Exhibit 17(h)
(BULL LOGO)
Merrill Lynch Investment Managers
Annual Report
December 31, 2001
Merrill Lynch
Global Bond Fund
For Investment and
Retirement
www.mlim.ml.com
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
Type of Issues*
As of December 31, 2001
Percent of
Type of Issues* Net Assets
Sovereign Government Obligations 42.7%
Banks 19.8
US Government & Agency Obligations 26.3
Supranational 9.9
Geographical Diversification*
As of December 31, 2001
Percent of
Countries Net Assets
Germany 25.5%
Sweden 1.3
Denmark 4.5
Netherlands 4.6
United Kingdom 7.4
Italy 5.1
France 8.9
Austria 3.6
Canada 3.8
Japan 7.7
United States 26.3
Maturity of Investments*
As of December 31, 2001
Percent of
Maturity of Investments* Net Assets
1 yr - 5 yrs 49.50%
5 yrs - 10 yrs 39.68
10 yrs+ 14.55
*Percent of net assets may not equal 100%.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
DEAR SHAREHOLDER
Fiscal Year in Review
For the 12 months ended December 31, 2001, the Fund's Class A,
Class B, Class C and Class D Shares had total returns of -3.78%,
- - -4.53%, -4.59% and -4.02%, respectively, compared with a total
return of -0.80% for the unmanaged J.P. Morgan Global Government
Bond Index for the same period. (Fund results shown 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.) Until November, the Fund's overweighted
position in dollar bloc bonds positively contributed to portfolio
performance. However, despite reducing the position, a market sell-
off and volatility later in the period offset many of these gains.
Concerns over supply kept the pressure on Japanese bonds, but during
the year yields fell slightly, which was a slight detriment to
performance, as the portfolio remained underweighted throughout the
year. The benefit from our overweighted position in European
duration bonds did not come until later in 2001, as investors
reacted to worsening economic data. However, once again, the market
sold off sharply in the last two months of the period. In summary,
the portfolio has been subject to market volatility in a time when
fixed-income funds should have been benefiting from positive
performing markets.
During the fiscal year, the yen, on balance, weakened. With the
exception of some tactical trades, the Fund's underweighted exposure
to the yen helped performance, as was the underweighted exposure to
the euro in the first half of the year.
Market Review
The year was characterized by continuing weakening in economies
globally. Although this type of environment typically is positive
for bond holders, most of the major bond markets performed poorly in
spring 2001. This was mainly because of inflationary concerns raised
by the rapid pace of monetary policy easing by the Federal Reserve
Board and special factors such as rising energy and food prices.
Toward late summer,it became apparent that the expected recovery
inthe United States would be pushed further back, and inflation
fears abated. These developments led to a bond rally lasting from
July to November. At the same time, yield curves steepened in most
major markets, because of a general easing of monetary policy.
In the United States, the Federal Reserve Board cut rates by 475
basis points (4.75%) during 2001 in order to provide liquidity to a
slowing economy. Although there were a few positive indicators that
surprised investors in the first part of the year, the economy
failed to show any consistent signs of an early recovery.
Expectations of easier monetary policy, combined with poor equity
market performance and declining inflation pressure, supported bond
prices for most of the summer. In September, terrorist attacks led
to a massive flight to quality and rapid steepening of the yield
curve. Yields on long-dated US Treasury issues rose amid concerns
that additional expense and aid packages would result in the
cancellation of the buyback program and even increased issuance. The
announcement of the suspension of sales of 30-year US Treasury
issues surprised investors at the end of October and led to a sharp
rally in the long bond. However, prices returned to their pre-
announcement levels in the second half of November, as there was a
general sell-off in the bond market.
Europe also faced falling interest rates in 2001, although the
European Central Bank was much less proactive than the US Federal
Reserve Board. The short end of the curve benefited throughout the
year from expectations of further monetary policy easing. Longer-
dated bonds were adversely affected by inflationary concerns early
in the year, but performed well in the summer as it became clear
that price pressures had been overestimated.
In the United Kingdom, gilts started off the period well, but yields
started to rise in March after the proposal to end the Minimum
Funding Requirement reduced the attraction of long-dated gilts.
Short-term yields fell steadily over the period as the Market
Performance Committee implemented a series of interest rate cuts,
taking the base rate to its lowest level in 40 years. In September,
the gilts market reacted sharply to the events in the United States
with the yield curve disinverting.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
Continuing economic weakness supported Japanese bonds well until
June 2001. In February, Standard & Poor's issued a credit downgrade,
but this had little effect on the bond rally. In March, the Bank of
Japan reacted to the deteriorating state of the economy with an
effective return to zero interest rate policy. The election of Prime
Minister Koizumi bolstered bond prices, which were also supported by
the proposal to limit debt issuance in coming years. The bond market
was put under more pressure with the announcement of a supplementary
budget in the autumn. At the end of November, Fitch downgraded
Japan's sovereign debt from AA+ to AA and Moody's Investors Service
and Standard & Poor's downgraded the debt by the same amount soon
after.
Bond Market Outlook
The economic outlook in Western economies looks better for 2002 than
it was in 2001. We believe equity returns should pick up, albeit
slowly, and for the first time in two years bonds look set to
underperform equities. We expect that high-quality, non-benchmark
bonds will continue to make up a significant part of returns in
aggregate portfolios, and spreads should narrow over the year.
