MERRILL LYNCH
GLOBAL
CONVERTIBLE
FUND, INC.
FUND LOGO
Semi-Annual Report
April 30, 1995
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.
<PAGE>
Merrill Lynch
Global Convertible
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH GLOBAL CONVERTIBLE FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
Harry E. Dewdney, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
State Street Bank & Trust Company
P.O. Box 351
Boston, Massachusetts 02101
Transfer Agent
Merrill Lynch
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
TO OUR SHAREHOLDERS
The first four months of 1995 have brought a welcome change from
most of 1994. Major equity markets in the United States are showing
positive gains in double digits. Bond markets have also rallied,
with yields on 30-year US Government bonds well off their high
points. It is our opinion that the performances in the United States
have led to higher equity and bond markets in most other world
markets with some exceptions, especially Tokyo where the Nikkei 225
Index is down 14.79% year-to-date.
The reasons for this strong performance in US markets seem to be
many and varied. First of all, the US economy has shown good
evidence of slowing down in recent weeks. The gross domestic product
(GDP) figure for the first quarter came in at 2.8% and final sales
rose at a meager 1.8% rate. The Index of Leading Economic Indicators
was down 0.5% in March, the largest dip in two years. At the same
time, consumer spending was rather lethargic, and auto sales were
showing lower patterns. These factors seem to indicate that the
Federal Reserve Board could keep monetary policy unchanged in coming
months, especially with inflation under control. In addition, strong
equity markets can be attributed to a relative shortage of shares
outstanding as new issuance has slowed and some major companies are
involved in stock buy-back plans. However, the main reason for the
good performance of both bonds and equities is a fundamental change
in attitude by investors. Most feel that the economy is slowing and
that interest rates will hold, or perhaps move lower in coming
months. While the sharp decline in the US dollar has been worrisome,
there is also the possibility that some nations will become buyers
of US debt and equities with "cheap" US dollars.
Worldwide, the Japanese economy was adversely affected by the sharp
rise of the yen versus the US dollar, and economists lowered their
GDP forecasts. While the equity markets have sold off, the yen-
denominated convertible market has been quite firm and has attracted
a good following in the last two months. This trend is expected to
continue as interest rates ease and buyers remain on the scene. In
Europe, signs point to a slowdown in economic activity but not
recession. In Latin America, the Mexican crisis has eased and the
worst seems to be over. Overall, we are encouraged by events of the
first four months of the year and expect further good developments
and firmer markets in coming months.
<PAGE>
Portfolio Strategy
Our assets have continued to grow from over $100 million on January
31, 1995 to almost $128 million on April 30, 1995. The new assets
were invested over a broad spectrum, but we continued to emphasize
US markets because of their strong performances so far this year.
Our US allocation continues high at 62.9% of net assets. Convertible
securities in the United States have benefited from the higher
equity markets and steady-to-lower interest rate environment.
Outside of the United States, we maintain positions in eight
countries; the largest percentage is 16.6% of net assets in Japan,
slightly lower than the 17.5% held at January 31, 1995. As we
mentioned, Japanese equity markets have been sharply lower but
convertible market improvement, coupled with the very sharp rise in
the yen versus the US dollar, has provided good total returns to our
portfolio.
While the Dow Jones Industrial Average (up 12.7%) and the Standard &
Poor's Index of 500 Stocks (up 12.1%) have scored impressive gains
so far in 1995, a wide sampling of stocks indicates mediocre
performances year-to-date. This, plus other technical factors, could
indicate that the major averages are due for a correction, and
further advances could be limited in scope as 1995 continues. In
view of this, our cash position is slightly over 14% of net assets,
giving us the opportunity to take advantage of any possible sell
offs that could occur. Our portfolio is balanced between convertible
securities with conversion premiums of less than 20% to take
advantage of equity moves to higher levels (albeit with lower
interest returns), and convertible securities with premiums ranging
from 21% to 50% that offer higher interest returns to take advantage
of a lower interest rate scenario. We believe this strategy should
provide our Fund with attractive total return potential in addition
to a good degree of downside protection.
While we are heavily weighted in the US market, we still seek out
special situations in markets throughout the world and are prepared
to take advantage of changing conditions and attractive issues as
they arise.
In Conclusion
We thank you for your ongoing interest in Merrill Lynch Global
Convertible Fund, Inc., and we look forward to assisting you with
your financial needs in the months and years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Harry E. Dewdney)
Harry E. Dewdney
Vice President and Portfolio
Manager
May 30, 1995
PROXY RESULTS
During the six-month period ended April 30, 1995, Merrill Lynch
Global Convertible Fund, Inc. shareholders voted on the following
proposals. Proposals 1, 2 and 4 were approved at a special
shareholders' meeting on September 27, 1994. Proposal 3 was passed
at a special shareholders' meeting on January 31, 1995. The
description of each proposal and number of shares voted are as
follows:
<TABLE>
<CAPTION>
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Kenneth S. Axelson 3,735,921 127,903
Herbert I. London 3,735,921 127,903
Robert R. Martin 3,735,921 127,903
Joseph L. May 3,735,921 127,903
Andre F. Perold 3,735,921 127,903
Arthur Zeikel 3,735,921 127,903
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 3,712,411 15,103 136,310
3. To approve certain changes to the Fund's fundamental
investment restrictions. 1,895,763 89,181 145,606
4. To amend the Fund's articles of incorporation to implement the
Merrill Lynch Select Pricing SM System. 3,402,295 172,332 289,197
</TABLE>
<PAGE>
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been 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 5.25% 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 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years.
