MERRILL LYNCH
GLOBAL
CONVERTIBLE
FUND, INC.
FUND LOGO
Annual Report
October 31, 1996
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.
<PAGE>
Merrill Lynch
Global Convertible
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH GLOBAL CONVERTIBLE FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
James H. Bodurtha, 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
Important Tax
Information
(unaudited)
<PAGE>
Of the ordinary income distributions paid quarterly by
Merrill Lynch Global Convertible Fund, Inc. during its fiscal year
ended October 31, 1996, 16.72% qualifies for the dividends-
received deduction for corporations. Additionally, there were
no long-term capital gain distributions paid by the Fund during
the year.
The law varies in each state as to whether and what percent-
age of dividend income attributable to Federal obligations
is exempt from state income tax. We recommend that you
consult your tax adviser to determine if any portion of the
dividends you received is exempt from state income tax.
Listed below are the percentages of the Fund's total assets
invested in Federal obligations as of the end of each quar-
ter of the fiscal year.
For the Quarter Ended Federal Obligations*
January 31, 1996 2.78%
April 30, 1996 9.56%
July 31, 1996 4.89%
October 31, 1996 4.54%
Of the Fund's dividends paid quarterly to shareholders from
ordinary income during the year ended October 31, 1996,
7.62% was attributable to Federal obligations. In calculating
the foregoing percentage, expenses of the Fund have been
allocated on a pro rata basis.
*For purposes of this calculation, Federal obligations include US Treasury
Notes, US Treasury Bills, and US Treasury Bonds. Also included are obliga-
tions issued by the following agencies: Banks for Cooperatives, Federal
Intermediate Credit Banks, Federal Land Banks, Federal Home Loan Banks,
and the Student Loan Marketing Association. Repurchase agreements are
not included in this calculation.
<PAGE>
TO OUR SHAREHOLDERS
During the year ended October 31,
1996, the investment environment
presented us with several counter-
vailing trends. US equity markets were
very strong with the leading averages
soaring to new highs, but not with-
out a few sharp corrections along the
way. Yet bond markets were lackluster,
with total returns generally rather
scant and unrewarding. In fact, the
unmanaged Domestic Master Index
showed a total rate of return of +2.21%
for October, one of the best monthly
returns in close to five years. Other-
wise, the return figures for the
12-month period would have been
worse. The question is whether bond
markets have turned decisively higher
or are merely experiencing a temporary
rally. In the United States, the overall
fundamental picture seems to indicate
a stable Federal Reserve Board pos-
ture in upcoming months.
The US economy slowed recently, with
gross domestic product (GDP) rising
at a meager 2.2% rate in the third
quarter of 1996. A rather large inven-
tory buildup during the quarter ended
October 31, 1996 accounted for most
of the growth. Our outlook for US
GDP growth in the fourth quarter of
1996 is anticipated in the 2% area.
One of the keys to equity market and
bond movements is inflation, which
certainly appears to be under control
with core consumer price indexes
up 2.7% from a year ago, and this
performance could continue into
1997.
Abroad, most world bond markets out-
performed those in the United States.
However, as mentioned earlier, the
strong US dollar did adversely affect
most major markets on an unhedged
basis. Higher-yielding European bond
markets suffered from profit taking in
October, but appear poised to rally as
the push increases for the European
Monetary Union. As in the United
States, inflation worldwide generally
seemed to be under control.
<PAGE>
The effect of all of the above-
mentioned factors on convertible
securities was mixed. Performance
for US convertible securities was
generally quite positive, showing
rather good total returns in 1996, with
the unmanaged Merrill Lynch All
Convertibles Index rising +12.96% for
year-to-date ended October 31, 1996.
On the other hand, the unmanaged
Merrill Lynch L-G300 World Convert-
ible Index was up +1.7% for the same
period. Again the strong US dollar
and poor performance by Japanese
convertible securities account for
most of the differences.
Fiscal Year in Review
For the year ended October 31, 1996,
the Fund's Class A, Class B, Class C
and Class D Shares had total returns
of +9.34%, +8.13%, +8.14% and
+9.07%, respectively, as compared to
the +21.28% total return for the un-
managed Standard & Poor's 500 Aver-
age. The Lipper Overseas Convertible
Fund Average of 16 other funds was
6.24%. (Results shown do not reflect
sales charges and would be lower if
sales charges were included. Com-
plete performance information,
including average annual total returns,
can be found on pages 3-7 of this
report to shareholders.)
This shortfall in the Fund's perform-
ance relative to the S&P 500 can be
attributed to several factors. First,
the Fund is mandated to invest on a
global basis, and most non-US markets
underperformed the United States.
Even though we maintained a large
allocation of US convertible securities,
other holdings, especially in Japan,
did not provide total returns anywhere
near those in the United States.
<PAGE>
Second, US bond market performance
was rather poor during the year and
since convertible securities do have a
fixed-income nature as well as an
equity nature, their performance
lagged relative to equities. Third, the
surging equity markets in the United
States made it extremely difficult to
match the spectacular performance
realized in the S&P 500. Finally,
convertible securities do not usually
track equity market indexes such
as the S&P 500, but do usually per-
form better in down markets as they
offer some degree of protection.
