-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Iy4b5c6io4MWjFFR8YoeDf7FpMc7pfVmVGpaUDU/nCtqVsKNHYrjLIrLBrJOnxi5 FVCO2XYigW7T7sif0GSHJw== 0000900092-96-000179.txt : 19960716 0000900092-96-000179.hdr.sgml : 19960716 ACCESSION NUMBER: 0000900092-96-000179 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19960715 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH GLOBAL UTILITY FUND INC CENTRAL INDEX KEY: 0000868452 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [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: 96594574 BUSINESS ADDRESS: STREET 1: P O BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 BUSINESS PHONE: 6092823319 MAIL ADDRESS: STREET 1: P O BOX 9066 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, 1996 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. 4 MetroTech Center, 18th Floor Brooklyn, NY 11245 Transfer Agent Merrill Lynch Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 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 Utility Fund, Inc. Box 9011 Princeton, NJ 08543-9011 MERRILL LYNCH GLOBAL UTILITY FUND, INC. Sector Diversification As a Percentage of Equities as of May 31, 1996 Pie graph depicting the following percentages. Utilities--Electric 42.8% Telecommunications 38.0% Utilities--Gas 15.3% Utilities--Water 3.9% Geographical Diversification As a Percentage of Equities as of May 31, 1996 Pie graph depicting the following percentages: United States 46.4% Europe 31.8% Americas (Ex-US) 11.1% Asia/Pacific 10.7% DEAR SHAREHOLDER Conflicting economic indicators created greater uncertainty in the investment outlook during the quarter ended May 31, 1996. With reports of stronger-than-expected employment data, investors began to anticipate renewed economic growth. Interest rates rose, and the Federal Reserve Board left monetary policy on hold. However, revised data indicate the US economy actually grew more slowly in the first quarter of 1996 than had been originally reported. In addition, consumer sentiment does not appear to be improving markedly. Investors also became concerned that inflationary pressures would increase because of higher prices for agricultural commodities and a sharp upturn in the price of crude oil. Nevertheless, other wholesale and consumer price increases remain subdued. More important, wage increases, a significant factor in the inflation outlook, continue to be well-contained. Investors are likely to continue to focus on the probable direction of economic activity and Federal Reserve Board monetary policy in the weeks ahead. At this time, it appears that the economy is not on the verge of overheating. Nevertheless, it is likely that any further near-term indication of stronger-than-expected economic activity may increase investor apprehension concerning the outlook for higher inflation and interest rates. Portfolio Matters For the quarter ended May 31, 1996, Merrill Lynch Global Utility Fund, Inc.'s Class A, Class B, Class C and Class D Shares had total returns of +2.12%, +1.92%, +1.88% and +2.04%, respectively. During the May quarter, Merrill Lynch Global Utility Fund, Inc. outperformed the global index of utility stocks as measured by the unmanaged Financial Times/Standard & Poor's--Actuaries World Utility Index which provided a total return of +0.84%. The Fund's outperformance relative to this index was primarily the result of having overweighted positions in Italy, Spain, France and Austria, and being underweight in the United Kingdom, Japan, Hong Kong, the Netherlands and Thailand. (Fund results shown do not reflect sales charges and would be lower if sales charges were included. For complete performance information, see page 4--6 of this report to shareholders.) The Fund also outperformed the Lipper Analytical Services Inc. utility fund average which had a total return of +0.42% for the three-month period ended May 31, 1996. The Fund's outperformance relative to this average was the result of our reducing investments in US-based utility stocks through the elimination or partial sale of 12 holdings. The percentage of net assets of the Fund invested in US-based utility stocks declined from 48.9% as of February 29, 1996 to 43.6% as of May 31, 1996. The US utility sector, which is currently the largest market of publicly traded utility stocks in terms of market capitalization and number of securities, had negative total return performance for the May quarter. Declining interest rates in several markets abroad and rising long- term interest rates in the United States were significant factors in the performance of the utility sector during the May quarter. On a fundamental basis, company managements continued to focus their attention on the issue of the opening of markets to competition. The degree to which investors felt confident in managements' ability to adapt to a changing environment was an important consideration in their individual stock selections. The status of the regulatory environment as well as the economic and political landscape continued to dictate geographical choices and selected opportunities for investors. Because of the importance of the utility sector in meeting basic consumer needs, regulation of the industry is often subject to potential changes in the political scene. Political factors were most evident in the UK electric utility sector, where they negatively impacted performance, and in the Spanish and Italian utility markets, where performance was positive. We made several new investments during the May quarter. We added Elektrowatt AG, a Swiss-based electric utility company, to the Fund's European utility holdings. In the past, Elektrowatt was active in acquiring various entities in electric power, engineering and construction, security systems, and electronics. Following their most recent acquisition, management decided to divest non-core operations and to focus more on faster-growing operations. As a result of management's new strategic plan, we expect higher valuations to be placed on the company's stock. Furthermore, the company's earnings potential is becoming clearer and showing signs of faster growth. In the same geographical region, we added to our underweighted position in the United Kingdom by purchasing National Power PLC. This UK-based generating company was added to the Fund's portfolio following a period of stock price weakness that resulted from the company not being allowed to go ahead with its proposed purchase of one of the regional electricity companies. While National Power was prevented from making this acquisition, we now expect the company to return value to shareholders through higher dividends. We initiated three new positions in the US utility market. We added MCI Communications Corp., the second-largest US long-distance telephone carrier, to our holdings in the telecommunications sector. The company has been expanding globally in its core business, primarily through several strategic alliances such as those with British Telecommunications PLC in the United Kingdom and Europe, Stentor Canadian Network Management in Canada, and Grupo Financiero Banamex-Accival S.A. in Mexico. Moreover, MCI has recently forged