* Class C Shares are subject to a distribution fee of 0.75% 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 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary", "Recent Performance Results"
and "Average Annual Total Return" tables on pages 4, 5 and 6. Data
for Class C and Class D Shares are also presented in the "Recent
Performance Results" and "Aggregate Total Return" tables on pages 4
and 5.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended April 30, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended April 30, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
<PAGE>
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.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
4/30/95 1/31/95 4/30/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML Global Convertible Fund, Inc. Class A Shares* $10.73 $10.21 $10.66 + 0.94%(1) + 5.09%
ML Global Convertible Fund, Inc. Class B Shares* 10.78 10.26 10.72 + 1.35(1) + 5.07
ML Global Convertible Fund, Inc. Class C Shares* 10.76 10.24 10.74 + 0.47(1) + 5.08
ML Global Convertible Fund, Inc. Class D Shares* 10.74 10.22 10.69 + 0.75(1) + 5.09
ML Global Convertible Fund, Inc. Class A Shares--Total Return* + 4.19(2) + 5.83(3)
ML Global Convertible Fund, Inc. Class B Shares--Total Return* + 3.13(4) + 5.56(5)
ML Global Convertible Fund, Inc. Class C Shares--Total Return* + 2.58(6) + 5.62(7)
ML Global Convertible Fund, Inc. Class D Shares--Total Return* + 3.09(8) + 5.77(9)
Dow Jones Industrial Average** 4,321.27 3,843.86 3,681.69 +17.37 +12.42
S&P 500 Index** 514.71 470.42 450.91 +14.15 + 9.41
Japan Nikkei Dow Jones 225** 16,806.75 18,649.82 19,725.25 -15.65 - 9.88
London Financial Times Index** 3,216.70 2,991.60 3,125.30 - 7.99 + 7.52
<FN>
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based Index comprised of common stocks.
(1)Percent change includes reinvestment of $0.029 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.333 per share ordinary
income dividends and $0.029 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.074 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.235 per share ordinary
income dividends and $0.029 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.049 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.217 per share ordinary
income dividends and $0.029 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.055 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.239 per share ordinary
income dividends and $0.029 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.069 per share ordinary
income dividends.
</TABLE>
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/95 +1.98% -3.37%
Five Years Ended 3/31/95 +8.01 +6.85
Inception (11/4/88) through 3/31/95 +6.75 +5.86
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/95 +0.93% -3.02%
Five Years Ended 3/31/95 +6.89 +6.89
Inception (2/26/88) through 3/31/95 +5.40 +5.40
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate
Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 3/31/95 +1.10% +0.10%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94) through 3/31/95 +1.47% -3.86%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
11/4/88--12/31/88 $ 9.97 $ 9.76 $0.173 $0.101 + 0.68%
1989 9.76 9.50 0.431 0.483 + 6.83
1990 9.50 8.20 0.047 0.497 - 8.07
1991 8.20 9.06 0.151 0.382 +17.22
1992 9.06 9.67 0.123 0.267 +11.12
1993 9.67 10.68 0.081 0.327 +14.74
1994 10.68 10.29 0.029 0.304 - 0.54
1/1/95--4/30/95 10.29 10.73 -- 0.074 + 5.00
------ ------
Total $1.035 Total $2.435
Cumulative total return as of 4/30/95: +54.31%**
<FN>
*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.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
2/26/88--12/31/88 $10.00 $ 9.77 $ 0.173 $0.313 + 2.63%
1989 9.77 9.51 0.431 0.376 + 5.68
1990 9.51 8.25 0.047 0.373 - 8.94
1991 8.25 9.12 0.151 0.284 +15.99
1992 9.12 9.74 0.123 0.166 + 9.99
1993 9.74 10.74 0.081 0.228 +13.48
1994 10.74 10.35 0.029 0.205 - 1.45
1/1/95--4/30/95 10.35 10.78 -- 0.049 + 4.64
------ ------
Total $1.035 Total $1.994
Cumulative total return as of 4/30/95: +47.45%**
<FN>
*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.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
LATIN Shares Value Percent of
AMERICA Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Mexico Utilities-- 20,000 Telefonos de Mexico, S.A. de C.V.
