MERRILL LYNCH
GLOBAL
CONVERTIBLE
FUND, INC.
FUND LOGO
Quarterly Report
January 31, 1998
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
Printed on post-consumer recycled paper
<PAGE>
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
<PAGE>
Merrill Lynch Global Convertible Fund, Inc., January 31, 1998
TO OUR SHAREHOLDERS
The global investment environment displayed both positive and
negative crosscurrents during the quarter ended January 31, 1998.
The Asian financial crisis has affected the world's investment
outlook. Investors are concerned about increasing inflation caused
by rapid growth and global deflation caused by economic contraction.
However, a more rational and reasonable mindset generally has set
the tone for the market during the January quarter. The effects of
the Asian slowdown are not likely to throw the world into a
depression at this time but rather will more likely affect isolated
countries and companies dealing in that region. Whether or not this
"Asian meltdown" will become the "Asian contagion" for the rest of
the world's economies remains to be seen. To put the situation in
perspective, it is interesting to note that the aggregate value of
the stock markets of Singapore, South Korea, Indonesia, the
Philippines and Thailand are of a lower value than the market
capitalization of one US company, General Electric Co. ($226 billion
versus $250 billion, respectively). Bristol-Myers Squibb Co. has
approximately the same market value as that of the entire Malaysian
stock market ($99 billion). In retrospect, much of the recent
volatility may be attributed to the "tail wagging the dog" rather
then the normal effects of supply and demand.
The apparently successful bailout by the International Monetary Fund
of Indonesia and South Korea, positive regulatory changes in Japan,
along with the prevailing so-called "Goldilocks" economy in the
United States (solid growth coupled with low inflation), helped push
the major markets higher during the January quarter. The Standard &
Poor's 500 Index advanced 7.18%, the Dow Jones Industrial Average
climbed 6.24%, and the Nikkei 225 advanced 1.03% during the quarter.
Most of the smaller Asian stock markets suffered declines, with the
Malaysian market fairing the worst, declining 29.69%, according to
the Jakarta Composite Index. The US dollar strengthened across the
board during the January quarter, rising 6% relative to the
Deutschemark and French franc and 5.5% compared to the Japanese yen.
US Treasury bonds climbed with the ten-year note's yield declining
33 basis points (0.33%), to rest at a yield of 5.50%. This backdrop
of higher equity prices coupled with higher volatility and lower
bond yields positively influenced convertible bond returns.
For the quarter ended January 31, 1998, Merrill Lynch Global
Convertible Fund, Inc.'s Class A, Class B, Class C and Class D
Shares had total returns of +1.78%, +1.51%, +1.50% and +1.69%,
respectively. The Fund outperformed the Lipper Overseas Global
Convertible Fund Average of 20 other funds, which had a return of
- -0.13% for the quarter. (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 4--7 of this report to shareholders.)
<PAGE>
Part of the Fund's outperformance can be attributed to our
concentration in US issues, which currently make up 70% of Fund
investments. Alza Corp., one of our largest positions, was a key
performer during the January quarter, rising 16.6% in value.
Furthermore, we reduced our cash position from 27% of net assets to
8% as compelling investments were identified.
We made many changes to the portfolio during the January quarter. In
particular, we added BankAtlantic Bancorp, Inc., the largest savings
bank in Florida; Hometown Buffets Inc., an operator of buffet-style
restaurants; Key Energy Group, Inc., a leading oil service company;
and Kmart Corp., an international retailer. Other additions included
RJR Nabisco Holdings Corp., an international consumer products
company; Thermo Instrument Systems, Inc., an analytical instrument
manufacturer; and U.S. Filter Corp., a global provider of industrial
and municipal water treatment systems. We also pared our holdings of
Home Depot, Inc., the leading retailer of building materials, and
Phycor, Inc., a physicians' practice management company. Portfolio
deletions included ConAgra Inc.
