MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Semi-Annual Report
June 30, 1999
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Global Bond Fund
For Investment
And Retirement
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
Merrill Lynch Global Bond Fund for Investment and Retirement
PORTFOLIO INFORMATION
Bar graph depicting Type of Issues* as a percentage of net assets as
of June 30, 1999
Commercial Paper 6.89%
Banking 8.22%
Sovereign Government Obligations 45.20%
Financial Services 11.39%
Special Purpose 2.00%
Supranational 8.98%
Industrials 13.66%
Telecommunications 2.45%
Pie graph depicting Geographical Diversification* as a percentage of
net assets as of June 30, 1999
Denmark 7.91%
Greece 5.04%
Canada 6.85%
Italy 11.29%
United States 22.47%
Japan 14.81%
United Kingdom 12.59%
Finland 4.48%
Spain 1.93%
Germany 6.06%
Norway 2.91%
France 2.45%
Bar graph depicting Maturity of Investments* as a percentage of net
assets as of June 30, 1999
5 yrs--10 yrs 25.82%
10 yrs+ 35.12%
0--1 yr 6.98%
1 yr--5 yrs 32.08%
[FN]
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
DEAR SHAREHOLDER
There were conflicting signals regarding the future direction of the
US economy during the three-month period ended June 30, 1999.
However, based on concerns that the domestic economy was growing at
a pace sufficient to spark inflation, the Federal Reserve Board
shifted its neutral bias toward one of tightening. On June 30, 1999,
the Federal Reserve Board raised interest rates 25 basis points
(0.25%).
Compared to the United States, Canada's growth was less robust and
inflation showed no signs of accelerating. In fact, Canada's
inflation has fallen below the Bank of Canada's target range. As a
result of low inflation and a strong currency, the Bank of Canada
cut its benchmark bank rate by 25 basis points on March 31 and May
4, 1999. The Canadian dollar is likely to prosper from low
inflation, higher oil prices and a rebound in other commodity
prices. Interest rates overall in Canada have risen given their
close correlation to US interest rates. During this period, interest
rates rose by 57 basis points for the ten-year Canadian sovereign
bond as compared to a 113 basis point increase for the ten-year US
Government bond.
In Europe, the convergence of the 11 European countries into the
European Monetary Union (EMU) was successfully completed on January
1, but the euro did not fair very well. With a stagnant Germany,
political infighting, low interest rates and a war in Kosovo, the
euro traded down. Germany's Finance Minister LaFontaine's
resignation temporarily inspired prospects for the euro, but an
aggressive interest rate cut in April and the protracted war in
Kosovo sent the euro on a downward slide. Interest rates during the
period were mostly lower except for the 10-year and 30-year German
bonds.
In non-EMU countries, we continue to see improve-ment in our UK,
Greek, Danish and Norwegian positions. We are overweight in our
holdings in these countries relative to the unmanaged J.P. Morgan
Global Government Bond Index because we believe these countries are
on track for the second wave of convergence into EMU and we believe
their bonds are relatively inexpensive. In the United Kingdom, most
of the improvement in yield has been in Gilts with maturities of
less than two years. This is a direct result of the interest rates
cuts by the Bank of England during this period. On the other hand,
yields on ten-year Gilts have risen. The Greek bond market
appreciated across the maturity spectrum. The drachma has remained
somewhat stable relative to the euro. In Denmark, most of the
decline has occurred in sovereign debt with maturities of less than
five years. Our new position during the six-month period was Norway,
the world's second-largest exporter of oil. Norwegian interest rates
have fallen, particularly in the under one-year maturities.
The yen gained strength as 1999 began, then proceeded to trade lower
as Finance Minister Miyazawa said he would tolerate a lower yen. In
addition, there were signs that the Bank of Japan (BOJ) might
consider monetizing the debt to lower interest rates. More fiscal
stimulus packages are needed, but they will impact the debt
structure of Japan and will lead to a downgrade of the sovereign
debt. This, in turn, could lead to higher interest rates. During the
period, ten-year Japanese government bonds experienced significant
volatility.