Significant risks in the credit system were emphasized in 2001 by
high profile defaults, such as Enron Corporation in the United
States and Railtrack Group in the United Kingdom.
The US economic recovery is likely to be slow and will probably not
start in earnest until at least the second quarter, in our opinion.
In Europe the outlook looks slightly worse with data likely to
continue to deteriorate for some months yet. This should help to
prolong the bond rally for a little while. The British economy
should continue to surge ahead of that in the United States and
Europe, and the gilts market is likely to underperform in 2002. The
outlook in Japan remains poor, as the economy struggles to escape
from yet another recession. Overall, bond markets are likely to post
lower returns this year than last, although the first few months of
the year should see a continuation of the 2001 bond market rally.
The yen is likely to weaken further over the coming year, although
not necessarily in a straight line. Official Japanese policy
continues to tolerate a weaker yen as part of a bigger plan for
economic recovery. However, there may be some yen strength in the
first quarter of the year, reflecting repatriation flows at the end
of the financial year.
In Conclusion
We thank you for your investment in Merrill Lynch Global Bond Fund
for Investment and Retirement, and we look forward to serving your
investment needs in the months and years ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Trustee
(Gareth Fielding)
Gareth Fielding
Senior Vice President and
Portfolio Manager
February 7, 2002
The Fund's transfer agency fee schedule has been amended. Under the
revised schedule, the fees payable to Financial Data Services, Inc.,
the transfer agent for the Fund, now range from $16 to $23 per
shareholder account (depending upon the level of service required)
or 0.10%of account assets for certain accounts that participate in
certain fee-based programs.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
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 ten 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. Performance results do not reflect the
deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. 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*
One Year Ended 12/31/01 -3.78% -7.63%
Five Years Ended 12/31/01 +0.19 -0.63
Ten Years Ended 12/31/01 +3.48 +3.06
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 12/31/01 -4.53% -8.28%
Five Years Ended 12/31/01 -0.59 -0.59
Ten Years Ended 12/31/01 +2.68 +2.68
*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*
One Year Ended 12/31/01 -4.59% -5.52%
Five Years Ended 12/31/01 -0.65 -0.65
Inception (10/21/94) through 12/31/01 +1.69 +1.69
*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*
One Year Ended 12/31/01 -4.02% -7.86%
Five Years Ended 12/31/01 -0.04 -0.86
Inception (10/21/94) through 12/31/01 +2.30 +1.72
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph illustrating the growth of a $10,000 investment in
ML Global Bond Fund++ Class A and Class B Shares compared to a
similar investment in JP Morgan Global Government Bond Index++++.
Values illustrated are as follow:
ML Global Bond Fund++
Class A Shares*
Date Value
December 1991 $ 9,600.00
December 1992 $10,352.00
December 1993 $11,719.00
December 1994 $11,099.00
December 1995 $12,585.00
December 1996 $13,393.00
December 1997 $13,552.00
December 1998 $15,177.00
December 1999 $13,975.00
December 2000 $14,048.00
December 2001 $13,517.00
ML Global Bond Fund++
Class B Shares*
Date Value
December 1991 $10,000.00
December 1992 $10,691.00
December 1993 $12,012.00
December 1994 $11,290.00
December 1995 $12,704.00
December 1996 $13,415.00
December 1997 $13,470.00
December 1998 $14,969.00
December 1999 $13,692.00
December 2000 $13,640.00
December 2001 $13,022.00
JP Morgan Global Government Bond Index++++
Date Value
December 1991 $10,000.00
December 1992 $10,456.00
December 1993 $11,738.00
December 1994 $11,888.00
December 1995 $14,184.00
December 1996 $14,808.00
December 1997 $15,016.00
December 1998 $17,316.00
December 1999 $16,436.00
December 2000 $16,821.00
December 2001 $16,686.00
A line graph illustrating the growth of a $10,000 investment in
ML Global Bond Fund++ Class C and Class D Shares compared to a
similar investment in JP Morgan Global Government Bond Index++++.
Values illustrated are as follow:
ML Global Bond Fund++
Class C Shares*
Date Value
10/21/1994 $10,000.00
December 1994 $ 9,827.00
December 1995 $11,049.00
December 1996 $11,658.00
December 1997 $11,696.00
December 1998 $12,991.00
December 1999 $11,862.00
December 2000 $11,824.00
December 2001 $11,281.00
ML Global Bond Fund++
Class D Shares*
Date Value
10/21/1994 $ 9,600.00
December 1994 $ 9,445.00
December 1995 $10,683.00
December 1996 $11,329.00
December 1997 $11,435.00
December 1998 $12,789.00
December 1999 $11,747.00
December 2000 $11,779.00
December 2001 $11,305.00
JP Morgan Global Government Bond Index++++
Date Value
10/21/1994 $10,000.00
December 1994 $ 9,897.00
December 1995 $11,809.00
December 1996 $12,328.00
December 1997 $12,501.00
December 1998 $14,415.00
December 1999 $13,683.00
December 2000 $14,003.00
December 2001 $13,891.00
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
+ML Global Bond Fund for Investment and Retirement 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. The starting date
for the Index in the Class C & Class D Shares' graph is from
10/31/94.
