-----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, BYUl3Xlj/wQC9gV9fWpd7w2DbCb9/gVnBYTHmBAazrgi1RiOJ8DyN/XCttJOFkm/ L9EzGUT7fYGXoindmS+A0w== 0001005477-99-000178.txt : 19990129 0001005477-99-000178.hdr.sgml : 19990129 ACCESSION NUMBER: 0001005477-99-000178 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990128 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: SEC FILE NUMBER: 811-06180 FILM NUMBER: 99514751 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 9066 CITY: PRINCETON STATE: NJ ZIP: 08543-9011 N-30D 1 ANNUAL REPORT MERRILL LYNCH GLOBAL UTILITY FUND, INC. [GRAPHIC OMITTED] STRATEGIC Performance Annual Report November 30, 1998 MERRILL LYNCH GLOBAL UTILITY FUND, INC. Sector Diversification As a Percentage of Equities as of November 30, 1998. A pie graph depicting Sector Diversification As a percentage of Equities as of November 30, 1998. Telecommunications 51.7% Utilities--Electric 32.0% Utilities--Gas 11.3% Utilities--Water 5.0% Geographical Diversification As a Percentage of Equities as of November 30, 1998. A pie graph depicting Geographical Diversification As a Percentage of Equities as of November 30. 1998. Europe 49.2% United States 40.6% Asia/Pacific Basin 6.5% Americas (Ex-US) 3.7% Merrill Lynch Global Utility Fund, Inc., November 30, 1998 DEAR SHAREHOLDER During the quarter ended November 30, 1998, stock and bond market volatility reflected shifting investor perceptions regarding global economic prospects. Early in the period, the deteriorating outlook for corporate profits amid signs of a weakening economy led to lower share prices in world stock markets. At the same time, the uncertain economic picture and the resulting flight to quality by investors pushed the 30-year US Treasury bond to record low yields. Yields also declined in sovereign bond markets of other major industrialized countries. In contrast, corporate bonds, mortgage-backed securities and emerging markets debt underperformed Treasury securities by a wide margin. Although a one-quarter point cut in the Federal Funds rate in late September did not restore investor confidence, an unexpected one quarter-point cut in October sparked a rally in stock and bond prices. The rally was fueled further by another easing of monetary policy in mid-November. However, by November quarter-end, share prices had resumed their decline amidst renewed investor uncertainties regarding global economic prospects. As long as worldwide economic conditions appear fragile, it is likely that stock and bond market volatility will continue. For the overall global economy, the deepening recession in Japan is of great concern as well as the difficulties in emerging economies such as Russia and Brazil. The announcements of banking system reform and fiscal stimulus packages in Japan provided some encouragement to investors, but the effectiveness of these programs remains to be seen. A multilateral aid package to Brazil initially bolstered investor confidence regarding the prospects for this country and other emerging markets. Further progress in easing strains within the global financial system, combined with continued monetary easing on the part of the Federal Reserve Board, would likely provide an important element of stability to the volatile investment environment. Fiscal Year in Review During the 12-month period ended November 30, 1998, the investment environment for global utilities was rather robust. The Fund's Class A, Class B, Class C and Class D Shares had total returns of +26.47%, +25.40%, +25.34% and +26.09%, respectively. This compares to a total return of +23.65% for the US-based equity market, as measured by the unmanaged Standard & Poor's (S&P) 500 Index for the same 12-month period. The unmanaged benchmark Financial Times/Standard & Poor's (FT/S&P) Actuaries World Utility Index had a total return of +31.92% for the fiscal year ended November 30, 1998. Several factors influenced the Fund's underperformance relative to its unmanaged benchmark index. The strongest performance came from the European region at +56.96%, in which the Fund maintained an overweighted position throughout the year. However, while the Fund benefited from an overweighting in Italy and Spain, its underweighting in the United Kingdom was a modest negative. As of November 30, 1998, the Fund had nearly 37% of its net assets invested in domestic utility stocks compared to the 50% in the FT/S&P Actuaries World Utility Index. This stance was beneficial for the Fund since the total return of the benchmark index was +32.83%, excluding the US utility market, for the 12 months ended November 30, 1998. However, the Fund was underweighted relative to the benchmark index in the large domestic telecommunications companies whose performance improved toward the end of the fiscal year. The Fund's weighting in domestic telecommunications stocks was approximately 12.7% of net assets compared to a weighting of 29.8% for the same nine stocks in the FT/S&P Actuaries World Utility Index. Finally, the Fund's weighting in US-based natural gas stocks of 4.0% of net assets compared to a weighting of approximately 1.7% for the benchmark index held back performance for the year. During the year ended November 30, 1998, the most significant portfolio change was the continued reduction in emerging markets in favor of the more mature but growing utility markets. While our assets in Asian emerging markets were modest at the end of the last fiscal year, the Fund's holdings in South American markets accounted for 11.2% of net assets. Several positions in this region were sold during the year and as of November 30, 1998, the Fund only had investments in Brazil and Mexico. These two countries accounted for 1.8% of net assets at fiscal year-end. Portfolio Matters For the quarter ended November 30, 1998, Merrill Lynch Global Utility Fund, Inc.'s Class A, Class B, Class C and Class D Shares had total returns of +13.75%, +13.44%, +13.42% and +13.61%, respectively. This compares to an average total return of +12.14% for the 103 utility funds tracked by Lipper Analytical Services, Inc. The unmanaged FT/S&P Actuaries World Utility Index had a total return of +15.71% during the November quarter. The strong performance of both US-based and European-based utility stocks significantly influenced Fund performance during the November quarter. These two markets accounted for the highest concentration of Fund assets. Throughout the quarter, the Fund's modest weighting in emerging markets hindered performance as many investors flocked to these markets on renewed optimism. In the utility arena, there was no new fundamental news that would have warranted the rally that occurred. While valuation levels were depressed because of overall market conditions, the outlook for utility companies did not appear to change. Forecasts of demand growth for electricity continued to be stable or revised downward in several emerging markets. Moreover, the ability to raise rates was made more difficult in some countries because of economic and political uncertainties. As a result of an improvement in the overall market, we saw the resurgence of stock offerings in the November quarter. We participated in two offerings in the utility sector. First, we added Sonera Group OYJ, the Finnish-based telecommunications company to the portfolio. Sonera is a leading provider of fixed-network telecommunications services in Finland and the largest mobile communications provider in the country with over 1.8 million subscribers. We also added Cable & Wireless Optus Limited to the Fund. The company is the second-largest provider of telecommunication services in Australia. Operations include a broad range of communication products, such as fixed-line, mobile and Internet services. 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 our next report to shareholders. Sincerely, /s/ Arthur Zeikel Arthur Zeikel President /s/ Walter D. Rogers Walter D. Rogers Senior Vice President and Portfolio Manager January 20, 1999 2 & 3 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 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: o 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. o Class B Shares are subject to a maximum contingent deferred sales charge of 4% if redeemed during the first year, decreasing 1% each year thereafter to 0% after the fourth year. In addition, Class B Shares are subject to a distribution fee of 0.50% and an account maintenance fee of 0.25%. These shares automatically convert to Class D Shares after approximately 10 years. (There is no initial sales charge for automatic share conversions.) o 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. o Class D Shares incur a maximum initial sales charge of 4% and an account maintenance fee of 0.25% (but no distribution fee). None of the past results shown should be considered a representation of future performance. Figures shown in the "Recent Performance Results" and "Average Annual Total Return" tables assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. Investment return and principal value of shares will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Dividends paid to each class of shares will vary because of the different levels of account maintenance, distribution and transfer agency fees applicable to each class, which are deducted from the income available to be paid to shareholders. Recent Performance Results*
