-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Gho5ox7NVwjURTvWaHGF5qe3X8xzauQ2BxyscXli6y9Ikyb7horuTt4atKT6skn7 llfZ1geWfektJlesAOzNaQ== 0000900092-94-000397.txt : 19940801 0000900092-94-000397.hdr.sgml : 19940801 ACCESSION NUMBER: 0000900092-94-000397 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940531 FILED AS OF DATE: 19940721 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH GLOBAL UTILITY FUND INC CENTRAL INDEX KEY: 0000868452 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-06180 FILM NUMBER: 94539617 BUSINESS ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P O BOX 9011 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 SEMI-ANNUAL REPORT MERRILL LYNCH GLOBAL UTILITY FUND, INC. FUND LOGO Semi-Annual Report May 31, 1994 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 re- port 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. Merrill Lynch Global Utility Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MERRILL LYNCH GLOBAL UTILITY FUND, INC. Officers and Directors Arthur Zeikel, President and Director Ronald W. Forbes, Director Cynthia A. Montgomery, Director Charles C. Reilly, Director Kevin A. Ryan, Director Richard R. West, Director Terry K. Glenn, Executive Vice President Norman R. Harvey, Senior Vice President Donald C. Burke, Vice President Walter D. Rogers, Vice President and Portfolio Manager Gerald M. Richard, Treasurer Patrick D. Sweeney, Secretary Custodian The Chase Manhattan Bank, N. A. 1 Chase Manhattan Plaza New York, New York 10005 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, Florida 32246-6484 (800) 637-3863 DEAR SHAREHOLDER Inflationary concerns persisted during the May quarter. The Federal Reserve Board followed up its initial increase in the Federal Funds rate with three subsequent monetary policy tightening moves. At the same time, investors viewed signs of economic strength as an indication that the rate of inflation would soon accelerate. Among the most troublesome statistics released was the mid-May rise in the Commodity Research Bureau's inflation index. However, by quarter-end this index had declined back to the levels at which it began the year. Despite an upward revision in gross domestic product growth to 3.0% for the first quarter of the year, later economic data releases suggest a moderating trend. Disposable income fell 0.5% in April, consumer spending dropped 0.4% after adjusting for inflation, and sales of new homes also fell. Consumer confidence declined for the first time in three months, reflected in sluggish retail sales. However, employment data for May sent somewhat conflicting signals. The unemployment rate dropped sharply in May from 6.4% to 6.0%, but at the same time business payrolls grew only modestly. In the weeks ahead, investors are likely to continue to focus their attention on the direction of the economy and inflationary trends. Evidence of stable and moderate economic growth, combined with subdued inflationary pressures, would be a positive development for the financial markets. The absence of these trends, along with continued monetary policy tightening by the central bank, would likely lead to continued volatility in stock and bond prices over the near term. Portfolio Matters With higher interest rates and declining bond prices, the May quarter was a difficult one for utility investments across all four sectors (electric, telephone, gas and water) worldwide. Since the end of the February quarter, the stock market sectors sustaining the steepest declines have been the electric utilities in the United States and the rest of the Americas and natural gas utilities in Europe. Using Dow Jones World Industry Groups data, electric util- ities in the United States and the Americas were down in price by 9.7%, and gas stocks in Europe were down 12.1%. On average, since the end of the February quarter, the best-performing sector world- wide was telephone stocks with a 1.7% decline. Positive results came from the Asia/Pacific region with a 4.2% gain, followed by a small decline of less than 1.0% in US telephone stock prices. Merrill Lynch Global Utility, Inc.'s performance was aided by its over 32% weighting in global telephone stocks, of which about 7% was in companies in the Asia/Pacific region and 13% was in US-based companies. The portfolio was negatively impacted by its 25% weight- ing in US-based electric utility holdings given the very poor price performance of the group. However, the yield provided by the domes- tic electrics in the portfolio helped to cushion the impact on total return. The Fund's exposure to European gas stocks, which as a group performed poorly, is limited to Italgas Torino and Energie Versorgung Niederoesterreich AG (EVN). Our Italgas investment accounts for under 1% of net assets and actually showed a positive price return for the quarter. EVN shares, which declined during the May quarter, account for approximately 0.6% of net assets. During the May quarter, we made some changes to the Fund's port- folio. We purchased seven new holdings and added to two existing holdings. In addition, we eliminated one position in the gas sector and reduced the weighting of another gas company. These changes helped to diversify the portfolio geographically. Moreover, we diversified our positions in Canada, the United Kingdom, Thailand and the United States even further by adding one new position in each country. As a percentage of the Fund's net assets, the largest new position was Tele Danmark A/S (ADR), a new issue that came to market in late April. Tele Danmark offers investors a combination of a defensive investment coupled with good earnings prospects. While earnings will predominantly be driven by cost reductions, revenue growth is expected to be rather healthy for this mature company, in the 4%--6% range in our opinion. The company has a strong management team in place and has a relatively modern network. Capital expenditures are expected to be flat, which will in turn increase the company's net cash flow. Overall, Tele Danmark appears to be well-positioned to handle competition in its market, operates under a fair regulatory scheme, and has an attractive valuation level. Our second-largest new position was in the shares of the German utility, VEBA AG. The company has operations in electricity, which is by far the largest contributor to earnings, trading/transpor- tation/services, oil, and chemicals. The timing of the purchase related to the company's continuing focus on restructuring its operations with an emphasis on its struggling chemical division. The actions taken by VEBA's management should aid earnings growth and in addition, may allow for a more aggressive dividend policy. The net result is expected to allow for a positive revaluation of the stock by local