MERRILL LYNCH
GLOBAL
CONVERTIBLE
FUND, INC.
FUND LOGO
Annual Report
October 31, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Global Convertible
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
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
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, Vice President
Daniel A. Luchansky, Vice President
Gerald M. Richard, Treasurer
Lawrence A. Rogers, Secretary
Custodian
State Street Bank and Trust Company
P.O. Box 351
Boston, MA 02101
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
TO OUR SHAREHOLDERS
Volatile is the word that best describes the quarter ended October
31, 1997. Virtually every world equity market experienced negative
returns for the October quarter, with many experiencing unnerving
fluctuations. For example, the Hang Seng Stock Index, the benchmark
for the Hong Kong stock market, saw its value plummet 13.7% on
October 27 then rebound 18.8% the following day. The Dow Jones
Industrial Average recorded both its largest point gain and largest
point decline in history in the same week.
<PAGE>
The Asian equity markets fared the worst, with serious local
economic problems and depreciating currencies. For the October
quarter, the Hang Seng Stock Index tumbled 34.6% while the Nikkei
225 Index fell 19.1%. Other local markets in South Korea, Malaysia,
Indonesia and Singapore were weak as well, experiencing double-digit
declines. The US market, as measured by the Standard & Poor's 500
Index, declined 3.7%. Major European markets posted negative returns
also. Concerns of an Asian economic slowdown have reverberated
throughout the world, raising questions about the appropriateness of
current equity valuations. Although certain markets are down
dramatically and appear inexpensive on a current earnings basis, the
increased interest rates in these markets may have a negative impact
on economic growth and future earnings.
The fixed-income markets rallied during the quarter ended October
31, 1997. The ten-year US Treasury note ended October yielding
5.83%, a 51 basis point (0.51%) drop since the July quarter. There
were three main forces that helped lift the US bond market:
continuing low inflation domestically, mounting deflationary
pressure from abroad and a global flight to quality. These factors
helped convince the Federal Reserve Board (FRB) not to raise
interest rates, which is an added positive for the market.
Global unrest bodes well for US dollar-denominated debt instruments,
as evidenced by the move out of Asian currencies into the US dollar,
confirming the US dollar as the dominant world currency. We believe
this trend will persist, and have allocated the majority of our
assets to dollar-denominated securities. In Europe, continued
European Monetary Union posturing resulted in the Bundesbank raising
short-term interest rates on October 9, 1997 in an effort to curtail
inflation as well as continue the long-standing strong Deutschemark
policy. Japan's ten-year government yield remained low, closing out
the October quarter at 1.82%.
It was a challenging three months for the convertible market. For
the quarter ended October 31, 1997, the total return for global
convertible securities, as measured by the Lipper Overseas Global
Convertible Funds Average, was -1.61%. The Fund's holdings remain
concentrated in the United States, accounting for 51.4% of portfolio
net assets. The US economy has remained hospitable, exhibiting
continued growth with little sign of accelerated inflation. This is
evidenced by the most recent consumer price index and producer price
index statistics. Furthermore, continued distress in the emerging
markets has all but prohibited the FRB from raising interest rates
in the near future, a positive for US investments.
<PAGE>
We sold some smaller positions during the October quarter, including
Japanese firms Shimadza Corp., Marubeni Corp. and Yamaichi
Securities Co., Ltd., as well as Dairy Farms International Holdings
Limited, whose operations are mostly in Asia. We added Phycor, Inc.,
ThermoTrex Corp. and Assisted Living Concepts, Inc., US holdings
that we believe have exceptional prospects. We will continue to
maintain offshore exposure through our investments in Japan and to a
lesser extent in the United Kingdom, Hong Kong, France and the
Netherlands. Finally, we adopted a more defensive posture,
temporarily raising our cash levels from 5.8% of net assets at the
start of the October quarter to nearly 27% at the close of the
quarter. These assets will be invested over time as suitable
securities are identified.
Fiscal Year in Review
For the year ended October 31, 1997, the Fund's Class A, Class B,
Class C and Class D Shares had total returns of +17.79%, +16.56%,
+16.40% and +17.41%, respectively. The Fund outperformed the Lipper
Overseas Convertible Fund Average of 16 other funds, which had a
total return of +9.95% for the fiscal year. (Results shown do not
reflect sales charges and would be lower if sales charges were
included. Complete performance information, including average annual
total returns, can be found on pages 5--9 of this report to
shareholders.)