Past performance is not predictive of future performance.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
PERFORMANCE DATA (concluded)
Recent Performance Results*
Ten-Year/
6-Month 12-Month Since Inception Standardized
As of December 31, 2001 Total Return Total Return Total Return 30-Day Yield
ML Global Bond Fund Class A Shares +2.18% -3.78% +40.82% 2.07%
ML Global Bond Fund Class B Shares +1.77 -4.53 +30.22 1.34
ML Global Bond Fund Class C Shares +1.75 -4.59 +12.82 1.30
ML Global Bond Fund Class D Shares +2.05 -4.02 +17.75 1.82
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge were 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.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
SCHEDULE OF INVESTMENTS
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
Austria
Banks YEN 260,000,000 Oesterreich Kontrollbank 1.80 % 3/22/2010 $ 2,101,917 3.6%
Total Investments in Austria (Cost--$2,306,760) 2,101,917 3.6
Canada
Sovereign C$ 910,000 Government of Canada 8.00 6/01/2023 723,018 1.2
Government
Obligations
Supranational 2,275,000 Inter-American Development Bank 7.25 11/03/2003 1,522,585 2.6
Total Investments in Canada (Cost--$2,293,478) 2,245,603 3.8
Denmark
Banks YEN 330,000,000 Deutsche Ausgleichsbank 1.85 9/20/2010 2,665,441 4.5
Total Investments in Denmark (Cost--$2,926,439) 2,665,441 4.5
France
Sovereign E 1,200,000 French OAT 5.25 4/25/2008 1,097,622 1.9
Government 4,500,000 French OAT 5.50 4/25/2010 4,147,286 7.0
Obligations
Total Investments in France (Cost--$5,424,505) 5,244,908 8.9
Germany
Banks E 1,400,000 Depfa Pfandbriefbank 5.00 2/03/2005 1,273,638 2.2
6,525,000 Eurohypo AG 4.00 2/01/2007 5,631,689 9.5
Sovereign 4,300,000 Bundesobligation 5.00 5/20/2005 3,927,444 6.6
Government 2,650,000 Bundesrepublik Deutschland 5.375 1/04/2010 2,414,283 4.1
Obligations 1,010,000 Bundesrepublik Deutschland 4.75 7/04/2028 813,327 1.4
1,014,000 Bundesrepublik Deutschland 6.25 1/04/2030 1,007,043 1.7
Total Investments in Germany (Cost--$15,387,845) 15,067,424 25.5
Italy
Sovereign YEN 355,000,000 Republic of Italy 3.75 6/08/2005 3,024,900 5.1
Government
Obligations
Total Investments in Italy (Cost--$3,311,695) 3,024,900 5.1
Japan
Sovereign YEN 300,000,000 Kingdom of Spain 4.75 3/14/2005 2,614,420 4.4
Government
Obligations
Supranational 230,000,000 Asian Development Bank 3.125 6/29/2005 1,924,635 3.3
Total Investments in Japan (Cost--$5,199,451) 4,539,055 7.7
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
SCHEDULE OF INVESTMENTS (concluded)
Face Interest Maturity Percent of
Amount Long-Term Obligations Rate Date Value Net Assets
Netherlands
Sovereign E 2,750,000 Netherlands Government Bond 7.75 % 3/01/2005 $ 2,709,706 4.6%
Government
Obligations
Total Investments in the Netherlands (Cost--$2,640,238) 2,709,706 4.6
Sweden
Sovereign SEK 8,800,000 Swedish Government Bond 3.50 4/20/2006 793,346 1.3
Government
Obligations
Total Investments in Sweden (Cost--$824,485) 793,346 1.3
United Kingdom
Sovereign P 1,250,000 United Kingdom Gilt 7.50 12/07/2006 2,004,450 3.4
Government
Obligations
Supranational 1,500,000 European Investment Bank 7.625 12/07/2006 2,391,245 4.0
Total Investments in the United Kingdom (Cost--$4,224,026) 4,395,695 7.4
United States
US US$ 1,280,000 Fannie Mae 7.00 7/15/2005 1,387,597 2.4
Government & 2,111,000 Fannie Mae 7.125 6/15/2010 2,314,838 3.9
Agency 1,360,000 Fannie Mae 7.25 5/15/2030 1,532,122 2.6
Obligations 900,000 US Treasury Bonds 8.00 11/15/2021 1,139,346 1.9
2,000,000 US Treasury Bonds 5.25 11/15/2028 1,867,820 3.2
710,000 US Treasury Bonds 6.25 5/15/2030 768,355 1.3
4,000,000 US Treasury Notes 3.00 11/30/2003 4,003,120 6.8
1,700,000 US Treasury Notes 3.50 11/15/2006 1,638,375 2.8
850,000 US Treasury Notes 5.00 2/15/2011 846,812 1.4
Total Investments in the United States (Cost--$15,194,347) 15,498,385 26.3
Total Investments in Long-Term Obligations (Cost--$59,733,269) 58,286,380 98.7
Total Investments (Cost--$59,733,269) 58,286,380 98.7
Unrealized Depreciation on Forward Foreign Exchange Contracts--Net* (40,317) (0.0)
Other Assets Less Liabilities 785,848 1.3
------------ -------
Net Assets $ 59,031,911 100.0%
============ =======
*Forward foreign exchange contracts as of December 31, 2001 were as
follows:
Foreign Expiration Unrealized
Currency Sold Date Appreciation
C$ 950,000 February 2002 $ 11,018
E 3,000,000 February 2002 35,490
P 750,000 February 2002 1,181
------------
Total (US$ Commitment--$4,399,503) $ 47,689
============
Foreign Expiration Unrealized
Currency Purchased Date Depreciation
Dkr 6,500,000 February 2002 $ (9,262)
YEN 417,000,000 February 2002 (78,744)
------------
Total (US$ Commitment--$4,051,820) $ (88,006)
------------
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts--Net $ (40,317)
============
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of December 31, 2001
Assets: Investments, at value (identified cost--$59,733,269) $ 58,286,380
Foreign cash 26,947
Receivables:
Securities sold $ 5,384,957
Interest 1,329,867
Beneficial interest sold 11,921 6,726,745
---------------
Prepaid registration fees and other assets 90,540
---------------
Total assets 65,130,612
---------------
Liabilities: Unrealized depreciation on forward foreign exchange contracts 40,317