12 Month 3 Month Since Inception Total Return Total Return Total Return ================================================================================================ ML Global Utility Fund, Inc. Class A Shares +26.47% +13.75% +193.37% - ------------------------------------------------------------------------------------------------ ML Global Utility Fund, Inc. Class B Shares +25.40 +13.44 +175.83 - ------------------------------------------------------------------------------------------------ ML Global Utility Fund, Inc. Class C Shares +25.34 +13.42 + 96.11 - ------------------------------------------------------------------------------------------------ ML Global Utility Fund, Inc. Class D Shares +26.09 +13.61 +100.74 ================================================================================================
* Investment results shown do not reflect sales charges; results shown would be lower if a sales charge was included. Total investment returns are based on changes in net asset values for the periods shown, and assume reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. The Fund's since inception periods are Class A & Class B Shares, from 12/28/90 to 11/30/98 and Class C & Class D Shares, from 10/21/94 to 11/30/98. Class A & Class B Shares Total Return Based on a $10,000 Investment--Class A and Class B Shares. A line graph depicting the growth of an investment in the Fund's Class A and Class B Shares compared to growth of an investment in the Financial Times/Standard & Poor's--Actuaries World Index and the the Financial Times/Standard & Poor's--Actuaries World Utility Index. Beginning and ending values are: 12/28/90** 11/98 ML Global Utility Fund, Inc.+-- Class A Shares* $ 9,475 $28,163 Class B Shares* $10,000 $27,583 Financial Times/Standard & Poor's --Actuaries World Index ++ $10,000 $27,000 Financial Times/Standard & Poor's --Actuaries World Utility Index +++ $10,000 $30,424 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + ML Global Utility Fund, Inc. invests at least 65% of its total assets in common stocks (including preferred of debt securities convertible into common stocks), preferred stocks and debt securities issued by domestic and foreign companies in the utilities industries. ++ This unmanaged market capitalization-weighted Index is comprised of 2,307 equities from 29 countries in 17 regions, including the United States. +++ This unmanaged market capitalization-weighted Index is comprised of utility stocks from any of the 29 countries that make up the Financial Times/Standard & Poor's--Actuaries World Index. Class A & Class B Shares Average Annual Total Return % Return Without % Return With Sales Charge Sales Charge** ================================================================================ Class A Shares* ================================================================================ Year Ended 9/30/98 +17.32% +12.63% - -------------------------------------------------------------------------------- Five Years Ended 9/30/98 +11.86 +10.95 - -------------------------------------------------------------------------------- Inception (12/28/90) through 9/30/98 +13.51 +12.91 - -------------------------------------------------------------------------------- * Maximum sales charge is 4%. ** Assuming maximum sales charge. % Return % Return Without CDSC With CDSC** ================================================================================ Class B Shares* ================================================================================ Year Ended 9/30/98 +16.38% +12.38% - -------------------------------------------------------------------------------- Five Years Ended 9/30/98 +10.99 +10.99 - -------------------------------------------------------------------------------- Inception (12/28/90) through 9/30/98 +12.63 +12.63 - -------------------------------------------------------------------------------- * Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4 years. ** Assuming payment of applicable contingent deferred sales charge. 4 & 5 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 PERFORMANCE DATA (concluded) Class C & Class D Shares Total Return Based on a $10,000 Investment Class C & Class D Shares Total Return Based on a $10,000 Investment--Class C and Class D Shares. A line graph depicting the growth of an investment in the Fund's Class C and Class D Shares compared to growth of an investment in the Financial Times/Standard & Poor's--Actuaries World Index and the the Financial Times/Standard & Poor's--Actuaries World Utility Index. Beginning and ending values are: 10/21/94** 11/98 ML Global Utility Fund, Inc.+-- Class C Shares* $10,000 $19,611 Class D Shares* $ 9,475 $19,273 Financial Times/Standard & Poor's --Actuaries World Index ++ $10,000 $17,850 Financial Times/Standard & Poor's --Actuaries World Utility Index +++ $10,000 $20,389 * Assuming maximum sales charge, transaction costs and other operating expenses, including advisory fees. ** Commencement of operations. + ML Global Utility Fund, Inc. invests at least 65% of its total assets in common stocks (including preferred of debt securities convertible into common stocks), preferred stocks and debt securities issued by domestic and foreign companies in the utilities industries. ++ This unmanaged market capitalization-weighted Index is comprised of 2,307 equities from 29 countries in 17 regions, including the United States. +++ This unmanaged market capitalization-weighted Index is comprised of utility stocks from any of the 29 countries that make up the Financial Times/Standard & Poor's--Actuaries World Index. Past performance is not predictive of future performance. Class C & Class D Shares Average Annual Total Return % Return % Return Without CDSC With CDSC** ================================================================================ Class C Shares* ================================================================================ Year Ended 9/30/98 +16.35% +15.35% - -------------------------------------------------------------------------------- Inception (10/21/94) through 9/30/98 +15.91 +15.91 - -------------------------------------------------------------------------------- * 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 9/30/98 +16.99% +12.31% - -------------------------------------------------------------------------------- Inception (10/21/94) through 9/30/98 +16.55 +15.35 - -------------------------------------------------------------------------------- * Maximum sales charge is 4%. ** Assuming maximum sales charge. 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 Walter D. Rogers, Senior Vice President and Portfolio Manager Donald C. Burke, Vice President Gerald M. Richard, Treasurer Thomas D. Jones, III, Secretary Custodian The Chase Manhattan Bank, N.A. 4 MetroTech Center, 18th Floor Brooklyn, NY 11245 Transfer Agent Financial Data Services, Inc. 4800 Deer Lake Drive East Jacksonville, FL 32246-6484 (800) 637-3863 6 & 7 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 SCHEDULE OF INVESTMENTS (in US dollars)
