MERRILL LYNCH
GLOBAL BOND
FUND
For Investment and
Retirement
FUND LOGO
Annual Report
December 31, 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 (unaudited)
Bar graph depicting Type of Issues*
as a percentage of net assets as of December 31, 1999
Commercial Paper 7.3%
Industrials 4.4%
Foreign Government Obligations 2.9%
Sovereign Government Obligations 68.3%
US Government & Agency
Obligations 8.7%
Supranational 6.1%
Transportation 3.1%
Telecommunications 2.1%
Pie Graph depicting Geographical Diversification*
as a percentage of net assets as of December 31, 1999
United States 19.0%
France 5.9%
Italy 4.6%
United Kingdom 9.8%
Finland 3.1%
Netherlands 3.0%
Germany 8.1%
Greece 4.6%
Canada 11.1%
Australia 0.7%
Spain 4.3%
Japan 24.4%
Bar graph depicting Maturity of Investments*
as a percentage of net assets as of December 31, 1999
5 yrs-10yrs 38.4%
10 yrs + 9.3%
0-1 yr 13.3%
1 yr-5 yrs 39.0%
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
DEAR SHAREHOLDER
Fiscal Year in Review
During the fiscal year ended December 31, 1999, the total return for
Merrill Lynch Global Bond Fund for Investment and Retirement's Class
A, Class B, Class C and Class D Shares was -7.92%, -8.53%, -8.69%
and -8.15%, respectively, as compared to -5.08% for the unmanaged
benchmark J.P. Morgan Global Government Bond Index for the same
period. (Fund results do not reflect sales charges, and would be
lower if sales charges were included. Complete performance
information can be found on pages 4--6 of this report to
shareholders.)
During the 12-month period ended December 31, 1999, much of our
strategy centered around adjusting the Fund's duration in response
to interest rate volatility. We shortened our duration in the dollar
bloc countries relative to the Fund's benchmark. We also reduced our
exposure to European Monetary Union (EMU) countries and increased
investments in non-EMU countries (the United Kingdom, Greece,
Norway, Denmark and Sweden). At the same time, we reduced the
duration of our EMU investments and extended duration of our non-EMU
investments. We expected interest rates in non-EMU countries to come
down to meet the lower interest rate structure in EMU countries.
However, late in the fiscal year interest rates began to rise in non-
EMU countries as well, which negatively impacted Fund performance.
Although our short duration in dollar-bloc countries helped
performance, it was not enough to offset the negative effect of our
European investments.
In Japan, our underweight position in the yen also hindered Fund
performance. We believed that we were still in a bullish trend for
the US dollar relative to the yen and that this was a correction in
the cycle that would soon end. We also kept a short duration in
Japan, anticipating that there would be a rise in Japanese interest
rates as the economy reflated. In fact, the yen got much stronger
and interest rates in Japan declined.
Investment Environment
During the fiscal year ended December 31, 1999, there were three
major predominant forces at work in the global bond markets. The
first was the Federal Reserve Board's attempt to preemptively
contain inflationary pressures before they materialized. At the end
of June, August and November, the Federal Reserve Board raised
interest rates 25 basis points (0.25%) to ensure a low level of
inflation, which in turn prompted the central banks of several
countries to raise their official interest rates in November. In
addition to the United States, Canada, Australia, New Zealand,
Germany, United Kingdom, Denmark and Sweden raised interest rates
between 25 basis points and 50 basis points.
The second factor influencing market activity was the rebound in the
Japanese economy and the resulting rise in the Japanese yen. Gross
domestic product (GDP) growth was surprisingly strong in the first
quarter and positive in the second quarter when a decline was
expected. With this economic rebound there came a robust stock
market.
The third important market influence was the pervasive weakness of
the euro throughout the period. The euro's weakness was attributed
to a poor, but slowly rising economy. Relative to the United States
and Japan, the EMU's economy was not moving along and inflationary
pressures were beginning to emerge. In addition, eurobond sales by
the Japanese, who had been large holders of eurobonds, hurt the euro
even further during the period. As a result, the euro relative to
the yen went from E123.625 on July 1, 1999 to E102.65 on December
30, 1999, a decline of 16.97%. Relative to the US dollar, the euro
went from E1.023 on July 1, 1999 to E1.0062 on December 31, 1999, a
1.64% decline. On an annual basis, the euro declined 13.98% versus
the US dollar.
Investment Outlook
Federal Reserve Board Chairman Alan Greenspan continues to voice the
central bank's desire to prevent any potential rise in inflation.