The Fund's performance can be partially attributed to our
overweighting in US domestic issues. Fund holdings such as Home
Depot, Inc. and WHX Corp. scored sharp gains during the fiscal year
ended October 31, 1997. The US equity market, as measured by the
unmanaged Standard & Poor's 500 Index, performed strongly during the
year ended October 31, 1997, returning +32.09%. Fixed-income
products experienced healthy gains for the year, with the ten-year
US Treasury note returning +9.60%.
Our largest exposure outside the United States was in Japan (8.45%
of net assets). Although the Japanese equity market posted a
negative return for the fiscal year (as measured by the 19.58%
Nikkei 225 decline), three of our largest Japanese holdings,
Matsushita Electric Industrial Co., Sony Corp. and Tokyo Electron
Ltd., registered gains. The Fund's holdings remain concentrated in
US dollar-denominated investments. The positive performance of the
US markets is owed to continued economic and earnings growth, low
inflation and relatively stable interest rates coupled with a
proactive, fiscally responsible government. Furthermore, as noted,
the US central bank is not likely to raise short-term interest rates
in the wake of the Asian financial crisis. Throughout the year, we
have decreased our foreign holdings but will continue to maintain
international exposure, as mandated by our prospectus, in companies
that we believe are promising investments in Japan and to a lesser
extent in the United Kingdom, Hong Kong, France and the Netherlands.
In addition, we may enter other countries as conditions warrant.
<PAGE>
In Conclusion
It is our opinion that the worldwide volatility exhibited during the
October quarter may be a precursor for the future. There are issues
related to the emerging markets that have yet to play out
completely. Currency, interest rate and stock market volatility
should be expected. The US market, although apparently healthy, can
be affected by events offshore. However, we believe the climate for
our Fund will be favorable in response to the inherent properties of
convertible securities. Compared to equities, convertible
securities' total returns historically capture about three-quarters
of a stock market's advance, but only participate in about half of a
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
market's decline while having a substantially higher current yield.
In addition, compared to the fixed-income universe, convertible
securities are consistently ranked among the best-performing
subcategories as measured by Lipper Analytical Services over all
measured time periods. In our view, global convertible issues are
likely to offer good upside potential during firm equity and bond
markets, yet offer a degree of protection when market conditions
become negative.
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 upcoming quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Daniel A. Luchansky)
Daniel A. Luchansky
Vice President and Portfolio Manager
<PAGE>
December 1, 1997
We are saddened to report the death of Harry Dewdney, Vice President
and Portfolio Manager of Merrill Lynch Global Convertible Fund, Inc.
The Fund benefited from his skillful and discerning management since
its inception in 1988. Harry's colleagues and many friends at
Merrill Lynch Asset Management will greatly miss his companionship
and guidance.
Daniel A. Luchansky has been designated to be the Fund's successor
Portfolio Manager. Mr. Luchansky has been employed by Merrill Lynch
Asset Management, L.P. (MLAM) since 1991 as Vice President and
Portfolio Manager. Prior thereto he was involved in high yield
analysis as well as convertible bond portfolio management and
analysis for MLAM from 1986 to 1991.
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.
* 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.)
<PAGE>
* 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).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<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
1996 10.27 10.54 0.190 0.388 + 8.40
1/1/97--10/31/97 10.54 11.87 -- 0.099 +13.67
------ ------
Total $1.225 Total $4.128
Cumulative total return as of 10/31/97: +103.79%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include any sales charge; results would be lower if
sales charge was included.