Percent Shares Value of Net COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Assets ==================================================================================================================================== Australia Telecommunications 721,400 +Cable & Wireless Optus Limited $ 982,720 $ 1,351,777 0.4 -------------------------------------------------------------------------------------------------------------------- Utilities--Gas 1,215,673 Australian Gas Light Company Limited 3,368,022 9,051,440 2.3 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Australia 4,350,742 10,403,217 2.7 ==================================================================================================================================== Austria Utilities--Gas 24,320 EVN AG 1,896,384 3,300,469 0.8 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Austria 1,896,384 3,300,469 0.8 ==================================================================================================================================== Brazil Telecommunications 28,000 +Embratel Participacoes S.A. (ADR) (b)(c) 593,704 448,000 0.1 2,800 +Tele Celular Sul Participacoes S.A. (ADR) (b)(c) 45,069 63,700 0.0 9,333 +Tele Centro Oeste Celular Participacoes S.A. (ADR) (b)(c) 28,168 44,333 0.0 5,600 +Tele Centro Sul Participacoes S.A. (ADR) (b)(c) 327,620 319,550 0.1 560 +Tele Leste Celular Participacoes S.A. (ADR) (b)(c) 15,081 23,415 0.0 1,400 +Tele Nordeste Celular Participacoes S.A. (ADR) (b)(c) 20,801 36,663 0.0 560 +Tele Norte Celular Participacoes S.A. (ADR) (b)(c) 8,711 22,925 0.0 28,000 +Tele Norte Leste Participacoes S.A. (ADR) (b)(c) 431,194 476,000 0.1 5,600 +Tele Sudeste Celular Participacoes S.A. (ADR) (b)(c) 178,544 151,200 0.0 28,000 +Telecomunicacoes Brasileiras S.A.--Telebras (ADR) (b) 2,167 4,813 0.0 1,400 +Telemig Celular Participacoes S.A. (ADR) (b)(c) 40,736 43,225 0.0 11,200 +Telesp Celular Participacoes S.A. (ADR) (b)(c) 360,556 294,000 0.1 28,000 +Telesp Participacoes S.A. (ADR) (b) 1,057,399 749,000 0.2 ------------ ----------- ----- 3,109,750 2,676,824 0.6 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 300,000 Companhia Paranaense de Energia S.A. (Copel) (ADR) (b) 5,400,000 2,925,000 0.8 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Brazil 8,509,750 5,601,824 1.4 ==================================================================================================================================== Canada Telecommunications 109,200 BC Telecom, Inc. 2,011,806 3,037,895 0.8 -------------------------------------------------------------------------------------------------------------------- Utilities--Gas 200,000 TransCanada PipeLines Limited (ADR) (b) 3,147,486 2,975,000 0.7 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Canada 5,159,292 6,012,895 1.5 ==================================================================================================================================== Denmark Telecommunications 160,000 Tele Danmark A/S (ADR) (b) 3,764,160 8,870,000 2.3 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Denmark 3,764,160 8,870,000 2.3 ==================================================================================================================================== Finland Telecommunications 18,218 +Sonera Group OYJ 160,197 263,726 0.1 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Finland 160,197 263,726 0.1 ==================================================================================================================================== France Utilities--Water 68,074 Vivendi 7,476,968 15,440,256 4.0 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in France 7,476,968 15,440,256 4.0 ==================================================================================================================================== Germany Telecommunications 24,300 Deutsche Telekom AG 462,162 684,224 0.2 6,843 Mannesmann AG 610,301 742,792 0.2 ------------ ----------- ----- 1,072,463 1,427,016 0.4 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 40,000 RWE AG 1,799,334 2,123,632 0.5 70,000 VEBA AG 2,284,445 3,892,340 1.0 4,000 Viag AG 1,764,306 2,472,641 0.6 ------------ ----------- ----- 5,848,085 8,488,613 2.1 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Germany 6,920,548 9,915,629 2.5 ==================================================================================================================================== Hong Kong Utilities--Gas 158,455 Hong Kong and China Gas Company Ltd. 178,364 209,773 0.1 7,202 Hong Kong and China Gas Company Ltd. (Warrants) (a) 0 753 0.0 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks & Warrants in Hong Kong 178,364 210,526 0.1 ==================================================================================================================================== Italy Telecommunications 2,775,000 Telecom Italia Mobile (TIM) S.p.A. 2,012,515 18,236,946 4.7 1,505,555 Telecom Italia S.p.A. 2,746,349 12,237,469 3.1 2,891,700 Telecom Italia S.p.A. (Registered Non-Convertible) 5,447,174 18,122,794 4.7 ------------ ----------- ----- 10,206,038 48,597,209 12.5 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 462,000 +AEM S.p.A. 437,927 695,567 0.2 -------------------------------------------------------------------------------------------------------------------- Utilities--Gas 1,786,300 Italgas S.p.A. 5,169,953 8,857,862 2.2 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Italy 15,813,918 58,150,638 14.9 ==================================================================================================================================== Japan Telecommunications 290 +Nippon Telegraph & Telephone Corporation (NTT) 2,475,448 2,168,400 0.6 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Japan 2,475,448 2,168,400 0.6 ==================================================================================================================================== Mexico Telecommunications 35,000 Telefonos de Mexico, S.A. de C.V. (ADR) (b) 1,924,311 1,629,688 0.4 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Mexico 1,924,311 1,629,688 0.4 ==================================================================================================================================== New Zealand Telecommunications 56,000 Telecom Corporation of New Zealand Limited (ADR) (b) 1,230,138 1,879,500 0.5 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in New Zealand 1,230,138 1,879,500 0.5 ==================================================================================================================================== Philippines Telecommunications 188,000 Philippine Long Distance Telephone Company (ADR) (b) 4,077,062 4,923,250 1.3 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the Philippines 4,077,062 4,923,250 1.3 ==================================================================================================================================== Portugal Telecommunications 205,740 Portugal Telecom S.A. (ADR) (b) 4,576,844 9,065,419 2.4 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 80,820 EDP--Electricidade de Portugal, S.A. (ADR) (b) 3,540,889 3,596,490 0.9 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Portugal 8,117,733 12,661,909 3.3 ==================================================================================================================================== Spain Telecommunications 477,300 Telefonica S.A. 5,492,570 22,499,437 5.8 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 259,200 Endesa S.A. (ADR) (b) 2,556,672 6,739,200 1.7 46,000 HidroelEctrica del Cantabrico, SA 1,553,961 2,232,358 0.6 323,500 Iberdrola S.A. 2,035,162 5,375,548 1.4 ------------ ----------- ----- 6,145,795 14,347,106 3.7 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in Spain 11,638,365 36,846,543 9.5 ====================================================================================================================================
8 & 9 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