Even though at present there are no significant signs of inflation,
we believe the Federal Reserve Board will strive to temper economic
growth through a gradual rise in interest rates. If the US central
bank can orchestrate a soft landing and get economic growth lower,
it may preclude significant future monetary policy tightenings in
2000. At the same time, growth is also present in Japan and the
country appears to be rebounding out of its deep recession, in our
view. However, despite intervention by the Bank of Japan, continued
strengthening of the yen could have an adverse effect on the
economic rebound.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
In Conclusion
We thank you for your investment in Merrill Lynch Global Bond Fund
for Investment and Retirment, and we look forward to sharing our
investment outlook and strategies with you in our next report to
shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Harry Escobar)
Harry Escobar
Senior Vice President and Portfolio Manager
February 7, 2000
To reduce shareholder expenses, Merrill Lynch Global Bond Fund for
Investment and Retirement will no longer be printing and mailing
quarterly reports to shareholders. We will continue to provide you
with reports on a semi-annual and annual basis.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 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 12/31/99 -7.92% -11.61%
Five Years Ended 12/31/99 +4.72 + 3.86
Ten Years Ended 12/31/99 +6.92 + 6.49
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/99 -8.53% -12.03%
Five Years Ended 12/31/99 +3.93 + 3.93
Ten Years Ended 12/31/99 +6.12 + 6.12
*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 12/31/99 -8.69% -9.56%
Five Years Ended 12/31/99 +3.84 +3.84
Inception (10/21/94)
through 12/31/99 +3.34 +3.34
*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 12/31/99 -8.15% -11.83%
Five Years Ended 12/31/99 +4.46 + 3.61
Inception (10/21/94)
through 12/31/99 +3.96 + 3.14
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
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:
12/89 12/99
ML Global Bond Fund++--
Class A Shares* $ 9,600 $18,747
ML Global Bond Fund++--
Class B Shares* $10,000 $18,107
JP Morgan Global Government
Bond Index++++ $10,000 $21,205
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:
10/21/94** 12/99
ML Global Bond Fund++--
Class C Shares* $10,000 $11,862
ML Global Bond Fund++--
Class D Shares* $ 9,600 $11,747
JP Morgan Global Government
Bond Index++++ $10,000 $13,660
*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, 1999
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
Ten Years/
3 Month 12 Month Since Inception Standardized
As of December 31, 1999 Total Return Total Return Total Return 30-Day Yield
<S> <C> <C> <C> <C>
ML Global Bond Fund Class A Shares -2.10% -7.92% +95.30% 3.30%
ML Global Bond Fund Class B Shares -2.30 -8.53 +81.06 2.65
ML Global Bond Fund Class C Shares -2.31 -8.69 +18.62 2.59
ML Global Bond Fund Class D Shares -2.17 -8.15 +22.34 3.05
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the payable date. The
Fund's ten-year/inception 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
Terry K. Glenn, President and 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
Donald Cecil and Edward H. Meyer, Trustees of Merrill Lynch Global
Bond Fund for Investment and Retirement have recently retired. The
Fund's Board of Trustees wishes Mr. Cecil and Mr. Meyer well in
their retirements.