further alliances with companies such as The News Corp. Ltd. and Microsoft Corp. to extend its core business into the lucrative and rapidly growing information market. We believe that MCI is in a favorable position to take advantage of the fast-changing telecommunications sector. We also added AGL Resources Inc., an Atlanta-based natural gas local distribution company, to the portfolio. The company distributes approximately 75% of the natural gas consumed in the state of Georgia and its dominant customer class is residential. The stock currently has a 6% yield, which is competitive with the domestic electric sector, but the company offers faster earnings and dividend growth prospects than most of its peers. Finally, we added American Water Works Co., Inc. to the Fund's domestic holdings on a secondary offering. The company is the largest domestic investor-owned and most geographically diverse water utility business in the United States. American Water Works serves more than 800 communities with a total population of approximately 7 million in 21 states. The company has better growth prospects and greater regulatory certainty than the domestic electric utility sector, in our view. In total, these three new domestic holdings raised the Fund's US-based utility holdings by approximately 1.2%. We eliminated Northeast Utilities Co., WestCoast Energy Inc. and Bell Atlantic Corp. from the Fund's portfolio. We believed that the risk/reward ratios were unfavorable for these companies relative to alternative investments in the utility sector. Reductions were made in 11 other securities, ten of which were US-based telephone and electric utility stocks. Investment Outlook It appears as though long-term interest rates, as measured by the 30- year US Treasury bond, are either near their peaks in yield or very close to them, with yields of about 7%. This would be positive news for the US-based utility sector, whose stock price performance is still very much tied to the direction of interest rates. On a fundamental basis, companies continue to address the transition stage of moving from a regulated environment into a more competitive one. We expect that selectivity among companies will continue to grow in importance. The overseas utility markets, particularly the more mature markets, also continue to be dominated by changes in interest rates, but fundamentals seem to be attracting greater attention from investors and therefore having a significant impact on stock price performance. The emerging utility markets appear to be offering good growth prospects in both Asia and South America. As utility markets around the globe begin to open up, productivity improvements, new sources of revenue, maintenance of current revenue/customer levels and managements' ability to execute plans efficiently will drive profitability. With the opening of utility markets at various stages and in different economic and political cycles, geography and company selection will become even more important in the future. In Conclusion We thank you for your investment in Merrill Lynch Global Utility Fund, Inc., and we look forward to discussing our investment strategy with you in future shareholder reports. Sincerely, (Arthur Zeikel) Arthur Zeikel President (Walter D. Rogers) Walter D. Rogers Vice President and Portfolio Manager June 26, 1996 PERFORMANCE DATA About Fund Performance Investors are able to purchase shares of the Fund through the Merrill Lynch Select Pricing SM System, which offers four pricing alternatives: *Class A Shares incur a maximum initial sales charge (front-end load) of 4% and bear no ongoing distribution or account maintenance fees. Class A Shares are available only to eligible investors. *Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.50% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 10 years. *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. 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. Recent Performance Results*
12 Month 3 Month 5/31/96 2/29/96 5/31/95 % Change % Change Class A Shares $14.15 $13.97 $13.11 + 9.89%(1) +1.29% Class B Shares 14.11 13.92 13.06 +10.00(1) +1.36 Class C Shares 14.09 13.91 13.06 + 9.85(1) +1.29 Class D Shares 14.16 13.98 13.14 + 9.71(1) +1.29 Class A Shares--Total Return +14.06(2) +2.12(3) Class B Shares--Total Return +13.22(4) +1.92(5) Class C Shares--Total Return +13.11(6) +1.88(7) Class D Shares--Total Return +13.55(8) +2.04(9) *Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. (1)Percent change includes reinvestment of $0.245 per share capital gains distributions. (2)Percent change includes reinvestment of $0.504 per share ordinary income dividends and $0.245 per share capital gains distributions. (3)Percent change includes reinvestment of $0.112 per share ordinary income dividends. (4)Percent change includes reinvestment of $0.388 per share ordinary income dividends and $0.245 per share capital gains distributions. (5)Percent change includes reinvestment of $0.076 per share ordinary income dividends. (6)Percent change includes reinvestment of $0.394 per share ordinary income dividends and $0.245 per share capital gains distributions. (7)Percent change includes reinvestment of $0.079 per share ordinary income dividends. (8)Percent change includes reinvestment of $0.466 per share ordinary income dividends and $0.245 per share capital gains distributions. (9)Percent change includes reinvestment of $0.102 per share ordinary income dividends.
Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** Class A Shares* Year Ended 3/31/96 +19.65% +14.86% Five Years Ended 3/31/96 +11.29 +10.39 Inception (12/28/90) through 3/31/96 +10.89 +10.04 [FN] *Maximum sales charge is 4%. **Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** Class B Shares* Year Ended 3/31/96 +18.64% +14.64% Five Years Ended 3/31/96 +10.43 +10.43 Inception (12/28/90) through 3/31/96 +10.04 +10.04 [FN] *Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. **Assuming payment of applicable contingent deferred sales charge. % Return % Return Without CDSC With CDSC** Class C Shares* Year Ended 3/31/96 +18.67% +17.67% Inception (10/21/94) through 3/31/96 +12.01 +12.01 [FN] *Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1 year. **Assuming payment of applicable contingent deferred sales charge. % Return Without % Return With Sales Charge Sales Charge** Class D Shares* Year Ended 3/31/96 +19.09% +14.33% Inception (10/21/94) through 3/31/96 +12.60 +9.46 [FN] *Maximum sales charge is 4%. **Assuming maximum sales charge. 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 1994 13.67 11.83 -- 0.480 -10.00 1995 11.83 13.86 0.245 0.483 +23.74 1/1/96--5/31/96 13.86 14.15 -- 0.112 +2.93 ------ ------ Total $0.284 Total $2.476 Cumulative total return as of 5/31/96: +78.09%** *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 DATA (concluded) 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 1994 13.63 11.81 -- 0.379 -10.62 1995 11.81 13.83 0.245 0.380 +22.73 1/1/96--5/31/96 13.83 14.11 -- 0.076 + 2.59 ------ ------ Total $0.284 Total $1.998 Cumulative total return as of 5/31/96: +70.77%** *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.