In April, the International Monetary Fund (IMF) forecast that
Japan's gross domestic product would contract in 1999, a view at
odds with consensus expectations that the Japanese economy may be
bottoming. On June 30, 1999, Bank of Japan Governor Hayami disturbed
Japanese government bond investors by stating that a quick, self-
sustaining recovery in private demand cannot be expected soon. Our
view is that the Japanese economy may have bottomed, but there are
still too many concerns to allow for a smooth recovery. We see bank
lending decreasing and bankruptcies increasing. We also see few
prospects for yen strengthening relative to the US dollar. Until we
see signs of slow growth and a weak yen improving, we will stay
underweight in Japan and long in US dollars.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
Portfolio Matters
The three-month period ended June 30, 1999 was characterized by
higher interest rates worldwide. Therefore, we reduced the overall
duration of the Fund. We maintained our short duration in Japan and
moved to a neutral position in the United States and dollar-bloc
countries relative to the unmanaged J.P. Morgan Global Government
Bond Index. We also reduced our duration in EMU countries and
increased the duration of non-EMU countries. We believe that the
convergence of non-EMU countries into EMU by 2002 will eventually
bring interest rates down in those countries currently not part of
the EMU.
In Conclusion
We thank you for your continued investment in Merrill Lynch Global
Bond Fund for Investment and Retirement, and we look forward to
reviewing our outlook with you again in our next report to
shareholders.
Sincerely,
(Harry Escobar)
Harry Escobar
Vice President and Portfolio Manager
August 13, 1999
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
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 6/30/99 -0.69% -4.66%
Five Years Ended 6/30/99 +5.09 +4.24
Ten Years Ended 6/30/99 +8.10 +7.66
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 -1.34% -5.10%
Five Years Ended 6/30/99 +4.30 +4.30
Ten Years Ended 6/30/99 +7.28 +7.28
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/99 -1.40% -2.34%
Inception (10/21/94)
through 6/30/99 +4.01 +4.01
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/99 -0.83% -4.80%
Inception (10/21/94)
through 6/30/99 +4.63 +3.72
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
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 6/30/99
<S> <C> <C> <C> <C>
ML Global Bond Fund Class A Shares -0.69% -3.99% +117.89% 3.74%
ML Global Bond Fund Class B Shares -1.34 -4.07 +101.98 3.11
ML Global Bond Fund Class C Shares -1.40 -4.19 + 20.25 3.06
ML Global Bond Fund Class D Shares -0.83 -3.95 + 23.65 3.50
<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/since inception periods are ten years for Class A &
Class B Shares and from 10/21/94 for Class C & Class D Shares.
</TABLE>
OFFICERS AND TRUSTEES
Donald Cecil, Trustee
Roland M. Machold, Trustee
Edward H. Meyer, Trustee
Charles C. Reilly, Trustee
Richard R. West, Trustee
Arthur Zeikel, Trustee
Edward D. Zinbarg, Trustee
Joseph T. Monagle Jr., Senior Vice President
Harry J. Escobar, Vice President
Donald C. Burke, Vice President and Treasurer
Ira P. Shapiro, 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
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <C> <C> <S> <C> <C> <C> <C>
Canada
Sovereign NZ$ 11,450,000 Canada Government Bond 6.625% 10/03/2007 $ 5,891,705 4.14%
Government
Obligations
Supra- C$ 5,470,000 Inter-American Development Bank 7.25 11/03/2003 3,857,623 2.71
national
Total Investments in Canada (Cost--$10,736,059) 9,749,328 6.85
Denmark
Banking US$ 7,250,000 Den Danske Bank (a)(b) 7.40 6/15/2010 7,248,659 5.10