During the Fund's fiscal year ended
October 31, 1996, we made relatively
few changes in our overall portfolio.
We continued to stress US holdings
maintaining 76% of net assets in US
currency with 57% in US domestic
issues, because we believed that US
convertible securities would perform
well in 1996. Our second-largest
exposure was in Japan with 16.6%.
While the Japanese equity markets
have not performed as well as other
world equity markets, bond markets
there were firm and helped the Fund's
overall performance. Our other major
holdings are in Hong Kong and the
United Kingdom, with smaller per-
centages of 2.5% or less of net assets
in France, Italy, Canada and Mexico.
We believe the outlook appears bright
both in the United States and world-
wide for continued strong equity
markets and firm bond markets as
the US economy perks along at a
satisfactory level in upcoming months.
With the US presidential election
behind us, more attention will prob-
ably be paid to economic, fiscal and
tax policies as 1997 progresses. We
anticipate many opportunities world-
wide during the coming weeks and
months, and therefore we will seek to
provide our shareholders with the
most attractive total returns possible.
<PAGE>
In Conclusion
We thank you for your ongoing interest
in Merrill Lynch Global Convertible
Fund, Inc., and we look forward to
reviewing our outlook and strategy in
our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Harry E. Dewdney)
Harry E. Dewdney
Vice President and Portfolio Manager
December 4, 1996
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through
the Merrill Lynch Select Pricing SM System, which offers four
pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-
end load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
<PAGE>
* 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. (There is no initial sales charge for
automatic share conversions.)
* 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 distribu-
tion fee).
None of the past results shown should be considered a repre-
sentation 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.
PERFORMANCE DATA (continued)
Class A and
Class B Shares
Total Return
Based on a $10,000
Investment
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 Shares
compared to growth of an investment in the S&P 500 Total Return Index.
Beginning and ending values are:
<PAGE>
11/04/88** 10/96
ML Global Convertible Fund, Inc.++--
Class A Shares* $ 9,475 $16,395
S&P 500 Total Return Index++++ $10,000 $32,370
A line graph depicting the growth of an investment in the Fund's Class B Shares
compared to growth of an investment in the S&P 500 Total Return Index.
Beginning and ending values are:
02/26/88** 10/96
ML Global Convertible Fund, Inc.++--
Class B Shares* $10,000 $16,254
S&P 500 Total Return Index++++ $10,000 $34,256
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Global Convertible Fund, Inc. invests primarily in an
internationally diversified portfolio of convertible debt
securities, convertible preferred stocks and "synthetic"
convertible securities consisting of a combination of debt
securities or preferred stock and warrants or options.
++++This unmanaged broad-based Index is comprised of
common stocks.
Past performance is not predictive of future performance.
Class C and
Class D Shares
Total Return
Based on a $10,000
Investment
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 S&P 500 Total
Return Index. Beginning and ending values are:
10/21/94** 10/96
<PAGE>
ML Global Convertible Fund, Inc.++--
Class C Shares* $10,000 $11,308
ML Global Convertible Fund, Inc.++--
Class D Shares* $ 9,475 $10,908
S&P 500 Total Return Index++++ $10,000 $15,943
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses including advisory fees.
**Commencement of Operations.
++ML Global Convertible Fund, Inc. invests primarily in an
internationally diversified portfolio of convertible debt
securities, convertible preferred stocks and "synthetic"
convertible securities consisting of a combination of debt
securities or preferred stock and warrants or options.
++++This unmanaged broad-based Index is comprised of
common stocks.
Past performance is not predictive of future performance.
Average Annual % Return Without % Return With
Total Return Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/96 +8.83% +3.12%
Five Years Ended 9/30/96 +8.97 +7.80
Inception (11/4/88) through 9/30/96 +7.23 +6.50
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/96 +7.57% +3.69%
Five Years Ended 9/30/96 +7.81 +7.81
Inception (2/26/88) through 9/30/96 +5.87 +5.87
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/96 +7.54% +6.57%
Inception (10/21/94) through 9/30/96 +6.77 +6.77
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/96 +8.44% +2.75%
Inception (10/21/94) through 9/30/96 +7.70 +4.76
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/96 7/31/96 10/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Global Convertible Fund, Inc. Class A Shares* $10.54 $10.25 $10.71 - 1.59% + 2.83%
ML Global Convertible Fund, Inc. Class B Shares* 10.61 10.32 10.77 - 1.49 + 2.81
ML Global Convertible Fund, Inc. Class C Shares* 10.59 10.30 10.75 - 1.49 + 2.82
ML Global Convertible Fund, Inc. Class D Shares* 10.55 10.26 10.72 - 1.59 + 2.83
ML Global Convertible Fund, Inc. Class A Shares--Total Return* + 9.34(1) + 3.42(2)
ML Global Convertible Fund, Inc. Class B Shares--Total Return* + 8.13(3) + 3.11(4)
ML Global Convertible Fund, Inc. Class C Shares--Total Return* + 8.14(5) + 3.13(6)
ML Global Convertible Fund, Inc. Class D Shares--Total Return* + 9.07(7) + 3.35(8)
Dow Jones Industrial Average** 6,029.38 5,528.91 4,755.48 +26.79 + 9.05
S&P 500 Index** 705.27 639.95 581.50 +21.28 +10.21
Japan Nikkei Dow Jones 225** 20,466.86 20,692.83 17,654.64 +15.93 - 1.09
London Financial Times Index** 3,979.10 3,703.20 3,529.10 +12.75 + 7.45
<PAGE>
<FN>
*Investment results shown do not reflect any 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 $1.113 per share
ordinary income dividends.