We believe the climate for convertible securities is a favorable
one. We remain partial toward domestic issues but continue to search
globally for appropriate investments. We have maintained global
exposure through our investments in Japan, the United Kingdom, Hong
Kong, France, the Netherlands and Canada. With current equity prices
near the high end of historical valuations, we intend to remain
defensively postured with an emphasis toward higher premium, less
equity sensitive, higher credit quality convertible issues. 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 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. For these
reasons, we continue to believe that 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.
In Conclusion
We thank you for your investment in Merrill Lynch Global Convertible
Fund, Inc.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Daniel A. Luchansky)
Daniel A. Luchansky
Vice President and
Portfolio Manager
March 4, 1998
Merrill Lynch Global Convertible Fund, Inc., January 31, 1998
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four
pricing alternatives:
* 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.)
* 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).
<PAGE>
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
1997 10.54 10.29 1.662 0.099 +14.58
1/1/98--1/31/98 10.29 10.39 -- -- + 0.97
------ ------
Total $2.887 Total $4.128
Cumulative total return as of 1/31/98: +107.42%**
<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>
<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
1997 10.63 10.30 1.662 0.064 +13.33
1/1/98--1/31/98 10.30 10.39 -- -- + 0.87
------ ------
Total $2.887 Total $3.427
Cumulative total return as of 1/31/98: +92.32%**
<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
1997 10.60 10.27 1.662 0.055 +13.26
1/1/98--1/31/98 10.27 10.36 -- -- + 0.88
------ ------
Total $1.881 Total $1.640
Cumulative total return as of 1/31/98: +33.60%**
<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>
<PAGE>
Merrill Lynch Global Convertible Fund, Inc., January 31, 1998
PERFORMANCE DATA (concluded)
<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
1997 10.55 10.27 1.662 0.092 +14.19
1/1/98--1/31/98 10.27 10.37 -- -- + 0.97
------ ------
Total $1.881 Total $1.879
Cumulative total return as of 1/31/98: +37.46%**
<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>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/97 +14.58% +8.57%
Five Years Ended 12/31/97 + 9.79 +8.61
Inception (11/4/88) through 12/31/97 + 8.18 +7.54
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +13.33% +9.45%
Five Years Ended 12/31/97 + 8.63 +8.63
Inception (2/26/88) through 12/31/97 + 6.77 +6.77
[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 12/31/97 +13.26% +12.29%
Inception (10/21/94) through 12/31/97 + 9.19 + 9.19
[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 12/31/97 +14.19% +8.19%
Inception (10/21/94) through 12/31/97 +10.14 +8.30
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent
Performance
Results
<CAPTION>
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Global Convertible Fund, Inc. Class A Shares* $10.39 $11.87 $10.62 +13.76%(1) + 1.78%(1)
ML Global Convertible Fund, Inc. Class B Shares* 10.39 11.90 10.70 +12.90(1) + 1.51(1)
ML Global Convertible Fund, Inc. Class C Shares* 10.36 11.87 10.68 +12.81(1) + 1.50(1)
ML Global Convertible Fund, Inc. Class D Shares* 10.37 11.86 10.63 +13.45(1) + 1.69(1)
Dow Jones Industrial Average** 7,906.50 7,442.08 6,813.09 +16.05 + 6.24
S&P 500 Index** 980.28 914.62 786.16 +24.69 + 7.18
Japan Nikkei Dow Jones 225**++ 16,628.47 16,458.94 18,330.01 - 9.28 + 1.03
London Financial Times Index** 5,458.50 4,842.30 4,275.80 +27.66 +12.73
ML Global Convertible Fund, Inc. Class A Shares--Total Return* +14.82(2) + 1.78(1)
ML Global Convertible Fund, Inc. Class B Shares--Total Return* +13.57(3) + 1.51(1)
ML Global Convertible Fund, Inc. Class C Shares--Total Return* +13.40(4) + 1.50(1)
ML Global Convertible Fund, Inc. Class D Shares--Total Return* +14.43(5) + 1.69(1)
Dow Jones Industrial Average--Total Return** +18.14 + 6.70
S&P 500 Index--Total Return** +26.89 + 7.62
<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 $1.662 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.099 per share ordinary
income dividends and $1.662 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.064 per share ordinary
income dividends and $1.662 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.055 per share ordinary
income dividends and $1.662 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.092 per share ordinary
income dividends and $1.662 per share capital gains distributions.