Sovereign DKr 26,600,000 Kingdom of Denmark 6.00 11/15/2009 3,998,886 2.81
Government
Obligations
Total Investments in Denmark (Cost--$12,321,479) 11,247,545 7.91
Finland
Sovereign E 3,195,570 Finnish Government Bond 7.25 4/18/2006 3,836,972 2.70
Government YEN 271,000,000 Republic of Finland 6.00 1/29/2002 2,539,887 1.78
Obligations
Total Investments in Finland (Cost--$6,485,751) 6,376,859 4.48
France
Telecom- E 3,170,939 France Telecom 5.75 4/25/2007 3,490,551 2.45
munications
Total Investments in France (Cost--$3,718,545) 3,490,551 2.45
Germany
Sovereign E 5,470,823 Land Baden-Wuerttemberg 5.75 1/19/2028 5,769,037 4.06
Government
Obligations
Special DM 5,350,000 European Credit Card Office 5.25 6/18/2008 2,845,829 2.00
Purpose
Total Investments in Germany (Cost--$9,101,382) 8,614,866 6.06
Greece
Sovereign GRD 1,961,000,000 Hellenic Republic 8.60 3/26/2008 7,168,735 5.04
Government
Obligations
Total Investments in Greece (Cost--$7,854,238) 7,168,735 5.04
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Long-Term Obligations Rate Date (Note 1a) Net Assets
<S> <C> <C> <S> <C> <C> <C> <C>
Sovereign E 12,730,640 Buoni Poliennali Del Tesoro 10.00 % 8/01/2003 $16,065,261 11.29%
Government
Obligations
Total Investments in Italy (Cost--$16,920,022) 16,065,261 11.29
Japan
Sovereign YEN 1,283,000,000 Japan Government Bond #161 4.70 9/22/2003 12,154,263 8.54
Government
Obligations
Supranational 930,000,000 African Development Bank 6.20 6/18/2002 8,921,912 6.27
Total Investments in Japan (Cost--$21,309,031) 21,076,175 14.81
Norway
Sovereign Nok 33,000,000 Norwegian Government 5.50 5/15/2009 4,143,357 2.91
Government
Obligations
Total Investments in Norway (Cost--$4,318,652) 4,143,357 2.91
Spain
Sovereign E 2,600,000 Spanish Government Bond 5.15 7/30/1999 2,750,200 1.93
Government
Obligations
Total Investments in Spain (Cost--$3,155,456) 2,750,200 1.93
United Kingdom
Financial Pound 6,600,000 FP Finance PLC 9.125 ++ 11,168,105 7.85
Services Sterling
Industrials 3,000,000 BAA PLC 7.875 2/10/2007 5,137,379 3.61
1,000,000 BOC Group PLC 7.25 6/07/2002 1,602,182 1.13
Total Investments in the United Kingdom
(Cost--$18,138,395) 17,907,666 12.59
United States
Banking US$ 4,300,000 Comerica Bank, Detroit 7.875 9/15/2026 4,441,126 3.12
Financial 5,000,000 Mellon Capital II 7.995 1/15/2027 5,033,000 3.54
Services
Industrials DM 7,100,000 Ford Motor Credit Co. 5.25 6/16/2008 3,755,366 2.64
US$ 10,000,000 Phelps Dodge Corporation 7.125 11/01/2027 8,937,700 6.28
Total Investments in the United States
(Cost--$23,533,282) 22,167,192 15.58
Total Investments in Long-Term Obligations
(Cost--$137,592,292) 130,757,735 91.90
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Value Percent of
Amount Short-Term Obligations Rate Date (Note 1a) Net Assets
<S> <C> <C> <S> <C> <C> <C> <C>
Commercial US$ 4,802,000 General Electric Capital Corp. 5.75% 7/01/1999 $ 4,802,000 3.38%
Paper* 5,000,000 General Motors Acceptance Corp. 5.63 7/01/1999 5,000,000 3.51
Total Investments in Short-Term Obligations
(Cost--$9,802,000) 9,802,000 6.89
Nominal Value
Covered by Options Issue
Options Purchased
Currency Put 7,100,000 Japanese Yen, expiring July 1999 at US$ 150 9,940 0.00
Options
Purchased
Total Currency Options Purchased
(Premiums Received--$14,555) 9,940 0.00
Total Investments (Cost--$147,408,847) 140,569,675 98.79
Unrealized Depreciation on Forward Foreign Exchange Contracts** (77,298) (0.05)
Other Assets Less Liabilities 1,799,121 1.26
------------ -------
Net Assets $142,291,498 100.00%
============ =======
<FN>
(a)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securities Act of 1933.
(b)Floating rate note.
++The security is a perpetual bond and has no stated maturity date.
*Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by the
Fund.