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
December 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Australia
Sovereign A$ 1,325,000 Australian Government Bond 5.75 % 6/15/2011 $ 780,144 0.7%
Government
Obligations
Total Investments in Australia (Cost--$780,343) 780,144 0.7
Canada
Sovereign NZ$ 11,450,000 Canada Government Bond 6.625 10/03/2007 5,551,476 4.8
Government
Obligations
Supra- C$ 5,470,000 Inter-American Development Bank 7.25 11/03/2003 3,876,749 3.4
national
Total Investments in Canada (Cost--$10,736,059) 9,428,225 8.2
Finland
Sovereign E 3,195,570 Finnish Government Bond 7.25 4/18/2006 3,557,493 3.1
Government
Obligations
Total Investments in Finland (Cost--$3,960,538) 3,557,493 3.1
France
Telecom- E 3,170,939 France Telecom 5.75 4/25/2007 3,234,135 2.8
munications
Transpor- 3,900,000 Societe National Chemins 4.625 10/25/2009 3,593,479 3.1
tation
Total Investments in France (Cost--$7,344,150) 6,827,614 5.9
Germany
Sovereign E 4,460,000 Bundesrepublic Deutschland 4.125 7/04/2008 4,125,527 3.6
Government 3,920,000 Bundesrepublic Deutschland 4.75 7/04/2028 3,289,268 2.8
Obligations 1,940,000 Bundesschatzanweisungen 4.00 3/17/2000 1,956,598 1.7
Total Investments in Germany (Cost--$9,960,495) 9,371,393 8.1
Greece
Sovereign GRD 1,524,000,000 Hellenic Republic 8.60 3/26/2008 5,266,221 4.6
Government
Obligations
Total Investments in Greece (Cost--$6,159,426) 5,266,221 4.6
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Italy
Sovereign E 4,530,640 Buoni Poliennali Del Tesoro 10.00 % 8/01/2003 $ 5,322,224 4.6%
Government
Obligations
Total Investments in Italy (Cost--$6,070,277) 5,322,224 4.6
Japan
Sovereign YEN 956,000,000 Japan Government Bond #145 5.50 3/20/2002 10,417,724 9.0
Government 1,306,000,000 Japan Government Bond #161 4.70 9/22/2003 14,659,227 12.7
Obligations
Supranational 282,000,000 World Bank 5.25 3/20/2002 3,065,049 2.7
Total Investments in Japan (Cost--$27,587,446) 28,142,000 24.4
Netherlands
Sovereign E 3,295,000 Netherlands Government Bond 6.50 4/15/2003 3,493,461 3.0
Government
Obligations
Total Investments in the Netherlands (Cost--$3,488,588) 3,493,461 3.0
Spain
Sovereign E 2,400,000 Bonos y Obligation Del Estado 5.25 1/31/2003 2,452,066 2.1
Government 2,600,000 Spanish Government Bond 5.15 7/30/2009 2,537,737 2.2
Obligations
Total Investments in Spain (Cost--$5,777,761) 4,989,803 4.3
United
Kingdom
Industrials Pound 1,000,000 BOC Group PLC 7.25 6/07/2002 1,611,198 1.4
Sterling
Sovereign 5,500,000 United Kingdom Gilt 7.50 12/07/2006 9,644,804 8.4
Government
Obligations
Total Investments in the United Kingdom
(Cost--$11,511,397) 11,256,002 9.8
United
States
Industrials DM 7,100,000 Ford Motor Credit Co. 5.25 6/16/2008 3,476,663 3.0
US US$ 3,000,000 Federal National Mortgage
Government Association 6.625 9/15/2009 2,913,750 2.5
& Agency 2,430,000 US Treasury Bonds 5.25 11/15/2028 2,001,713 1.8
Obligations 4,840,000 US Treasury Bonds 6.125 8/15/2029 4,613,875 4.0
Total Investments in the United States
(Cost--$13,847,805) 13,006,001 11.3
Total Investments in Long-Term Obligations
(Cost--$107,224,285) 101,440,581 88.0
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Interest Maturity Percent of
Amount Short-Term Obligations Rate Date Value Net Assets
<S> <S> <C> <S> <C> <C> <C> <C>
Canada
Foreign C$ 4,800,000 Ontario Treasury Bill 4.80% 1/17/2000 $ 3,301,719 2.9%
Government
Obligations*
Total Short-Term Obligations in Canada (Cost--$3,270,299) 3,301,719 2.9
United
States
Commercial E 5,192,000 General Electric Capital Corp 3.41 3/29/2000 5,186,648 4.5
Paper* US$ 3,238,000 General Motors Acceptance Corp. 5.00 1/03/2000 3,238,000 2.8
US Government 500,000 US Treasury Bills 4.66 1/20/2000 498,830 0.4
Obligations*
Total Short-Term Obligations in the United States
(Cost--$9,034,627) 8,923,478 7.7
Total Investments in Short-Term Obligations
(Cost--$12,304,926) 12,225,197 10.6
Nominal Value
Covered by Options
Options Purchased
Currency Put 11,200,000 Japanese Yen, expiring January 2000 at YEN 105 22,512 0.0
Options
Purchased
Total Currency Options Purchased (Cost--$86,016) 22,512 0.0
Total Investments (Cost--$119,615,227) 113,688,290 98.6
Unrealized Depreciation on Forward Foreign Exchange Contracts** (508,648) (0.4)
Other Assets Less Liabilities 2,097,681 1.8
------------ ------
Net Assets $115,277,323 100.0%
============ ======
*Commercial Paper, certain Foreign and US Government Obligationsare
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
**Forward foreign exchange contracts as of December 31, 1999 were
as follows:
Unrealized
Expiration Appreciation
Foreign Currency Sold Date (Depreciation)
A$ 1,254,762 January 2000 $ (21,394)
C$ 2,409,952 January 2000 (38,022)
E 3,894,633 February 2000 42,666
Pound Sterling 1,782,733 January 2000 (8,824)
NZ$ 6,068,982 February 2000 (139,405)
YEN 1,471,681,925 January 2000 (336,424)
------------
Total (US$ Commitment--$26,392,748) (501,403)
------------
Expiration
Foreign Currency Purchased Date
Pound Sterling 726,682 January 2000 $ (7,245)
------------
Total (US$ Commitment--$1,180,349) (7,245)
------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (508,648)