Percent Shares Value of Net COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Assets ==================================================================================================================================== United Kingdom Telecommunications 671,000 British Telecommunications PLC $ 4,688,465 $ 9,195,995 2.4% 225,000 Cable & Wireless PLC 2,867,544 2,858,972 0.7 88,000 Vodafone Group PLC (ADR ) (b) 2,605,300 12,996,500 3.3 ------------ ----------- ----- 10,161,309 25,051,467 6.4 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 208,000 National Power PLC 1,723,671 1,771,127 0.5 370,000 PowerGen PLC 2,705,142 5,113,557 1.3 ------------ ----------- ----- 4,428,813 6,884,684 1.8 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United Kingdom 14,590,122 31,936,151 8.2 ==================================================================================================================================== United States Telecommunications 46,000 AT&T Corp. 1,848,510 2,866,375 0.7 140,000 Ameritech Corporation 2,996,450 7,577,500 1.9 95,232 Bell Atlantic Corporation 2,819,654 5,297,280 1.4 91,800 BellSouth Corporation 2,702,773 8,009,550 2.1 108,000 Frontier Corporation 2,193,480 3,253,500 0.8 85,000 GTE Corporation 3,145,450 5,270,000 1.4 108,000 +MCI WorldCom, Inc. 3,572,937 6,365,250 1.6 139,800 SBC Communications Inc. 2,939,711 6,701,663 1.7 68,000 U S WEST, Inc. 1,895,186 4,233,000 1.1 ------------ ----------- ----- 24,114,151 49,574,118 12.7 -------------------------------------------------------------------------------------------------------------------- Utilities--Electric 156,000 Allegheny Energy, Inc. 4,213,210 5,265,000 1.4 87,200 BEC Energy 2,722,264 3,597,000 0.9 166,962 Cinergy Corp. 4,045,124 5,770,624 1.5 84,200 Consolidated Edison, Inc. 2,991,744 4,278,412 1.1 118,900 DTE Energy Company 4,092,463 5,187,012 1.3 85,000 Duke Energy Corporation 3,180,276 5,317,812 1.4 86,000 Edison International 1,925,397 2,365,000 0.6 106,000 Energy East Corporation 3,787,564 5,624,625 1.4 127,300 GPU, Inc. 4,047,821 5,577,331 1.4 75,200 Houston Industries Incorporated 1,840,708 2,378,200 0.6 239,500 NIPSCO Industries, Inc. 3,715,746 7,020,344 1.8 124,000 New Century Energies, Inc. 3,798,642 5,959,750 1.5 140,500 PECO Energy Company 4,344,731 5,637,562 1.5 183,000 PacifiCorp. 3,657,980 3,431,250 0.9 91,200 The Southern Company 2,022,770 2,690,400 0.7 68,000 TECO Energy, Inc. 1,789,080 1,827,500 0.5 100,000 Texas Utilities Company 3,506,000 4,456,250 1.1 ------------ ----------- ----- 55,681,520 76,384,072 19.6 -------------------------------------------------------------------------------------------------------------------- Utilities--Gas 95,000 The Coastal Corporation 1,262,602 3,313,125 0.9 40,000 Enron Corporation 1,842,108 2,102,500 0.5 130,000 KeySpan Energy 3,371,550 3,859,375 1.0 168,000 Questar Corporation 2,475,460 3,223,500 0.8 46,300 Sonat, Inc. 1,537,769 1,374,531 0.4 60,000 The Williams Companies, Inc. 1,978,230 1,728,750 0.4 ------------ ----------- ----- 12,467,719 15,601,781 4.0 -------------------------------------------------------------------------------------------------------------------- Utilities--Water 86,200 Philadelphia Suburban Corporation 1,869,462 2,181,937 0.6 -------------------------------------------------------------------------------------------------------------------- Total Common Stocks in the United States 94,132,852 143,741,908 36.9 ==================================================================================================================================== Total Investments in Common Stocks & Warrants 192,416,354 353,956,529 91.0 ==================================================================================================================================== Face Amount Short-Term Securities ==================================================================================================================================== Commercial $10,461,000 Ford Motor Credit Company, 5.51% due Paper* 12/01/1998 10,461,000 10,461,000 2.7 10,000,000 Lexington Parker Capital Company, LLC, 5.45% due 1/05/1999 9,947,014 9,947,014 2.6 15,000,000 Variable Funding Capital Corp., 5.50% due 1/07/1999 14,915,208 14,915,208 3.8 -------------------------------------------------------------------------------------------------------------------- Total Investments in Short-Term Securities 35,323,222 35,323,222 9.1 ==================================================================================================================================== Total Investments $227,739,576 389,279,751 100.1 ============ Liabilities in Excess of Other Assets (219,060) (0.1) ------------ ----- Net Assets $389,060,691 100.0% ------------ ----- ====================================================================================================================================
(a) Warrants entitle the Fund to purchase a predetermined number of shares of Common Stock and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date. (b) American Depositary Receipts (ADR). (c) Acquired from the breakup of Telecomunicacoes Brasileiras S.A.--Telebras (ADR). * Commercial Paper is traded on a discount basis; the interest rates shown reflect the discount rates paid at the time of purchase by the Fund. + Non-income producing security. See Notes to Financial Statements. 10 & 11 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1998 ================================================================================================================================ Assets: Investments, at value (identified cost -- $227,739,576) (Note 1a) ............... $389,279,751 Cash ............................................................................ 578 Receivables: Dividends ..................................................................... $ 584,067 Capital shares sold ........................................................... 377,650 961,717 ------------ Prepaid registration fees and other assets (Note 1f) ............................ 28,775 ------------ Total assets .................................................................... 390,270,821 ------------ ================================================================================================================================ Liabilities: Payables: Capital shares redeemed ....................................................... 607,663 Distributor (Note 2) .......................................................... 213,691 Investment adviser (Note 2) ................................................... 195,373 1,016,727 ------------ Accrued expenses and other liabilities .......................................... 193,403 ------------ Total liabilities ............................................................... 1,210,130 ------------ ================================================================================================================================ Net Assets: Net assets ...................................................................... $389,060,691 ============ ================================================================================================================================ Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. $ 215,416 Consist of: Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. 1,686,439 Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. 41,055 Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized .. 59,207 Paid-in capital in excess of par ................................................ 195,703,132 Undistributed investment income--net ............................................ 364,998 Undistributed realized capital gains on investments and foreign currency transactions--net ............................................................... 29,440,938 Unrealized appreciation on investments and foreign currency transactions--net ... 161,549,506 ------------ Net assets ...................................................................... $389,060,691 ============ ================================================================================================================================ Net Asset Class A--Based on net assets of $41,976,251 and 2,154,163 shares outstanding .... $ 19.49 Value: ============ Class B--Based on net assets of $327,589,198 and 16,864,386 shares outstanding .. $ 19.42 ============ Class C--Based on net assets of $7,954,246 and 410,544 shares outstanding ....... $ 19.37 ============ Class D--Based on net assets of $11,540,996 and 592,072 shares outstanding ...... $ 19.49 ============ ================================================================================================================================
See Notes to Financial Statements. STATEMENT OF OPERATIONS