Payables:
Securities purchased 3,999,526
Custodian bank 1,566,724
Beneficial interest redeemed 308,886
Dividends to shareholders 42,125
Investment adviser 29,912
Distributor 21,068 5,968,241
---------------
Accrued expenses and other liabilities 90,143
---------------
Total liabilities 6,098,701
---------------
Net Assets: Net assets $ 59,031,911
===============
Net Assets Class A Shares of beneficial interest, $.10 par value,
Consist of: unlimited number of shares authorized $ 115,873
Class B Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 317,350
Class C Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 7,432
Class D Shares of beneficial interest, $.10 par value,
unlimited number of shares authorized 335,327
Paid-in capital in excess of par 100,753,531
Accumulated investment loss--net $ (316,306)
Accumulated realized capital losses on investments and foreign
currency transactions--net (40,673,103)
Unrealized depreciation on investments and foreign currency
transactions--net (1,508,193)
---------------
Total accumulated losses--net (42,497,602)
---------------
Net assets $ 59,031,911
===============
Net Asset Class A--Based on net assets of $8,814,749 and 1,158,732
Value: shares of beneficial interest outstanding $ 7.61
===============
Class B--Based on net assets of $24,148,094 and 3,173,504
shares of beneficial interest outstanding $ 7.61
===============
Class C--Based on net assets of $565,266 and 74,319
shares of beneficial interest outstanding $ 7.61
===============
Class D--Based on net assets of $25,503,802 and 3,353,273
shares of beneficial interest outstanding $ 7.61
===============
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (continued)
Statement of Operations for the Year Ended December 31, 2001
Investment Interest $ 2,858,438
Income:
Expenses: Investment advisory fees $ 409,837
Account maintenance and distribution fees--Class B 229,136
Professional fees 115,175
Accounting services 94,391
Transfer agent fees--Class B 84,021
Account maintenance fees--Class D 67,419
Transfer agent fees--Class D 64,963
Printing and shareholder reports 50,881
Registration fees 43,962
Trustees' fees and expenses 36,144
Transfer agent fees--Class A 24,557
Custodian fees 21,874
Account maintenance and distribution fees--Class C 4,224
Pricing services 2,889
Transfer agent fees--Class C 1,514
Other 14,693
---------------
Total expenses 1,265,680
---------------
Investment income--net 1,592,758
---------------
Realized & Realized gain (loss) on:
Unrealized Investments--net 470,290
Gain (Loss) on Foreign currency transactions--net (6,122,768) (5,652,478)
Investments & ---------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net 1,193,004
Transactions Foreign currency transactions--net (143,153) 1,049,851
- - --Net: --------------- ---------------
Net Decrease in Net Assets Resulting from Operations $ (3,009,869)
===============
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (continued)
Statements of Changes in Net Assets
For the Year Ended
December 31,
Increase (Decrease) in Net Assets: 2001 2000
Operations: Investment income--net $ 1,592,758 $ 3,731,999
Realized loss on investments and foreign currency
transactions--net (5,652,478) (7,763,652)
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 1,049,851 2,983,139
--------------- ---------------
Net decrease in net assets resulting from operations (3,009,869) (1,048,514)
--------------- ---------------
Dividends to Return of capital--net:
Shareholders: Class A (283,999) (639,366)
Class B (611,668) (1,792,439)
Class C (9,896) (21,251)
Class D (675,162) (1,278,943)
--------------- ---------------
Net decrease in net assets resulting from dividends to
shareholders (1,580,725) (3,731,999)
--------------- ---------------
Beneficial Net decrease in net assets derived from beneficial
Interest interest transactions (14,908,274) (31,966,031)
Transactions: --------------- ---------------
Net Assets: Total decrease in net assets (19,498,868) (36,746,544)
Beginning of year 78,530,779 115,277,323
--------------- ---------------
End of year* $ 59,031,911 $ 78,530,779
=============== ===============
*Accumulated investment loss--net $ (316,306) --
=============== ===============
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights
The following per share data and ratios
have been derived from information Class A
provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value, beginning of year $ 8.13 $ 8.46 $ 9.66 $ 9.12 $ 9.56
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .22 .36 .45 .52 .54
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.52) (.33) (1.20) .54 (.44)
--------- --------- --------- --------- ---------
Total from investment operations (.30) .03 (.75) 1.06 .10
--------- --------- --------- --------- ---------
Less dividends:
Investment income--net -- -- (.34) (.52) (.14)
Return of capital--net (.22) (.36) (.11) -- (.40)
--------- --------- --------- --------- ---------
Total dividends (.22) (.36) (.45) (.52) (.54)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 7.61 $ 8.13 $ 8.46 $ 9.66 $ 9.12
========= ========= ========= ========= =========
Total Based on net asset value per share (3.78%) .52% (7.92%) 11.99% 1.19%