investors as well as create more investor interest in the company from abroad. During a stock offering that took place during the May quarter, we took a small position in the developing market of India with the purchase of an Indian electric utility, CESC Ltd. The company's operations consist of the generation, transmission and distribution of electric power in the cities of Calcutta and Howrah and adjoining areas in West Bengal. The company currently faces no competition in its distribution area, and it sells electricity directly to over 1.1 million end-users, including residential customers as well as in- dustrial and commercial customers. Unit sales to residential cus- tomers increased by 5.9% on average per year between 1989 and 1993. The current regulatory scheme under which CESC operates appears favorable, given that the Indian government is trying to make the electric market attractive to more developers and investors in response to the country's need for power and frequent blackouts. Coal is the primary fuel source used by the company in the gener- ation of electricity. Westcoast Energy Inc., another company added during the May quarter, is a Canadian energy company that has operations in natural gas pipelines, gas distribution and other related businesses. West- coast's pipeline distribution systems carry Canadian natural gas to markets in British Columbia, other sections of Canada and to the western part of the United States. We believe that the earnings prospects of the company are good as is its ability to raise its dividend. PowerGen PLC, another new addition, is a UK-based power generation company. As one of the country's two generation companies, PowerGen has had among the fastest earnings and dividend growth of the mature UK utilities. The company's dividend cover is high, its balance sheet is in excellent shape, and annual dividend growth is in the mid-to high-teen range. The company has been improving earnings principally by reducing costs. With most of the cost cutting done, the focus is shifting towards finding new sources of growth such as power projects outside of the United Kingdom. PowerGen is conserv- atively managed, and therefore we expect the diversification outside of the United Kingdom to be done well. The stock was purchased given its above industry average expected dividend growth and current valuation level versus National Power, the other UK-based power generation company. We also purchased Jasmine International Public Co., Ltd., a telecom- munications company based in Thailand. The company participates in several areas such as new telecommunications concessions; the design, supply and installation of telecommunications equipment; and consultancy and maintenance. The company does not manufacture any telecommunications equipment but imports it from abroad from various companies. Jasmine's customer base includes government agencies and state enterprises. We established only a very small position in the company, since demand for the offering exceeded the supply. The stock will start trading in July. National Fuel Gas Company, another new addition, is an integrated US-based company that consists of a gas distribution utility which accounts for over 50% of its revenues. Gas supply, transmission, storage operations and oil and gas exploration and production operations make up the rest of the company. The company's gas distribution operations serve parts of western New York, including the city of Buffalo, and northwestern Pennsylvania. In addition to its diversified energy asset base, the stock offers an above-average market yield coupled with steady dividend and earnings growth. We added to our existing position in BC Telecom, Inc. given that its prospects remain attractive and the position was small as a percentage of net assets. We also added to our position in Duke Power Co. The Fund's position in Consolidated Natural Gas Co. was eliminated because of the negative earnings estimate revision for the company following the release of first quarter earnings and the stock's valuation level. We also reduced our position in El Paso Natural Gas Co. given concern over pipeline overcapacity in California, the most important market for El Paso. Investment Outlook We plan to continue increasing the Fund's foreign holdings given the clouded prospects in the United States for electric utility stocks and the Fund's present broad-based weighting in US-based telephone stocks. US electric utility stocks were hit by two events during the May quarter. The first was a proposal by the California Public Utility Commission to open up the retail market to competition. The second was the announcement by FPL Corp. to cut its dividend by 32%, which reduces its payout ratio and allows for the buy back of stock and also allows the company to be classified as a growth stock to participate in a more competitive investment environment. The FPL announcement caught investors by surprise since the company is financially strong and this move was not necessary from a financial perspective. The investment community is now focusing on which utility may be next in terms of cutting its dividend, and this, combined with the uncertainty in California, is creating weakness in the domestic electric utility stocks. In light of these develop- ments, over the near term, foreign utilities will probably offer both greater growth potential and less near-term stock price volatility for the Fund. In Conclusion We thank you for your investment in Merrill Lynch Global Utility Fund, Inc., and we look forward to discussing our investment strategy and outlook with you in future shareholder reports. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Walter D. Rogers) Walter D. Rogers Vice President and Portfolio Manager July 1, 1994 PERFORMANCE DATA None of the past results shown should 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. Recent Performance Results
12 Month 3 Month 5/31/94 2/28/94 5/31/93 % Change % Change Class A Shares $12.66 $13.13 $12.35 +2.72%(1) -3.58% Class B Shares 12.62 13.08 12.31 +2.73(1) -3.52 Class A Shares--Total Return +6.15(2) -2.76(3) Class B Shares--Total Return +5.43(4) -2.89(5) *Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charges. (1) Percent change includes reinvestment of $0.027 per share capital gains distributions. (2) Percent change includes reinvestment of $0.429 per share ordinary income dividends and $0.027 per share capital gains distributions. (3) Percent change includes reinvestment of $0.107 per share ordinary income dividends. (4) Percent change includes reinvestment of $0.337 per share ordinary income dividends and $0.027 per share capital gains distributions. (5) Percent change includes reinvestment of $0.081 per share ordinary income dividends.
Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** Class A Shares* Year Ended 3/31/94 + 4.84% -1.97% Inception (12/28/90) through 3/31/94 +11.84 +9.56 [FN] *Maximum sales charge is 6.5%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 3/31/94 + 4.07% + 0.07% Inception (12/28/90) through 3/31/94 +10.98 +10.94 [FN] *Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. **Assuming payment of applicable contingent deferred sales charge. PERFORMANCE DATA (concluded) Performance Summary-- Class A Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 12/28/90--12/31/90 $10.00 $10.01 -- -- + 0.10% 1991 10.01 10.93 -- $0.508 +14.74 1992 10.93 11.40 $0.012 0.469 + 8.97 1993 11.40 13.67 0.027 0.424 +24.13 1/1/94--5/31/94 13.67 12.66 -- 0.107 - 6.60 ------ ------ Total $0.039 Total $1.508 Cumulative total return as of 5/31/94: +45.11%** *Figures may include short-term capital gains distributions. **Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date, and do not include sales charge; results would be lower if sales charge was included.
Performance Summary-- Class B Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 12/28/90--12/31/90 $10.00 $10.01 -- -- + 0.10% 1991 10.01 10.92 -- $0.435 +13.84 1992 10.92 11.38 $0.012 0.391 + 8.12 1993 11.38 13.63 0.027 0.337 +23.17 1/1/94--5/31/94 13.63 12.62 -- 0.081 - 6.81 ------ ------ Total $0.039 Total $1.244 Cumulative total return as of 5/31/94: +41.42%** *Figures may include short-term capital gains distributions. **Figures assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date, and do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
SCHEDULE OF INVESTMENTS (in US dollars)
Shares Value Percent of Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets COUNTRY Argentina Telecommunications 138,479 Telecom Argentina Stet S.A. (ADR)++ (1) $ 5,075,039 $ 9,001,135 1.4% 128,513 Telefonica de Argentina S.A. (ADR)++ (1) 4,824,906 9,269,000 1.4 ------------ ------------ ------ 9,899,945 18,270,135 2.8 Utilities--Electric 6,600 Central Costanera S.A. (ADR)++ (1) 158,400 245,850 0.0 Total Common Stocks in Argentina 10,058,345 18,515,985 2.8 Australia Utilities--Gas 2,479,584 Australian Gas & Light Co., Ltd. 6,364,362 7,577,976 1.2 Total Common Stocks in Australia 6,364,362 7,577,976 1.2 Austria Utilities--Gas 34,850 Energie Versorgung Niederoesterreich AG (EVN) 3,050,014 3,855,809 0.6 Total Common Stocks in Austria 3,050,014 3,855,809 0.6 Canada Energy 400,000 Westcoast Energy Inc. 6,901,727 6,950,000 1.1 Telecommunications 321,700 BC Telecom, Inc. 6,009,937 5,952,031 0.9 Utilities--Electric 458,600 Nova Scotia Power Co. 4,322,473 3,849,260 0.6 Utilities--Gas 573,700 Transcanada Pipeline Co. Ltd. (ADR)++ 8,602,384 7,458,100 1.1 Total Common Stocks in Canada 25,836,521 24,209,391 3.7 Chile Telecommunications 84,300 Compania de Telefonos de Chile S.A. (ADR)++ 5,871,894 7,671,300 1.2 Utilities--Electric 186,000 Distribuidora Chilectra Metropolitana S.A. (ADR)++ (1) 5,031,451 8,067,750 1.2 28,000 Enersis S.A. (ADR)++ 544,224 644,000 0.1 ------------ ------------ ------ 5,575,675 8,711,750 1.3 Total Common Stocks in Chile 11,447,569 16,383,050 2.5 Denmark Telecommunications 331,000 Tele Danmark A/S (ADR)++ 7,787,106 8,275,000 1.3 Total Common Stocks in Denmark 7,787,106 8,275,000 1.3 France Utilities--Water 26,922 Compagnie Generale des Eaux 11,509,640 11,954,172 1.8 40,000 Lyonnaise des Eaux-Dumez 3,989,365 4,058,280 0.6 ------------ ------------ ------ 15,499,005 16,012,452 2.4 Total Common Stocks in France 15,499,005 16,012,452 2.4 Germany Utilities--Gas 20,000 VEBA AG 6,526,985 6,155,718 0.9 Total Common Stocks in Germany 6,526,985 6,155,718 0.9 Hong Kong Telecommunications 7,644,000 Hong Kong Telecommunications, Ltd. PLC 12,600,067 15,138,593 2.3 Utilities--Electric 4,061,200 China Light & Power Co., Ltd. 23,403,683 22,604,569 3.5 1,552,000 Hong Kong Electric Holdings, Ltd. 3,897,526 4,861,614 0.7 ------------ ------------ ------ 27,301,209 27,466,183 4.2 Utilities--Gas 2,626,800 The Hong Kong & China Gas Co., Ltd. 4,674,416 5,542,274 0.9 218,900 The Hong Kong & China Gas Co., Ltd. (Warrants)(b)(2) 0 125,381 0.0 ------------ ------------ ------ 4,674,416 5,667,655 0.9 Total Common Stocks & Warrants in Hong Kong 44,575,692 48,272,431 7.4 India Utilities--Electric 49,500 CESC Ltd. (Units) 2,640,330 2,450,250 0.4 Total Common Stocks in India 2,640,330 2,450,250 0.4
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