For the Year Ended November 30, 1998 ================================================================================================================================ Investment Income Dividends (net of $661,926 foreign withholding tax) ............................. $ 10,613,908 (Notes 1d & 1e): Interest and discount earned .................................................... 791,273 ------------ Total income .................................................................... 11,405,181 ------------ ================================================================================================================================ Expenses: Account maintenance and distribution fees--Class B (Note 2) ..................... $ 2,367,413 Investment advisory fees (Note 2) ............................................... 2,230,556 Transfer agent fees--Class B (Note 2) ........................................... 328,153 Custodian fees .................................................................. 166,048 Accounting services (Note 2) .................................................... 86,303 Printing and shareholder reports ................................................ 78,941 Professional fees ............................................................... 73,163 Registration fees (Note 1f) ..................................................... 62,459 Account maintenance and distribution fees--Class C (Note 2) ..................... 50,011 Transfer agent fees--Class A (Note 2) ........................................... 35,072 Account maintenance fees--Class D (Note 2) ...................................... 21,678 Transfer agent fees--Class D (Note 2) ........................................... 7,349 Transfer agent fees--Class C (Note 2) ........................................... 6,944 Directors' fees and expenses .................................................... 6,822 Pricing fees .................................................................... 3,021 Other ........................................................................... 11,341 ------------ Total expenses .................................................................. 5,535,274 ------------ Investment income--net .......................................................... 5,869,907 ------------ ================================================================================================================================ Realized & Realized gain (loss) from: Unrealized Gain Investments--net .............................................................. 29,440,935 (Loss) on Foreign currency transactions--net ............................................ (101,742) 29,339,193 Investments & ------------ Foreign Currency Change in unrealized appreciation/depreciation on: Transactions--Net Investments--net .............................................................. 48,826,439 (Notes 1b, 1c, Foreign currency transactions--net ............................................ 10,051 48,836,490 1e & 3): ------------ ------------ Net realized and unrealized gain on investments and foreign currency transactions .................................................................... 78,175,683 ------------ Net Increase in Net Assets Resulting from Operations ............................ $ 84,045,590 ============ ================================================================================================================================
See Notes to Financial Statements. 12 & 13 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 STATEMENTS OF CHANGES IN NET ASSETS
For the Year Ended November 30, ------------------------------ Increase (Decrease) in Net Assets: 1998 1997 ============================================================================================================================== Operations: Investment income--net ..................................................... $ 5,869,907 $ 8,412,988 Realized gain on investments and foreign currency transactions--net ........ 29,339,193 25,279,564 Change in unrealized appreciation/depreciation on investments and foreign currency transactions--net ................................................. 48,836,490 29,205,060 ------------- ------------- Net increase in net assets resulting from operations ....................... 84,045,590 62,897,612 ------------- ------------- ============================================================================================================================== Dividends & Investment income--net: Distributions to Class A .................................................................. (942,410) (1,226,228) Shareholders Class B .................................................................. (4,895,531) (7,470,524) (Note 1g): Class C .................................................................. (94,022) (104,297) Class D .................................................................. (178,336) (159,532) Realized gain on investments--net: Class A .................................................................. (2,800,654) (1,172,347) Class B .................................................................. (21,708,174) (9,833,032) Class C .................................................................. (400,316) (98,232) Class D .................................................................. (489,776) (130,954) ------------- ------------- Net decrease in net assets resulting from dividends and distributions to shareholders ............................................................... (31,509,219) (20,195,146) ------------- ------------- ============================================================================================================================== Capital Share Net decrease in net assets derived from capital share transactions ......... (16,180,815) (73,229,623) Transactions ------------- ------------- (Note 4): ============================================================================================================================== Net Assets: Total increase (decrease) in net assets .................................... 36,355,556 (30,527,157) Beginning of year .......................................................... 352,705,135 383,232,292 ------------- ------------- End of year* ............................................................... $ 389,060,691 $ 352,705,135 ============= ============= ============================================================================================================================== *Undistributed investment income--net (Note 1h) ............................. $ 364,998 $ 707,132 ============= ============= ==============================================================================================================================
See Notes to Financial Statements. FINANCIAL HIGHLIGHTS
The following per share data and ratios have Class A been derived from information provided in -------------------------------------------------------- the financial statements. For the Year Ended November 30, -------------------------------------------------------- Increase (Decrease) in Net Asset Value: 1998+ 1997+ 1996+ 1995 1994 =============================================================================================================================== Per Share Net asset value, beginning of year ............... $ 16.97 $ 15.09 $ 13.52 $ 12.08 $ 13.22 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ........................... .41 .47 .50 .51 .94 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ........... 3.77 2.35 1.84 1.42 (1.57) -------- -------- -------- -------- -------- Total from investment operations ................. 4.18 2.82 2.34 1.93 (.63) -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ......................... (.42) (.49) (.53) (.49) (.47) Realized gain on investments--net .............. (1.24) (.45) (.24) -- (.04) -------- -------- -------- -------- -------- Total dividends and distributions ................ (1.66) (.94) (.77) (.49) (.51) -------- -------- -------- -------- -------- Net asset value, end of year ..................... $ 19.49 $ 16.97 $ 15.09 $ 13.52 $ 12.08 ======== ======== ======== ======== ======== =============================================================================================================================== Total Investment Based on net asset value per share ............... 26.47% 19.65% 17.94% 16.34% (4.89%) Return:* ======== ======== ======== ======== ======== =============================================================================================================================== Ratios to Average Expenses ......................................... .82% .82% .84% .91% .86% Net Assets: ======== ======== ======== ======== ======== Investment income--net ........................... 2.26% 2.98% 3.51% 3.73% 3.58% ======== ======== ======== ======== ======== =============================================================================================================================== Supplemental Net assets, end of year (in thousands) ........... $ 41,977 $ 38,825 $ 40,055 $ 44,775 $ 56,659 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................... 6.56% 6.23% 5.03% 2.92% 17.02% ======== ======== ======== ======== ======== ===============================================================================================================================