Investment ========= ========= ========= ========= =========
Return:*
Ratios to Expenses 1.40% 1.07% 1.06% .92% .96%
Average ========= ========= ========= ========= =========
Net Assets: Investment income--net 2.79% 4.50% 5.02% 5.57% 5.83%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 8,815 $ 11,517 $ 16,776 $ 26,289 $ 27,522
Data: ========= ========= ========= ========= =========
Portfolio turnover 124.66% 221.49% 138.81% 129.20% 699.63%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
The following per share data and ratios
have been derived from information Class B
provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value, beginning of year $ 8.13 $ 8.47 $ 9.66 $ 9.12 $ 9.56
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .15 .29 .38 .45 .47
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.52) (.34) (1.19) .54 (.44)
--------- --------- --------- --------- ---------
Total from investment operations (.37) (.05) (.81) .99 .03
--------- --------- --------- --------- ---------
Less dividends:
Investment income--net -- -- (.28) (.45) (.13)
Return of capital--net (.15) (.29) (.10) -- (.34)
--------- --------- --------- --------- ---------
Total dividends (.15) (.29) (.38) (.45) (.47)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 7.61 $ 8.13 $ 8.47 $ 9.66 $ 9.12
========= ========= ========= ========= =========
Total Based on net asset value per share (4.53%) (.38%) (8.53%) 11.13% .41%
Investment ========= ========= ========= ========= =========
Return:*
Ratios to Expenses 2.18% 1.86% 1.84% 1.71% 1.73%
Average ========= ========= ========= ========= =========
Net Assets: Investment income--net 2.02% 3.71% 4.24% 4.80% 5.07%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 24,148 $ 38,426 $ 62,822 $ 110,620 $ 160,571
Data: ========= ========= ========= ========= =========
Portfolio turnover 124.66% 221.49% 138.81% 129.20% 699.63%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
The following per share data and ratios
have been derived from information Class C
provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value, beginning of year $ 8.13 $ 8.46 $ 9.66 $ 9.12 $ 9.56
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .15 .29 .37 .45 .46
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.52) (.33) (1.20) .54 (.44)
--------- --------- --------- --------- ---------
Total from investment operations (.37) (.04) (.83) .99 .02
--------- --------- --------- --------- ---------
Less dividends:
Investment income--net -- -- (.28) (.45) (.12)
Return of capital--net (.15) (.29) (.09) -- (.34)
--------- --------- --------- --------- ---------
Total dividends (.15) (.29) (.37) (.45) (.46)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 7.61 $ 8.13 $ 8.46 $ 9.66 $ 9.12
========= ========= ========= ========= =========
Total Based on net asset value per share (4.59%) (.32%) (8.69%) 11.07% .33%
Investment ========= ========= ========= ========= =========
Return:*
Ratios to Expenses 2.26% 1.91% 1.89% 1.75% 1.82%
Average ========= ========= ========= ========= =========
Net Assets: Investment income--net 1.89% 3.65% 4.19% 4.74% 4.94%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 565 $ 407 $ 785 $ 1,848 $ 2,284
Data: ========= ========= ========= ========= =========
Portfolio turnover 124.66% 221.49% 138.81% 129.20% 699.63%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
FINANCIAL INFORMATION (concluded)
Financial Highlights (concluded)
The following per share data and ratios
have been derived from information Class D
provided in the financial statements.
For the Year Ended December 31,
Increase (Decrease) in Net Asset Value: 2001 2000 1999 1998 1997
Per Share Net asset value, beginning of year $ 8.13 $ 8.46 $ 9.66 $ 9.11 $ 9.55
Operating --------- --------- --------- --------- ---------
Performance: Investment income--net .20 .32 .43 .50 .51
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net (.52) (.33) (1.20) .55 (.44)
--------- --------- --------- --------- ---------
Total from investment operations (.32) (.01) (.77) 1.05 .07
--------- --------- --------- --------- ---------
Less dividends:
Investment income--net -- -- (.32) (.50) (.13)
Return of capital--net (.20) (.32) (.11) -- (.38)
--------- --------- --------- --------- ---------
Total dividends (.20) (.32) (.43) (.50) (.51)
--------- --------- --------- --------- ---------
Net asset value, end of year $ 7.61 $ 8.13 $ 8.46 $ 9.66 $ 9.11
========= ========= ========= ========= =========
Total Based on net asset value per share (4.02%) .27% (8.15%) 11.84% .94%
Investment ========= ========= ========= ========= =========
Return:*
Ratios to Expenses 1.65% 1.32% 1.31% 1.17% 1.19%
Average ========= ========= ========= ========= =========
Net Assets: Investment income--net 2.52% 4.25% 4.77% 5.32% 5.66%
========= ========= ========= ========= =========
Supplemental Net assets, end of year (in thousands) $ 25,504 $ 28,181 $ 34,894 $ 48,724 $ 49,813
Data: ========= ========= ========= ========= =========
Portfolio turnover 124.66% 221.49% 138.81% 129.20% 699.63%
========= ========= ========= ========= =========
*Total investment returns exclude the effects of sales charges.