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$119,529,211) $ 113,665,778
Options purchased, at value (cost--$86,016) 22,512
Cash 764
Foreign cash 1,147,727
Receivables:
Interest $ 2,307,002
Beneficial interest sold 211,747 2,518,749
--------------
Prepaid registration fees and other assets 66,448
--------------
Total assets 117,421,978
--------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts 508,648
Payables:
Beneficial interest redeemed 1,008,139
Dividends to shareholders 268,464
Investment adviser 68,272
Distributor 52,480 1,397,355
--------------
Accrued expenses and other liabilities 238,652
--------------
Total liabilities 2,144,655
--------------
Net Assets: Net assets $ 115,277,323
==============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 198,216
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 742,032
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 9,282
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 412,329
Paid-in capital in excess of par 160,066,318
Accumulated realized capital losses on investments and foreign
currency transactions--net (39,677,554)
Unrealized depreciation on investments and foreign currency
transactions--net (6,473,300)
--------------
Net assets $ 115,277,323
==============
Net Asset Value: Class A--Based on net assets of $16,776,100 and 1,982,158 shares
of beneficial interest outstanding $ 8.46
==============
Class B--Based on net assets of $62,822,021 and 7,420,320 shares
of beneficial interest outstanding $ 8.47
==============
Class C--Based on net assets of $785,542 and 92,818 shares
of beneficial interest outstanding $ 8.46
==============
Class D--Based on net assets of $34,893,660 and 4,123,286 shares
of beneficial interest outstanding $ 8.46
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended December 31, 1999
<S> <S> <C> <C>
Investment Interest and discount earned (net of $42,047
Income: foreign withholding tax) $ 8,955,322
Expenses: Investment advisory fees $ 884,105
Account maintenance and distribution fees--Class B 626,158
Transfer agent fees--Class B 154,056
Professional fees 113,587
Account maintenance fees--Class D 102,430
Accounting services 101,099
Printing and shareholder reports 65,393
Transfer agent fees--Class D 63,858
Custodian fees 58,204
Registration fees 55,972
Trustees' fees and expenses 45,203
Transfer agent fees--Class A 33,713
Account maintenance and distribution fees--Class C 9,912
Transfer agent fees--Class C 2,313
Pricing services 773
Other 5,408
--------------
Total expenses 2,322,184
--------------
Investment income--net 6,633,138
--------------
Realized & Realized loss from:
Unrealized Gain Investments--net (2,703,987)
(Loss) on Foreign currency transactions--net (2,474,273) (5,178,260)
Investments & --------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net (15,817,826)
Foreign currency transactions--net 867,442 (14,950,384)
-------------- --------------
Net realized and unrealized loss on investments and foreign
currency transactions (20,128,644)
--------------
Net Decrease in Net Assets Resulting from Operations $ (13,495,506)
==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 6,633,138 $ 10,367,907
Realized gain (loss) on investments and foreign currency
transactions--net (5,178,260) 4,640,406
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net (14,950,384) 7,107,890
-------------- --------------
Net increase (decrease) in net assets resulting
from operations (13,495,506) 22,116,203
-------------- --------------
Dividends to Investment income--net:
Shareholders: Class A (812,197) (1,440,531)
Class B (2,645,207) (6,208,193)
Class C (38,789) (88,360)
Class D (1,459,445) (2,630,823)
Return of capital:
Class A (274,931) --
Class B (895,412) --
Class C (13,130) --
Class D (494,027) --
-------------- --------------
Net decrease in net assets resulting from
dividends to shareholders (6,633,138) (10,367,907)
-------------- --------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (52,074,917) (64,457,478)
Transactions: -------------- --------------
Net Assets: Total decrease in net assets (72,203,561) (52,709,182)
Beginning of year 187,480,884 240,190,066
-------------- --------------
End of year $ 115,277,323 $ 187,480,884
============== ==============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .45 .52 .54 .56 .59
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.20) .54 (.44) .02 .58
---------- ---------- ---------- ---------- ----------
Total from investment operations (.75) 1.06 .10 .58 1.17
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.34) (.52) (.14) (.56) (.39)
Return of capital--net (.11) -- (.40) -- (.20)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.45) (.52) (.54) (.56) (.59)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.46 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (7.92%) 11.99% 1.19% 6.42% 13.39%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.06% .92% .96% .87% .86%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 5.02% 5.57% 5.83% 6.02% 6.31%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $ 16,776 $ 26,289 $ 27,522 $ 72,876 $ 85,610
