are:
12/88 12/98
ML Global Bond Fund++--
Class C Shares* $10,000 $12,991
ML Global Bond Fund++--
Class D Shares* $ 9,600 $12,789
JP Morgan Global Government
Bond Index++++ $10,000 $14,390
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Global Bond Fund invests in a global portfolio of debt
instruments denominated in various currencies and multinational
currency units.
++++This unmanaged Index is comprised of government bonds in the 13
largest bond markets, including the United States.
Past performance is not predictive of future performance.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/ Standardized
12 Month 3 Month Since Inception 30-Day Yield
Total Return Total Return Total Return As of 12/31/98
<S> <C> <C> <C> <C>
ML Global Bond Fund Class A Shares +11.99% +3.25% +127.52% 4.09%
ML Global Bond Fund Class B Shares +11.13 +3.05 +110.71 3.48
ML Global Bond Fund Class C Shares +11.07 +3.03 + 29.91 3.43
ML Global Bond Fund Class D Shares +11.84 +3.19 + 33.20 3.85
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/since inception periods are Class A & Class B
Shares, for the ten years ended 12/31/98 and Class C & Class D
Shares, from 10/21/94 to 12/31/98.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <S>
Canada
Sovereign NZ$ 14,250,000 Canada Government Bond 6.625% 10/03/2007 $ 7,667,436 4.09%
Government
Obligations
Supra- C$ 5,470,000 Interamerican Development Bank 7.25 11/03/2003 3,863,827 2.06
national
Total Investments in Canada (Cost--$12,463,007) 11,531,263 6.15
Denmark
Banking US$ 8,250,000 Den Danske Bank (a) 7.40 6/15/2010 8,499,480 4.53
Financial DKr 42,216,000 Nykredit A/S 6.00 10/01/2026 6,627,686 3.54
Services
Total Investments in Denmark (Cost--$14,419,011) 15,127,166 8.07
Finland
Sovereign Fim 19,000,000 Finnish Government Bond 7.25 4/18/2006 4,519,141 2.41
Government YEN 271,000,000 Republic of Finland 6.00 1/29/2002 2,758,071 1.47
Obligations
Total Investments in Finland (Cost--$6,485,751) 7,277,212 3.88
France
Sovereign ECU 2,185,000 Government of France 8.25 4/25/2022 3,835,695 2.05
Government
Obligations
Telecom- Frf 20,800,000 France Telecom 5.75 4/25/2007 4,119,284 2.20
munications
Total Investments in France (Cost--$7,442,109) 7,954,979 4.25
Germany
Banking DM 4,250,000 Rheinische Hypbank AG 5.50 12/05/2001 2,693,878 1.44
Sovereign 13,700,000 Land Baden-Wuerttemberg 5.75 1/19/2028 8,997,101 4.80
Government
Obligations
Special 5,350,000 European Credit Card
Purpose Offerings, Series A 5.25 6/18/2008 3,363,820 1.79
Total Investments in Germany (Cost--$13,477,066) 15,054,799 8.03
Greece
Sovereign GRD1,118,000,000 Hellenic Republic 8.60 3/26/2008 4,445,638 2.37
Government
Obligations
Total Investments in Greece (Cost--$4,335,927) 4,445,638 2.37
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <S>
Italy
Sovereign Lit 24,650,000,000 Buoni Poliennali Del Tesoro 10.00 % 8/01/2003 $ 18,916,228 10.09%
Government
Obligations
Total Investments in Italy (Cost--$16,920,022) 18,916,228 10.09
Japan
Sovereign YEN 1,758,000,000 Japan Government Bond #155 4.60 3/20/2003 17,655,309 9.42
Government
Obligations
Supranational 930,000,000 African Development Bank 6.20 6/18/2002 9,640,508 5.14
Total Investments in Japan (Cost--$25,803,157) 27,295,817 14.56
Spain
Sovereign ECU 2,600,000 Spanish Government Bonds 7.40 7/30/1999 3,242,385 1.73
Government
Obligations
Total Investments in Spain (Cost--$3,155,456) 3,242,385 1.73
United Kingdom
Financial Pound 8,300,000 FP Finance PLC 9.125 ++ 15,349,748 8.19
Services Sterling
Industrials 3,000,000 BAA PLC 7.875 2/10/2007 5,707,759 3.05
1,000,000 BOC Group PLC 7.25 6/07/2002 1,733,782 0.92
Telecommuni- 1,000,000 Vodafone Group PLC 7.875 11/06/2001 1,732,656 0.92
cations
Total Investments in the United Kingdom (Cost--$22,696,755) 24,523,945 13.08
United States
Banking US$ 7,500,000 Comerica Bank 7.875 9/15/2026 8,769,975 4.68