Communications (TELMEX) (ADR) (a) $ 756,200 $ 605,000 0.47%
Total Investments in Latin American
Securities 756,200 605,000 0.47
<PAGE>
NORTH
AMERICA
United Chemicals 5,000 Witco Corp. 145,300 143,125 0.11
States
Forest 15,000 International Paper Co. 1,139,962 1,155,000 0.90
Products /
Paper &
Packaging
Metals & Mining 10,000 ++WHX Corp. 179,350 107,500 0.08
Retail Stores 87,741 Home Depot, Inc. 4,020,587 3,663,187 2.87
Total Investments in United States
Common Stocks 5,485,199 5,068,812 3.96
<CAPTION>
Convertible Preferred Stocks
<S> <S> <C> <S> <C> <C> <C>
Canada Oil & Gas 10,000 Occidental Petroleum Corp., Pfd.,
Producers Series A 500,700 570,000 0.45
Total Investments in Canadian
Convertible Preferred Stocks 500,700 570,000 0.45
United Automobile 3,000 Goodrich (B.F.) Company, $3.50 Pfd.,
States Parts Series D 164,550 152,250 0.12
Chemicals 20,000 Ashland Oil Inc., $6.25 Pfd. 1,065,800 1,190,000 0.93
Data Processing 20,000 UNISYS Corp., $3.75 Pfd., Series A 1,233,875 800,000 0.63
Food/ 30,000 ConAgra Inc., Pfd., Class E 998,025 1,023,750 0.80
Beverage/
Tobacco &
Household
Forest 10,000 Federal Paper Board Co., $2.875 Pfd. 489,550 550,000 0.43
Products/ 9,000 James River Corp. of Virginia, $3.375
Paper & Pfd. A, Series K 377,320 389,250 0.30
Packaging ------------ ------------ -------
866,870 939,250 0.73
Metals & 10,000 USX Corp., $3.25 Pfd. 505,800 448,750 0.35
Mining 35,500 WHX Corp., Pfd. 1,630,980 1,508,750 1.18
20,000 WHX Corp., Pfd. B 1,000,150 840,000 0.66
------------ ------------ -------
3,136,930 2,797,500 2.19
<PAGE>
Real Estate 50,000 Merry Land & Investment Company,
Investment Inc., Pfd. 1,250,000 1,237,500 0.97
Trust
Transportation 20,000 Delta Airlines, Inc., $3.50 Pfd. C 1,010,350 1,095,000 0.86
Total Investments in United States
Convertible Preferred Stocks 9,726,400 9,235,250 7.23
Face
Amount Convertible Bonds
<S> <S> <S> <C> <S> <C> <C> <C>
Canada Metals & US$ 2,500,000 Inco Ltd., 5.75% due 7/01/2004 2,723,625 2,600,000 2.03
Mining
Oil & 5,000,000 Amoco Canada Petro Co., Ltd.,
Related 7.375% due 9/01/2013 5,851,500 6,250,000 4.89
Total Investments in Canadian
Convertible Bonds 8,575,125 8,850,000 6.92
United Automobile 2,010,000 The Pep Boys--Manny, Moe & Jack,
States Parts 4% due 9/01/1999 1,978,775 1,809,000 1.41
Building & 3,000,000 Masco Corp., 5.25% due 2/15/2012 2,480,750 2,557,500 2.00
Construction
Chemicals 3,200,000 Ashland Oil Inc., 6.75% due 7/01/2014 2,936,750 3,120,000 2.44
Computer 500,000 Cray Research, Inc., 6.125% due
Services 2/01/2011 510,000 375,000 0.29
Environmental 4,000,000 Browning-Ferris Industries, Inc.,
Control 6.25% due 8/15/2012 3,837,500 3,990,000 3.12
Forest 4,920,000 Boise Cascade Corp. (Series E), 7%
Products/ due 5/01/2016 4,491,950 4,698,600 3.68
Paper &
Packaging
Industrial 3,000,000 Rouse Co., 5.75% due 7/23/2002 2,477,500 2,662,500 2.08
Insurance 2,000,000 Aegon N.V., 4.75% due 11/01/2004 2,195,000 2,307,600 1.81
3,500,000 Chubb Capital Corp., 6% due 5/15/1998 3,542,500 3,613,750 2.83
------------ ------------ -------
5,737,500 5,921,350 4.64
<PAGE>
Leisure 4,700,000 Time Warner Inc., 8.75% due 1/10/2015 4,632,750 4,711,750 3.69
Machine 1,750,000 Cooper Industries, Inc., 7.05% due
Diversified 1/01/2015 1,787,500 1,811,250 1.42
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Face Value Percent of
(concluded) Industries Amount Convertible Bonds Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
United Metals US$ 3,500,000 Homestake Mining Co., 5.50% due
States & Mining 6/23/2000 $ 3,624,500 $ 3,552,500 2.78%
(concluded) 1,300,000 USX Corp., 7% due 6/15/2017 1,178,100 1,157,000 0.90
------------ ------------ -------
4,802,600 4,709,500 3.68
Multi- 1,000,000 Ogden Corp., 5.75% due 10/20/2002 935,500 850,000 0.66
Industry
Natural 5,000,000 Consolidated Natural Gas Co., 7.25%
Gas due 12/15/2015 5,081,750 5,100,000 3.99
Oil & 5,100,000 Pennzoil Co., 4.75% due 10/01/2003 4,725,875 4,794,000 3.75
Related
Real Estate 500,000 Rockefeller Center Properties, Inc.,
8% due 12/31/2000 520,000 477,500 0.37
Textiles 250,000 Fieldcrest Cannon, Inc., 6% due 3/15/2012 160,000 190,000 0.15
Total Investments in United States
Convertible Bonds 47,096,700 47,777,950 37.37
Total Investments in North American
Securities 71,384,124 71,502,012 55.93
<CAPTION>
PACIFIC Shares
BASIN Held Common Stocks
<S> <S> <C> <S> <C> <C> <C>
Hong Kong Utilities-- 70,000 Shandong Huaneng Power Company Ltd.