Performance Summary-- Class C Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 10/21/94--12/31/94 $12.34 $11.81 -- $0.117 - 3.35% 1995 11.81 13.82 $0.245 0.383 +22.67 1/1/96--5/31/96 13.82 14.09 -- 0.079 + 2.54 ------ ------ Total $0.245 Total $0.579 Cumulative total return as of 5/31/96: +21.58%** *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.
Performance Summary-- Class D Shares
Net Asset Value Capital Gains Period Covered Beginning Ending Distributed Dividends Paid* % Change** 10/21/94--12/31/94 $12.37 $11.84 -- $0.124 - 3.29% 1995 11.84 13.90 $0.245 0.445 +23.62 1/1/96--5/31/96 13.90 14.16 -- 0.102 + 2.62 ------ ------ Total $0.245 Total $0.671 Cumulative total return as of 5/31/96: +22.69%** *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.
SCHEDULE OF INVESTMENTS (in US dollars)
Shares Value Percent of COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets Argentina Telecommunications 100,000 Telecom Argentina STET S.A. (ADR) (b) $ 3,770,294 $ 4,650,000 1.1% 200,000 Telefonica de Argentina S.A. (ADR) (b) 4,140,594 5,825,000 1.4 ------------ ------------ ------ 7,910,888 10,475,000 2.5 Utilities--Electric 6,600 Central Costanera S.A. (ADR)(b)++++ 158,400 237,600 0.1 Total Common Stocks in Argentina 8,069,288 10,712,600 2.6 Australia Utilities--Gas 2,000,000 Australian Gas & Light Co., Ltd. 5,280,752 8,249,252 2.0 Total Common Stocks in Australia 5,280,752 8,249,252 2.0 Austria Utilities--Gas 41,820 Energie--Versorgung Niederoesterreich AG (EVN) 3,050,015 6,082,201 1.5 Total Common Stocks in Austria 3,050,015 6,082,201 1.5 Brazil Telecommunications 45,000 Telecomunicacoes Brasileiras S.A. --Telebras (ADR) (b) 2,176,898 2,896,875 0.7 Total Common Stocks in Brazil 2,176,898 2,896,875 0.7 Canada Telecommunications 140,000 BC Telecom, Inc. 2,593,297 2,697,810 0.7 Utilities--Electric 458,600 Nova Scotia Power Co. 4,322,473 4,134,095 1.0 Utilities--Gas 254,400 Transcanada Pipeline Co. Ltd. (ADR) (b) 3,941,562 3,688,800 0.9 Total Common Stocks in Canada 10,857,332 10,520,705 2.6 Chile Telecommunications 51,000 Compania de Telecommunicaciones de Chile S.A.(Sponsored) (ADR) (b) 3,711,460 4,653,750 1.1 Utilities--Electric 65,000 Chilgener S.A. (ADR) (b) 1,495,000 1,535,625 0.4 156,000 Distribuidora Chilectra Metropolitana S.A. (ADR) (b)++++ 4,249,463 8,112,000 2.0 28,000 Enersis S.A. (ADR) (b) 544,224 822,500 0.2 ------------ ------------ ------ 6,288,687 10,470,125 2.6 Total Common Stocks in Chile 10,000,147 15,123,875 3.7 Denmark Telecommunications 281,000 Tele Danmark A/S (ADR) (b) 6,610,806 6,989,875 1.7 Total Common Stocks in Denmark 6,610,806 6,989,875 1.7 France Utilities--Water 87,988 Generale des Eaux 9,481,908 9,411,482 2.3 40,000 Lyonnaise des Eaux-Dumez 3,989,365 3,876,209 0.9 Total Common Stocks in France 13,471,273 13,287,691 3.2 Germany Utilities--Electric 200,000 Veba AG 6,526,985 10,465,269 2.5 Total Common Stocks in Germany 6,526,985 10,465,269 2.5 Hong Kong Utilities--Gas 1,200,000 The Hong Kong & China Gas Co., Ltd. 1,627,410 1,907,765 0.5 100,000 The Hong Kong & China Gas Co., Ltd. (Warrants) (a) 0 28,112 0.0 Total Common Stocks & Warrants in Hong Kong 1,627,410 1,935,877 0.5 India Utilities--Electric 247,500 ++CESC Ltd. (GDR) (e)++++ 2,640,330 712,800 0.2 Total Common Stocks in India 2,640,330 712,800 0.2 Indonesia Telecommunications 5,500 PT Indonesian Satellite Corp. (Indosat) (ADR) (b) 176,275 188,375 0.1 29,600 PT Telekomunikasi Indonesia (Persero) (ADR) (b) 532,800 902,800 0.2 Total Common Stocks in Indonesia 709,075 1,091,175 0.3
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
Shares Value Percent of COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets Italy Telecommunications 3,091,700 Societa Finanziara Telefonica S.p.A. (STET) $ 5,780,442 $ 8,854,869 2.1% 5,000,000 Telecom Italia Mobile S.p.A. 3,090,118 10,679,612 2.6 3,900,000 Telecom Italia S.p.A. 3,619,691 7,800,000 1.9 ------------ ------------ ------ 12,490,251 27,334,481 6.6 Utilities--Gas 1,786,300 Italgas Torino 5,169,953 6,445,710 1.6 Total Common Stocks in Italy 17,660,204 33,780,191 8.2 Korea Utilities--Gas 199,200 Korea Electric Power Corp. (KEPCO) (ADR) (b) 4,008,900 5,154,300 1.3 Total Common Stocks in Korea 4,008,900 5,154,300 1.3 Malaysia Telecommunications 1,035,000 Telekom Malaysia BHD 7,499,205 9,450,541 2.3 Total Common Stocks in Malaysia 7,499,205 9,450,541 2.3 Mexico Telecommunications 105,000 Telefonos de Mexico, S.A. de C.V. (ADR) (b) 5,594,445 3,465,000 0.8 Total Common Stocks in Mexico 5,594,445 3,465,000 0.8 New Telecommunications 100,000 Telecom Corporation of New Zealand Zealand Ltd. (ADR) (b) 3,935,303 6,562,500 1.6 Total Common Stocks in New Zealand 3,935,303 6,562,500 1.6 Philip- Telecommunications 100,000 Philippine Long Distance Telephone Co. pines (ADR) (b) 4,311,241 5,750,000 1.3 Utilities--Electric 57,000 Manila Electric Co. (MERALCO) 'B' 