Financial 3,000,000 Association Corp. N.A.,
Services Series 8 7.375 6/11/2007 3,223,869 1.72
5,000,000 Mellon Capital II 7.995 1/15/2027 5,559,300 2.97
Industrials DM 10,600,000 Ford Motor Credit Co. 5.25 6/16/2008 6,582,689 3.51
US$ 10,000,000 Phelps Dodge Corporation 7.125 11/01/2027 9,798,500 5.23
US 1,960,000 Federal National Mortgage
Government Association 5.25 1/15/2003 1,973,465 1.05
& Agency 2,990,000 United States Treasury Bonds 5.25 11/15/2028 3,061,012 1.63
Obligations 8,640,000 United States Treasury Notes 4.75 11/15/2008 8,707,478 4.64
Total Investments in the United States (Cost--$45,893,066) 47,676,288 25.43
Total Investments in Long-Term Obligations
(Cost--$173,091,327) 183,045,720 97.64
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Short-Term Obligations Rate Date (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <S>
United States
Commercial US$ $2,347,000 General Motors Acceptance Corp. 5.13% 1/04/1999 $ 2,347,000 1.25%
Paper*
Total Investments in Short-Term Obligations (Cost--$2,347,000) 2,347,000 1.25
Total Investments (Cost--$175,438,327) 185,392,720 98.89
Unrealized Depreciation on Forward Foreign Exchange Contracts** (1,591,576) (0.85)
Other Assets Less Liabilities 3,679,740 1.96
------------ -------
Net Assets $187,480,884 100.00%
============ =======
<FN>
(a)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 is traded on a discount basis; the interest rate
shown reflects the discount rate paid at the time of purchase by the
Fund.
**Forward foreign exchange contracts as of December 31, 1998 were
as follows:
Unrealized
Expiration Depreciation
Foreign Currency Sold Date (Note 1b)
DM 49,542,698 January 1999 $ (611,713)
Pound Sterling 6,000,885 January 1999 (33,785)
YEN 3,393,825,650 January 1999 (1,054,037)
------------
(US$ Commitment--$68,266,693) $ (1,699,535)
============
Unrealized
Expiration Appreciation
Foreign Currency Purchased Date (Note 1b)
DM 48,699,589 January 1999 $ 100,096
Pound Sterling 2,091,117 January 1999 7,863
------------
(US$ Commitment--$32,634,833) $ 107,959
------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (1,591,576)
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$175,438,327) (Note 1a) $ 185,392,720
Cash 297,805
Foreign cash (Note 1c) 979
Receivables:
Interest $ 4,366,000
Beneficial interest sold 89,468
Securities sold 36,169 4,491,637
--------------
Prepaid registration fees and other assets (Note 1f) 18,783
--------------
Total assets 190,201,924
--------------
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1b) 1,591,576
Payables:
Dividends to shareholders (Note 1g) 450,775
Beneficial interest redeemed 275,799
Investment adviser (Note 2) 105,669
Distributor (Note 2) 90,992 923,235
--------------
Accrued expenses and other liabilities 206,229
--------------
Total liabilities 2,721,040
--------------
Net Assets: Net assets $ 187,480,884
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 272,168
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 1,144,898
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 19,130
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 504,506
Paid-in capital in excess of par 213,239,892
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (36,176,794)
Unrealized appreciation on investments and foreign currency
transactions--net 8,477,084
--------------
Net assets $ 187,480,884
==============
Net Asset Value: Class A--Based on net assets of $26,289,236 and 2,721,680 shares
of beneficial interest outstanding $ 9.66
==============
Class B--Based on net assets of $110,619,890 and 11,448,978 shares
of beneficial interest outstanding $ 9.66
==============
Class C--Based on net assets of $1,847,634 and 191,303 shares
of beneficial interest outstanding $ 9.66
==============
Class D--Based on net assets of $48,724,124 and 5,045,061 shares