Shares Value Percent of Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets COUNTRY Italy Telecommunications 1,786,300 Italgas Torino $ 5,169,953 $ 5,827,088 0.9% 3,091,700 Societa Finanziaria Telefonica S.p.A. (STET) 5,780,442 8,686,297 1.3 5,505,250 Societa Italiana Esercizio Telecom S.p.A. (SIP) 7,916,167 14,879,054 2.3 ------------ ------------ ------ 18,866,562 29,392,439 4.5 Total Common Stocks in Italy 18,866,562 29,392,439 4.5 Malaysia Telecommunications 1,385,000 Telekom Malaysia BHD 9,502,659 10,202,380 1.6 Total Common Stocks in Malaysia 9,502,659 10,202,380 1.6 Mexico Telecommunications 140,000 Telefonos de Mexico, S.A. de C.V. (ADR)++ 7,377,170 8,697,500 1.3 Total Common Stocks in Mexico 7,377,170 8,697,500 1.3 New Zealand Telecommunications 216,500 Telecom Corporation of New Zealand Ltd. (ADR)++ 7,525,095 10,094,313 1.6 Total Common Stocks in New Zealand 7,525,095 10,094,313 1.6 Philippines Telecommunications 134,100 Philippine Long Distance Telephone Co. (ADR)++ 5,583,592 9,487,575 1.5 Total Common Stocks in the Philippines 5,583,592 9,487,575 1.5 Spain Telecommunications 537,300 Telefonica de Espana S.A. 6,164,064 7,293,486 1.1 Utilities--Electric 154,800 Empresa Nacional de Electricidad S.A. (ADR)++ 5,123,952 7,372,350 1.1 92,000 Hidrocantabrico S.A. 3,107,921 2,904,906 0.4 808,500 Iberdrola I S.A. 4,998,320 5,946,695 0.9 ------------ ------------ ------ 13,230,193 16,223,951 2.4 Total Common Stocks in Spain 19,394,257 23,517,437 3.5 Thailand Telecommunications 44,200 Jasmine International Public Co., Ltd. 611,419 611,419 0.1 15,000 TelecomAsia Corporation Public Co., Ltd. LC (ADR)++ (1) 328,050 562,500 0.1 Total Common Stocks in Thailand 939,469 1,173,919 0.2 United Kingdom Telecommunications 845,000 British Telecommunications PLC (Ord.) 5,900,759 4,633,720 0.7 1,426,860 British Telecommunications PLC (Part Pay) 6,877,400 5,263,042 0.8 60,000 Vodafone Group PLC (ADR)++ 5,355,931 4,822,500 0.7 ------------ ------------ ------ 18,134,090 14,719,262 2.2 Utilities--Electric 445,000 Powergen PLC (Ord.) 3,253,482 3,047,360 0.5 Total Common Stocks in the United Kingdom 21,387,572 17,766,622 2.7 United States Telecommunications 175,100 Airtouch Communications, Inc. 3,298,013 4,268,063 0.7 111,200 American Telephone & Telegraph Co. 6,407,214 6,060,400 0.9 220,800 Ameritech Corp. 8,274,518 8,638,800 1.3 151,700 Bell Atlantic Corp. 8,027,948 8,096,988 1.2 163,400 BellSouth Corp. 9,162,908 9,722,300 1.5 257,700 GTE Corp. 9,016,758 7,956,488 1.2 208,000 MCI Communications Corp. 5,645,600 4,992,000 0.8 205,700 NYNEX Corp. 8,342,529 7,765,175 1.2 175,100 Pacific Telesis Group 4,555,333 5,318,662 0.8 216,900 Southwestern Bell Corp. 7,422,726 8,920,012 1.4 319,900 US West, Inc. 14,757,846 12,835,987 2.0 ------------ ------------ ------ 84,911,393 84,574,875 13.0 Utilities--Electric 117,000 AES China Generating Co., Ltd. 1,872,000 1,433,250 0.2 326,000 Allegheny Power System, Inc. 8,652,910 6,927,500 1.1 220,200 Boston Edison Co. 5,789,754 6,083,025 0.9 210,000 Central & SouthWest Corp. 5,840,299 4,620,000 0.7 231,200 Consolidated Edison Co. of New York 7,260,774 6,386,900 1.0 146,900 Detroit Edison Co. 4,899,043 3,782,675 0.6 110,250 Dominion Resources, Inc. 4,427,302 4,354,875 0.7 265,000 Duke Power Co. 10,851,663 9,540,000 1.5 267,500 Entergy Corp. 8,646,550 7,724,062 1.2 414,800 General Public Utilities Corp. 11,683,837 11,873,650 1.8 339,100 Houston Industries, Inc. 15,787,663 10,935,975 1.7 338,600 Long Island Lighting Co. 8,537,882 6,814,325 1.0 259,800 NIPSCO Industries, Inc. 6,905,271 7,988,850 1.2 235,000 New York State Electric & Gas Corp. 8,459,615 5,904,375 0.9 196,700 Northeast Utilities Co. 5,253,338 4,474,925 0.7 440,000 PECO Energy Co. (a) 12,186,735 11,990,000 1.8 385,600 PSI Resources, Inc. 9,257,252 8,483,200 1.3 342,000 PacifiCorp 6,846,153 6,027,750 0.9 164,800 Pennsylvania Power & Light Co. 4,428,338 3,646,200 0.6 200,000 Public Service Co. of Colorado 6,071,450 5,200,000 0.8 186,300 Rochester Gas & Electric Corp. 4,775,302 4,215,037 0.7 300,000 SCEcorp 6,765,509 4,200,000 0.6 404,200 Southern Co. 6,989,691 7,477,700 1.2 188,300 Texas Utilities Co. 7,596,591 6,213,900 1.0 203,300 Western Resources Co. 6,442,514 5,692,400 0.9 ------------ ------------ ------ 186,227,436 161,990,574 25.0 Utilities--Gas 130,000 Brooklyn Union Gas Co. 3,371,550 3,055,000 0.5 240,000 The Coastal Corp. 6,414,080 6,780,000 1.0 116,300 El Paso Natural Gas Co. 4,496,795 3,896,050 0.6 399,100 Enron Corp. 8,119,749 12,172,550 1.9 258,300 NICOR Inc. 5,661,173 6,941,812 1.1 31,000 National Fuel Gas Company 945,500 941,625 0.1 115,000 New Jersey Resources Corp. 3,262,177 2,760,000 0.4 250,000 Questar Corp. 6,792,478 8,000,000 1.2 338,300 Sonat, Inc. 7,262,851 9,641,550 1.5 116,300 Washington Gas Light Co. 4,016,691 4,419,400 0.7 365,000 Williams Co., Inc. 6,931,607 10,265,625 1.6 ------------ ------------ ------ 57,274,651 68,873,612 10.6 Total Common Stocks in the United States 328,413,480 315,439,061 48.6 Total Investments in Common Stocks & Warrants 552,775,785 577,479,308 88.7