497,246 583,301 0.1 Total Common Stocks in the Philippines 4,808,487 6,333,301 1.4 Portugal Telecommunications 30,900 Portugal Telecom, S.A. (ADR) (b) 578,602 749,325 0.2 Total Common Stocks in Portugal 578,602 749,325 0.2 Spain Telecommunications 537,300 Telefonica de Espana S.A. 6,164,064 9,651,345 2.4 32,000 Telefonica de Espana S.A. (ADR) (b) 1,275,584 1,676,000 0.4 ------------ ------------ ------ 7,439,648 11,327,345 2.8 Utilities--Electric 154,800 Empresa Nacional de Electricidad S.A. (ADR) (b) 5,123,952 9,636,300 2.3 92,000 HidroElectrica Del Cantabrico S.A. 3,107,921 2,968,896 0.7 808,500 Iberdrola I S.A. 4,998,321 8,204,452 2.0 ------------ ------------ ------ 13,230,194 20,809,648 5.0 Total Common Stocks in Spain 20,669,842 32,136,993 7.8 Switzerland Utilities--Electric 4,300 Elektrowatt AG 1,687,158 1,624,200 0.4 Total Common Stocks in Switzerland 1,687,158 1,624,200 0.4 Thailand Telecommunications 15,000 ++TelecomAsia Corporation Public Co.,. Ltd(ADR) (b) 328,050 292,500 0.1 Utilities--Electric 332,000 Electricity Generating Company of Thailand (EGCOMP) 296,433 1,417,233 0.3 Total Common Stocks in Thailand 624,483 1,709,733 0.4 United Telecommunications 771,000 British Telecommunications PLC 5,385,185 4,240,238 1.0 Kingdom 180,000 Vodafone Group PLC (ADR) (b) 5,355,931 7,132,500 1.7 ------------ ------------ ------ 10,741,116 11,372,738 2.7 Utilities--Electric 77,142 London Electricity PLC 1,201,329 870,021 0.2 76,752 National Grid Group PLC 246,312 215,217 0.1 208,000 National Power PLC 1,723,671 1,672,392 0.4 445,000 PowerGen PLC 3,253,482 3,577,955 0.9 ------------ ------------ ------ 6,424,794 6,335,585 1.6 Total Common Stocks in the United Kingdom 17,165,910 17,708,323 4.3 United Telecommunications 31,000 AT&T Corp. 1,749,485 1,933,625 0.5 States 146,800 Ameritech Corp. 5,940,672 8,294,200 2.0 152,800 BellSouth Corp. 4,485,504 6,207,500 1.5 120,000 Frontier Corp. 2,437,200 3,840,000 0.9 155,000 GTE Corp. 5,702,350 6,626,250 1.6 55,000 MCI Communications Corp. 1,656,875 1,595,000 0.4 87,700 NYNEX Corp. 3,961,099 4,045,163 1.0 100,900 SBC Communications, Inc. 3,963,641 4,981,938 1.2 127,900 U S West Communications Group (c) 3,557,224 4,172,738 1.0 ------------ ------------ ------ 33,454,050 41,696,414 10.1 Utilities--Electric 289,500 Allegheny Power System, Inc. 7,707,195 8,504,063 2.1 207,200 Boston Edison Co. 5,530,724 5,076,400 1.2 249,962 CINergy Corp. 5,997,206 7,405,124 1.8 174,200 Consolidated Edison Co. of New York 5,650,524 4,855,825 1.2 138,900 DTE Energy Co. (d) 4,670,083 4,062,825 1.0 110,250 Dominion Resources, Inc. 4,427,302 4,175,719 1.0 193,000 Duke Power Co. 7,776,207 9,312,250 2.3 283,000 Edison International 6,379,546 4,669,500 1.1 248,300 General Public Utilities Corp. 7,653,794 8,318,050 2.0 290,200 Houston Industries, Inc. 7,082,367 6,348,125 1.6 244,800 NIPSCO Industries, Inc. 6,616,371 9,118,800 2.2 221,000 New York State Electric & Gas Corp. 7,952,312 5,055,375 1.2 180,500 PECO Energy Co. 5,532,539 4,444,813 1.1 76,000 Pacific Gas and Electric Company 2,095,320 1,767,000 0.4 323,000 PacifiCorp 6,465,176 6,500,375 1.6 192,000 Public Service Co. of Colorado 5,832,890 6,360,000 1.6 324,200 Southern Co. 5,858,779 7,497,125 1.8 177,300 Western Resources Co. 5,664,717 5,119,537 1.2 ------------ ------------ ------ 108,893,052 108,590,906 26.4 Utilities--Gas 95,100 AGL Resources Inc. 1,781,042 1,676,137 0.4 130,000 The Brooklyn Union Gas Co. 3,371,550 3,477,500 0.8 226,000 The Coastal Corp. 6,038,593 9,266,000 2.3 236,000 Questar Corp. 6,554,436 7,729,000 1.9 127,300 Sonat, Inc. 3,309,934 5,394,337 1.3 ------------ ------------ ------ 21,055,555 27,542,974 6.7 Utilities--Water 43,000 American Water Works Co., Inc. 1,617,875 1,531,875 0.4 Total Common Stocks in the United States 165,020,532 179,362,169 43.6 Total Investments in Common Stocks & Warrants 320,273,382 386,104,771 93.8
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Face Value Percent of COUNTRY Industries Amount Fixed-Income Securities Cost (Note 1a) Net Assets Australia Telecommuni- US$ 7,960,000 Telstra Corp., Ltd., 6.50% due cations 7/31/2003++++ $ 8,115,578 $ 7,581,900 1.8% Total Fixed-Income Securities in 8,115,578 7,581,900 1.8 Australia Korea Telecommunications 2,500,000 Korea Telecom, 7.40% due 12/01/1999 2,499,500 2,527,450 0.6 Total Fixed-Income Securities in Korea 2,499,500 2,527,450 0.6 United Telecommunications 3,500,000 Bell Cablemedia PLC, 11.95%* due 2,435,736 2,502,500 0.6 Kingdom 7/15/2004 Total Fixed-Income Securities in the United Kingdom 2,435,736 2,502,500 0.6 United Telecommunications 4,000,000 Rochester Telephone Corp., 9.25% due 4,111,200 4,293,560 1.1 States 6/01/2000 Utilities--Electric 4,000,000 Consumer Power Co., 8.875% due 4,190,000 4,147,680 1.0 11/15/1999 Total Fixed-Income Securities 8,301,200 8,441,240 2.1 in the United States Total Investments in Fixed-Income Securities 21,352,014 21,053,090 5.1 Short-Term Securities Repurchase 4,392,000 SBC Capital Markets, Inc., purchased Agreements** on 5/31/96 to yield 5.28% to 6/03/96 4,392,000 4,392,000 1.1 Total Investments in Short-Term 4,392,000 4,392,000 1.1 Securities Total Investments $346,017,396 411,549,861 100.0 ============ Other Assets Less Liabilities 170,620 0.0 ------------ ------ Net Assets $411,720,481 100.0% ============ ====== *Represents a zero coupon or step-up bond; the interest rate shown is the effective yield at the time of the purchase by the Fund. **Repurchase Agreements are fully collateralized by US Government & Agency Obligations. (a)These warrants were acquired through a corporate action. 