Electric (ADR) (a) 704,200 568,750 0.44
Total Investments in Hong Kong
Common Stocks 704,200 568,750 0.44
<PAGE>
Japan Financial 10,000 Daiwa Securities Co., Ltd. 109,055 126,175 0.10
Services 10,000 Nikko Securities Co., Ltd. 91,790 98,084 0.08
6,000 Nomura Securities Co., Ltd. 94,803 121,414 0.09
10,000 Yamaichi Securities Co., Ltd. 94,005 69,158 0.05
------------ ------------ -------
389,653 414,831 0.32
Machinery 20,000 Shimadzu Corp. 156,900 125,461 0.10
5,000 ++Sodick Co., Ltd. 94,250 39,876 0.03
------------ ------------ -------
251,150 165,337 0.13
Total Investments in Japanese
Common Stocks 640,803 580,168 0.45
<CAPTION>
Convertible Preferred Stocks
<S> <S> <C> <S> <C> <C> <C>
Hong Kong Food & 20,000 Dairy Farms International Holdings
Beverage Ltd., $6.50 Pfd. 1,977,000 1,670,000 1.31
Total Investments in Hong Kong
Convertible Preferred Stocks 1,977,000 1,670,000 1.31
<CAPTION>
Face
Amount Convertible Bonds
<S> <S> <S> <C> <S> <C> <C> <C>
Australia Banking US$ 750,000 Lend Lease Finance International,
4.75% due 6/01/2003 848,437 800,625 0.63
Total Investments in Australian
Convertible Bonds 848,437 800,625 0.63
Hong Kong Real HK$ 1,000,000 Wharf Capital Ltd., 5% due 7/15/2000 985,000 967,500 0.76
Estate
Total Investments in Hong Kong
Convertible Bonds 985,000 967,500 0.76
Japan Auto & YEN 50,000,000 No. 2 Toyota Motor Corp., 1.20% due
Truck 1/28/1998 572,731 591,596 0.46
Automobile 30,000,000 No. 6 Aisin Seiki Co., Ltd., 1.90%
Parts due 3/31/1998 333,854 356,029 0.28
Automotive 15,000,000 No. 2 Mazda Motors, Ltd., 1.70% due
3/31/1998 131,050 173,194 0.14
<PAGE>
Building & 25,000,000 No. 2 Nichiei Construction Co., Ltd.,
Construction 1.50% due 4/30/1999 195,234 278,241 0.22
25,000,000 No. 5 Nichiei Construction Co.,
Ltd., 1.70% due 10/31/2002 261,132 259,493 0.20
------------ ------------ -------
456,366 537,734 0.42
Chemicals 20,000,000 No. 6 Sekisui Plastic Co., Ltd., 2%
due 9/29/2000 217,189 229,735 0.18
100,000,000 No. 6 Sumitomo Chemical Co., 1.20%
due 9/29/2006 1,042,946 1,154,624 0.90
------------ ------------ -------
1,260,135 1,384,359 1.08
Computer 5,000,000 No. 5 CSK Corp., 3.80% due 3/19/1999 38,344 60,707 0.05
Services 5,000,000 No. 6 CSK Corp., 3.90% due 3/20/2001 38,344 60,707 0.05
------------ ------------ -------
76,688 121,414 0.10
Electronics 50,000,000 No. 7 Fujitsu Ltd., 4.30% due 9/29/1995 505,415 599,333 0.47
125,000,000 No. 8 Fujitsu Ltd., 1.90% due 3/29/2002 1,249,731 1,476,015 1.15
15,000,000 No. 2 Kyushu Matsushita Electric Co.,
Inc., 1.50% due 3/31/1999 158,941 167,837 0.13
100,000,000 No. 5 Matsushita Electric Industrial
Co., 1.30% due 3/29/2002 1,026,774 1,153,434 0.90
75,000,000 No. 11 Sharp Corp., 1.50% due 9/30/1998 803,237 907,035 0.71
------------ ------------ -------
3,744,098 4,303,654 3.36
Food & 15,000,000 No. 4 Asahi Breweries, Ltd., 2.10%
Beverage due 10/21/1997 138,779 176,586 0.14
50,000,000 No. 1 Sanyo Coca-Cola Bottling, Inc.,
0.90% due 6/30/2003 522,384 546,959 0.43
50,000,000 No. 3 Sapporo Breweries, Ltd., 1.20%
due 12/18/2009 525,379 555,291 0.43
------------ ------------ -------
1,186,542 1,278,836 1.00
Food & 35,000,000 No. 3 Itoham Foods, Inc., 1.80%
Household due 2/28/2003 336,922 365,790 0.29
Products 45,000,000 No. 4 Kikkoman Corp., 1.60% due
12/29/2000 468,167 494,941 0.39
30,000,000 No. 6 Meiji Milk Products, 2.10% due
9/30/2002 303,887 334,960 0.26
60,000,000 No. 2 Skylark Co., Ltd., 1.60%
due 6/28/1996 562,294 707,059 0.55
------------ ------------ -------
1,671,270 1,902,750 1.49
<PAGE>
Health & 15,000,000 No. 2 Dai-Ichi Kogyo Seiyaku Co.,
Personal Ltd.,2% due 3/31/1997 162,367 177,657 0.14
Care 15,000,000 No. 3 EISAI Co., Ltd., 4.20% due
3/31/1998 183,945 189,442 0.15
------------ ------------ -------
346,312 367,099 0.29
Industrial 10,000,000 No. 2 Nippon Electric Glass Co.,
Ltd., 2% due 3/29/2002 99,651 119,153 0.09
50,000,000 No. 3 Sony Corp., 1.40% due 9/30/2003 523,434 564,814 0.44
------------ ------------ -------
623,085 683,967 0.53
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
PACIFIC BASIN Face Value Percent of
(concluded) Industries Amount Convertible Bonds Cost (Note 1a) Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
Japan Leisure YEN 50,000,000 No. 4 Canon Co., 1.20% due 12/20/2005 $ 553,669 $ 591,596 0.46%