(2)Percent change includes reinvestment of $0.061 per share
ordinary income dividends.
(3)Percent change includes reinvestment of $0.991 per share
ordinary income dividends.
(4)Percent change includes reinvestment of $0.032 per share
ordinary income dividends.
(5)Percent change includes reinvestment of $0.991 per share
ordinary income dividends.
(6)Percent change includes reinvestment of $0.032 per share
ordinary income dividends.
(7)Percent change includes reinvestment of $1.089 per share
ordinary income dividends.
(8)Percent change includes reinvestment of $0.054 per share
ordinary income dividends.
</TABLE>
<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
1995 10.29 10.27 -- 1.280 +12.54
1/1/96--10/31/96 10.27 10.54 -- 0.203 + 4.61
------ ------
Total $1.035 Total $3.844
Cumulative total return as of 10/31/96: +73.01%**
<PAGE>
<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>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <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
1995 10.35 10.35 -- 1.146 +11.30
1/1/96--10/30/96 10.35 10.61 -- 0.116 + 3.63
------ ------
Total $1.035 Total $3.207
Cumulative total return as of 10/31/96: +62.54%**
<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>
<PAGE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.74 $10.33 $0.029 $0.162 - 2.03%
1995 10.33 10.34 -- 1.146 +11.43
1/1/96--10/31/96 10.34 10.59 -- 0.121 + 3.59
------ ------
Total $0.029 Total $1.429
Cumulative total return as of 10/31/96: +13.08%**
<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>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $10.69 $10.30 $0.029 $0.170 - 1.78%
1995 10.30 10.29 -- 1.252 +12.34
1/1/96--10/31/96 10.29 10.55 -- 0.186 + 4.34
------ ------
Total $0.029 Total $1.608
Cumulative total return as of 10/31/96: +15.13%**
<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>
<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--Communications 20,000 Telefonos de Mexico, S.A. de C.V.
(TELMEX) (ADR) (a) $ 756,200 $ 610,000 0.88%
Total Investments in Latin American
Securities 756,200 610,000 0.88
NORTH
AMERICA
United States Food/Beverage/ 20,531 ConAgra Inc. 653,326 1,023,984 1.48
Tobacco & Household
Metals & Mining 10,000 ++WHX Corp. 179,350 83,750 0.12
Retail Stores 20,000 Home Depot, Inc. 944,247 1,095,000 1.58
Total Investments in United States
Common Stocks 1,776,923 2,202,734 3.18
Convertible Preferred Stocks
Canada Oil & Gas Producers 25,000 Occidental Petroleum Corp., Pfd.,
Series A 1,371,600 1,606,250 2.32
Total Investments in Canadian
Convertible Preferred Stocks 1,371,600 1,606,250 2.32
United States Data Processing 20,000 UNISYS Corp., $3.75 Pfd., Series A 1,233,875 605,000 0.87
Insurance 25,000 American General Corp., Pfd. 1,306,729 1,306,250 1.89
25,000 St. Paul Companies, Inc., Pfd. 1,307,892 1,312,500 1.89
----------- ----------- -------
2,614,621 2,618,750 3.78
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Value Percent of
(concluded) Industries Held Convertible Preferred Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Metals & Mining 50,000 USX Corp., $3.25 Pfd. $ 2,413,750 $ 2,106,250 3.04%
(concluded) 35,500 WHX Corp., Pfd. 1,630,980 1,375,625 1.99
20,000 WHX Corp., Pfd., Series B 1,000,150 790,000 1.14
----------- ----------- -------
5,044,880 4,271,875 6.17