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Face Value Percent of Industries Amount Fixed-Income Securities Cost (Note 1a) Net Assets COUNTRY Australia Telecommunications US$ 7,960,000 Telstra Corp., Ltd., 6.50% due 7/31/2003 (1) $ 8,115,578 $ 7,262,505 1.1% Total Fixed-Income Securities in Australia 8,115,578 7,262,505 1.1 Canada Utilities--Electric 2,000,000 Hydro-Quebec, 9.23% due 12/04/2000 2,038,540 2,172,960 0.3 Total Fixed-Income Securities in Canada 2,038,540 2,172,960 0.3 Japan Telecommunications 4,000,000 Nippon Telegraph & Telephone Corp., 9.50% due 7/27/1998 4,244,380 4,344,240 0.7 Total Fixed-Income Securities in Japan 4,244,380 4,344,240 0.7 Korea Telecommunications 2,500,000 Korea Telecom, 7.40% due 12/01/1999 2,499,500 2,458,000 0.4 Utilities--Electric 6,000,000 Korea Electric Power Corp., 6.375% due 12/01/2003 5,913,060 5,205,540 0.8 Total Fixed-Income Securities in Korea 8,412,560 7,663,540 1.2 United States Telecommunications 4,000,000 Rochester Telephone Corp., 9.25% due 6/01/2000 4,111,200 4,360,600 0.7 Utilities--Electric 4,000,000 Consumer Power Co., 8.875% due 11/15/1999 4,190,000 4,154,920 0.6 4,000,000 Niagara Mohawk Power Corp., 9.50% due 6/01/2000 4,197,640 4,297,880 0.7 ------------ ------------ ------ 8,387,640 8,452,800 1.3 Total Fixed-Income Securities in the United States 12,498,840 12,813,400 2.0 Total Investments in Fixed-Income Securities 35,309,898 34,256,645 5.3 Short-Term Securities United States Commercial Paper* 39,000,000 Matterhorn Capital Corp., 3.82% due 6/01/1994 39,000,000 39,000,000 6.0 Repurchase 962,000 Swiss Bank Corp., purchased on 5/31/1994 to yield Agreement** 4.20% to 6/01/1994 962,000 962,000 0.2 Total Investments in Short-Term Securities 39,962,000 39,962,000 6.2 Total Investments $628,047,683 651,697,953 100.2 ============ Liabilities in Excess of Other Assets (1,435,963) (0.2) ------------ ------ Net Assets $650,261,990 100.0% ============ ====== *Commercial Paper is traded on a discount basis; the interest rates shown are the discount rates paid at the time of purchase by the Fund. **Repurchase Agreements are fully collateralized by US Government or Agency Obligations. ++American Depositary Receipts (ADR). (a) Formerly Philadelphia Electric Co. (b) Warrants entitle the Fund to purchase a predetermined number of shares of Common Stock. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. (1) Restricted security pursuant to Rule 144A. The value of the Fund's investment in restricted securities was approximately $34,409,000, representing 5.3% of net assets. (2) Non-income producing security. See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 1994 Assets: Investments, at value (identified cost--$628,047,683)(Note 1a) $651,697,953 Cash 207,283 Receivables: Dividends $ 2,173,456 Capital shares sold 1,952,686 Interest 866,060 4,992,202 ------------ Deferred organizational expenses (Note 1f) 43,526 Prepaid registration fees and other assets (Note 1f) 35,134 ------------ Total assets 656,976,098 ------------ Liabilities: Payables: Securities purchased 3,249,594 Capital shares redeemed 2,400,685 Distributor (Note 2) 382,681 Investment adviser (Note 2) 345,715 6,378,675 ------------ Accrued expenses and other liabilities 335,433 ------------ Total liabilities 6,714,108 ------------ Net Assets: Net assets $650,261,990 ============ Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 Consist of: shares authorized $ 582,057 Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 4,569,754 Paid-in capital in excess of par 619,338,281 Undistributed investment income--net 3,230,076 Accumulated realized capital losses on investments and foreign currency transactions--net (1,114,299) Unrealized appreciation on investments and foreign currency transactions--net 23,656,121 ------------ Net assets . $650,261,990 ============ Net Asset Class A--Based on net assets of $73,713,378 and 5,820,579 shares outstanding $ 12.66 Value: ============ Class B--Based on net assets of $576,548,612 and 45,697,537 shares outstanding $ 12.62 ============ See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1994 Investment Dividends (net of $328,600 foreign withholding tax) $ 11,877,867 Income Interest and discount earned 2,765,008 (Notes 1d & 1e): ------------ Total income 14,642,875 ------------ Expenses: Distribution fees--Class B (Note 2) $ 2,280,730 Investment advisory fees (Note 2) 2,068,015 Transfer agent fees--Class B (Note 2) 287,917 Custodian fees 251,758 Printing and shareholder reports 82,638 Registration fees (Note 1f) 59,576 Accounting services (Note 2) 57,404 Professional fees 34,008 Transfer agent fees--Class A (Note 2) 31,605 Directors' fees and expenses 11,364 Amortization of organization expenses (Note 1f) 9,526 Other 9,776 ------------ Total expenses 5,184,317 ------------ Investment income--net 9,458,558 ------------ Realized & Realized gain (loss) from: Unrealized Gain Investments--net (1,198,293) (Loss) on Foreign currency transactions--net 30,665 (1,167,628) Investments and ------------ Foreign Currency Change in unrealized appreciation on: Transactions--Net Investments--net (27,552,434) (Notes 1b, 1e & 3): Foreign currency transactions--net 5,407 (27,547,027) ------------ ------------ Net realized and unrealized loss on investments and foreign currency transactions (28,714,655) ------------ Net Decrease in Net Assets Resulting from Operations $(19,256,097) ------------ See Notes to Financial Statements.