</TABLE>
<PAGE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
PERFORMANCE DATA (continued)
<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
1996 10.35 10.63 0.190 0.272 + 7.26
1/1/97--10/31/97 10.63 11.90 -- 0.064 +12.62
------ ------
Total $1.225 Total $3.427
Cumulative total return as of 10/31/97: +89.45%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<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
1996 10.34 10.60 0.190 0.277 + 7.12
1/1/97--10/31/97 10.60 11.87 -- 0.055 +12.56
------ ------
Total $0.219 Total $1.640
Cumulative total return as of 10/31/97: +31.62%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures 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
1996 10.29 10.55 0.190 0.365 + 8.04
1/1/97--10/31/97 10.55 11.86 -- 0.092 +13.39
------ ------
Total $0.219 Total $1.879
Cumulative total return as of 10/31/97: +35.18%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
10/31/97 7/31/97 10/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Global Convertible Fund, Inc. Class A Shares* $11.87 $12.09 $10.54 +14.68%(1) - 1.82%
ML Global Convertible Fund, Inc. Class B Shares* 11.90 12.15 10.61 +14.19(1) - 2.06
ML Global Convertible Fund, Inc. Class C Shares* 11.87 12.13 10.59 +14.12(1) - 2.14
ML Global Convertible Fund, Inc. Class D Shares* 11.86 12.09 10.55 +14.47(1) - 1.90
Dow Jones Industrial Average** 7,442.08 8,222.61 6,029.38 +23.43 - 9.49
S&P 500 Index** 914.62 954.29 705.27 +29.68 - 4.16
Japan Nikkei Dow Jones 225**++ 16,458.94 20,331.43 20,466.86 -19.58 -19.05
London Financial Times Index** 4,842.30 4,907.50 3,979.10 +21.69 - 1.33
ML Global Convertible Fund, Inc. Class A Shares--Total Return* +17.79(2) - 1.82
ML Global Convertible Fund, Inc. Class B Shares--Total Return* +16.56(3) - 2.06
ML Global Convertible Fund, Inc. Class C Shares--Total Return* +16.40(4) - 2.14
ML Global Convertible Fund, Inc. Class D Shares--Total Return* +17.41(5) - 1.90
Dow Jones Industrial Average--Total Return** +25.76 - 9.09
S&P 500 Index--Total Return** +32.09 - 3.73
<PAGE>
<FN>
*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.
++Index is expressed in base currency terms (yen).
(1)Percent change includes reinvestment of $0.190 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.285 per share ordinary
income dividends and $0.190 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.220 per share ordinary
income dividends and $0.190 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.211 per share ordinary
income dividends and $0.190 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.271 per share ordinary
income dividends and $0.190 per share capital gains distributions.
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
PERFORMANCE DATA (concluded)
Total Return
Based on a $10,000
Investment
Class A Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to the growth of an investment in the S&P
500 Total Return Index.
Beginning and ending values are:
11/04/88** 10/97
ML Global Convertible Fund, Inc.++--
Class A Shares* $ 9,475 $19,311
S&P 500 Total Return Index++++ $10,000 $42,759
<PAGE>
Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to the growth of an investment in the S&P
500 Total Return Index.
Beginning and ending values are:
2/26/88** 10/97
ML Global Convertible Fund, Inc.++--
Class B Shares* $10,000 $18,945
S&P 500 Total Return Index++++ $10,000 $45,249
Class C & Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C and Class D Shares compared to the growth of an investment
in the S&P 500 Total Return Index.
Beginning and ending values are:
10/21/94** 10/97
ML Global Convertible Fund, Inc.++--
Class C Shares* $10,000 $13,162
ML Global Convertible Fund, Inc.++--
Class D Shares* $ 9,475 $12,807
S&P 500 Total Return Index++++ $10,000 $21,059
[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.