Real Estate 50,000 Merry Land & Investment Company,
Investment Trust Inc., Pfd. 1,261,637 1,312,500 1.89
Total Investments in United States
Convertible Preferred Stocks 10,155,013 8,808,125 12.71
Face
Amount Convertible Bonds
United Automobile Parts US$ 2,000,000 The Pep Boys--Manny, Moe & Jack,
States 4% due 9/01/1999 1,931,875 2,080,000 3.00
Building &
Construction 2,000,000 Masco Corp., 5.25% due 2/15/2012 1,765,500 1,930,000 2.79
Chemicals 1,400,000 Ashland Oil Inc., 6.75% due 7/01/2014 1,379,000 1,429,750 2.06
Computer Services 500,000 Cray Research, Inc., 6.125% due
2/01/2011 510,000 380,625 0.55
Industrial 2,000,000 Rouse Co., 5.75% due 7/23/2002 1,699,000 2,000,000 2.89
Insurance 2,000,000 Aegon N.V., 4.75% due 11/01/2004 2,420,250 3,640,000 5.25
Machine Diversified 1,500,000 Cooper Industries, Inc.,
7.05% due 1/01/2015 1,538,750 1,590,000 2.30
Metals & Mining 1,000,000 USX Corp., 7% due 6/15/2017 913,500 960,000 1.39
Natural Gas 3,200,000 Consolidated Natural Gas Co.,
7.25% due 12/15/2015 3,243,250 3,440,000 4.97
Oil & Related 2,000,000 Pennzoil Co., 4.75% due 10/01/2003 1,904,250 2,330,000 3.36
Pharmaceuticals 1,500,000 Alza Corp., 5% due 5/01/2006 1,503,750 1,438,125 2.08
Retail Stores 3,200,000 Home Depot, Inc., 3.25% due 10/01/2001 3,284,375 3,196,000 4.61
Transportation 1,200,000 Alaska Air Group, Inc.,
6.50% due 6/15/2005 1,247,250 1,360,500 1.96
<PAGE>
Total Investments in United States
Convertible Bonds 23,340,750 25,775,000 37.21
Total Investments in
North American Securities 36,644,286 38,392,109 55.42
PACIFIC Shares
BASIN Held Common Stocks
Hong Kong Utilities--Electric 70,000 Shandong Huaneng Power Company Ltd.
(ADR) (a) 704,200 638,750 0.92
Total Investments in Hong Kong
Common Stocks 704,200 638,750 0.92
Japan Financial Services 10,000 Daiwa Securities Co., Ltd. 109,055 108,132 0.16
10,000 Nikko Securities Co., Ltd. 91,790 95,824 0.14
10,000 Yamaichi Securities Co., Ltd. 94,000 55,736 0.08
----------- ----------- -------
294,850 259,692 0.38
Machinery 20,000 Shimadzu Corp. 156,900 117,802 0.17
Trading 50,000 Marubeni Corp. 241,883 231,648 0.33
Total Investments in Japanese
Common Stocks 693,633 609,142 0.88
Face
Amount Convertible Bonds
Hong Kong Food & Beverage US$ 2,000,000 Dairy Farms International Holdings Ltd.,
6.50% due 5/10/2049 1,977,000 1,355,000 1.95
Real Estate 2,500,000 Wharf Capital Ltd.,
5% due 7/15/2000 2,655,000 3,142,500 4.54
Total Investments in Hong Kong
Convertible Bonds 4,632,000 4,497,500 6.49
Japan Auto & Truck YEN 50,000,000 No. 2 Toyota Motor Corp., 1.20%
due 1/28/1998 572,731 611,429 0.88
<PAGE>
Chemicals 100,000,000 No. 6 Sumitomo Bakelite Co., Ltd.,
1.20% due 9/29/2006 1,042,946 927,473 1.34
Electronics 40,000,000 No. 2 Kokusai Electric Co.,
1.30% due 9/30/2002 452,059 374,505 0.54
50,000,000 No. 5 Matsushita Electric Industrial Co.,
1.30% due 3/29/2002 513,387 511,209 0.74
37,000,000 No. 6 Sanyo Electric Co., Ltd.,
1.70% due 11/29/2002 391,721 340,888 0.49
50,000,000 No. 11 Sharp Corp., 1.50% due 9/30/1998 551,096 505,494 0.73
50,000,000 No. 2 Tokyo Electron Ltd., 0.90%
due 9/30/2003 572,581 442,198 0.64
----------- ----------- -------
2,480,844 2,174,294 3.14
Food & Beverage 100,000,000 No. 9 Asahi Breweries, Ltd., 0.95%
due 12/26/2002 1,114,675 915,165 1.32
50,000,000 No. 1 Sanyo Coca-Cola Bottling, Inc.,
0.90% due 6/30/2003 522,384 441,758 0.64