STATEMENT OF CHANGES IN NET ASSETS
For the Six For the Year Months Ended Ended Increase (Decrease) in Net Assets: May 31, 1994 Nov. 30, 1993 Operations: Investment income--net $ 9,458,558 $ 11,336,371 Realized gain (loss) on investments and foreign currency transactions--net (1,167,628) 4,716,322 Change in unrealized appreciation on investments and foreign currency transactions--net (27,547,027) 37,518,154 ------------ ------------ Net increase (decrease) in net assets resulting from operations (19,256,097) 53,570,847 ------------ ------------ Dividends & Investment income--net: Distributions to Class A (1,362,335) (1,417,410) Shareholders Class B (7,918,856) (8,066,873) (Note 1g): Realized gain on investments--net: Class A (219,759) (33,059) Class B (1,627,301) (223,915) ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (11,128,251) (9,741,257) ------------ ------------ Capital Share Net increase in net assets derived from capital share transactions 2,474,084 404,174,719 Transactions ------------ ------------ (Note 4): Net Assets: Total increase (decrease) in net assets (27,910,264) 448,004,309 Beginning of period 678,172,254 230,167,945 ------------ ------------ End of period* $650,261,990 $678,172,254 ============ ============ *Undistributed investment income--net $ 3,230,076 $ 3,052,709 ============ ============ See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
Class A For the For the Six Period The following per share data and ratios have been derived Months Dec. 28, from information provided in the financial statements. Ended For the Year 1990++ to May 31, Ended November 30, Nov. 30, Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 Per Share Net asset value, beginning of period $ 13.22 $ 11.23 $ 10.67 $ 10.00 Operating -------- -------- -------- -------- Performance: Investment income--net .23 .40 .47 .49 Realized and unrealized gain (loss) on investments and foreign currency transactions--net (.53) 2.01 .57 .56 -------- -------- -------- -------- Total from investment operations (.30) 2.41 1.04 1.05 -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.22) (.41) (.48) (.38) Realized gain on investments--net (.04) (.01) -- -- -------- -------- -------- -------- Total dividends and distributions (.26) (.42) (.48) (.38) -------- -------- -------- -------- Net asset value, end of period $ 12.66 $ 13.22 $ 11.23 $ 10.67 ======== ======== ======== ======== Total Investment Based on net asset value per share (2.32%)+++ 21.80% 10.05% 10.83%+++ Return:** ======== ======== ======== ======== Ratios to Average Expenses .83%* .82% 1.01% 1.28%* Net Assets: ======== ======== ======== ======== Investment income--net 3.42%* 3.57% 4.47% 5.57%* ======== ======== ======== ======== Supplemental Net assets, end of period (in thousands) $ 73,713 $ 81,718 $ 29,772 $ 20,579 Data: ======== ======== ======== ======== Portfolio turnover 2.61% 8.92% 30.91% 20.51% ======== ======== ======== ======== Class B For the For the Six Period The following per share data and ratios have been derived Months Dec. 28, from information provided in the financial statements. Ended For the Year 1990++ to May 31, Ended November 30, Nov. 30, Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 Per Share Net asset value, beginning of period $ 13.17 $ 11.20 $ 10.65 $ 10.00 Operating -------- -------- -------- -------- Performance: Investment income--net .18 .33 .39 .40 Realized and unrealized gain (loss) on investments and foreign currency transactions--net (.52) 1.98 .57 .58 -------- -------- -------- -------- Total from investment operations (.34) 2.31 .96 .98 -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.17) (.33) (.41) (.33) Realized gain on investments--net (.04) (.01) -- -- -------- -------- -------- -------- Total dividends and distributions (.21) (.34) (.41) (.33) -------- -------- -------- -------- Net asset value, end of period $ 12.62 $ 13.17 $ 11.20 $ 10.65 ======== ======== ======== ======== Total Investment Based on net asset value per share (2.63%)+++ 20.86% 9.20% 10.05%+++ Return:** ======== ======== ======== ======== Ratios to Average Expenses, excluding distribution fees .84%* .84% 1.02% 1.29%* Net Assets: ======== ======== ======== ======== Expenses 1.59%* 1.59% 1.77% 2.04%* ======== ======== ======== ======== Investment income--net 2.65%* 2.81% 3.65% 4.78%* ======== ======== ======== ======== Supplemental Net assets, end of period (in thousands) $576,549 $596,455 $200,396 $ 90,966 Data: ======== ======== ======== ======== Portfolio turnover 2.61% 8.92% 30.91% 20.51% ======== ======== ======== ======== *Annualized. **Total investment returns exclude the effects of sales loads. ++Commencement of Operations. +++Aggregate total investment return. See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS 1. Significant Accounting Policies: Merrill Lynch Global Utility Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund offers both Class A and Class B Shares. Class A Shares are sold with a front-end sales charge. Class B Shares may be subject to a contingent deferred sales charge. Both classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B Shares bear certain expenses related to the distribution of such shares and have exclusive voting rights with respect to matters relating to such 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 or yield equivalents obtained from one or more dealers in the over-the- counter market prior to the time of valuation. Portfolio securities which are traded on stock exchanges are valued at the last sale price on the principal market 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. Options written are valued based upon the last asked price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, at the average of the last asked price as obtained from one or more dealers. Options purchased by the Fund are valued at their last bid price in the case of exchange-traded options or, in the case of options traded in the over-the-counter market, at the average of the last bid price as obtained from two or more dealers. Other investments, including futures contracts and related options, are stated at market value. 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 Board of Directors of the Fund, including valuations furnished by a pricing service retained by the Fund. Short-term securities are valued at amortized cost, which approximates market value. (b) 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. 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. Premium or discount is amortized over the life of the contracts. (c) Options--When the Fund sells 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 is less than or exceeds the premiums paid or received). Written and purchased options are non-income producing 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. Dividend income is recorded on the ex-dividend date, except that if the ex-dividend date has passed, certain dividends from foreign securities are recorded as soon as the Fund is informed of the ex-dividend date. Realized gains and losses on security transactions are determined on the identified cost basis. (f) Deferred Organization Expenses and Prepaid Registration Fees-- Deferred organization expenses are charged to expense over a five- year period. Prepaid registration fees are charged to expense as the related shares are issued. (g) Dividends and Distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch Asset Management, L.P. ("MLAM"). Effective January 1, 1994, the investment advisory business of MLAM was reorganized from a corporation to a limited partnership. Both prior to and after the reorganization, ultimate control of MLAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The general partner of MLAM is Princeton Services, Inc., an indirect wholly-owned subsidiary of ML & Co. The limited partners are ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary of ML & Co. The Fund has also entered into a Distribution Agreement and a Distribution Plan with Merrill Lynch Funds Distri- butor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of MLIM. 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 operation of the Fund. For such services, the Fund pays a monthly fee of 0.60%, on an annual basis, of the average daily value of the Fund's net assets. The most restrictive annual expense limitation requires that the Investment Adviser reimburse the Fund to the extent the Fund's expenses (excluding interest, taxes, distribution fees, brokerage fees and commissions, and extraordinary items) exceed 2.5% of the Fund's first $30 million of average daily net assets, 2.0% of the next $70 million of average daily net assets and 1.5% of the average daily net assets in excess thereof. MLAM's obligation to reimburse the Fund is limited to the amount of the advisory fee. No fee payment will be made to the Investment Adviser during any fiscal year which will cause such expenses to exceed the most restrictive expense limitation applicable at the time of such payment. Pursuant to a distribution plan (the "Distribution Plan") adopted by the Fund in accordance with Rule 12b-1 under the Investment Com- pany Act of 1940, the Fund pays the Distributor an ongoing account maintenance fee and distribution fee, which are accrued daily and paid monthly at the annual rate of 0.25% and 0.50%, respectively, of the average daily net assets of the Class B Shares of the Fund. Pursuant to a subagreement with the Distributor, Merrill Lynch provides account maintenance and distribution services to the Fund with respect to Class B Shares. This fee is to compensate the Distributor for the services it provides and the expenses borne by the Distributor under the Distribution