(concluded) 25,000,000 No. 3 Canon Co., 1.30% due 12/19/2008 293,750 296,988 0.23
30,000,000 No. 2 Tokyo Dome Co., Ltd., 1.70%
due 1/31/1997 303,458 353,172 0.28
------------ ------------ -------
1,150,877 1,241,756 0.97
Machinery 50,000,000 No. 9 Matsushita Electric Works, 1%
due 11/30/2005 486,611 559,457 0.44
70,000,000 No. 2 Nippondenso Co., Ltd., 1.20%
due 12/26/1997 787,148 834,901 0.65
10,000,000 No. 1 Organo Corp., 2.20% due
3/31/2004 99,651 118,914 0.09
60,000,000 No. 5 Toppan Printing Co. Ltd.,
1.90% due 11/30/2001 642,844 678,491 0.53
------------ ------------ -------
2,016,254 2,191,763 1.71
Metals & 25,000,000 No. 2 Godo Steel Co., Ltd., 2.60%
Mining due 3/29/2002 256,657 288,656 0.23
Multi- 60,000,000 No. 5 Asahi Glass Co., Ltd., 1.90%
Industry due 12/26/2008 624,629 714,201 0.56
50,000,000 No. 3 Mitsui & Co., 1.50% due 3/31/2003 529,601 570,765 0.45
40,000,000 No. 4 Sony Corp., 1.40% due 3/31/2005 278,956 408,999 0.32
------------ ------------ -------
1,433,186 1,693,965 1.33
<PAGE>
Oil & 20,000,000 No. 4 Nippon Oil Co., Ltd., 1.70%
Related due 3/31/2003 147,642 206,642 0.16
Pharma- 50,000,000 No. 3 Dainippon Pharmaceutical,
ceuticals 1.40% due 9/30/2003 511,213 577,312 0.45
80,000,000 No. 3 Sankyo Co., Ltd., 0.70% due
3/30/2001 872,081 956,077 0.75
------------ ------------ -------
1,383,294 1,533,389 1.20
Real Estate 15,000,000 No. 12 Mitsui Real Estate Development
Co., Ltd., 1.40% due 9/30/2003 148,558 150,696 0.12
Retail 30,000,000 No. 4 Best Denki Co., Ltd., 1.90% due
Stores 2/28/2002 311,038 356,386 0.28
Transpor- 60,000,000 No. 4 All Nippon Airways Co., Ltd., 1%
tation due 3/31/2004 633,355 664,207 0.52
50,000,000 No. 6 Yamato Transport Co., Ltd.,
1.70% due 9/30/2002 539,151 583,859 0.46
------------ ------------ -------
1,172,506 1,248,066 0.98
Total Investments in Japanese
Convertible Bonds 18,422,143 20,611,951 16.13
Total Investments in Pacific Basin
Securities 23,577,583 25,198,994 19.72
<CAPTION>
WESTERN Shares
EUROPE Held Common Stocks
<S> <S> <C> <C> <C> <C> <C>
United Business 71,944 ++Saatchi & Saatchi Co., PLC 217,005 108,880 0.08
Kingdom Services
Total Investments in United Kingdom
Common Stocks 217,005 108,880 0.08
<CAPTION>
Face
Amount Convertible Bonds
<S> <S> <S> <C> <S> <C> <C> <C>
France Auto & Ffr 7,500 Peugeot S.A., 2% due 1/01/2001 1,367,262 1,414,373 1.11
Truck
<PAGE>
Leisure 4,200,000 Euro Disney SCA, 6.75% due 10/01/2001 686,297 689,602 0.54
Total Investments in French Convertible
Bonds 2,053,559 2,103,975 1.65
Switzerland Banking US$ 700,000 CS Holdings, 4.875% due 11/19/2002 890,750 892,500 0.70
Total Investments in Swiss Convertible
Bonds 890,750 892,500 0.70
United Business Pound 1,000,000 Hanson Trust PLC, 9.50% due 1/31/2006 1,703,627 1,642,200 1.28
Kingdom Services Sterling
Food & 1,000,000 Allied-Lyons PLC, 6.75% due 7/07/2008 1,676,191 1,537,550 1.20
Beverage 550,000 Northern Foods PLC, 6.75% due 8/08/2008 867,775 712,828 0.56
500,000 Tate & Lyle PLC, 5.75% due 3/21/2001 672,690 676,200 0.53
------------ ------------ -------
3,216,656 2,926,578 2.29
Oil & 1,200,000 EE Finance, 8.75% due 6/27/2006 1,860,229 1,874,040 1.47
Related
Transportation 1,000,000 P&O Steam Navigation Co., 7.25% due
5/19/2003 1,605,646 1,541,575 1.21
Total Investments in United Kingdom
Convertible Bonds 8,386,158 7,984,393 6.25
Total Investments in Western
European Securities 11,547,472 11,089,748 8.68
<CAPTION>
Face
Amount Short-Term Securities
<S> <S> <S> <C> <S> <C> <C> <C>
United Commercial US$ 1,463,000 General Electric Capital Corp., 5.93%
States Paper* due 5/01/1995 1,462,518 1,462,518 1.14
US Government US Treasury Bills:
& Agency 8,000,000 5.50% due 6/01/1995 7,959,667 7,959,667 6.23
Obligations* 9,000,000 5.50% due 6/22/1995 8,925,750 8,922,260 6.98
------------ ------------ -------
16,885,417 16,881,927 13.21
Total Investments in Short-Term
Securities 18,347,935 18,344,445 14.35
<PAGE>
Total Investments $125,613,314 126,740,199 99.15
============
Unrealized Depreciation on Forward Foreign Exchange Contracts** (386,563) (0.30)
Other Assets Less Liabilities 1,471,015 1.15
------------ -------
Net Assets $127,824,651 100.00%
============ =======
<FN>
++Non-income producing security.