* Total investment returns exclude the effects of sales loads. + Based on average shares outstanding. See Notes to Financial Statements. 14 & 15 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 FINANCIAL HIGHLIGHTS (concluded)
The following per share data and ratios have Class B been derived from information provided in -------------------------------------------------------- the financial statements. For the Year Ended November 30, -------------------------------------------------------- Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994 =============================================================================================================================== Per Share Net asset value, beginning of year ............... $ 16.93 $ 15.05 $ 13.47 $ 12.04 $ 13.17 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ........................... .27 .35 .39 .38 .74 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ........... 3.74 2.35 1.84 1.44 (1.46) -------- -------- -------- -------- -------- Total from investment operations ................. 4.01 2.70 2.23 1.82 (.72) -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ......................... (.28) (.37) (.41) (.39) (.37) Realized gain on investments--net .............. (1.24) (.45) (.24) -- (.04) -------- -------- -------- -------- -------- Total dividends and distributions ................ (1.52) (.82) (.65) (.39) (.41) -------- -------- -------- -------- -------- Net asset value, end of year ..................... $ 19.42 $ 16.93 $ 15.05 $ 13.47 $ 12.04 ======== ======== ======== ======== ======== =============================================================================================================================== Total Investment Based on net asset value per share ............... 25.40% 18.77% 17.07% 15.38% (5.60%) Return:** ======== ======== ======== ======== ======== =============================================================================================================================== Ratios to Average Expenses ......................................... 1.59% 1.59% 1.61% 1.68% 1.63% Net Assets: ======== ======== ======== ======== ======== Investment income--net ........................... 1.48% 2.22% 2.74% 2.95% 2.82% ======== ======== ======== ======== ======== =============================================================================================================================== Supplemental Net assets, end of year (in thousands) ........... $327,589 $301,459 $335,487 $381,098 $459,185 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................... 6.56% 6.23% 5.03% 2.92% 17.02% ======== ======== ======== ======== ======== =============================================================================================================================== Class C -------------------------------------------------------- For the The following per share data and ratios have Period been derived from information provided in Oct. 21, the financial statements. For the Year Ended November 30, 1994+ to ------------------------------------------- Nov. 30, Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994 =============================================================================================================================== Per Share Net asset value, beginning of period ............. $ 16.89 $ 15.03 $ 13.46 $ 12.05 $ 12.34 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ........................... .25 .33 .38 .39 .01 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ........... 3.73 2.35 1.84 1.43 (.30) -------- -------- -------- -------- -------- Total from investment operations ................. 3.98 2.68 2.22 1.82 (.29) -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ......................... (.26) (.37) (.41) (.41) -- Realized gain on investments--net .............. (1.24) (.45) (.24) -- -- -------- -------- -------- -------- -------- Total dividends and distributions ................ (1.50) (.82) (.65) (.41) -- -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 19.37 $ 16.89 $ 15.03 $ 13.46 $ 12.05 ======== ======== ======== ======== ======== =============================================================================================================================== Total Investment Based on net asset value per share ............... 25.34% 18.66% 17.03% 15.38% (2.35%)+++ Return:** ======== ======== ======== ======== ======== =============================================================================================================================== Ratios to Average Expenses ......................................... 1.64% 1.63% 1.66% 1.73% 1.60%* Net Assets: ======== ======== ======== ======== ======== Investment income--net ........................... 1.38% 2.07% 2.65% 2.85% 3.01%* ======== ======== ======== ======== ======== =============================================================================================================================== Supplemental Net assets, end of period (in thousands) ......... $ 7,954 $ 5,486 $ 3,325 $ 2,072 $ 445 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................... 6.56% 6.23% 5.03% 2.92% 17.02% ======== ======== ======== ======== ======== =============================================================================================================================== Class D -------------------------------------------------------- For the The following per share data and ratios have Period been derived from information provided in Oct. 21, the financial statements. For the Year Ended November 30, 1994+ to ------------------------------------------- Nov. 30, Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994 =============================================================================================================================== Per Share Net asset value, beginning of period ............. $ 16.98 $ 15.10 $ 13.55 $ 12.09 $ 12.37 Operating -------- -------- -------- -------- -------- Performance: Investment income--net ........................... .36 .43 .50 .52 .02 Realized and unrealized gain (loss) on investments and foreign currency transactions--net ........... 3.77 2.35 1.79 1.40 (.30) -------- -------- -------- -------- -------- Total from investment operations ................. 4.13 2.78 2.29 1.92 (.28) -------- -------- -------- -------- -------- Less dividends and distributions: Investment income--net ......................... (.38) (.45) (.50) (.46) -- Realized gain on investments--net .............. (1.24) (.45) (.24) -- -- -------- -------- -------- -------- -------- Total dividends and distributions ................ (1.62) (.90) (.74) (.46) -- -------- -------- -------- -------- -------- Net asset value, end of period ................... $ 19.49 $ 16.98 $ 15.10 $ 13.55 $ 12.09 ======== ======== ======== ======== ======== =============================================================================================================================== Total Investment Based on net asset value per share ............... 26.09% 19.35% 17.45% 16.21% (2.26%)+++ Return:** ======== ======== ======== ======== ======== =============================================================================================================================== Ratios to Average Expenses ......................................... 1.07% 1.06% 1.07% 1.15% 1.08%* Net Assets: ======== ======== ======== ======== ======== Investment income--net ........................... 1.97% 2.70% 3.30% 3.36% 3.25%* ======== ======== ======== ======== ======== =============================================================================================================================== Supplemental Net assets, end of period (in thousands) ......... $ 11,541 $ 6,935 $ 4,365 $ 1,516 $ 239 Data: ======== ======== ======== ======== ======== Portfolio turnover ............................... 6.56% 6.23% 5.03% 2.92% 17.02% ======== ======== ======== ======== ======== ===============================================================================================================================