Agreement. As authorized by the Plan, the Distributor has entered into an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), which provides for the compensation of MLPF&S for providing distribution-related services to the Fund. For the six months ended May 31, 1994, MLFD earned $2,280,730 under the Plan, all of which was paid to MLPF&S pursuant to the agreement. NOTES TO FINANCIAL STATEMENTS (concluded) For the six months ended May 31, 1994, MLFD earned underwriting discounts of $16,858, and MLPF&S earned dealer concessions of $283,874 on sales of Class A Shares. MLPF&S also received contin- gent deferred sales charges of $567,791 relating to Class B Share transactions and $16,044 in commissions on the execution of portfolio security transactions for the Fund during the period. During the period May 25, 1994 to May 31, 1994, the Fund paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $585 for security price quotations to compute the Net Asset Value of the Fund. Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is the Fund's transfer agent. Accounting services are provided to the Fund by MLAM at cost. Certain officers and/or directors of the Fund are officers and/or directors of MLIM, MLPF&S, FDS, MLFD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended May 31, 1994 were $85,026,332 and $15,926,570, respectively. Net realized and unrealized gains (losses) as of May 31, 1994 were as follows: Realized Gains Unrealized (Losses) Gains Long-term investments $(1,198,280) $23,650,270 Short-term investments (13) -- Foreign currency transactions 30,665 5,851 ----------- ----------- Total $(1,167,628) $23,656,121 =========== =========== As of May 31, 1994, net unrealized appreciation for Federal income tax purposes aggregated $23,650,270, of which $63,422,050 related to appreciated securities and $39,771,780 related to depreciated securities. The aggregate cost of investments at May 31, 1994 for Federal income tax purposes was $628,047,683. 4. Capital Share Transactions: Net increase in net assets derived from capital share transactions was $2,474,084 and $404,174,719 for the six months ended May 31, 1994 and the year ended November 30, 1993, respectively. Transactions in capital shares for Class A and Class B Shares were as follows: Class A Shares for the Six Months Dollar Ended May 31, 1994 Shares Amount Shares sold 1,164,608 $ 15,436,072 Shares issued to shareholders in reinvestment of dividends & distributions to shareholders 94,663 1,224,287 ------------ ------------ Total issued 1,259,271 16,660,359 Shares redeemed (1,619,653) (21,145,568) ------------ ------------ Net decrease (360,382) $ (4,485,209) ============ ============ Class A Shares for the Year Ended Dollar November 30, 1993 Shares Amount Shares sold 4,349,217 $ 56,997,490 Shares issued to shareholders in reinvestment of dividends & distributions to shareholders 85,983 1,081,152 ------------ ------------ Total issued 4,435,200 58,078,642 Shares redeemed (905,090) (11,584,655) ------------ ------------ Net increase 3,530,110 $ 46,493,987 ============ ============ Class B Shares for the Six Months Dollar Ended May 31, 1994 Shares Amount Shares sold 7,269,220 $ 96,031,158 Shares issued to shareholders in reinvestment of dividends & distributions to shareholders 594,022 7,672,819 ------------ ------------ Total issued 7,863,242 103,703,977 Shares redeemed (7,451,029) (96,744,684) ------------ ------------ Net increase 412,213 $ 6,959,293 ============ ============ Class B Shares for the Year Ended Dollar November 30, 1993 Shares Amount Shares sold 30,702,352 $399,813,619 Shares issued to shareholders in reinvestment of dividends & distributions to shareholders 501,195 6,292,835 ------------ ------------ Total issued 31,203,547 406,106,454 Shares redeemed (3,809,433) (48,425,722) ------------ ------------ Net increase 27,394,114 $357,680,732 ============ ============ 5. Commitments: At May 31, 1994, the Fund had entered into forward foreign exchange contracts under which it agreed to purchase various currencies with an approximate value of $3,250,000. PORTFOLIO INFORMATION Worldwide Investments as of May 31, 1994 Top Ten Holdings Percent of (Equity Investments) Net Assets China Light & Power Co., Ltd. 3.5% Hong Kong Telecommunications, Ltd. PLC 2.3 Societa Italiana Esercizio Telecom S.p.A. (SIP) 2.3 US West, Inc. 2.0 Enron Corp. 1.9 PECO Energy Co. 1.8 Compagnie Generale des Eaux 1.8 General Public Utilities Corp. 1.8 Houston Industries, Inc. 1.7 Williams Co., Inc. 1.6 Additions Airtouch Communications, Inc.* CESC Ltd. (Units) The Hong Kong & China Gas Co., Ltd. (Warrants) Jasmine International Public Co., Ltd. National Fuel Gas Company PowerGen PLC (Ord.) Tele Danmark A/S (ADR) VEBA AG Westcoast Energy Inc. Deletion Consolidated Natural Gas Co. [FN] *Airtouch Communications, Inc. was acquired as a result of a spinoff from Pacific Telesis Group. -----END PRIVACY-ENHANCED MESSAGE-----