<PAGE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +19.33% +13.06%
Five Years Ended 9/30/97 +10.10 + 8.91
Inception (11/4/88) through 9/30/97 + 8.53 + 7.87
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +18.08% +14.08%
Five Years Ended 9/30/97 + 8.94 + 8.94
Inception (2/26/88) through 9/30/97 + 7.08 + 7.08
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/97 +18.02% +17.02%
Inception (10/21/94) through 9/30/97 +10.48 +10.48
[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*
Year Ended 9/30/97 +19.08% +12.83%
Inception (10/21/94) through 9/30/97 +11.45 + 9.43
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
NORTH Shares Value Percent of
AMERICA Industries Held Common Stocks Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United States Food/Beverage/ 20,000 ConAgra Inc. $ 309,079 $ 602,500 2.08%
Tobacco & Household
Pharmaceuticals 1,091 ++Crescendo Pharmaceuticals Corp. 12,547 12,274 0.04
Retail Stores 22,500 Home Depot, Inc. 707,041 1,251,562 4.33
Total Investments in
United States Common Stocks 1,028,667 1,866,336 6.45
Convertible Preferred Stocks
United States Insurance 10,000 American General Corp., Pfd. 523,200 665,000 2.30
15,000 St. Paul Companies, Inc., Pfd. 784,736 1,050,000 3.63
------------ ------------ -------
1,307,936 1,715,000 5.93
Oil & Gas Producers 7,000 Lomak Petroleum, Inc., $5.75 Pfd. 350,000 353,500 1.22
10,000 Occidental Petroleum Corp.,
Pfd., Series A 580,600 940,000 3.25
------------ ------------ -------
930,600 1,293,500 4.47
<PAGE>
Real Estate 20,000 Merry Land & Investment
Investment Company, Inc., Pfd. 509,462 552,500 1.91
Trust
Steel 30,000 USX Capital Trust I, Pfd. 1,387,500 1,425,000 4.93
20,000 WHX Corp., Pfd., Series B 993,700 985,000 3.40
------------ ------------ -------
2,381,200 2,410,000 8.33
Total Investments in
United States Convertible
Preferred Stocks 5,129,198 5,971,000 20.64
Face
Amount Convertible Bonds
Canada Metals & US$ 700,000 Inco, Limited, 5.75% due
Mining 7/01/2004 765,625 712,250 2.46
Total Investments in Canadian
Convertible Bonds 765,625 712,250 2.46
United States Assisted Living 300,000 Assisted Living Concepts, Inc.,
6% due 11/01/2002 300,000 330,000 1.14
Automobile Parts 1,500,000 The Pep Boys--Manny, Moe & Jack,
4% due 9/01/1999 1,461,250 1,481,250 5.12
Health Services 1,500,000 PhyCor, Inc., 4.50% due 2/15/2003 1,395,000 1,387,500 4.80
Medical Equipment 800,000 ThermoTrex Corp., 3.25% due
11/01/2007 800,000 802,000 2.77
Pharmaceuticals 1,500,000 Alza Corp., 5% due 5/01/2006 1,531,250 1,462,500 5.06
Retail Stores 500,000 Home Depot, Inc., 3.25% due
10/01/2001 509,375 627,500 2.17
Transportation 600,000 Alaska Air Group, Inc., 6.50% due
6/15/2005 625,500 951,000 3.29
Total Investments in
United States Convertible Bonds 6,622,375 7,041,750 24.35
Total Investments in
North American Securities 13,545,865 15,591,336 53.90
PACIFIC Shares
BASIN Held Common Stocks
<PAGE>
Hong Kong Utilities--Electric 50,000 Shandong Huaneng Power Company
Ltd. (ADR) (a) 503,000 371,875 1.29
Total Investments in
Hong Kong Common Stocks 503,000 371,875 1.29
Face
Amount Convertible Bonds
Japan Auto & YEN 25,000,000 No. 2 Toyota Motor Corp.,
Truck 1.20% due 1/28/1998 286,365 359,371 1.24
Chemicals 50,000,000 No. 6 Sumitomo Bakelite Co.,
Ltd., 1.20% due 9/29/2006 521,478 499,958 1.73
Electronics 50,000,000 No. 5 Matsushita Electric
Industrial Co., 1.30% due
3/29/2002 513,387 532,402 1.84
30,000,000 No. 3 Sony Corp., 1.40% due
9/30/2003 361,653 454,704 1.57
30,000,000 No. 2 Tokyo Electron Ltd.,
0.90% due 9/30/2003 343,548 488,146 1.69
------------ ------------ -------
1,218,588 1,475,252 5.10
Food & Beverage 14,000,000 No. 1 Sanyo Coca-Cola Bottling,
Inc., 0.90% due 6/30/2003 146,267 110,873 0.38
Total Investments in Japanese
Convertible Bonds 2,172,698 2,445,454 8.45
Total Investments in
Pacific Basin Securities 2,675,698 2,817,329 9.74
WESTERN
EUROPE
France Leisure Frf 4,200,000 Euro Disney SCA, 6.75% due
10/01/2001 686,298 780,572 2.70
Pharmaceuticals 7,000 Sanofi S.A., 4% due 1/01/2000
(Units) 498,434 730,963 2.53
Total Investments in French
Convertible Bonds 1,184,732 1,511,535 5.23
Netherlands Insurance US$ 500,000 Aegon N.V., 4.75% due 11/01/2004 626,250 1,387,500 4.80
Total Investments in the
Netherlands Convertible Bonds 626,250 1,387,500 4.80
<PAGE>
United Kingdom Food & Pound 500,000 Allied-Lyons PLC, 6.75% due 858,247 842,994 2.91
Beverage Sterling 7/07/2008
US$ 500,000 Grand Metropolitan PLC,
6.50% due 1/31/2000 552,500 647,500 2.24
Total Investments in
United Kingdom Convertible Bonds 1,410,747 1,490,494 5.15
Total Investments in