See Notes to Financial Statements.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
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 conformity with accounting
principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. The Fund
offers four classes of shares under the Merrill Lynch Select
PricingSM 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 investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. Losses may arise due to
changes in the value of the contract or if the counterparty does not
perform under the contract.
o 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.
o 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.
o 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, 2001
o 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). Realized gains and losses on security
transactions are determined on the identified cost basis. Interest
income is recognized on the accrual basis.
As required, effective January 1, 2001, the Fund has adopted
the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing all premiums and
discounts on debt securities. The cumulative effect of this
accounting change had no impact on total net assets of the Fund, but
resulted in a $932,117 reduction in cost of securities (which in
return results in a corresponding $932,117 decrease in undistributed
net investment income), based on securities held by the Fund as of
December 31, 2000.
The effect of this change for the year ended December 31, 2001 was
to increase net investment income by $12,033, decrease net
unrealized depreciation by $65,419 and decrease net realized capital
losses by $854,665. The statement of changes in net assets and
financial highlights for prior periods has not been restated to
reflect this change in presentation.
(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.
(h) Custodian bank--The Fund recorded an amount payable to the
Custodian Bank reflecting an overnight overdraft that resulted from
management estimates of available cash.
(i) Reclassification--Accounting principles generally accepted in
the United States of America require that certain components of net
assets be adjusted to reflect permanent differences between
financial and tax reporting. Accordingly, the current year's
permanent book/tax differences of $9,292,360 have been reclassified
between paid-in capital in excess of par and accumulated net
investment loss and $8,688,582 has been reclassified between
accumulated net investment loss and accumulated net realized capital
losses. These reclassifications have no effect on net assets or net
asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Investment Managers, L.P. ("MLIM"). The general
partner of MLIM 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 FAM Distributors,
Inc. ("FAMD" or the "Distributor"), which is a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
NOTES TO FINANCIAL STATEMENTS (continued)
MLIM 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
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, 2001, FAMD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class D Shares as follows:
FAMD MLPF&S
Class D $197 $2,271
For the year ended December 31, 2001, MLPF&S received contingent
deferred sales charges of $7,903 and $130 relating to transactions
in Class B and Class C Shares, respectively.
For the year ended December 31, 2001, Merrill Lynch Security Pricing
Service, an affiliate of MLPF&S, earned $474 for providing security
price quotations to complete the Fund's net asset value.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Prior to January 1, 2001, MLIM provided accounting services to the
Fund at its cost and the Fund reimbursed MLIM for these services.
MLIM continues to provide certain accounting services to the Fund.
The Fund reimburses MLIM at its cost for such services. For the year
ended December 31, 2001, the Fund reimbursed MLIM an aggregate of
$16,717 for the above-described services. The Fund entered into an
agreement with State Street Bank and Trust Company ("State Street"),
effective January 1, 2001, pursuant to which State Street provides
certain accounting services to the Fund. The Fund pays a fee for
these services.
Certain officers and/or trustees of the Fund are officers and/or
directors of MLIM, PSI, FAMD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended December 31, 2001 were $81,474,646 and
$95,872,842, respectively.
Net realized losses for the year ended December 31, 2001 and net
unrealized losses as of December 31, 2001 were as follows:
Realized Unrealized
Gains (Losses) Losses
Investments:
Long-term $ 470,290 $ (1,446,889)
------------- -------------
Total investments 470,290 (1,446,889)
------------- -------------
Currency transactions:
Foreign currency
transactions (5,964,913) (20,987)
Forward foreign exchange
contracts (157,855) (40,317)
------------- -------------
Total currency transactions (6,122,768) (61,304)
------------- -------------
Total $ (5,652,478) $ (1,508,193)
============= =============
As of December 31, 2001, net unrealized depreciation for Federal
income tax purposes aggregated $1,513,163, of which $801,411 related
to appreciated securities and $2,314,574 related to depreciated
securities. The aggregate cost of investments at December 31, 2001
for Federal income tax purposes was $59,799,543.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
4. Beneficial Interest Transactions:
Net decrease in net assets derived from beneficial interest
transactions was $14,908,274 and $31,966,031 for the years ended
December 31, 2001 and December 31, 2000, respectively.