* Annualized. ** Total investment returns exclude the effects of sales loads. + Commencement of operations. ++ Based on average shares outstanding. +++ Aggregate total investment return. See Notes to Financial Statements. 16 & 17 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 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's financial statements are prepared in accordance with generally accepted accounting principles which may require the use of management accruals and estimates. The Fund offers four classes of shares under the Merrill Lynch Select PricingSM System. Shares of Class A and Class D are sold with a front-end sales charge. Shares of Class B and Class C may be subject to a contingent deferred sales charge. All classes of shares have identical voting, dividend, liquidation and other rights and the same terms and conditions, except that Class B, Class C and Class D Shares bear certain expenses related to the account maintenance of such shares, and Class B and Class C Shares also bear certain expenses related to the distribution of such shares. Each class has exclusive voting rights with respect to matters relating to its account maintenance and distribution expenditures. The following is a summary of significant accounting policies followed by the Fund. (a) Valuation of securities--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 or purchased are valued at the last sale price in the case of exchange-traded options. In the case of options traded in the over-the-counter market, valuation is the last asked price (options written) or the last bid price (options purchased). 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. o 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. o Financial futures contracts--The Fund may purchase or sell financial futures contracts and options on such futures contracts. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized gains or losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. o Forward foreign exchange contracts--The Fund is authorized to enter into forward foreign exchange contracts as a hedge against either specific transactions or portfolio positions. Such contracts are not entered on the Fund's records. However, the effect on operations is recorded from the date the Fund enters into such contracts. Premium or discount is amortized over the life of the contracts. o Foreign currency options and futures--The Fund may also purchase or sell listed or over-the-counter foreign currency options, foreign currency futures and related options on foreign currency futures as a short or long hedge against possible variations in foreign exchange rates. Such transactions may be effected with respect to hedges on non-US dollar denominated securities owned by the Fund, sold by the Fund but not yet delivered, or committed or anticipated to be purchased by the Fund. (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 dates. Dividends from foreign securities where the ex-dividend date may have passed are subsequently recorded when the Fund has determined the ex-dividend dates. Realized gains and losses on security transactions are determined on the identified cost basis. (f) Prepaid registration fees--Prepaid registration fees are charged to expense as the related shares are issued. (g) Dividends and distributions--Dividends and distributions paid by the Fund are recorded on the ex-dividend dates. (h) Reclassification--Generally accepted accounting principles require that certain components of net assets be adjusted to reflect permanent differences between financial and tax reporting. Accordingly, current year's permanent book/tax differences of $101,742 have been reclassified between undistributed net realized capital gains and undistributed net investment income and $46 has been reclassified between paid-in capital in excess of par and undistributed net realized capital gains. These reclassifications have no effect on net assets or net asset values per share. 2. Investment Advisory Agreement and Transactions with Affiliates: The Fund has entered into an Investment Advisory Agreement with Merrill Lynch 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 ("MLFD" or "Distributor"), a division of Princeton Funds Distributor, Inc. ("PFD"), which is 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. Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule 12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor ongoing account maintenance and distribution fees. The fees are accrued daily 18 & 19 Merrill Lynch Global Utility Fund, Inc., November 30, 1998 NOTES TO FINANCIAL STATEMENTS (concluded) and paid monthly at annual rates based upon the average daily net assets of the shares as follows: - -------------------------------------------------------------------------------- Account Distribution Maintenance Fee Fee - -------------------------------------------------------------------------------- Class B .................................... 0.25% 0.50% Class C .................................... 0.25% 0.55% Class D .................................... 0.25% -- - -------------------------------------------------------------------------------- Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account maintenance and distribution services to the Fund. The ongoing account maintenance fee compensates the Distributor and MLPF&S for providing account maintenance services to Class B, Class C and Class D shareholders. The ongoing distribution fee compensates the Distributor and MLPF&S for providing shareholder and distribution-related services to Class B and Class C shareholders. For the year ended November 30, 1998, MLFD earned underwriting discounts and direct commissions and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D Shares as follows: - -------------------------------------------------------------------------------- MLFD MLPF&S - -------------------------------------------------------------------------------- Class A .................................... $236 $3,194 Class D .................................... $592 $5,771 - -------------------------------------------------------------------------------- For the year ended November 30, 1998, MLPF&S received contingent deferred sales charges of $91,017 and $1,827, relating to transactions in Class B Shares and Class C Shares, respectively. In addition, MLPF&S received $31,045 in commissions on the execution of portfolio security transactions for the Fund for the year ended November 30, 1998. 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 MLAM, PSI, FDS, PFD, and/or ML & Co. 3. Investments: Purchases and sales of investments, excluding short-term securities, for the year ended November 30, 1998 were $23,162,665 and $91,547,511, respectively. Net realized gains (losses) for the year ended November 30, 1998 and net unrealized gains as of November 30, 1998 were as follows: - -------------------------------------------------------------------------------- Realized Unrealized Gains (Losses) Gains - -------------------------------------------------------------------------------- Long-term investments ...................... $29,440,935 $161,540,175 Foreign currency transactions .............. (101,742) 9,331 ----------- ------------ Total ...................................... $29,339,193 $161,549,506 =========== ============ - -------------------------------------------------------------------------------- As of November 30, 1998, net unrealized appreciation for Federal income tax purposes aggregated $161,540,175, of which $165,993,426 related to appreciated securities and $4,453,251 related to depreciated securities. The aggregate cost of investments at November 30, 1998 for Federal income tax purposes was $227,739,576. 4. Capital Share Transactions: Net decrease in net assets derived from capital share transactions was $16,180,815 and $73,229,623 for the years ended November 30, 1998 and November 30, 1997, respectively. Transactions in capital shares for each class were as follows: - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended November 30, 1998 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 431,597 $ 7,895,940 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 179,840 2,998,839 ----------- ------------ Total issued ............................... 