Western European Securities 3,221,729 4,389,529 15.18
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Issue Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial US$ 865,000 General Motors Acceptance
Paper* Corp., 5.75% due 11/03/1997 $ 864,724 $ 864,724 2.99%
US Government US Treasury Bills:
Obligations* 750,000 4.62% due 11/06/1997 749,519 749,519 2.59
750,000 4.83% due 11/13/1997 748,793 748,793 2.59
1,400,000 4.85% due 11/13/1997 1,397,737 1,397,737 4.83
800,000 4.80% due 11/20/1997 797,973 797,973 2.76
2,500,000 4.85% due 12/04/1997 2,488,885 2,488,885 8.61
750,000 4.85% due 12/11/1997 745,958 745,958 2.58
------------ ------------ -------
6,928,865 6,928,865 23.96
Total Investments in
Short-Term Securities 7,793,589 7,793,589 26.95
Total Investments $ 27,236,881 30,591,783 105.77
============
Liabilities in Excess of Other Assets (1,669,496) (5.77)
------------ -------
Net Assets $ 28,922,287 100.00%
============ =======
<FN>
(a)American Depositary Receipts (ADR).
++Non-income producing security .
*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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of October 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$27,236,881) (Note 1a) $ 30,591,783
Cash 840,687
Foreign cash (Note 1b) 241,801
Receivables:
Securities sold $ 760,125
Interest 144,790
Capital shares sold 16,375
Dividends 1,489 922,779
------------
Prepaid expenses (Note 1f) 40,417
------------
Total assets 32,637,467
------------
Liabilities: Payables:
Securities purchased 2,209,812
Capital shares redeemed 129,346
Distributor (Note 2) 18,024
Investment adviser (Note 2) 16,446 2,373,628
------------
Accrued expenses and other liabilities 1,341,552
------------
Total liabilities 3,715,180
------------
Net Assets: Net assets $ 28,922,287
============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 29,199
Class B Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 149,016
Class C Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 9,367
Class D Shares of Common Stock, $0.10 par value,
100,000,000 shares authorized 55,764
Paid-in capital in excess of par 21,584,498
Accumulated distributions in excess of investment
loss--net (Note 1g) (572,021)
Undistributed realized capital gains on investments and
foreign currency transactions--net 4,312,039
Unrealized appreciation on investments and foreign
currency transactions--net 3,354,425
------------
Net assets $ 28,922,287
<PAGE> ============
Net Asset Class A--Based on net assets of $3,465,875 and 291,989
Value: shares outstanding $ 11.87
============
Class B--Based on net assets of $17,730,531 and 1,490,162
shares outstanding $ 11.90
============
Class C--Based on net assets of $1,112,046 and 93,671
shares outstanding $ 11.87
============
Class D--Based on net assets of $6,613,835 and 557,641
shares outstanding $ 11.86
============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended October 31, 1997
<S> <S> <C> <C>
Investment Interest and discount earned (net of $6,762
Income foreign withholding tax) $ 1,585,213
(Notes 1d & 1e): Dividends (net of $963 foreign withholding tax) 637,281
------------
Total income 2,222,494
------------
Expenses: Investment advisory fees (Note 2) $ 301,179
Account maintenance and distribution fees--Class B (Note 2) 267,689
Transfer agent fees--Class B (Note 2) 114,858
Printing and shareholder reports 90,433
Accounting services (Note 2) 69,859
Registration fees (Note 1f) 67,344
Professional fees 65,021
Directors' fees and expenses 45,388
Transfer agent fees--Class A (Note 2) 36,491
Transfer agent fees--Class D (Note 2) 28,456
Account maintenance and distribution fees--Class C (Note 2) 24,342
Account maintenance fees--Class D (Note 2) 18,545
Custodian fees 15,132
Transfer agent fees--Class C (Note 2) 11,193
Pricing fees 9,942
Other 4,519
------------
Total expenses 1,170,391
------------
Investment income--net 1,052,103
------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 4,313,181
(Loss) on Foreign currency transactions--net (961,097) 3,352,084
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 3,226,474
(Notes 1b, 1c, Foreign currency transactions--net (63,442) 3,163,032
1e & 3): ------------ ------------
Net realized and unrealized gain on investments and
foreign currency transactions 6,515,116
------------
Net Increase in Net Assets Resulting from Operations $ 7,567,219
============
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: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 1,052,103 $ 1,655,902
Realized gain on investments and foreign
currency transactions--net 3,352,084 1,834,024