of beneficial interest outstanding $ 9.66
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended December 31, 1998
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $6,471
(Notes 1d & 1e): foreign withholding tax) $ 13,423,673
Expenses: Investment advisory fees (Note 2) $ 1,238,792
Account maintenance and distribution fees--Class B (Note 2) 969,992
Transfer agent fees--Class B (Note 2) 199,240
Account maintenance fees--Class D (Note 2) 123,555
Accounting services (Note 2) 117,106
Professional fees 80,635
Printing and shareholder reports 70,797
Registration fees (Note 1f) 64,264
Transfer agent fees--Class D (Note 2) 60,624
Custodian fees 37,665
Trustees' fees and expenses 36,962
Transfer agent fees--Class A (Note 2) 31,680
Account maintenance and distribution fees--Class C (Note 2) 14,908
Transfer agent fees--Class C (Note 2) 2,890
Pricing services 1,116
Other 5,540
--------------
Total expenses 3,055,766
--------------
Investment income--net 10,367,907
--------------
Realized & Realized gain from:
Unrealized Gain Investments--net 2,745,098
(Loss) on Foreign currency transactions--net 1,895,308 4,640,406
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 9,710,424
(Notes 1b, 1c, Foreign currency transactions--net (2,602,534) 7,107,890
1e & 3): -------------- --------------
Net realized and unrealized gain on investments and
foreign currency transactions 11,748,296
--------------
Net Increase in Net Assets Resulting from Operations $ 22,116,203
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 10,367,907 $ 17,327,991
Realized gain (loss) on investments and foreign currency
transactions--net 4,640,406 (23,718,229)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 7,107,890 902,161
-------------- --------------
Net increase (decrease) in net assets resulting
from operations 22,116,203 (5,488,077)
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (1,440,531) (695,428)
Shareholders Class B (6,208,193) (3,018,723)
(Note 1g): Class C (88,360) (56,943)
Class D (2,630,823) (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 (10,367,907) (17,327,991)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (64,457,478) (212,434,471)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (52,709,182) (235,250,539)
Beginning of year 240,190,066 475,440,605
-------------- --------------
End of year $ 187,480,884 $ 240,190,066
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived
from information provided in the financial statements.
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 year $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .52 .54 .56 .59 .55
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .54 (.44) .02 .58 (1.07)
--------- --------- --------- --------- ---------
Total from investment operations 1.06 .10 .58 1.17 (.52)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.52) (.14) (.56) (.39) (.24)
Return of capital--net -- (.40) -- (.20) (.28)
In excess of realized gain on
investments--net -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total dividends and distributions (.52) (.54) (.56) (.59) (.55)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 11.99% 1.19% 6.42% 13.39% (5.29%)
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses .92% .96% .87% .86% .84%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.57% 5.83% 6.02% 6.31% 5.84%
========= ========= ========= ========= =========
Supplemental Net assets, end of year
Data: (in thousands) $ 26,289 $ 27,522 $ 72,876 $ 85,610 $ 90,823
========= ========= ========= ========= =========
Portfolio turnover 129.20% 699.63% 1234.05% 512.75% 405.00%
========= ========= ========= ========= =========
<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, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived
from information provided in the financial statements.