Transactions in shares of capital for each class were as follows:
Class A Shares for the Year Dollar
Ended December 31, 2001 Shares Amount
Shares sold 338,085 $ 2,682,717
Shares issued to shareholders
in reinvestment of dividends 15,382 120,121
------------- -------------
Total issued 353,467 2,802,838
Shares redeemed (611,782) (4,807,425)
------------- -------------
Net decrease (258,315) $ (2,004,587)
============= =============
Class A Shares for the Year Dollar
Ended December 31, 2000 Shares Amount
Shares sold 237,764 $ 1,920,665
Shares issued to shareholders
in reinvestment of dividends 37,086 298,570
------------- -------------
Total issued 274,850 2,219,235
Shares redeemed (839,961) (6,731,278)
------------- -------------
Net decrease (565,111) $ (4,512,043)
============= =============
Class B Shares for the Year Dollar
Ended December 31, 2001 Shares Amount
Shares sold 83,072 $ 656,472
Shares issued to shareholders
in reinvestment of dividends 40,013 313,370
------------- -------------
Total issued 123,085 969,842
Automatic conversion of shares (639,208) (5,048,243)
Shares redeemed (1,037,154) (8,152,105)
------------- -------------
Net decrease (1,553,277) $(12,230,506)
============= =============
Class B Shares for the Year Dollar
Ended December 31, 2000 Shares Amount
Shares sold 141,392 $ 1,148,917
Shares issued to shareholders
in reinvestment of dividends 117,716 949,916
------------- -------------
Total issued 259,108 2,098,833
Automatic conversion of shares (477,463) (3,829,786)
Shares redeemed (2,475,184) (20,037,127)
------------- -------------
Net decrease (2,693,539) $(21,768,080)
============= =============
Class C Shares for the Year Dollar
Ended December 31, 2001 Shares Amount
Shares sold 43,912 $ 345,003
Shares issued to shareholders
in reinvestment of dividends 957 7,485
------------- -------------
Total issued 44,869 352,488
Shares redeemed (20,684) (161,855)
------------- -------------
Net increase 24,185 $ 190,633
============= =============
Class C Shares for the Year Dollar
Ended December 31, 2000 Shares Amount
Shares sold 19,190 $ 154,871
Shares issued to shareholders
in reinvestment of dividends 2,128 17,146
------------- -------------
Total issued 21,318 172,017
Shares redeemed (64,002) (518,629)
------------- -------------
Net decrease (42,684) $ (346,612)
============= =============
Class D Shares for the Year Dollar
Ended December 31, 2001 Shares Amount
Shares sold 36,281 $ 282,741
Automatic conversion of shares 639,577 5,048,243
Shares issued to shareholders
in reinvestment of dividends 55,944 437,560
------------- -------------
Total issued 731,802 5,768,544
Shares redeemed (846,529) (6,632,358)
------------- -------------
Net decrease (114,727) $ (863,814)
============= =============
Class D Shares for the Year Dollar
Ended December 31, 2000 Shares Amount
Shares sold 23,375 $ 190,124
Automatic conversion of shares 477,719 3,829,786
Shares issued to shareholders
in reinvestment of dividends 102,399 824,380
------------- -------------
Total issued 603,493 4,844,290
Shares redeemed (1,258,779) (10,183,586)
------------- -------------
Net decrease (655,286) $ (5,339,296)
============= =============
5.Short-Term Borrowings:
The Fund, along with certain other funds managed by MLIM and its
affiliates, is a party to a $1,000,000,000 credit agreement with
Bank One, N.A. and certain other lenders. The Fund may borrow under
the credit agreement to fund shareholder redemptions and for other
lawful purposes other than for leverage. The Fund may borrow up to
the maximum amount allowable under the Fund's current prospectus and
statement of additional information, subject to various other legal,
regulatory or contractual limits. The Fund pays a commitment fee of
.09% per annum based on the Fund's pro rata share of the unused
portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election,
the Federal Funds rate plus .50% or a base rate as determined by
Bank One, N.A. On November 30, 2001, the credit agreement was
renewed for one year under the same terms. The Fund did not borrow
under the credit agreement during the year ended December 31, 2001.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
NOTES TO FINANCIAL STATEMENTS (concluded)
6. Distributions to Shareholders:
The tax character of distributions paid during the fiscal years
ended December 31, 2001 and December 31, 2000 was as follows:
12/31/2001 12/31/2000
Distributions paid from:
Return of capital $ 1,580,725 $ 3,731,999
------------- -------------
Total taxable distributions $ 1,580,725 $ 3,731,999
============= =============
As of December 31, 2001, the components of accumulated losses on a
tax basis were as follows:
Undistributed ordinary income--net --
Undistributed long-term capital gains--net --
---------------
Total undistributed earnings--net --
---------------
Capital loss carryforward $ (40,672,248)*
Unrealized losses--net (1,825,354)**
---------------
Total accumulated losses--net (42,497,602)
===============
*On December 31, 2001, the Fund had a net capital loss carryforward
of approximately $40,672,248, of which $23,790,675 expires in 2002,
$10,514,501 expires in 2005, $3,475,027 expires in 2007, $2,499,201
expires in 2008 and $392,844 expires 2009. This amount will be
available to offset like amounts of any future taxable gains.
**The difference between book-basis and tax-basis net unrealized
losses is attributable primarily to the tax deferral of losses on
wash sales, the tax deferral of losses on straddles, the realization
for tax purposes of unrealized gains (losses) on certain futures and
forward foreign currency contracts, the difference between book and
tax amortization methods for premiums and discounts on fixed-income
securities and the deferral of post-October currency losses for tax
purposes.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
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,
2001, 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 presented. 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 auditing standards
generally accepted in the United States of America. 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, 2001, by
correspondence with the custodian and brokers; where replies were
not received from brokers, we performed other auditing procedures.