50,000,000 No. 3 Sapporo Breweries, Ltd.,
1.20% due 12/18/2009 525,379 441,319 0.64
----------- ----------- -------
2,162,438 1,798,242 2.60
Industrial 70,000,000 No. 3 Sony Corp., 1.40% due 9/30/2003 832,971 782,769 1.13
50,000,000 No. 5 Sony Corp., 0.15% due 3/30/2001 498,392 469,451 0.68
----------- ----------- -------
1,331,363 1,252,220 1.81
Leisure 50,000,000 No. 5 Canon Co., 1% due 12/20/2002 639,008 646,154 0.93
Machinery 100,000,000 No. 8 Matsushita Electric Works, Ltd.,
2.70% due 5/31/2002 1,228,409 1,054,945 1.52
25,000,000 No. 8 NEC Corp., 1.70% due 3/31/1999 315,788 280,220 0.41
30,000,000 No. 2 Nippondenso Co., Ltd., 1.20%
due 12/26/1997 337,449 337,582 0.49
----------- ----------- -------
1,881,646 1,672,747 2.42
Retail Stores 50,000,000 No. 1 Taiyo Company Ltd., 2.50%
due 2/28/2002 594,601 446,154 0.64
Transportation 50,000,000 No. 6 Keihan Electric Railway Co., Ltd.,
1% due 3/31/2003 539,009 404,396 0.58
50,000,000 No. 1 Nankai Electric Railway Co., Ltd.,
2.70% due 3/30/2001 593,306 463,736 0.67
50,000,000 No. 6 Yamato Transport Co., Ltd.,
1.70% due 9/30/2002 539,151 490,110 0.71
----------- ----------- -------
1,671,466 1,358,242 1.96
<PAGE>
Total Investments in Japanese
Convertible Bonds 12,377,043 10,886,955 15.72
Total Investments in Pacific
Basin Securities 18,406,876 16,632,347 24.01
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN Shares Value Percent of
EUROPE Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Kingdom Business Services 71,944 ++Cordiant PLC (Ordinary) $ 170,504 $ 118,194 0.17%
Total Investments in United Kingdom
Common Stocks 170,504 118,194 0.17
Face
Amount Convertible Bonds
France Leisure Frf 4,200,000 Euro Disney SCA, 6.75% due 10/01/2001 686,298 854,575 1.23
Pharmaceuticals 7,000 Sanofi S.A., 4% due 1/01/2000 (Units) 498,434 703,042 1.02
Total Investments in French
Convertible Bonds 1,184,732 1,557,617 2.25
Italy Foreign Government US$ 1,500,000 Republic of Italy, 5% due 6/28/2001 1,526,250 1,500,000 2.16
Obligations
Total Investments in Italian
Convertible Bonds 1,526,250 1,500,000 2.16
<PAGE>
United Kingdom Food & Pound 500,000 Allied-Lyons PLC, 6.75% due 7/07/2008 858,247 799,067 1.15
Beverage Sterling
US$ 1,500,000 Grand Metropolitan PLC,
6.50% due 1/31/2000 1,612,500 1,750,500 2.53
Pound 550,000 Northern Foods PLC, 6.75% due 8/08/2008 867,775 796,221 1.15
Sterling
Total Investments in United Kingdom
Convertible Bonds 3,338,522 3,345,788 4.83
Total Investments in Western
European Securities 6,220,008 6,521,599 9.41
Short-Term Securities
United States Commercial Paper* US$ 3,358,000 General Electric Capital Corp.,
5.56% due 11/01/1996 3,358,000 3,358,000 4.85
US Government US Treasury Bills:
Obligations* 500,000 4.84% due 11/14/1996 499,126 499,126 0.72
1,500,000 4.85% due 11/14/1996 1,497,373 1,497,373 2.16
1,393,000 4.84% due 1/02/1997 1,381,389 1,381,132 1.99
----------- ----------- -------
3,377,888 3,377,631 4.87
Total Investments in
Short-Term Securities 6,735,888 6,735,631 9.72
Total Investments $68,763,258 68,891,686 99.44
===========
Unrealized Appreciation on Forward Foreign Exchange Contracts** 62,673 0.09
Other Assets Less Liabilities 324,564 0.47
----------- -------
Net Assets $69,278,923 100.00%
=========== =======
<FN>
++Non-income producing security.
(a)American Depositary Receipts (ADR).