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., January 31, 1998
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
NORTH Shares Percent of
AMERICA Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Metals & Mining 20,000 Inco, Limited $ 364,012 $ 355,000 1.34%
Total Investments in
Canadian Common Stocks 364,012 355,000 1.34
United States Consumer Products 10,000 RJR Nabisco Holdings Corp. 320,600 315,000 1.19
Pharmaceuticals 1,091 Crescendo Pharmaceuticals Corp. 12,547 12,683 0.05
Total Investments in the
United States Common Stocks 333,147 327,683 1.24
Convertible Preferred Stocks
United States Insurance 10,000 American General Corp., Pfd. 523,200 730,000 2.76
15,000 St. Paul Companies, Inc., Pfd. 784,736 1,137,188 4.29
------------ ------------ -------
1,307,936 1,867,188 7.05
Oil & Gas Producers 7,000 Lomak Petroleum, Inc.,
$5.75 Pfd. 350,000 326,375 1.23
10,000 Occidental Petroleum Corp.,
Pfd., Series A 580,600 775,000 2.93
------------ ------------ -------
930,600 1,101,375 4.16
Real Estate Investment 20,000 Merry Land & Investment
Trust Company, Inc., Pfd. 509,462 557,500 2.11
Retail 10,000 Kmart Corp. Financing I, Pfd. 556,850 515,000 1.94
Steel 30,000 USX Capital Trust I, Pfd. 1,387,500 1,436,250 5.42
20,000 WHX Corp., Pfd., Series B 993,700 933,750 3.53
------------ ------------ -------
2,381,200 2,370,000 8.95
Total Investments in the
United States Convertible
Preferred Stocks 5,686,048 6,411,063 24.21
Face
Amount Convertible Bonds
<PAGE>
United States Assisted Living US$ 300,000 Assisted Living Concepts,
Inc., 6% due 11/01/2002 300,000 318,000 1.20
Automobile Parts 1,500,000 The Pep Boys--Manny, Moe & Jack,
4% due 9/01/1999 1,461,250 1,477,500 5.58
Banking 435,000 BankAtlantic Bancorp, Inc.,
5.625% due 12/01/2007 435,000 489,375 1.85
Environmental 600,000 U.S. Filter Corp., 4.50% due
12/15/2001 636,000 664,500 2.51
Health Services 800,000 Phycor, Inc., 4.50% due 2/15/2003 744,000 726,000 2.74
160,000 Tenet Healthcare Corp., 6%
due 12/01/2005 (convertible into
Vencor) 151,600 152,800 0.58
------------ ------------ -------
895,600 878,800 3.32
Medical Equipment 800,000 ThermoTrex Corp., 3.25% due
11/01/2007 800,000 710,000 2.68
Mining 250,000 Coeur D'Alene Mines Corp., 7.25%
due 10/31/2005 183,750 192,500 0.73
Office Supplies 600,000 US Office Products Co., 5.50%
due 5/15/2003 549,000 512,250 1.93
Oil Service 500,000 Key Energy Group, Inc., 5% due
9/15/2004 417,150 421,875 1.59
Pharmaceuticals 1,500,000 Alza Corp., 5% due 5/01/2006 1,531,250 1,705,320 6.44
Restaurants 350,000 Hometown Buffet, Inc., 7% due
12/01/2002 351,750 348,687 1.31
Retail Stores 250,000 Home Depot, Inc., 3.25% due
10/01/2001 254,687 350,000 1.32
Scientific Instruments 500,000 Thermo Instrument Systems, Inc.,
4% due 1/15/2005 500,000 508,125 1.92
Transportation 600,000 Alaska Air Group, Inc., 6.50%
due 6/15/2005** 625,500 1,360,878 5.14