(a)American Depositary Receipt (ADR).
*Commercial Paper and certain US Government & Agency Obligations are
traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
**Forward foreign exchange contracts as of April 30, 1995 are as
follows:
Unrealized
Appreciation
Foreign Currency Sold Expiration Date (Depreciation)
Ffr 5,000,000 June 1995 $ 24,308
YEN 300,000,000 May 1995 (502,178)
YEN 450,000,000 June 1995 67,014
YEN 200,000,000 July 1995 24,293
Total Unrealized Depreciation--Net on Forward Foreign
Exchange Contracts (US$ Commitment--$12,003,428) $(386,563)
=========
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of April 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$125,613,314) (Note 1a) $126,740,199
Cash 144
Foreign cash (Note 1b) 25
Receivables:
Interest $ 1,464,768
Securities sold 1,240,059
Capital shares sold 446,650
Dividends 33,162 3,184,639
------------
Prepaid expenses and other assets (Note 1f) 92,034
------------
Total assets 130,017,041
------------
<PAGE>
Liabilities: Unrealized depreciation on forward foreign exchange contracts
(Note 1c) 386,563
Payables:
Securities purchased 1,123,500
Capital shares redeemed 537,428
Distributor (Note 2) 82,651
Investment adviser (Note 2) 62,248 1,805,827
------------ ------------
Total liabilities 2,192,390
------------
Net Assets: Net assets $127,824,651
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 133,253
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 950,834
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 64,531
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 38,318
Paid-in capital in excess of par 125,511,730
Undistributed investment income--net 427,385
Accumulated realized capital losses on investments and foreign
currency transactions--net (48,224)
Unrealized appreciation on investments and foreign currency
transactions--net 746,824
------------
Net assets $127,824,651
============
Net Asset Class A--Based on net assets of $14,300,320 and 1,332,525
Value: shares outstanding $ 10.73
============
Class B--Based on net assets of $102,467,285 and 9,508,337
shares outstanding $ 10.78
============
Class C--Based on net assets of $6,942,251 and 645,312
shares outstanding $ 10.76
============
Class D-- Based on net assets of $4,114,795 and 383,179
shares outstanding $ 10.74
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended April 30, 1995
<S> <S> <C> <C>
Investment Interest and discount earned (net of $13,976 foreign
Income withholding tax) $ 2,209,007
(Notes 1d Dividends (net of $531 foreign withholding tax) 323,555
& 1e): ------------
Total income 2,532,562
------------
Expenses: Distribution fees-- Class B (Note 2) $ 414,331
Investment advisory fees (Note 2) 328,467
Transfer agent fees--Class B (Note 2) 114,138
Printing and shareholder reports 46,130
Registration fees (Note 1f) 33,820
Professional fees 31,212
Directors' fees and expenses 17,359
Distribution fees--Class C (Note 2) 17,260
Accounting services (Note 2) 16,826
Custodian fees 15,732
Transfer agent fees--Class A (Note 2) 14,372
Transfer agent fees--Class C (Note 2) 4,789
Account maintenance fees--Class D (Note 2) 2,768
Transfer agent fees--Class D (Note 2) 2,498
Pricing fees 1,234
Other 2,412
------------
Total expenses 1,063,348
------------
Investment income--net 1,469,214
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 919,921
(Loss) on Foreign currency transactions--net (797,380) 122,541
Investments & ------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net 2,208,329
Transactions Foreign currency transactions--net (258,468) 1,949,861
- --Net (Notes ------------ ------------
1b, 1c, Net realized and unrealized gain on investments and
1e & 3): foreign currency transactions 2,072,402
------------
Net Increase in Net Assets Resulting from Operations $ 3,541,616
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: April 30, 1995 Oct. 31, 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 1,469,214 $ 914,075
Realized gain on investments and foreign currency
transactions--net 122,541 806,359
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 1,949,861 (1,834,527)
------------ ------------
Net increase (decrease) in net assets resulting from
operations 3,541,616 (114,093)
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (207,928) (148,368)
Shareholders Class B (972,501) (616,538)
(Note 1g): Class C (46,852) --
Class D (35,297) --
Realized gain on investments--net:
Class A (133,108) (36,309)
Class B (832,533) (244,353)
Class C (20,618) --
Class D (14,017) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (2,262,854) (1,045,568)
------------ ------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 65,192,708 28,124,292
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 66,471,470 26,964,631
Beginning of period 61,353,181 34,388,550
------------ ------------
End of period* $127,824,651 $ 61,353,181
============ ============
<FN>
*Undistributed investment income--net $ 427,385 $ 220,749
============ ============
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.75 $ 11.08 $ 9.79 $ 9.39 $ 8.37