========== ========== ========== ========== ==========
Portfolio turnover 138.81% 129.20% 699.63% 1234.05% 512.75%
========== ========== ========== ========== ==========
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 1999 1998 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .38 .45 .47 .49 .51
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.19) .54 (.44) .02 .58
---------- ---------- ---------- ---------- ----------
Total from investment operations (.81) .99 .03 .51 1.09
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.28) (.45) (.13) (.49) (.34)
Return of capital--net (.10) -- (.34) -- (.17)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.38) (.45) (.47) (.49) (.51)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.47 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (8.53%) 11.13% .41% 5.60% 12.52%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.84% 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 year
Data: (in thousands) $ 62,822 $ 110,620 $ 160,571 $ 347,529 $ 540,887
========== ========== ========== ========== ==========
Portfolio turnover 138.81% 129.20% 699.63% 1234.05% 512.75%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived Class C
from information provided in the financial statements.
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 year $ 9.66 $ 9.12 $ 9.56 $ 9.54 $ 8.96
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .37 .45 .46 .48 .51
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.20) .54 (.44) .02 .58
---------- ---------- ---------- ---------- ----------
Total from investment operations (.83) .99 .02 .50 1.09
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.28) (.45) (.12) (.48) (.34)
Return of capital--net (.09) -- (.34) -- (.17)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.37) (.45) (.46) (.48) (.51)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.46 $ 9.66 $ 9.12 $ 9.56 $ 9.54
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (8.69%) 11.07% .33% 5.51% 12.44%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.89% 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 year
Data: (in thousands) $ 785 $ 1,848 $ 2,284 $ 9,351 $ 8,468
========== ========== ========== ========== ==========
Portfolio turnover 138.81% 129.20% 699.63% 1234.05% 512.75%
========== ========== ========== ========== ==========
<CAPTION>
The following per share data and ratios have been derived Class D
from information provided in the financial statements.
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 year $ 9.66 $ 9.11 $ 9.55 $ 9.54 $ 8.96
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .43 .50 .51 .54 .56
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (1.20) .55 (.44) .01 .58
---------- ---------- ---------- ---------- ----------
Total from investment operations (.77) 1.05 .07 .55 1.14
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.32) (.50) (.13) (.54) (.37)
Return of capital--net (.11) -- (.38) -- (.19)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (.43) (.50) (.51) (.54) (.56)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 8.46 $ 9.66 $ 9.11 $ 9.55 $ 9.54
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (8.15%) 11.84% .94% 6.05% 13.11%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.31% 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 year
Data: (in thousands) $ 34,894 $ 48,724 $ 49,813 $ 45,685 $ 5,665
========== ========== ========== ========== ==========
Portfolio turnover 138.81% 129.20% 699.63% 1234.05% 512.75%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 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. 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
December 31, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
* Options--The Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from)the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various
rates.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. A portion of the net
investment income dividends paid by the Fund during the year ended
December 31, 1999 is characterized as a return of capital.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$1,677,500 have been reclassified between paid-in capital in excess
of par and accumulated net realized capital losses. These
classifications have no effect on net assets or net asset values per
share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or 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 .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
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
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 .25% .50%
Class C .25% .55%
Class D .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.
For the year ended December 31, 1999, 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 $10 $144
Class D $20 $335
For the year ended December 31, 1999, MLPF&S received contingent
deferred sales charges of $45,136 and $326 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 year ended December 31, 1999were $192,440,778 and
$257,453,031, respectively.