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. (b)American Depositary Receipts (ADR). (c)U S West Inc. spun off U S West Media Group and changed its name to U S West Communications Group. (d)Formerly Detroit Edison Co. (e)Global Depositary Receipts (GDR). ++Non-income producing securities. ++++Restricted securities as to resale. The value of the Fund's investment in restricted securities was approximately $16,644,000, representing 4.0% of net assets. Acquisition Value Issue Date(s) Cost (Note 1a) CESC Ltd. (GDR) 4/11/1994 $ 2,640,330 $ 712,800 Central Costanera S.A. (ADR) 12/17/1993 158,400 237,600 Distribuidora Chilectra Metropolitana S.A. (ADR) 2/12/1992-12/21/1993 4,249,463 8,112,000 Telstra Corp., Ltd., 6.50% due 7/31/2003 7/26/1993-9/29/1993 8,115,578 7,581,900 Total $15,163,771 $16,644,300 =========== =========== See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 1996 Assets: Investments, at value (identified cost--$346,017,396) (Note 1a) $411,549,861 Receivables: Dividends $ 1,341,510 Interest 344,624 Capital shares sold 56,500 1,742,634 ------------ Deferred organization expenses (Note 1f) 1,741 Prepaid registration fees and other assets (Note 1f) 34,060 ------------ Total assets 413,328,296 ------------ Liabilities: Payables: Capital shares redeemed 717,221 Distributor (Note 2) 236,532 Investment adviser (Note 2) 212,696 1,166,449 ------------ Accrued expenses and other liabilities 441,366 ------------ Total liabilities 1,607,815 ------------ Net Assets: Net assets $411,720,481 ============ Net Assets Consist of: Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized $ 309,997 Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 2,565,274 Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 21,562 Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 20,880 Paid-in capital in excess of par 336,849,542 Undistributed investment income--net 2,882,157 Undistributed realized capital gains on investments and foreign currency transactions--net 3,551,756 Unrealized appreciation on investments and foreign currency transactions--net 65,519,313 ------------ Net assets $411,720,481 ============ Net Asset Class A--Based on net assets of $43,852,101 and 3,099,965 shares Value: outstanding $ 14.15 ============ Class B--Based on net assets of $361,875,004 and 25,652,742 shares outstanding $ 14.11 ============ Class C--Based on net assets of $3,037,581 and 215,615 shares outstanding $ 14.09 ============ Class D--Based on net assets of $2,955,795 and 208,804 shares outstanding $ 14.16 ============ See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended May 31, 1996 Investment Income Dividends (net of $518,356 foreign withholding tax) $ 8,686,143 (Notes 1d & 1e): Interest and discount earned 1,041,217 ------------ Total income 9,727,360 ------------ Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 1,438,962 Investment advisory fees (Note 2) 1,303,210 Transfer agent fees--Class B (Note 2) 304,681 Custodian fees 91,964 Printing and shareholder reports 91,545 Accounting services (Note 2) 56,665 Professional fees 46,802 Registration fees (Note 1f) 44,410 Transfer agent fees--Class A (Note 2) 30,304 Account maintenance and distribution fees--Class C (Note 2) 10,994 Directors' fees and expenses 10,731 Account maintenance fees--Class D (Note 2) 3,174 Transfer agent fees--Class C (Note 2) 2,247 Transfer agent fees--Class D (Note 2) 1,688 Amortization of organization expenses (Note 1f) 976 Pricing fees 303 Other 9,777 ------------ Total expenses 3,448,433 ------------ Investment income--net 6,278,927 ------------ Realized & Realized gain (loss) from: Unrealized Gain Investments--net 3,555,691 (Loss) on Foreign currency transactions--net (3,871) 3,551,820 Investments & ------------ Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net Investments--net 23,405,219 (Notes 1b, 1c, Foreign currency transactions--net (24,864) 23,380,355 1e & 3): ------------ ------------ Net realized gain on investments and foreign currency transactions 26,932,175 ------------ Net Increase in Net Assets Resulting from Operations $ 33,211,102 ============ See Notes to Financial Statements.