**Forward foreign exchange contracts as of June 30, 1999 were as
follows:
Unrealized
Appreciation
Expiration (Depreciation)
Foreign Currency Sold Date (Note 1b)
E 622,494 July 1999 $ 566
Pound 5,051,720 July 1999 7,780
Sterling
NZ$ 12,246,488 July 1999 66,315
YEN 2,943,363,850 July 1999 (93,719)
Total (US$ Commitment--$39,410,620) (19,058)
------------
Foreign Currency Purchased
NZ$ 12,246,488 July 1999 $ (65,274)
YEN 1,471,681,925 July 1999 7,034
Total (US$ Commitment--$18,709,692) (58,240)
------------
Total Unrealized Depreciation
on Forward Foreign Exchange
Contracts--Net $ (77,298)
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$147,394,292) (Note 1a) $ 140,559,735
Options purchased, at value (cost--$14,555)(Notes 1a &1b) 9,940
Receivables:
Interest $ 2,711,649
Beneficial interest sold 35,822 2,747,471
--------------
Prepaid registration fees and other assets (Note 1f) 28,796
--------------
Total assets 143,345,942
--------------
Liabilities: Unrealized depreciation on forward foreign exchange
contracts (Note 1b) 77,298
Payables:
Beneficial interest redeemed 401,101
Dividends to shareholders (Note 1g) 240,376
Investment adviser (Note 2) 72,144
Distributor (Note 2) 60,251
Options purchased (Note 1b) 14,555
Forward foreign exchange contracts (Note 1b) 476 788,903
--------------
Accrued expenses and other liabilities 188,243
--------------
Total liabilities 1,054,444
--------------
Net Assets: Net assets $ 142,291,498
==============
Net Assets Class A Shares of beneficial interest, $0.10 par value,
Consist of: unlimited number of shares authorized $ 244,585
Class B Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 914,112
Class C Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 12,829
Class D Shares of beneficial interest, $0.10 par value,
unlimited number of shares authorized 451,760
Paid-in capital in excess of par 184,155,008
Accumulated realized capital losses on investments and foreign
currency transactions--net (Note 5) (36,504,037)
Unrealized depreciation on investments and foreign currency
transactions--net (6,982,759)
--------------
Net assets $ 142,291,498
==============
Net Asset Value: Class A--Based on net assets of $21,436,699 and 2,445,853 shares
of beneficial interest outstanding $ 8.76
==============
Class B--Based on net assets of $80,141,174 and 9,141,116 shares
of beneficial interest outstanding $ 8.77
==============
Class C--Based on net assets of $1,124,221 and 128,285 shares
of beneficial interest outstanding $ 8.76
==============
Class D--Based on net assets of $39,589,404 and 4,517,603 shares
of beneficial interest outstanding $ 8.76
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended June 30, 1999
<S> <S> <C> <C>
Investment Income Interest and discount earned (net of $21,661 foreign
(Notes 1d & 1e): withholding tax) $ 4,894,647
Expenses: Investment advisory fees (Note 2) $ 485,763
Account maintenance and distribution fees--Class B (Note 2) 350,916
Transfer agent fees--Class B (Note 2) 82,218
Accounting services (Note 2) 67,122
Account maintenance fees--Class D (Note 2) 54,459
Professional fees 39,573
Printing and shareholder reports 32,400
Transfer agent fees--Class D (Note 2) 32,159
Registration fees (Note 1f) 31,134
Custodian fees 26,633
Trustees' fees and expenses 24,285
Transfer agent fees--Class A (Note 2) 17,174
Account maintenance and distribution fees--Class C (Note 2) 5,997
Transfer agent fees--Class C (Note 2) 1,324
Pricing services 380
Other 2,208
--------------
Total expenses 1,253,745
--------------
Investment income--net 3,640,902
--------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 582,549
(Loss) on Foreign currency transactions--net (909,792) (327,243)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (16,788,950)
(Notes 1b, 1c, Foreign currency transactions--net 1,329,107 (15,459,843)
1e & 3): -------------- --------------
Net realized and unrealized loss on investments and
foreign currency transactions (15,787,086)
--------------
Net Decrease in Net Assets Resulting from Operations $ (12,146,184)
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 3,640,902 $ 10,367,907
Realized gain (loss) on investments and foreign currency
transactions--net (327,243) 4,640,406
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net (15,459,843) 7,107,890
-------------- --------------
Net increase (decrease) in net assets resulting from operations (12,146,184) 22,116,203
-------------- --------------
Dividends to Investment income--net:
Shareholders Class A (584,568) (1,440,531)
(Note 1g): Class B (1,985,305) (6,208,193)
Class C (31,425) (88,360)
Class D (1,039,604) (2,630,823)
-------------- --------------
Net decrease in net assets resulting from dividends to
shareholders (3,640,902) (10,367,907)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial interest
Interest transactions (29,402,300) (64,457,478)
Transactions -------------- --------------
(Note 4):
Net Assets: Total decrease in net assets (45,189,386) (52,709,182)
Beginning of period 187,480,884 240,190,066
-------------- --------------
End of period $ 142,291,498 $ 187,480,884
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .23 .52 .54 .56 .59
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.90) .54 (.44) .02 .58
--------- --------- --------- --------- ---------
Total from investment operations (.67) 1.06 .10 .58 1.17
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.23) (.52) (.14) (.56) (.39)
Return of capital--net -- -- (.40) -- (.20)
--------- --------- --------- --------- ---------