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 3,163,032 2,580,476
------------ ------------
Net increase in net assets resulting from operations 7,567,219 6,070,402
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (339,437) (694,324)
Shareholders Class B (569,149) (1,473,613)
(Note 1g): Class C (57,198) (112,375)
Class D (168,936) (224,218)
In excess of investment income--net:
Class A (14,383) --
Class B (24,118) --
Class C (2,424) --
Class D (7,159) --
Realized gain on investments--net:
Class A (371,547) (820,273)
Class B (771,279) (2,671,664)
Class C (84,137) (180,592)
Class D (171,039) (171,093)
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (2,580,806) (6,348,152)
------------ ------------
<PAGE>
Capital Share Net decrease in net assets derived from capital
Transactions share transactions (45,343,049) (20,834,705)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (40,356,636) (21,112,455)
Beginning of year 69,278,923 90,391,378
------------ ------------
End of year* $ 28,922,287 $ 69,278,923
============ ============
<FN>
*Undistributed (accumulated distributions in excess of)
investment income--net (Note 1h) $ (572,021) $ 82,617
============ ============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios Class A
have been derived from information provided
in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.54 $ 10.71 $ 10.75 $ 11.08 $ 9.79
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .33 .32 .42 .33 .23
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net 1.47 .62 .11 (.27) 1.45
-------- -------- -------- -------- --------
Total from investment operations 1.80 .94 .53 .06 1.68
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.24) (.48) (.46) (.30) (.23)
In excess of investment income--net (.01) -- -- -- --
Realized gain on investments--net (.22) (.63) (.11) (.09) (.16)
-------- -------- -------- -------- --------
Total dividends and distributions (.47) (1.11) (.57) (.39) (.39)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.87 $ 10.54 $ 10.71 $ 10.75 $ 11.08
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 17.79% 9.34% 5.10% .61% 17.64%
Return:** ======== ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses 1.81% 1.57% 1.38% 1.66% 2.22%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 3.01% 3.05% 4.03% 2.97% 2.36%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 3,466 $ 17,741 $ 23,634 $ 7,850 $ 4,557
Data: ======== ======== ======== ======== ========
Portfolio turnover 33.42% 14.72% 101.12% 38.04% 26.02%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0607 $ .0679 -- -- --
======== ======== ======== ======== ========
<CAPTION>
The following per share data and ratios Class B
have been derived from information provided
in the financial statements. For the Year Ended October 31,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 10.61 $ 10.77 $ 10.80 $ 11.13 $ 9.84
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .21 .21 .37 .21 .13
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.49 .62 .05 (.25) 1.46
-------- -------- -------- -------- --------
Total from investment operations 1.70 .83 .42 (.04) 1.59
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.18) (.36) (.34) (.20) (.14)
In excess of investment income--net (.01) -- -- -- --
Realized gain on investments--net (.22) (.63) (.11) (.09) (.16)
-------- -------- -------- -------- --------
Total dividends and distributions (.41) (.99) (.45) (.29) (.30)
-------- -------- -------- -------- --------
Net asset value, end of year $ 11.90 $ 10.61 $ 10.77 $ 10.80 $ 11.13
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 16.56% 8.13% 4.01% (.37%) 16.45%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 2.87% 2.64% 2.37% 2.69% 3.26%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 1.92% 1.98% 2.95% 1.95% 1.32%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 17,730 $ 38,830 $ 58,660 $ 53,121 $ 29,831
Data: ======== ======== ======== ======== ========
Portfolio turnover 33.42% 14.72% 101.12% 38.04% 26.02%
======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0607 $ .0679 -- -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended 1994++ to
October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.59 $ 10.75 $ 10.81 $ 10.74
Operating -------- -------- -------- --------
Performance: Investment income--net .21 .21 .36 --
Realized and unrealized gain on investments
and foreign currency transactions--net 1.47 .62 .05 .07
-------- -------- -------- --------
Total from investment operations 1.68 .83 .41 .07
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.17) (.36) (.36) --