*Commercial Paper and certain US Government 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 October 31, 1996 were as follows:
<CAPTION>
Unrealized
Appreciation
Foreign Currency Sold Expiration Date (Note 1c)
<S> <S> <C>
YEN 300,000,000 December 1996 $62,673
Unrealized Appreciation on Forward Foreign
Exchange Contracts (US$ Commitment--$2,714,932) $62,673
=======
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$68,763,258) (Note 1a) $68,891,686
Unrealized appreciation on forward foreign exchange contracts (Note 1c) 62,673
Cash 2,245
Receivables:
Interest $ 555,904
Capital shares sold 79,979
Dividends 7,089 642,972
-----------
Prepaid expenses (Note 1f) 80,879
-----------
Total assets 69,680,450
-----------
Liabilities: Payables:
Capital shares redeemed 160,746
Distributor (Note 2) 38,585
Investment adviser (Note 2) 38,508 237,839
-----------
Accrued expenses and other liabilities 163,693
-----------
Total liabilities 401,532
-----------
Net Assets: Net assets $69,278,923
===========
<PAGE>
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized $ 168,358
Consist of: Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 365,869
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 38,925
Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares authorized 81,391
Paid-in capital in excess of par 66,516,350
Undistributed investment income--net 82,617
Undistributed realized capital gains on investments and foreign currency transactions--net 1,834,020
Unrealized appreciation on investments and foreign currency transactions--net 191,393
-----------
Net assets $69,278,923
===========
Net Asset Class A--Based on net assets of $17,741,239 and 1,683,579 shares outstanding $ 10.54
Value: ===========
Class B--Based on net assets of $38,830,004 and 3,658,695 shares outstanding $ 10.61
===========
Class C--Based on net assets of $4,122,419 and 389,247 shares outstanding $ 10.59
===========
Class D--Based on net assets of $8,585,261 and 813,909 shares outstanding $ 10.55
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1996
<S> <S> <C> <C>
Investment Interest and discount earned (net of $13,671 foreign withholding tax) $ 2,420,356
Income Dividends (net of $850 foreign withholding tax) 882,162
(Notes 1d & 1e): -----------
Total income 3,302,518
-----------
Expenses: Investment advisory fees (Note 2) $ 463,001
Account maintenance and distribution fees--Class B (Note 2) 436,795
Transfer agent fees--Class B (Note 2) 185,100
Printing and shareholder reports 116,876
Accounting services (Note 2) 79,047
Professional fees 72,610
Registration fees (Note 1f) 63,434
Transfer agent fees--Class A (Note 2) 61,964
Directors' fees and expenses 45,497
Account maintenance & distribution fees--Class C (Note 2) 37,775
Transfer agent fees--Class D (Note 2) 22,690
Custodian fees 18,882
Transfer agent fees--Class C (Note 2) 16,778
Account maintenance fees--Class D (Note 2) 16,646
Pricing fees 4,691
Other 4,830
-----------
Total expenses 1,646,616
-----------
Investment income--net 1,655,902
-----------
<PAGE>
Realized & Realized gain from:
Unrealized Gain Investments--net 1,396,864
(Loss) on Foreign currency transactions--net 437,160 1,834,024
Investments & Change in unrealized appreciation/depreciation on: -----------
Foreign Currency Investments--net 2,709,718
Transactions--Net Foreign currency transactions--net (129,242) 2,580,476
(Notes 1b, 1c, ----------- -----------
1e & 3): Net realized and unrealized gain on investments and foreign currency transactions 4,414,500
-----------
Net Increase in Net Assets Resulting from Operations $ 6,070,402
===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended,
October 31,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 1,655,902 $ 3,817,569
Realized gain on investments and foreign currency transactions--net 1,834,024 4,600,356
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net 2,580,476 (1,186,046)
----------- -----------
Net increase in net assets resulting from operations 6,070,402 7,231,879
----------- -----------
Dividends & Investment income--net:
Distributions Class A (694,324) (983,944)
to Shareholders Class B (1,473,613) (2,414,489)
(Note 1g): Class C (112,375) (162,116)
Class D (224,218) (132,498)
Realized gain on investments--net:
Class A (820,273) (133,107)
Class B (2,671,664) (832,533)
Class C (180,592) (20,618)
Class D (171,093) (14,017)
----------- -----------
Net decrease in net assets resulting from dividends and distributions
to shareholders (6,348,152) (4,693,322)
----------- -----------
<PAGE>
Capital Share Net increase (decrease) in net assets derived from capital share transactions (20,834,705) 26,499,640
Transactions ----------- -----------
(Note 4):
Net Assets: Total increase (decrease) in net assets (21,112,455) 29,038,197
Beginning of year 90,391,378 61,353,181
----------- -----------
End of year* $69,278,923 $90,391,378
=========== ===========
<FN>
*Undistributed investment income--net $ 82,617 $ 931,245
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.71 $ 10.75 $ 11.08 $ 9.79 $ 9.39
Operating -------- -------- -------- -------- -------
Performance: Investment income--net .32 .42 .33 .23 .21
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .62 .11 (.27) 1.45 .68
-------- -------- -------- -------- -------
Total from investment operations .94 .53 .06 1.68 .89
-------- -------- -------- -------- -------
Less dividends and distributions:
Investment income--net (.48) (.46) (.30) (.23) (.25)
Realized gain on investments--net (.63) (.11) (.09) (.16) (.24)
-------- -------- -------- -------- -------
Total dividends and distributions (1.11) (.57) (.39) (.39) (.49)
-------- -------- -------- -------- -------
Net asset value, end of year $ 10.54 $ 10.71 $ 10.75 $ 11.08 $ 9.79
======== ======== ======== ======== =======
Total Investment Based on net asset value per share 9.34% 5.10% .61% 17.64% 10.00%