Net realized gains (losses) for the year ended December 31, 1999 and
net unrealized losses as of December 31, 1999 were as follows:
Realized
Gains Unrealized
(Losses) Losses
Investments:
Long-term $ (2,713,246) $ (5,783,704)
Short-term (3,451) (79,729)
Financial futures contracts 12,710 --
------------ ------------
Total investments (2,703,987) (5,863,433)
------------ ------------
Currency transactions:
Options written 78,680 --
Options purchased (261,998) (63,504)
Foreign currency
transactions (197,723) (37,715)
------------ ------------
Forward foreign exchange
contracts (2,093,232) (508,648)
------------ ------------
Total currency transactions (2,474,273) (609,867)
------------ ------------
Total $ (5,178,260) $ (6,473,300)
============ ============
As of December 31, 1999, net unrealized deprecia-tion for Federal
income tax purposes aggregated $6,189,891, of which $607,334 related
to appreciated securities and $6,797,225 related to depreciated
securities. The aggregate cost of investments at December 31, 1999
for Federal income tax purposes was $119,855,669.
Transactions in options written for the year ended December 31,
1999, were as follows:
Nominal Value
Covered by
Written Premiums
Call Options Written Options Received
Outstanding call options
written, beginning of year -- --
Options written $ 6,800,000 $ 78,680
Options expired (6,800,000) (78,680)
------------ ------------
Outstanding call options
written, end of year $ -- $ --
============ =============
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $52,074,917 and $64,457,478 for the years ended
December 31, 1999 and December 31, 1998, respectively.
Merrill Lynch Global Bond Fund for Investment and Retirement
December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in shares of capital for each class were as follows:
Class A Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 342,620 $ 3,103,935
Shares issued to shareholders
in reinvestment of dividends 60,335 541,594
------------ ------------
Total issued 402,955 3,645,529
Shares redeemed (1,142,477) (10,228,013)
------------ ------------
Net decrease (739,522) $ (6,582,484)
============ ============
Class A Shares for the Year Dollar
Ended 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)
============ ============
Class B Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 222,665 $ 2,037,879
Shares issued to share-
holders in reinvestment of
dividends 226,620 2,037,643
------------ ------------
Total issued 449,285 4,075,522
Automatic conversion
of shares (301,066) (2,690,620)
Shares redeemed (4,176,877) (37,697,677)
------------ ------------
Net decrease (4,028,658) $(36,312,775)
============ ============
Class B Shares for the Year Dollar
Ended 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 C Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 10,394 $ 93,209
Shares issued to share-
holders in reinvestment of
dividends 4,789 43,148
------------ ------------
Total issued 15,183 136,357
Shares redeemed (113,668) (1,023,182)
------------ ------------
Net decrease (98,485) $ (886,825)
============ ============
Class C Shares for the Year Dollar
Ended 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 D Shares for the Year Dollar
Ended December 31, 1999 Shares Amount
Shares sold 39,011 $ 352,215
Automatic conversion
of shares 301,217 2,690,620
Shares issued to shareholders
in reinvestment of dividends 143,701 1,287,452
------------ ------------
Total issued 483,929 4,330,287
Shares redeemed (1,405,704) (12,623,120)
------------ ------------
Net decrease (921,775) $ (8,292,833)
============ ============
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, 1999, the Fund had a net capital loss carryforward
of approximately $37,780,000, of which $23,791,000 expires in 2002,
$10,514,000 expires in 2005 and $3,475,000 expires in 2007. 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, 1999
<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,
1999, 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, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global Bond Fund for Investment and Retirement as of
December 31, 1999, 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 16, 2000
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
Of the monthly cash distributions paid by Merrill Lynch Global Bond
Fund for Investment and Retirement during its taxable year ended
December 31, 1999, 9.5455% of the February distribution and 28.8964%
of the distributions paid from March through December are
characterized as return of capital distributions. The tax reporting
treatment of a return of capital distribution is different from that
of a taxable distribution. Rather than being included in your
current taxable income, a return of capital is non-taxable and will
reduce the cost basis of your shares in the Fund. The entire amount
of the January dividend represents a taxable dividend.
Additionally, 59.0747% of the January distribution, 63.0483% of the
February distribution and 71.1036% of the distributions paid from
March through December represent income from foreign sources.
The Fund incurred foreign taxes which it has elected to pass through
its shareholders. Your share of the Fund's total foreign taxes paid
or withheld is 0.2393% multiplied by the February cash distribution
and 0.7243% multiplied by the cash distributions paid from March
through December.
There are no foreign withholding taxes associated with the January
distribution.
The foreign taxes paid or withheld represent taxes incurred by the
Fund on interest received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included as foreign source taxable
income with an offsetting deduction from gross income or as a credit
for taxes paid to foreign governments. You should consult your tax
advisor regarding the appropriate treatments of foreign taxes paid.
Please retain this information for your records.