Total dividends and distributions (.23) (.52) (.54) (.56) (.59)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.76 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (7.06%)++ 11.99% 1.19% 6.42% 13.39%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.02%* .92% .96% .87% .86%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 5.02%* 5.57% 5.83% 6.02% 6.31%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 21,437 $ 26,289 $ 27,522 $ 72,876 $ 85,610
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.99% 129.20% 699.63% 1234.05% 512.75%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .19 .45 .47 .49 .51
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.89) .54 (.44) .02 .58
--------- --------- --------- --------- ---------
Total from investment operations (.70) .99 .03 .51 1.09
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.19) (.45) (.13) (.49) (.34)
Return of capital--net -- -- (.34) -- (.17)
--------- --------- --------- --------- ---------
Total dividends and distributions (.19) (.45) (.47) (.49) (.51)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.77 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (7.31%)++ 11.13% .41% 5.60% 12.52%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.80%* 1.71% 1.73% 1.65% 1.64%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.24%* 4.80% 5.07% 5.25% 5.56%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 80,141 $ 110,620 $ 160,571 $ 347,529 $ 540,887
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.99% 129.20% 699.63% 1234.05% 512.75%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the Six
The following per share data and ratios have been derived Months Ended
from information provided in the financial statements. June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .19 .45 .46 .48 .51
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.90) .54 (.44) .02 .58
--------- --------- --------- --------- ---------
Total from investment operations (.71) .99 .02 .50 1.09
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.19) (.45) (.12) (.48) (.34)
Return of capital--net -- -- (.34) -- (.17)
--------- --------- --------- --------- ---------
Total dividends and distributions (.19) (.45) (.46) (.48) (.51)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.76 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (7.44%)++ 11.07% .33% 5.51% 12.44%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.85%* 1.75% 1.82% 1.73% 1.71%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.19%* 4.74% 4.94% 5.16% 5.44%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 1,124 $ 1,848 $ 2,284 $ 9,351 $ 8,468
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.99% 129.20% 699.63% 1234.05% 512.75%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
June 30, For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.66 $ 9.11 $ 9.55 $ 9.54 $ 8.96
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .22 .50 .51 .54 .56
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.90) .55 (.44) .01 .58
--------- --------- --------- --------- ---------
Total from investment operations (.68) 1.05 .07 .55 1.14
--------- --------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.22) (.50) (.13) (.54) (.37)
Return of capital--net -- -- (.38) -- (.19)
--------- --------- --------- --------- ---------
Total dividends and distributions (.22) (.50) (.51) (.54) (.56)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 8.76 $ 9.66 $ 9.11 $ 9.55 $ 9.54
========= ========= ========= ========= =========
Total Investment Based on net asset value per share (7.17%)++ 11.84% .94% 6.05% 13.11%
Return:** ========= ========= ========= ========= =========
Ratios to Average Expenses 1.27%* 1.17% 1.19% 1.08% 1.11%
Net Assets: ========= ========= ========= ========= =========
Investment income--net 4.77%* 5.32% 5.66% 5.74% 6.07%
========= ========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 39,589 $ 48,724 $ 49,813 $ 45,685 $ 5,665
Data: ========= ========= ========= ========= =========
Portfolio turnover 43.99% 129.20% 699.63% 1234.05% 512.75%
========= ========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Bond Fund for Investment and Retirement (the
"Fund") is registered under the Investment Company Act of 1940 as a
non-diversified, open-end management investment company. These
unaudited financial statements reflect all adjustments which are, in
the opinion of management, necessary to a fair statement of the
results for the interim period presented. All such adjustments are
of a normal recurring nature. The Fund'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 that 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). 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.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Financial futures contracts--The Fund may purchase or sell
financial futures contracts and options on such futures contracts as
a hedge against adverse changes in interest rates. A futures
contract is an agreement between two parties to buy and sell a
security, respectively, for a set price on a future date. Upon
entering into a contract, the Fund deposits and maintains as
collateral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash equal
to the daily fluctuation in value of the contract. Such receipts or
payments are known as variation margin and are recorded by the Fund
as unrealized gains or losses. When the contract is closed, the Fund
records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
Merrill Lynch Global Bond Fund for Investment and Retirement
June 30, 1999
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various
rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
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 the "Distributor"), a division of
Princeton Funds Distributor, Inc. ("PFD"), a wholly-owned subsidiary
of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee of 0.60%, on an annual basis,
of the average daily value of the Fund's net assets.