Return:** ======== ======== ======== ======== =======
<PAGE>
Ratios to Average Expenses, net of reimbursement 1.57% 1.38% 1.66% 2.22% 2.47%
Net Assets: ======== ======== ======== ======== =======
Expenses 1.57% 1.38% 1.66% 2.22% 2.86%
======== ======== ======== ======== =======
Investment income--net 3.05% 4.03% 2.97% 2.36% 2.61%
======== ======== ======== ======== =======
Supplemental Net assets, end of year (in thousands) $ 17,741 $ 23,634 $ 7,850 $ 4,557 $ 2,283
Data: ======== ======== ======== ======== =======
Portfolio turnover 14.72% 101.12% 38.04% 26.02% 4.91%
======== ======== ======== ======== =======
Average commission rate paid++++++ $ .0679 -- -- -- --
======== ======== ======== ======== =======
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.77 $ 10.80 $ 11.13 $ 9.84 $ 9.44
Operating -------- -------- -------- -------- -------
Performance: Investment income--net .21 .37 .21 .13 .12
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .62 .05 (.25) 1.46 .67
-------- -------- -------- -------- -------
Total from investment operations .83 .42 (.04) 1.59 .79
-------- -------- -------- -------- -------
Less dividends and distributions:
Investment income--net (.36) (.34) (.20) (.14) (.15)
Realized gain on investments--net (.63) (.11) (.09) (.16) (.24)
-------- -------- -------- -------- -------
Total dividends and distributions (.99) (.45) (.29) (.30) (.39)
-------- -------- -------- -------- -------
Net asset value, end of year $ 10.61 $ 10.77 $ 10.80 $ 11.13 $ 9.84
======== ======== ======== ======== =======
Total Investment Based on net asset value per share 8.13% 4.01% (.37%) 16.45% 8.77%
Return:** ======== ======== ======== ======== =======
Ratios to Average Expenses, net of reimbursement 2.64% 2.37% 2.69% 3.26% 3.49%
Net Assets: ======== ======== ======== ======== =======
Expenses 2.64% 2.37% 2.69% 3.26% 3.96%
======== ======== ======== ======== =======
Investment income--net 1.98% 2.95% 1.95% 1.32% 1.53%
======== ======== ======== ======== =======
<PAGE>
Supplemental Net assets, end of year (in thousands) $ 38,830 $ 58,660 $ 53,121 $ 29,831 $13,975
Data: ======== ======== ======== ======== =======
Portfolio turnover 14.72% 101.12% 38.04% 26.02% 4.91%
======== ======== ======== ======== =======
Average commission rate paid++++++ $ .0679 -- -- -- --
======== ======== ======== ======== =======
<CAPTION>
Class C Class D
For the For the
The following per share data and ratios Period Period
have been derived from information Oct. 21, Oct. 21,
provided in the financial statements. For the Year Ended 1994++ to For the Year Ended 1994++ to
October 31, Oct. 31, October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1996++++ 1995 1994++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.75 $ 10.81 $ 10.74 $ 10.72 $ 10.76 $ 10.69
Operating ------- -------- -------- -------- -------- -------
Performance: Investment income--net .21 .36 -- .31 .42 --
Realized and unrealized gain on investments
and foreign currency transactions--net .62 .05 .07 .61 .09 .07
------- -------- -------- -------- -------- -------
Total from investment operations .83 .41 .07 .92 .51 .07
------- -------- -------- -------- -------- -------
Less dividends and distributions:
Investment income--net (.36) (.36) -- (.46) (.44) --
Realized gain on investments--net (.63) (.11) -- (.63) (.11) --
------- -------- -------- -------- -------- -------
Total dividends and distributions (.99) (.47) -- (1.09) (.55) --
------- -------- -------- -------- -------- -------
Net asset value, end of period $ 10.59 $ 10.75 $ 10.81 $ 10.55 $ 10.72 $ 10.76
======= ======== ======== ======== ======== =======
Total Investment Based on net asset value per share 8.14% 3.89% .65%+++ 9.07% 4.87% .65%+++
Return:** ======= ======== ======== ======== ======== =======
Ratios to Average Expenses 2.65% 2.41% 5.64%* 1.77% 1.62% 5.13%*
Net Assets: ======= ======== ======== ======== ======== =======
Investment income (loss)--net 1.97% 2.99% (1.74%)* 2.85% 3.79% (1.24%)*
======= ======== ======== ======== ======== =======
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 4,123 $ 4,598 $ 203 $ 8,585 $ 3,499 $ 179
Data: ======= ======== ======== ======== ======== =======
Portfolio turnover 14.72% 101.12% 38.04% 14.72% 101.12% 38.04%
======= ======== ======== ======== ======== =======
Average commission rate paid++++++ $ .0679 -- -- $ .0679 -- --
======= ======== ======== ======== ======== =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the Fund is required
to disclose its average commission rate per share for purchases and sales of
equity securities. The "Average Commission Rate Paid" includes commissions
paid in foreign currencies, which have been converted into US dollars using
the prevailing exchange rate on the date of the transaction. Such conversions
may materially affect the rate shown.
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. 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 broad-
est and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or,
in the case of options traded in the over-the-counter market, the
last asked price. Options purchased are valued at the last sale price
in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the direction
of the Fund's Board of Directors.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the period.
Foreign currency transactions are the result of settling (realized)
or valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the con-
tract 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 opera-
tions 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 con-
tracts 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 covered call options and
purchase 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.
(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 be imposed on interest, dividends, and capital
gains at various rates.