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, 2001, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated
periods in conformity with accounting principles generally accepted
in the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
February 13, 2002
IMPORTANT TAX INFORMATION (unaudited)
Of the monthly distributions paid by Merrill Lynch Global Bond
Fund for Investment and Retirement during its taxable year ended
December 31, 2001, 100% is 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 nontaxable and will reduce the cost basis of your
shares in the Fund.
Please retain this information for your records.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
OFFICERS AND TRUSTEES
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years Trustee Trustee
Interested Trustee
Terry K. Glenn* President 1999 to Chairman, Americas Region since 2001, and 196 None
800 Scudders Mill Road and Trustee present Executive Vice President since 1983 of
Plainsboro, NJ 08536 Fund Asset Management ("FAM") and Merrill
Age: 61 Lynch Investment Managers L.P. ("MLIM");
Presidentof FAM Distributors, Inc. ("FAMD")
since 1986 and Director thereof since 1991;
Executive Vice President and Director of
Princeton Services, Inc. ("Princeton
Services") since 1993; President of
Princeton Administrators, L.P. since
1988; Director of Financial Data
Services, Inc., since 1985.
*Mr. Glenn is a director, trustee or member of an advisory board of
certain other investment companies for which FAM or MLIM acts as
investment adviser. Mr. Glenn is an "interested person," as
described in the Investment Company Act, of each Fund based on his
positions as Chairman (Americas Region) and Executive Vice President
of FAM and MLIM; President of FAMD; Executive Vice President of
Princeton Services; and President of Princeton Administrators, L.P.
The Trustee's term is unlimited.
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Trustee Trustee
Independent Trustees
Ronald W. Forbes Trustee 1977 to Professor Emeritus of Finance, School of 57 None
1400 Washington Avenue present Business, State University of New York at
Albany, NY 12222 Albany since 2000; and Professor thereof
Age: 61 from 1989 to 2000.
Cynthia A. Montgomery Trustee 1995 to Professor, Harvard Business School since 1989. 57 Unum-
Harvard Business School present Provident
Soldiers Field Road Corpora-
Boston, MA 02163 tion;
Age: 49 Newell
Rubber-
maid Inc.
Charles C. Reilly Trustee 1990 to Self-employed financial consultant since 1990. 57 None
9 Hampton Harbor Road present
Hampton Bays, NY 11946
Age: 70
Kevin A. Ryan Trustee 1992 to Founder and currently Director Emeritus of The 57 Charter
127 Commonwealth Avenue present Boston University Center for the Advancement Education
Chestnut Hill, MA 02467 of Ethics and Character and Director thereof Partner-
Age: 69 from 1989 to 1999; Professor from 1982 to 1999 ship;
at Boston University. Council
for
Ethical
and
Spiritual
Education.
Merrill Lynch Global Bond Fund for Investment and Retirement,
December 31, 2001
Number of
Portfolios Other
in Fund Director-
Position(s) Length Complex ships
Held of Time Overseen by Held by
Name, Address & Age with Fund Served* Principal Occupation(s) During Past 5 Years Trustee Trustee
Independent Trustees (concluded)
Roscoe S. Suddarth Trustee 2000 to Former President, Middle East Institute from 57 None
7403 MacKenzie Court present 1995 to 2001.
Bethesda, MD 20817
Age: 66
Richard R. West Trustee 1978 to Professor of Finance since 1984, and currently 70 Bowne &
Box 604 present Dean Emeritus of New York University Leonard Co., Inc.;
Genoa, NV 89411 N. Stern School of Business Administration. Vornado
Age: 63 Realty
Trust;
Alexander's
Inc.
Edward D. Zinbarg Trustee 1994 to Self-employed financial consultant since 1994. 57 None
5 Hardwell Road present
Short Hills, NJ 07078-2117
Age: 67
*The Trustee's term is unlimited.
Position(s) Length
Held of Time
Name, Address & Age with Fund Served Principal Occupation(s) During Past 5 Years
Fund Officers
Donald C. Burke Vice Vice First Vice President of FAM and MLIM since 1997 and the Treasurer there-
P.O. Box 9011 President President of since 1999; Senior Vice President and Treasurer of Princeton Services
Princeton, NJ 08543-9011 and since since 1999; Vice President of FAMD since 1999; Vice President of FAM and
Age: 41 Treasurer 1993 MLIM from 1990 to 1997; Director of Taxation of MLIM since 1990.
and
Treasurer
since 1999
Gareth Fielding Senior 2001 to Director (Global Fixed Income) of the Investment Adviser since 1998;
P.O. Box 9011 Vice present Senior Portfolio Manager, J.P. Morgan from 1991 to 1998.
Princeton, NJ 08543-9011 President
Age: 38 and
Portfolio
Manager
Phillip S. Gillespie Secretary 2000 to First Vice President of MLIM since 2001; Director of MLIM from 1999
P.O. Box 9011 present to 2000; Vice President of MLIM in 1999; Attorney associated with the
Princeton, NJ 08543-9011 Manager and FAM from 1998 to 1999; Assistant General Counsel LGT Asset
Management, Inc. from 1997 to 1998; Senior Counsel and Attorney in the
Age:37 Division of Investment Management and the Office of General Counsel at
the U.S. Securities and Exchange Commission from 1993 to 1997.
Further information about the Fund's Trustees is available in the
Fund's Statement of Additional Information, which can be
obtainedwithout charge by calling 1-800-MER-FUND.
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