611,437 10,894,779 Shares redeemed ............................ (744,730) (13,435,233) ----------- ------------ Net decrease ............................... (133,293) $ (2,540,454) =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class A Shares for the Year Dollar Ended November 30, 1997 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 153,463 $ 2,379,323 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 129,136 1,920,920 ----------- ------------ Total issued ............................... 282,599 4,300,243 Shares redeemed ............................ (649,437) (10,126,477) ----------- ------------ Net decrease ............................... (366,838) $ (5,826,234) =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended November 30, 1998 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 1,798,516 $ 32,421,070 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 1,251,468 20,655,107 ----------- ------------ Total issued ............................... 3,049,984 53,076,177 Automatic conversion of shares ............. (55,904) (1,011,761) Shares redeemed ............................ (3,938,213) (70,455,451) ----------- ------------ Net decrease ............................... (944,133) $(18,391,035) =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class B Shares for the Year Dollar Ended November 30, 1997 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 742,021 $ 11,572,951 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 907,341 13,394,936 ----------- ------------ Total issued ............................... 1,649,362 24,967,887 Automatic conversion of shares ............. (116,073) (1,799,482) Shares redeemed ............................ (6,016,308) (94,007,577) ----------- ------------ Net decrease ............................... (4,483,019) $(70,839,172) =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended November 30, 1998 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 160,601 $ 2,882,085 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 25,572 421,385 ----------- ------------ Total issued ............................... 186,173 3,303,470 Shares redeemed ............................ (100,433) (1,783,048) ----------- ------------ Net increase ............................... 85,740 $ 1,520,422 =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class C Shares for the Year Dollar Ended November 30, 1997 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 203,432 $ 3,216,009 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 11,912 178,063 ----------- ------------ Total issued ............................... 215,344 3,394,072 Shares redeemed ............................ (111,820) (1,799,829) ----------- ------------ Net increase ............................... 103,524 $ 1,594,243 =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended November 30, 1998 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 476,893 $ 8,231,578 Automatic conversion of shares ............. 55,711 1,011,761 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 33,182 554,571 ----------- ------------ Total issued ............................... 565,786 9,797,910 Shares redeemed ............................ (382,059) (6,567,658) ----------- ------------ Net increase ............................... 183,727 $ 3,230,252 =========== ============ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Class D Shares for the Year Dollar Ended November 30, 1997 Shares Amount - -------------------------------------------------------------------------------- Shares sold ................................ 240,150 $ 3,891,095 Automatic conversion of shares ............. 115,735 1,799,482 Shares issued to shareholders in reinvestment of dividends and distributions .......................... 16,802 252,302 ----------- ------------ Total issued ............................... 372,687 5,942,879 Shares redeemed ............................ (253,415) (4,101,339) ----------- ------------ Net increase ............................... 119,272 $ 1,841,540 =========== ============ - -------------------------------------------------------------------------------- 5. Subsequent Event: On December 1, 1998, the Fund's Board of Directors declared an ordinary income dividend in the amount of $.069230 per Class A Share, $.045267 per Class B Share, $.044805 per Class C Share, $.062067 per Class D Share and a long-term capital gains distribution in the amount of $1.439029 per share for each of the four classes, payable on December 28, 1998 to shareholders of record as of December 17, 1998. 20 & 21 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders, Merrill Lynch Global Utility Fund, Inc.: Merrill Lynch Global Utility Fund, Inc., November 30, 1998 We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Merrill Lynch Global Utility Fund, Inc. as of November 30, 1998, the related statements of operations for the year then ended and changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and the financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and the financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned at November 30, 1998 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Merrill Lynch Global Utility Fund, Inc. as of November 30, 1998, the results of its operations, the changes in its net assets, and the financial highlights for the respective stated periods in conformity with generally accepted accounting principles. Deloitte & Touche LLP Princeton, New Jersey January 21, 1999 IMPORTANT TAX INFORMATION (unaudited) The following information summarizes the distributions paid by Merrill Lynch Global Utility Fund, Inc. to all classes of shares during the fiscal year ended November 30, 1998:
- ------------------------------------------------------------------------------------------------------------------ Domestic Domestic Foreign Record Payable Qualifying Non-Qualifying Foreign Source Total Withholding Taxes Date Date Ordinary Income Income Income Ordinary Income (Per Share) - ------------------------------------------------------------------------------------------------------------------ 12/18/97 12/29/97 40.86% 2.02% 57.12% 100.00% $.008367 - ------------------------------------------------------------------------------------------------------------------ 4/01/98 4/09/98 88.79% 4.02% 7.19% 100.00% $.007545 - ------------------------------------------------------------------------------------------------------------------ 7/06/98 7/14/98 88.79% 4.02% 7.19% 100.00% $.011075 - ------------------------------------------------------------------------------------------------------------------ 10/01/98 10/09/98 88.79% 4.02% 7.19% 100.00% $.009162 - ------------------------------------------------------------------------------------------------------------------
In addition, the Fund paid a long-term capital gains distribution of $1.235641 per share to shareholders of record as of December 18, 1997. Please retain this information for your records. PORTFOLIO INFORMATION (unaudited) Worldwide Investments as of November 30, 1998 Ten Largest Holdings Percent of (Equity Investments) Net Assets Telefonica S.A. ............................ 5.8% Telecom Italia Mobile (TIM) S.p.A. ......... 4.7 Telecom Italia S.p.A. (Registered Non-Convertible) ......................... 4.7 Vivendi .................................... 4.0 Vodafone Group PLC (ADR) ................... 3.3 Telecom Italia S.p.A. ...................... 3.1 British Telecommunications PLC ............. 2.4 Portugal Telecom S.A. (ADR) ................ 2.4 Australian Gas Light Company Limited ....... 2.3 Tele Danmark A/S (ADR) ..................... 2.3 Additions Cable & Wireless Optus Limited Embratel Participacoes S.A. (ADR) Sonera Group OYJ Tele Celular Sul Participacoes S.A. (ADR) Tele Centro Oeste Celular Participacoes S.A. (ADR) Tele Centro Sul Participacoes S.A. (ADR) Tele Leste Celular Participacoes S.A. (ADR) Tele Nordeste Celular Participacoes S.A. (ADR) Tele Norte Celular Participacoes S.A. (ADR) Tele Norte Leste Participacoes S.A. (ADR) Tele Sudeste Celular Participacoes S.A. (ADR) Telemig Celular Participacoes S.A. (ADR) Telesp Celular Participacoes S.A. (ADR) Telesp Participacoes S.A. (ADR) Deletions Nova Scotia Power Co. Telstra Corporation Ltd. 22 & 23 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 #11693--11/98 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----