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 year $ 9.12 $ 9.56 $ 9.54 $ 8.96 $ 10.03
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .45 .47 .49 .51 .47
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .54 (.44) .02 .58 (1.07)
--------- --------- --------- --------- ---------
Total from investment operations .99 .03 .51 1.09 (.60)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.45) (.13) (.49) (.34) (.20)
Return of capital--net -- (.34) -- (.17) (.24)
In excess of realized gain on
investments--net -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Total dividends and distributions (.45) (.47) (.49) (.51) (.47)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 11.13% .41% 5.60% 12.52% (6.01%)
Return:* ========= ========= ========= ========= =========
Ratios to Average Expenses 1.71% 1.73% 1.65% 1.64% 1.61%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.80% 5.07% 5.25% 5.56% 5.06%
========= ========= ========= ========= =========
Supplemental Net assets, end of year
Data: (in thousands) $ 110,620 $ 160,571 $ 347,529 $ 540,887 $ 700,995
========= ========= ========= ========= =========
Portfolio turnover 129.20% 699.63% 1234.05% 512.75% 405.00%
========= ========= ========= ========= =========
<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, 1998
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: 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 .45 .46 .48 .51 .09
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .54 (.44) .02 .58 (.25)
--------- --------- --------- --------- ---------
Total from investment operations .99 .02 .50 1.09 (.16)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.45) (.12) (.48) (.34) (.03)
Return of capital--net -- (.34) -- (.17) (.05)
In excess of realized gain on
investments--net -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.45) (.46) (.48) (.51) (.09)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 11.07% .33% 5.51% 12.44% (1.73%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.75% 1.82% 1.73% 1.71% 1.69%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.74% 4.94% 5.16% 5.44% 5.20%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 1,848 $ 2,284 $ 9,351 $ 8,468 $ 3,614
========= ========= ========= ========= =========
Portfolio turnover 129.20% 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, 1998
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: 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 .50 .51 .54 .56 .10
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net .55 (.44) .01 .58 (.25)
--------- --------- --------- --------- ---------
Total from investment operations 1.05 .07 .55 1.14 (.15)
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.50) (.13) (.54) (.37) (.04)
Return of capital--net -- (.38) -- (.19) (.05)
In excess of realized gain on
investments--net -- -- -- -- (.01)
--------- --------- --------- --------- ---------
Total dividends and distributions (.50) (.51) (.54) (.56) (.10)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 9.66 $ 9.11 $ 9.55 $ 9.54 $ 8.96
========= ========= ========= ========= =========
Total Investment Based on net asset value per share 11.84% .94% 6.05% 13.11% (1.62%)+++
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.17% 1.19% 1.08% 1.11% 1.12%*
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.32% 5.66% 5.74% 6.07% 5.81%*
========= ========= ========= ========= =========
Supplemental Net assets, end of period
Data: (in thousands) $ 48,724 $ 49,813 $ 45,685 $ 5,665 $ 1,755
========= ========= ========= ========= =========
Portfolio turnover 129.20% 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, 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. The Fund's
financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of
management accruals and estimates. 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 or purchased are valued at the last
sale price in the case of exchange-traded options. In the case of
options traded in the over-the-counter market, valuation is the last
asked price (options written) or the last bid price (options
purchased). 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.
* 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.
* 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.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
NOTES TO FINANCIAL STATEMENTS (continued)
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"), which is 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
Maintenance Distribution
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 Incorporated ("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
December 31, 1998
For the year ended December 31, 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 $ 8 $ 79
Class D $ 304 $ 3,422
For the year ended December 31, 1998, MLPF&S received contingent
deferred sales charges of $121,648 and $283 relating to transactions
in Class B and Class C Shares, respectively.
During the year ended December 31, 1998, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $411 for security
price quotations to compute the net asset value of the Fund.
Financial Data Services, Inc. ("FDS"), 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, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 1998 were $245,878,642 and
$309,126,478, respectively.
Net realized gains (losses) for the year ended December 31, 1998 and
net unrealized gains (losses) as of December 31, 1998 were as
follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ 2,359,262 $ 9,954,393
Short-term 1,563 --
Financial futures contracts 384,273 --
------------ ------------
Total investments 2,745,098 9,954,393
------------ ------------
Currency transactions:
Options written (233,693) --
Options purchased (180,639) --
Foreign currency
transactions 782,435 114,267
Forward foreign exchange
contracts 1,527,205 (1,591,576)
------------ ------------
Total currency transactions 1,895,308 (1,477,309)
------------ ------------
Total $ 4,640,406 $ 8,477,084
============ ============
As of December 31, 1998, net unrealized appreciation for Federal
income tax purposes aggregated $9,901,116, of which $11,205,136
related to appreciated securities and $1,304,020 related to
depreciated securities. The aggregate cost of investments at
December 31, 1998 for Federal income tax purposes was $175,491,604.