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .18 .33 .23 .21 .25
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .08 (.27) 1.45 .68 1.22
-------- -------- -------- -------- --------
Total from investment operations .26 .06 1.68 .89 1.47
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.17) (.30) (.23) (.25) (.37)
Realized gain on investments--net (.11) (.09) (.16) (.24) (.08)
-------- -------- -------- -------- --------
Total dividends and distributions (.28) (.39) (.39) (.49) (.45)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.73 $ 10.75 $ 11.08 $ 9.79 $ 9.39
======== ======== ======== ======== ========
Total Based on net asset value per share 2.50%+++ 0.61% 17.64% 10.00% 18.09%
Investment ======== ======== ======== ======== ========
Return:**
Ratios to Expenses, net of reimbursement 1.21%* 1.66% 2.22% 2.47% 2.47%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.21%* 1.66% 2.22% 2.86% 2.87%
======== ======== ======== ======== ========
Investment income--net 3.80%* 2.97% 2.36% 2.61% 3.16%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 14,300 $ 7,850 $ 4,557 $ 2,283 $ 448
Data: ======== ======== ======== ======== ========
Portfolio turnover 25.85% 38.04% 26.02% 4.91% 18.02%
======== ======== ======== ======== ========
<CAPTION>
<PAGE>
Class B
The following per share data and ratios
have been derived from information For the Six
provided in the financial statements. Months Ended
April 30, For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.80 $ 11.13 $ 9.84 $ 9.44 $ 8.39
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .12 .21 .13 .12 .18
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .09 (.25) 1.46 .67 1.20
-------- -------- -------- -------- --------
Total from investment operations .21 (.04) 1.59 .79 1.38
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.12) (.20) (.14) (.15) (.25)
Realized gain on investments--net (.11) (.09) (.16) (.24) (.08)
-------- -------- -------- -------- --------
Total dividends and distributions (.23) (.29) (.30) (.39) (.33)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.78 $ 10.80 $ 11.13 $ 9.84 $ 9.44
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 2.02%+++ (.37%) 16.45% 8.77% 16.79%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, excluding distribution fees
Average and net of reimbursement 1.25%* 1.69% 2.26% 2.49% 2.50%
Net Assets: ======== ======== ======== ======== ========
Expenses, net of reimbursement 2.25%* 2.69% 3.26% 3.49% 3.50%
======== ======== ======== ======== ========
Expenses 2.25%* 2.69% 3.26% 3.96% 3.88%
======== ======== ======== ======== ========
Investment income--net 2.76%* 1.95% 1.32% 1.53% 2.25%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in
Data: thousands) $102,467 $ 53,121 $ 29,831 $ 13,975 $ 14,973
======== ======== ======== ======== ========
Portfolio turnover 25.85% 38.04% 26.02% 4.91% 18.02%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C Class D
The following per share data and ratios have For the Six For the For the Six For the
been derived from information provided Months Period Months Period
in the financial statements. Ended Oct. 21, 1994++ Ended Oct. 21, 1994++
April 30, to Oct. 31, April 30, to Oct. 31,
Increase (Decrease) in Net Asset Value: 1995 1994++++ 1995 1994++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.81 $ 10.74 $ 10.76 $ 10.69
Operating -------- -------- -------- --------
Performance: Investment income--net .14 -- .17 --
Realized and unrealized gain on investments
and foreign currency transactions--net .06 .07 .08 .07
-------- -------- -------- --------
Total from investment operations .20 .07 .25 .07
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.14) -- (.16) --
Realized gain on investments--net (.11) -- (.11) --
-------- -------- -------- --------
Total dividends and distributions (.25) -- (.27) --
-------- -------- -------- --------
Net asset value, end of period $ 10.76 $ 10.81 $ 10.74 $ 10.76
======== ======== ======== ========
Total Based on net asset value per share 1.91%+++ .65%+++ 2.42%+++ .65%+++
Investment ======== ======== ======== ========
Return:**
Ratios to Expenses, excluding account maintenance and
Average distribution fees and net of reimbursement 1.25%* 4.64%* 1.20%* 4.88%*
Net Assets: ======== ======== ======== ========
Expenses 2.25%* 5.64%* 1.45%* 5.13%*
======== ======== ======== ========
Investment income--net 2.78%* (1.74%)* 3.61%* (1.24%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,942 $ 203 $ 4,115 $ 179
Data: ======== ======== ======== ========
Portfolio turnover 25.85% 38.04% 25.85% 38.04%
======== ======== ======== ========
<FN>
*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.
<PAGE>
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Convertible Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a non-
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.
<PAGE>
(a) Valuation of investments--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) such transactions 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.
* 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.