Pursuant to the Distribution Plans adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith 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
June 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
For the six months ended June 30, 1999, 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 $10 $144
Class D $15 $266
For the six months ended June 30, 1999, MLPF&S received contingent
deferred sales charges of $25,133 and $254 relating to transactions
in Class B and Class C Shares, respectively.
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 six months ended June 30, 1999 were $69,054,593 and
$104,159,456, respectively.
Net realized gains (losses) for the six months ended June 30, 1999
and net unrealized losses as of June 30, 1999 were as follows:
Realized
Gains Unrealized
(Losses) Losses
Long-term investments $ 582,549 $ (6,834,557)
------------ ------------
Currency transactions:
Options written (40,280) --
Options purchased (101,020) (4,615)
Foreign currency
transactions (1,086,317) (66,289)
Forward foreign exchange
contracts 317,825 (77,298)
------------ ------------
Total currency transactions (909,792) (148,202)
------------ ------------
Total $ (327,243) $ (6,982,759)
============ ============
As of June 30 1999, net unrealized depreciation for Federal income
tax purposes aggregated $6,834,557, of which $128,475 related to
appreciated securities and $6,963,032 related to depreciated
securities. The aggregate cost of investments at June 30, 1999 for
Federal income tax purposes was $147,394,292.
Transactions in options written for the six months ended June 30,
1999, were as follows:
Nominal Value
Covered by Premiums
Written Options Received
Outstanding call options
written, beginning of period -- --
Options written 3,800,000 $ 40,280
Options expired (3,800,000) (40,280)
------------ ------------
Outstanding call options
written, end of period -- $ --
============ ============
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $29,402,300 and $64,457,478 for the six months
ended June 30, 1999 and for the year ended December 31, 1998,
respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
Shares sold 204,954 $ 1,908,484
Shares issued to shareholders
in reinvestment of dividends 30,100 278,913
------------ ------------
Total issued 235,054 2,187,397
Shares redeemed (510,881) (4,756,209)
------------ ------------
Net decrease (275,827) $ (2,568,812)
============ ============
Class A Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
Shares sold 627,002 $ 5,905,680
Shares issued to shareholders
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
June 30, 1999
Class B Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
Shares sold 140,996 $ 1,328,504
Shares issued to shareholders
in reinvestment of dividends 116,553 1,081,160
------------ ------------
Total issued 257,549 2,409,664
Automatic conversion of
shares (144,956) (1,339,404)
Shares redeemed (2,420,455) (22,452,306)
------------ ------------
Net decrease (2,307,862) $(21,382,046)
============ ============
Class B Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
Shares sold 712,547 $ 6,697,291
Shares issued to shareholders
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 C Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
Shares sold 6,687 $ 61,305
Shares issued to shareholders
in reinvestment of dividends 2,657 24,633
------------ ------------
Total issued 9,344 85,938
Shares redeemed (72,362) (664,302)
------------ ------------
Net decrease (63,018) $ (578,364)
============ ============
Class C Shares for the Year Dollar
Ended December 31, 1998 Shares Amount
Shares sold 202,335 $ 1,890,629
Shares issued to shareholders
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 D Shares for the Six Months Dollar
Ended June 30, 1999 Shares Amount
Shares sold 24,571 $ 227,326
Automatic conversion of
shares 145,017 1,339,404
Shares issued to shareholders
in reinvestment of dividends 69,104 640,038
------------ ------------
Total issued 238,692 2,206,768
Shares redeemed (766,150) (7,079,846)
------------ ------------
Net decrease (527,458) $ (4,873,078)
============ ============
Class D Shares for the Year Dollar
Ended 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)
============ ============
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.