<PAGE>
(e) Security transactions and investment income--Security trans-
actions 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 divi-
dends from foreign securities are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income (including amor-
tization of discount) is recognized on the accrual basis. 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.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general
partner of MLAM is Princeton Services, Inc. ("PSI"), an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."),
which is the limited partner. The Fund has also entered into a
Distribution Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the 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.
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 year ended October 31, 1996, MLFD earned underwriting
discounts and MLPF&S earned dealer concessions on sales of the
Fund's Class A and Class D Shares as follows:
MLFD MLPF&S
Class A $ 117 $ 1,531
Class D $ 1,818 $23,376
For the year ended October 31, 1996, MLPF&S received contingent
deferred sales charges of $110,201 and $2,756 relating to transactions
in Class B and Class C Shares, respectively. Furthermore, MLPF&S
received contingent deferred sales charges of $497 relating to
transactions subject to front-end sales charges waivers in Class D
Shares.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1996 were $9,589,917 and
$32,752,174, respectively.
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized and unrealized gains (losses) as of October 31, 1996 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 1,397,590 $ 128,685
Short-term investments (726) (257)
Foreign currency transactions (26,974) 292
Forward foreign exchange contracts 464,134 62,673
------------ -------------
Total $ 1,834,024 $ 191,393
============ =============
As of October 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $128,428, of which $4,577,553
related to appreciated securities and $4,449,125 related to depreci-
ated securities. At October 31, 1996, the aggregate cost of invest-
ments for Federal income tax purposes was $68,763,258.
<PAGE>
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions were $(20,834,705) and $26,499,640 for the years ended
October 31, 1996 and October 31, 1995, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 685,844 $ 7,246,703
Shares issued to shareholders in
reinvestment of dividends
and distributions 135,086 1,380,166
------------ -------------
Total issued 820,930 8,626,869
Shares redeemed (1,343,548) (14,564,322)
------------ -------------
Net decrease (522,618) $ (5,937,453)
============ =============
Class A Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 4,429,386 $ 47,904,765
Shares issued to shareholders in
reinvestment of dividends
and distributions 91,827 983,674
------------ -------------
Total issued 4,521,213 48,888,439
Shares redeemed (3,044,979) (33,329,139)
------------ -------------
Net increase 1,476,234 $ 15,559,300
============ =============
Class B Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 958,130 $ 10,188,233
Shares issued to shareholders in
reinvestment of dividends
and distributions 295,014 3,025,724
------------ -------------
Total issued 1,253,144 13,213,957
Automatic conversion of shares (559,618) (5,864,176)
Shares redeemed (2,481,068) (26,810,294)
------------ -------------
Net decrease (1,787,542) $ (19,460,513)
============ =============
<PAGE>
Class B Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 7,306,514 $ 77,802,488
Shares issued to shareholders in
reinvestment of dividends
and distributions 244,737 2,595,029
------------ -------------
Total issued 7,551,251 80,397,517
Automatic conversion of shares (159,520) (1,700,100)
Shares redeemed (6,861,967) (75,080,334)
------------ -------------
Net increase 529,764 $ 3,617,083
============ =============
Class C Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
Shares sold 234,669 $ 2,490,027
Shares issued to shareholders in
reinvestment of dividends
and distributions 21,832 223,912
------------ -------------
Total issued 256,501 2,713,939
Shares redeemed (294,992) (3,188,951)
------------ -------------
Net decrease (38,491) $ (475,012)
============ =============
Class C Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 1,012,755 $ 10,768,784
Shares issued to shareholders in
reinvestment of dividends
and distributions 13,905 149,071
------------ -------------
Total issued 1,026,660 10,917,855
Shares redeemed (617,701) (6,780,755)
------------ -------------
Net increase 408,959 $ 4,137,100
============ =============
Class D Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
<PAGE>
Shares sold 225,183 $ 2,423,111
Automatic conversion of shares 562,293 5,864,176
Shares issued to shareholders in
reinvestment of dividends
and distributions 27,215 280,369
------------ -------------
Total issued 814,691 8,567,656
Shares redeemed (327,147) (3,529,383)
------------ -------------
Net increase 487,544 $ 5,038,273
============ =============
Class D Shares for the Year Dollar
Ended October 31, 1995 Shares Amount
Shares sold 593,147 $ 6,348,782
Automatic conversion of shares 160,026 1,700,100
Shares issued to shareholders in
reinvestment of dividends
and distributions 10,076 107,975
------------ -------------
Total issued 763,249 8,156,857
Shares redeemed (453,469) (4,970,700)
------------ -------------
Net increase 309,780 $ 3,186,157
============ =============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Global Convertible Fund, Inc.:
We have audited the accompanying statement of assets and liabili-
ties, including the schedule of investments, of Merrill Lynch Global
Convertible Fund, Inc. as of October 31, 1996, 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 finan-
cial highlights based on our audits.
<PAGE>
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 October 31, 1996, by correspondence with the custodian
and broker. An audit also includes assessing the accounting princi-
ples 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 Convertible Fund, Inc. as of October 31, 1996,
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
December 4, 1996
</AUDIT-REPORT>