STATEMENTS OF CHANGES IN NET ASSETS
For the For the Six Months Year Ended Ended May 31, November 30, Increase (Decrease) in Net Assets: 1996 1995 Operations: Investment income--net $ 6,278,927 $ 14,205,177 Realized gain on investments and foreign currency transactions--net 3,551,820 9,039,213 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net 23,380,355 43,819,383 ------------ ------------ Net increase in net assets resulting from operations 33,211,102 67,063,773 ------------ ------------ Dividends & Investment income--net: Distributions to Class A (748,264) (1,952,696) Shareholders Class B (4,594,796) (12,961,394) (Note 1g): Class C (31,455) (47,650) Class D (31,940) (39,117) Realized gain on investments--net: Class A (807,670) -- Class B (6,874,204) -- Class C (38,876) -- Class D (29,789) -- ------------ ------------ Net decrease in net assets resulting from dividends and distributions to shareholders (13,156,994) (15,000,857) ------------ ------------ Capital Share Net decrease in net assets derived from capital share Transactions transactions (37,794,391) (139,129,318) (Note 4): ------------ ------------- Net Assets: Total decrease in net assets (17,740,283) (87,066,402) Beginning of period 429,460,764 516,527,166 ------------ ------------ End of period* $411,720,481 $429,460,764 ============ ============ *Undistributed investment income--net $ 2,882,157 $ 2,009,685 ============ =========== See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
The following per share data and ratios Class A have been derived from information provided For the Six in the financial statements. Months Ended May 31, For the Year Ended November 30, Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992 Per Share Net asset value, beginning of period $ 13.52 $ 12.08 $ 13.22 $ 11.23 $ 10.67 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .25 .51 .94 .40 .47 Realized and unrealized gain (loss) on nvestments and foreign currency transactions--net .85 1.42 (1.57) 2.01 .57 -------- -------- -------- -------- -------- Total from investment operations 1.10 1.93 (.63) 2.41 1.04 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.23) (.49) (.47) (.41) (.48) Realized gain on investments--net (.24) -- (.04) (.01) -- -------- -------- -------- -------- -------- Total dividends and distributions (.47) (.49) (.51) (.42) (.48) -------- -------- -------- -------- -------- Net asset value, end of period $ 14.15 $ 13.52 $ 12.08 $ 13.22 $ 11.23 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 8.34%+++ 16.34% (4.89%) 21.80% 10.05% Return:** ======== ======== ======== ======== ======== Ratios to Average Expenses .89%* .91% .86% .82% 1.01% Net Assets: ======== ======== ======== ======== ======== Investment income--net 3.58%* 3.73% 3.58% 3.57% 4.47% ======== ======== ======== ======== ======== Supplemental Net assets, end of period (in thousands) $ 43,852 $ 44,775 $ 56,659 $ 81,718 $ 29,772 Data ======== ======== ======== ======== ======== Portfolio turnover 2.75% 2.92% 17.02% 8.92% 30.91% ======== ======== ======== ======== ======== Average commission rate paid+++++ $ .0310 -- -- -- -- ======== ======== ======== ======== ======== Class B The following per share data and ratios have been derived from information For the Six provided in the financial statements. Months Ended May 31, For the Year Ended November 30, Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992 Per Share Net asset value, beginning of period $ 13.47 $ 12.04 $ 13.17 $ 11.20 $ 10.65 Operating -------- -------- -------- -------- -------- Performance: Investment income--net .20 .38 .74 .33 .39 Realized and unrealized gain (loss) on nvestments and foreign currency transactions--net .85 1.44 (1.46) 1.98 .57 -------- -------- -------- -------- -------- Total from investment operations 1.05 1.82 (.72) 2.31 .96 -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.17) (.39) (.37) (.33) (.41) Realized gain on investments--net (.24) -- (.04) (.01) -- -------- -------- -------- -------- -------- Total dividends and distributions (.41) (.39) (.41) (.34) (.41) -------- -------- -------- -------- -------- Net asset value, end of period $ 14.11 $ 13.47 $ 12.04 $ 13.17 $ 11.20 ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 7.94%+++ 15.38% (5.60%) 20.86% 9.20% Return:** ======== ======== ======== ======== ======== Ratios to Average Expenses 1.67%* 1.68% 1.63% 1.59% 1.77% Net Assets: ======== ======== ======== ======== ======== Investment income--net 2.80%* 2.95% 2.82% 2.81% 3.65% ======== ======== ======== ======== ======== Supplemental Net assets, end of period (in thousands) $361,875 $381,098 $459,185 $596,455 $200,396 Data: ======== ======== ======== ======== ======== Portfolio turnover 2.75% 2.92% 17.02% 8.92% 30.91% ======== ======== ======== ======== ======== Average commission rate paid+++++ $ .0310 -- -- -- -- ======== ======== ======== ======== ======== Class C Class D The following per share data and ratios For the For the have been derived from information For the Period For the Period provided in the financial statements. Six Months For the Oct. 21, Six Months For the Oct. 21, Ended Year Ended 1994++ to Ended Year Ended 1994++ to Increase (Decrease) in Net May 31, Nov. 30, Nov. 30, May 31, Nov. 30, Nov. 30, Asset Value: 1996++++ 1995 1994 1996++++ 1995 1994 Per Share Net asset value, beginning of period $ 13.46 $ 12.05 $ 12.34 $ 13.55 $ 12.09 $ 12.37 Operating -------- -------- -------- -------- -------- -------- Performance: Investment income--net .19 .39 .01 .27 .52 .02 Realized and unrealized gain (loss) on investments and foreign currency transactions--net .85 1.43 (.30) .80 1.40 (.30) -------- -------- -------- -------- -------- -------- Total from investment operations 1.04 1.82 (.29) 1.07 1.92 (.28) -------- -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net (.17) (.41) -- (.22) (.46) -- Realized gain on investments--net (.24) -- -- (.24) -- -- -------- -------- -------- -------- -------- -------- Total dividends and distributions (.41) (.41) -- (.46) (.46) -- -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 14.09 $ 13.46 $ 12.05 $ 14.16 $ 13.55 $ 12.09 ======== ======== ======== ======== ======== ======== Total Investment Based on net asset value per share 7.90%+++ 15.38% (2.35%)+++ 8.02%+++ 16.21% (2.26%)+++ Return:** ======== ======== ======== ======== ======== ======== Ratios to Average Expenses 1.72%* 1.73% 1.60%* 1.14%* 1.15% 1.08%* Net Assets: ======== ======== ======== ======== ======== ======== Investment income--net 2.74%* 2.85% 3.01%* 3.48%* 3.36% 3.25%* ======== ======== ======== ======== ======== ======== Supplemental Net assets, end of period Data: in thousands) $ 3,037 $ 2,072 $ 445 $ 2,956 $ 1,516 $ 239 ======== ======== ======== ======== ======== ======== Portfolio turnover 2.75% 2.92% 17.02% 2.75% 2.92% 17.02% ======== ======== ======== ======== ======== ======== Average commission rate paid+++++ $ .0310 -- -- $ .0310 -- -- ======== ======== ======== ======== ======== ======== *Annualized. **Total investment returns exclude the effect of sales loads. ++Commencement of Operations. ++++Based on average shares outstanding during the period. +++Aggregate total investment return. +++++For fiscal years beginning on or after September 1, 1995, the Fund is required to disclose its average commission rate per share for purchases and sales of equity securities. 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. These unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented. All such adjustments are of a normal recurring nature. The Fund offers four classes of shares under the Merrill Lynch Select Pricing SM System. Shares of Class A and Class D are sold with a front-end sales charge. Shares of Class B and Class C may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B, Class C and Class D Shares bear certain expenses related to the account maintenance of such shares, and Class B and Class C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its account maintenance and distribution expenditures. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of securities--Portfolio securities which are traded on stock exchanges are valued at the last sale price on the exchange on which such securities are traded, as of the close of business on the day the securities are being valued or, lacking any sales, at the last available bid price. Securities traded in the over-the- counter market are valued at the last available bid price prior to the time of valuation. 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 Directors as the primary market. Securities which are traded both in the over-the- counter market and on a stock exchange are valued according to the broadest and most representative market. Options written 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 asked price. 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. Short- term securities are valued at amortized cost, which approximates market value. Other investments, including futures contracts and related options, are stated at market value. Securities and assets for which market value quotations are not available are valued at their fair value as determined in good faith by or under the direction of the Fund's Board of Directors. (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. (c) Derivative financial instruments--The Fund may engage in various portfolio strategies to seek to increase its return by hedging its portfolio against adverse movements in the equity, debt and currency markets. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. * Options--The Fund is authorized to write and purchase call options 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. * 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. Premium or discount is amortized over the life of the contracts. * Foreign currency options and futures--The Fund may also purchase or sell listed or over-the-counter foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-US dollar denominated securities owned by the Fund, sold by the Fund but not yet delivered, or committed or anticipated to be purchased by the Fund. (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"). The general partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly- owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of Merrill Lynch Group, Inc. MLAM is responsible for the management of the Fund's portfolio and provides the necessary personnel, facilities, equipment and certain other services necessary to the 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 MLAM 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 MLAM 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 the distribution plans (the "Distribution Plans") adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance and distribution fees. The fees are accrued daily and paid monthly at annual rates based upon the average daily net assets of the shares as follows: Account Distribution Maintenance Fee Fee Class B 0.25% 0.50% Class C 0.25% 0.55% Class D 0.25% -- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Inc. ("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 six months ended May 31, 1996, MLFD earned underwriting discounts and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D Shares as follows: MLFD MLPF&S Class A $336 $3,102 Class D $878 $8,839 For the six months ended May 31, 1996, MLPF&S received contingent deferred sales charges of $424,789 and $1,131 relating to transactions in Class B Shares and Class C Shares, respectively. In addition, MLPF&S received $3,402 in commissions on the execution of portfolio security transactions for the Fund for the six months ended May 31, 1996. For the six months ended May 31, 1996, the Fund paid Merrill Lynch Security Pricing Service, an affiliate of MLPF&S, $380 for security price quotations to compute the net asset value of the Fund. Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co. NOTES TO FINANCIAL STATEMENTS (concluded) 3. Investments: Purchases and sales of investments, excluding short-term securities, for the six months ended May 31, 1996 were $11,692,847 and $50,388,140, respectively. Net realized and unrealized gains (losses) as of May 31, 1996 were as follows: Realized Unrealized Gains Gains (Losses) (Losses) Long-term investments $ 3,555,691 $65,532,465 Foreign currency transactions (3,871) (13,152) ----------- ----------- Total $ 3,551,820 $65,519,313 =========== =========== As of May 31, 1996, net unrealized appreciation for Federal income tax purposes aggregated $65,532,465, of which $82,253,209 related to appreciated securities and $16,720,744 related to depreciated securities. The aggregate cost of investments at May 31, 1996 for Federal income tax purposes was $346,017,396. 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $37,794,391 and $139,129,318 for the six months ended May 31, 1996 and the year ended November 30, 1995, respectively. Transactions in capital shares for each class were as follows: Class A Shares for the Six Months Dollar Ended May 31, 1996 Shares Amount Shares sold 100,932 $ 1,410,075 Shares issued to shareholders in reinvestment of dividends and distributions 88,387 1,199,976 ----------- ------------- Total issued 189,319 2,610,051 Shares redeemed (401,861) (5,609,179) ----------- ------------- Net decrease (212,542) $ (2,999,128) =========== ============= Class A Shares for Year Ended Dollar November 30, 1995 Shares Amount Shares sold 165,580 $ 2,080,607 Shares issued to shareholders in reinvestment of dividends 116,128 1,460,439 ----------- ------------- Total issued 281,708 3,541,046 Shares redeemed (1,658,669) (20,944,113) ----------- ------------- Net decrease (1,376,961) $ (17,403,067) =========== ============= Class B Shares for the Six Months Dollar Ended May 31, 1996 Shares Amount Shares sold 1,077,227 $ 15,011,874 Shares issued to shareholders in reinvestment of dividends & distributions 664,510 8,994,101 ----------- ------------- Total issued 1,741,737 24,005,975 Automatic conversion of shares (55,709) (767,677) Shares redeemed (4,324,584) (60,219,535) ----------- ------------- Net decrease (2,638,556) $ (36,981,237) =========== ============= Class B Shares for the Year Ended Dollar November 30, 1995 Shares Amount Shares sold 1,655,159 $ 20,831,069 Shares issued to shareholders in reinvestment of dividends 796,753 9,996,426 ----------- ------------- Total issued 2,451,912 30,827,495 Automatic conversion of shares (10,704) (138,527) Shares redeemed (12,290,113) (154,903,079) ----------- ------------- Net decrease (9,848,905) $(124,214,111) =========== ============= Class C Shares for the Six Months Dollar Ended May 31, 1996 Shares Amount Shares sold 92,019 $ 1,285,854 Shares issued to shareholders in reinvestment of dividends & distributions 4,680 63,358 ----------- ------------- Total issued 96,699 1,349,212 Shares redeemed (34,998) (486,054) ----------- ------------- Net increase 61,701 $ 863,158 =========== ============= Class C Shares for the Year Ended Dollar November 30, 1995 Shares Amount Shares sold 259,375 $ 3,186,034 Shares issued to shareholders in reinvestment of dividends 3,375 43,016 ----------- ------------- Total issued 262,750 3,229,050 Shares redeemed (145,762) (1,797,850) ----------- ------------- Net increase 116,988 $ 1,431,200 =========== ============= Class D Shares for the Six Months Dollar Ended May 31, 1996 Shares Amount Shares sold 1,188,663 $ 16,735,013 Automatic conversion of shares 55,513 767,677 Shares issued to shareholders in reinvestment of dividends and distributions 3,700 50,424 ----------- ------------- Total issued 1,247,876 17,553,114 Shares redeemed (1,150,967) (16,230,298) ----------- ------------- Net increase 96,909 $ 1,322,816 =========== ============= Class D Shares for the Year Dollar Ended November 30, 1995 Shares Amount Shares sold 2,762,874 $ 34,867,068 Automatic conversion of shares 9,840 138,527 Shares issued to shareholders in reinvestment of dividends 1,912 24,419 ----------- ------------- Total issued 2,774,626 35,030,014 Shares redeemed (2,682,472) (33,973,354) ----------- ------------- Net increase 92,154 $ 1,056,660 =========== ============= PORTFOLIO INFORMATION Worldwide Investments as of 5/31/96 Ten Largest Holdings Percent of (Equity Investments) Net Assets Telecom Italia Mobile S.p.A. 2.6% Veba AG 2.5 Telefonica de Espana S.A. 2.4 Empresa Nacional de Electricidad, S.A., (ADR) (b) 2.3 Telekom Malaysia BHD 2.3 Generale des Eaux 2.3 Duke Power Co. 2.3 The Coastal Corp. 2.3 NIPSCO Industries, Inc. 2.2 Societa Finanziara Telefonica S.p.A. (STET) 2.2 Additions AGL Resources Inc. American Water Works Co., Inc. Elektrowatt AG The Hong Kong & China Gas Co., Ltd. (Warrants) MCI Communications Corp. National Power PLC Deletions Bell Atlantic Corp. Northeast Utilities Co. WestCoast Energy Inc. -----END PRIVACY-ENHANCED MESSAGE-----