<PAGE>
* Foreign currency options and futures--The Fund may also purchase or
sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* Financial futures contracts--The Fund may purchase or sell interest
rate futures contracts and options on such futures contracts for the
purpose of hedging the market risk on existing securities or the
intended purchase of securities. Futures contracts are contracts for
delayed delivery of securities at a specific future date and at a
specific price or yield. 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.
* Options--The Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written.
When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
<PAGE>
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially 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 by 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). 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. Interest income
(including amortization of discount) is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis.
NOTES TO FINANCIAL STATEMENTS (concluded)
(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.
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.
<PAGE>
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at the annual rate of 0.65% of
the average daily value of the Fund's net assets. Certain of the
states in which the shares of the Fund are qualified for sale impose
limitations on the expenses of the Fund. The most restrictive annual
expense limitation requires that the Investment Adviser reimburse
the Fund to the extent the Fund's expenses (excluding interest,
taxes, distribution fees, brokerage fees and commissions, and
extraordinary items) exceed 2.5% of the Fund's first $30 million of
average daily net assets, 2.0% of the Fund's 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 management fee.
No fee payment will be made to MLAM during any fiscal year that will
cause such expenses to exceed the most restrictive expense
limitation 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% 0.75%
Class C 0.25% 0.75%
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.
<PAGE>
For the six months ended April 30, 1995, 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 $118 $1,196
Class D $391 $6,420
For the six months ended April 30, 1995, MLPF&S received contingent
deferred sales charges of $148,698 and $1,553 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $4,200 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended April 30, 1995.
Merrill Lynch 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, MLPF&S, FDS, MLFD and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended April 30, 1995 were $79,493,054 and
$21,377,664, respectively.
Net realized and unrealized gains (losses) as of April 30, 1995 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 921,238 $ 1,130,375
Short-term investments (1,317) (3,490)
Foreign currency transactions (5,593) 6,502
Forward foreign exchange contracts (791,787) (386,563)
---------- ----------
Total $ 122,541 $ 746,824
========== ==========
As of April 30, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $1,126,885, of which $4,307,877 related to
appreciated securities and $3,180,992 related to depreciated
securities. At April 30, 1995, the aggregate cost of investments for
Federal income tax purposes was $125,613,314.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
were $65,192,708 and $28,124,292 for the six months ended April 30,
1995 and the year ended October 31, 1994, respectively.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the Six Months Dollar
Ended April 30, 1995 Shares Amount
Shares sold 791,863 $ 8,351,517
Shares issued to shareholders in
reinvestment of dividends and
distributions 28,715 296,794
---------- -----------
Total issued 820,578 8,648,311
Shares redeemed (218,016) (2,279,672)
---------- -----------
Net increase 602,562 $ 6,368,639
========== ===========
Class A Shares for the Year Dollar
Ended October 31, 1994 Shares Amount
Shares sold 552,279 $ 5,969,087
Shares issued to shareholders in
reinvestment of dividends and
distributions 13,838 147,006
---------- -----------
Total issued 566,117 6,116,093
Shares redeemed (247,561) (2,665,037)
---------- -----------
Net increase 318,556 $ 3,451,056
========== ===========
Class B Shares for the Six Months Dollar
Ended April 30, 1995 Shares Amount
Shares sold 5,492,761 $57,924,901
Shares issued to shareholders in
reinvestment of dividends and
distributions 145,647 1,511,812
---------- -----------
Total issued 5,638,408 59,436,713
Automatic conversion of shares (123,026) (1,299,750)
Shares redeemed (923,518) (9,687,557)
---------- -----------
Net increase 4,591,864 $48,449,406
========== ===========
<PAGE>
Class B Shares for the Year Dollar
Ended October 31, 1994 Shares Amount
Shares sold 3,053,210 $33,198,057
Shares issued to shareholders in
reinvestment of dividends and
distributions 62,480 619,865
---------- -----------
Total issued 3,115,690 33,817,922
Shares redeemed (878,683) (9,525,443)
---------- -----------
Net increase 2,237,007 $24,292,479
========== ===========
Class C Shares for the Six Months Dollar
Ended April 30, 1995 Shares Amount
Shares sold 647,964 $ 6,778,416
Shares issued to shareholders in
reinvestment of dividends and
distributions 5,661 59,090
---------- -----------
Total issued 653,625 6,837,506
Shares redeemed (27,092) (285,220)
---------- -----------
Net increase 626,533 $ 6,552,286
========== ===========
Class C Shares for the Period
October 21, 1994++ to Dollar
October 31, 1994 Shares Amount
Shares sold 18,780 $ 202,593
Shares redeemed (1) (11)
---------- -----------
Net increase 18,779 $ 202,582
========== ===========
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Six Months Dollar
Ended April 30, 1995 Shares Amount
Shares sold 275,123 $ 2,861,153
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,686 38,440
Automatic conversion of shares 123,360 1,299,750
---------- -----------
Total issued 402,169 4,199,343
Shares redeemed (35,575) (376,966)
---------- -----------
Net increase 366,594 $ 3,822,377
========== ===========
Class D Shares for the Period
October 21, 1994++ to Dollar
October 31, 1994 Shares Amount
Shares sold 16,586 $ 178,186
Shares redeemed (1) (11)
---------- -----------
Net increase 16,585 $ 178,175
========== ===========
[FN]
++Commencement of Operations.