In excess of investment income--net (.01) -- -- --
Realized gain on investments--net (.22) (.63) (.11) --
-------- -------- -------- --------
Total dividends and distributions (.40) (.99) (.47) --
-------- -------- -------- --------
Net asset value, end of period $ 11.87 $ 10.59 $ 10.75 $ 10.81
======== ======== ======== ========
Total Investment Based on net asset value per share 16.40% 8.14% 3.89% .65%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.89% 2.65% 2.41% 5.64%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net 1.91% 1.97% 2.99% (1.74%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,112 $ 4,123 $ 4,598 $ 203
Data: ======== ======== ======== ========
Portfolio turnover 33.42% 14.72% 101.12% 38.04%
======== ======== ======== ========
Average commission rate paid++++++ $ .0607 $ .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 significantly affect the rate shown.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended 1994++ to
October 31, Oct. 31,
Increase (Decrease) in Net Asset Value: 1997++++ 1996++++ 1995 1994++++
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.55 $ 10.72 $ 10.76 $ 10.69
Operating -------- -------- -------- --------
Performance: Investment income--net .30 .31 .42 --
Realized and unrealized gain on investments
and foreign currency transactions--net 1.47 .61 .09 .07
-------- -------- -------- --------
Total from investment operations 1.77 .92 .51 .07
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.23) (.46) (.44) --
In excess of investment income--net (.01) -- -- --
Realized gain on investments--net (.22) (.63) (.11) --
-------- -------- -------- --------
Total dividends and distributions (.46) (1.09) (.55) --
-------- -------- -------- --------
Net asset value, end of period $ 11.86 $ 10.55 $ 10.72 $ 10.76
======== ======== ======== ========
Total Investment Based on net asset value per share 17.41% 9.07% 4.87% .65%+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses 2.09% 1.77% 1.62% 5.13%*
Net Assets: ======== ======== ======== ========
Investment income (loss)--net 2.69% 2.85% 3.79% (1.24%)*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 6,614 $ 8,585 $ 3,499 $ 179
Data: ======== ======== ======== ========
Portfolio turnover 33.42% 14.72% 101.12% 38.04%
======== ======== ======== ========
Average commission rate paid++++++ $ .0607 $ .0679 -- --
======== ======== ======== ========
<PAGE>
<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 significantly 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
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
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
(b) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
Forward foreign exchange contracts--The Fund is authorized to enter
into forward foreign exchange contracts as a hedge against either
specific transactions or portfolio positions. Such contracts are not
entered on the Fund's records. However, the effect on operations is
recorded from the date the Fund enters into such contracts. Premium
or discount is amortized over the life of the contracts.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
<PAGE>
* 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.
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
NOTES TO FINANCIAL STATEMENTS (continued)
* 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.
(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 dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined 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.
<PAGE>
(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. Distributions in
excess of net investment income are due primarily to differing tax
treatments for foreign currency transactions.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$523,937 have been reclassified between undistributed net realized
capital gains and accumulated distributions in excess of net
investment income. These reclassifications have no effect on net
assets or net asset values per share.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-
owned subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is
the limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, 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 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, 1997, 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 $ 42 $ 519
Class D $395 $5,780
For the year ended October 31, 1997, MLPF&S received contingent
deferred sales charges of $209,470 and $1,308 relating to
transactions in Class B and Class C Shares, respectively.