Transactions in options written for the year ended December 31,
1998, were as follows:
Nominal Value
Covered by Written Premiums
Call Options Written Options Received
Outstanding call options
written, beginning of year -- --
Options written $ 5,935,632,875 $ 797,467
Options exercised (1,864,574,000) (105,964)
Options expired (4,071,058,875) (691,503)
--------------- ------------
Outstanding call options
written, end of year $ -- $ --
=============== ============
Nominal Value
Covered by Written Premiums
Put Options Written Options Received
Outstanding put options
written, beginning of year -- --
Options written $ 594,204,890 $ 485,472
Options exercised (59,149,052) (47,580)
Options expired (535,055,838) (437,892)
------------- ------------
Outstanding put options
written, end of year $ -- $ --
============= ============
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $64,457,478 and $212,434,471 for the years ended
December 31, 1998 and December 31, 1997, respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the
Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 627,002 $ 5,905,680
Shares issued to share-
holders in reinvestment of
dividends 81,606 765,110
------------ ------------
Total issued 708,608 6,670,790
Shares redeemed (1,006,080) (9,387,918)
------------ ------------
Net decrease (297,472) $ (2,717,128)
============ ============
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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)
============ ============
Class B Shares for the
Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 712,547 $ 6,697,291
Shares issued to share-
holders in reinvestment of
dividends 388,224 3,636,446
------------ -------------
Total issued 1,100,771 10,333,737
Automatic conversion
of shares (861,807) (8,009,803)
Shares redeemed (6,398,617) (59,593,100)
------------ -------------
Net decrease (6,159,653) $ (57,269,166)
============ =============
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)
============ =============
Class C Shares for the
Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 202,335 $ 1,890,629
Shares issued to share-
holders in reinvestment of
dividends 6,983 65,483
------------ ------------
Total issued 209,318 1,956,112
Shares redeemed (268,515) (2,499,193)
------------ ------------
Net decrease (59,197) $ (543,081)
============ ============
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 D Shares for the
Year Ended Dollar
December 31, 1998 Shares Amount
Shares sold 92,117 $ 866,710
Automatic conversion
of shares 862,073 8,009,803
Shares issued to shareholders
in reinvestment of dividends 186,617 1,749,511
------------ ------------
Total issued 1,140,807 10,626,024
Shares redeemed (1,560,809) (14,554,127)
------------ ------------
Net decrease (420,002) $ (3,928,103)
============ ============
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
============ ============
5. Capital Loss Carryforward:
At December 31, 1998, the Fund had a net capital loss carryforward
of approximately $34,305,000, of which $23,791,000 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, 1998
<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,
1998, 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, 1998, by correspondence with the custodian and broker. 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, 1998, 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 12, 1999
</AUDIT-REPORT>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
IMPORTANT TAX INFORMATION (unaudited)
During the 1998 calendar year, a portion of Merrill Lynch Global
Bond Fund for Investment and Retirement's ordinary income was
derived from foreign sources. The foreign source income has taxes
associated with it that were paid by the Fund to various foreign
jurisdictions. The Fund has qualified to `pass-through' the foreign
taxes to its shareholders. Accordingly, you may elect to deduct your
portion of the taxes in computing your individual taxable income.
Alternatively, it may be beneficial for you to elect to forego the
deduction and to take a credit against your tax liability. These
deductions or credits may be subject to limitations under the tax
law. Please consult your tax adviser regarding the appropriate
treatment of foreign taxes paid.
Of the monthly cash distributions paid by the Fund during its
taxable year ended December 31, 1998, 59.07% represents income from
foreign sources. Additionally, the Fund incurred foreign taxes which
it has elected to pass through to its shareholders. Your share of
the Fund's total foreign taxes paid or withheld is .0624% multiplied
by the cash distributions paid from January through December.
There were no long-term capital gains distributed during the 1998
calendar year.
Please retain this information for your records.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1998
OFFICERS AND TRUSTEES
Arthur Zeikel, President and Trustee
Donald Cecil, Trustee
Roland M. Machold, 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
Robert Harris, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
225 Franklin Street
Boston, MA 02101
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