During the year ended October 31, 1997, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $59 for security
price quotations to compute the net asset value of the Fund.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), a wholly-
owned subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended October 31, 1997 were $14,422,368 and
$60,395,126, respectively.
Net realized and unrealized gains (losses) as of October 31, 1997
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 4,313,459 $ 3,354,902
Short-term investments (278) --
Foreign currency transactions (982,156) (477)
Forward foreign exchange contracts 21,059 --
------------ -------------
Total $ 3,352,084 $ 3,354,425
============ =============
As of October 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $3,345,402, of which $3,696,792
related to appreciated securities and $351,390 related to
depreciated securities. At October 31,1997, the aggregate cost of
investments for Federal income tax purposes was $27,246,381.
<PAGE>
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
were $45,343,049 and $20,834,705 for the years ended October 31,
1997 and October 31, 1996, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 1,031,544 $ 11,066,318
Shares issued to shareholders in
reinvestment of dividends
and distributions 59,638 620,254
------------ -------------
Total issued 1,091,182 11,686,572
Shares redeemed (2,482,772) (26,937,299)
------------ -------------
Net decrease (1,391,590) $ (15,250,727)
============ =============
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 B Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 314,434 $ 3,542,687
Shares issued to shareholders in
reinvestment of dividends
and distributions 99,185 1,040,450
------------ -------------
Total issued 413,619 4,583,137
Automatic conversion of shares (28,947) (322,485)
Shares redeemed (2,553,205) (28,269,334)
------------ -------------
Net decrease (2,168,533) $ (24,008,682)
============ =============
<PAGE>
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)
============ =============
Merrill Lynch Global Convertible Fund, Inc., October 31, 1997
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 45,903 $ 515,280
Shares issued to shareholders in
reinvestment of dividends
and distributions 11,375 118,943
------------ -------------
Total issued 57,278 634,223
Shares redeemed (352,854) (3,888,088)
------------ -------------
Net decrease (295,576) $ (3,253,865)
============ =============
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)
============ =============
<PAGE>
Class D Shares for the Year Dollar
Ended October 31, 1997 Shares Amount
Shares sold 40,916 $ 459,749
Automatic conversion of shares 29,028 322,485
Shares issued to shareholders in
reinvestment of dividends
and distributions 23,285 243,244
------------ -------------
Total issued 93,229 1,025,478
Shares redeemed (349,497) (3,855,253)
------------ -------------
Net decrease (256,268) $ (2,829,775)
============ =============
Class D Shares for the Year Dollar
Ended October 31, 1996 Shares Amount
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
============ =============
<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
liabilities, including the schedule of investments, of Merrill Lynch
Global Convertible Fund, Inc. as of October 31, 1997, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the five-year
period then ended. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
<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, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global Convertible Fund, Inc. as of October 31, 1997,
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 5, 1997
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
The following information summarizes all per share distributions
paid by Merrill Lynch Global Convertible Fund, Inc. during the
taxable year ended October 31, 1997:
Domestic Qualifying Interest From Domestic Non-Qualifying Total Long-Term
Record Date Payable Date Ordinary Income Federal Obligations Ordinary Income Ordinary Income Capital Gains
<S> <C> <C> <C> <C> <C> <C>
Class A Shares:
12/17/96 12/26/96 $.100506 $.005557 $.079841 $.185904 $.189624
4/16/97 4/24/97 $.093975 $.000289 $.004640 $.098904 --
Class B Shares:
12/17/96 12/26/96 $.084422 $.004668 $.067064 $.156154 $.189624
4/16/97 4/24/97 $.060776 $.000187 $.003001 $.063964 --
Class C Shares:
12/17/96 12/26/96 $.084237 $.004657 $.066918 $.155812 $.189624
4/16/97 4/24/97 $.052706 $.000162 $.002603 $.055471 --
Class D Shares:
12/17/96 12/26/96 $.096733 $.005348 $.076845 $.178926 $.189624
4/16/97 4/24/97 $.087116 $.000268 $.004302 $.091686 --
<PAGE>
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
The law varies in each state as to whether and what percentage 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.
Please retain this information for your records.
</TABLE>