Total Investments in the
United States Convertible Bonds 8,940,937 9,937,810 37.52
Total Investments in North
American Securities 15,324,144 17,031,556 64.31
<PAGE>
PACIFIC Shares
BASIN Held Common Stocks
Hong Kong Utilities--Electric 50,000 Shandong Huaneng Power
Company Ltd. (ADR) (a) 503,000 381,250 1.44
Total Investments in Hong Kong
Common Stocks 503,000 381,250 1.44
Face
Amount Convertible Bonds
Japan Chemicals YEN 50,000,000 No. 6 Sumitomo Bakelite Co.,
Ltd., 1.20% due 9/29/2006 521,478 453,900 1.71
Electronics 50,000,000 No. 5 Matsushita Electric
Industrial Co., 1.30% due
3/29/2002 513,387 497,673 1.88
30,000,000 No. 3 Sony Corp., 1.40% due
9/30/2003 361,653 505,639 1.91
30,000,000 No. 2 Tokyo Electron Ltd.,
0.90% due 9/30/2003 343,548 373,847 1.41
------------ ------------ -------
1,218,588 1,377,159 5.20
Food & Beverage 14,000,000 No. 1 Sanyo Coca-Cola Bottling,
Inc., 0.90% due 6/30/2003 146,267 97,721 0.37
Total Investments in Japanese
Convertible Bonds 1,886,333 1,928,780 7.28
Total Investments in
Pacific Basin Securities 2,389,333 2,310,030 8.72
</TABLE>
Merrill Lynch Global Convertible Fund, Inc., January 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN Shares Percent of
EUROPE Industries Held Common Stocks Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Kingdom Food & Beverage 72,876 Diageo PLC $ 566,012 $ 653,826 2.47%
Total Investments in the
United Kingdom Common Stocks 566,012 653,826 2.47
<PAGE>
Face
Amount Convertible Bonds
France Leisure Frf 4,200,000 Euro Disney SCA, 6.75% due
10/01/2001 686,298 743,397 2.81
Pharmaceuticals 2,170,000 Sanofi S.A., 4% due 1/01/2000
(Units) 498,434 830,779 3.14
Total Investments in French
Convertible Bonds 1,184,732 1,574,176 5.95
Netherlands Insurance US$ 500,000 Aegon N.V., 4.75% due 11/01/2004 626,250 1,691,800 6.39
Total Investments in the Netherlands
Convertible Bonds 626,250 1,691,800 6.39
United Kingdom Food & Pound 500,000 Allied-Lyons PLC, 6.75%
Beverage Sterling due 7/07/2008 858,247 848,150 3.20
Total Investments in the
United Kingdom Convertible Bonds 858,247 848,150 3.20
Total Investments in
Western European Securities 3,235,241 4,767,952 18.01
SHORT-TERM
SECURITIES Issue
Commercial US$ 300,000 General Electric Capital Corp.,
Paper* 5.64% due 2/02/1998 299,906 299,906 1.13
1,078,000 General Motors Acceptance Corp.,
5.63% due 2/02/1998 1,077,663 1,077,663 4.07
------------ ------------ -------
1,377,569 1,377,569 5.20
US Government 1,500,000 US Treasury Bills, 4.90% due
Obligations* 2/05/1998 1,498,979 1,498,979 5.66
Total Investments in
Short-Term Securities 2,876,548 2,876,548 10.86
Total Investments $ 23,825,266 26,986,086 101.90
============
Short Sales (Proceeds--$859,122)** (1,218,919) (4.60)
Liabilities in Excess of Other Assets 714,953 2.70
------------ -------
Net Assets $ 26,482,120 100.00%
============ =======
<PAGE>
Net Asset Class A--Based on net assets of $3,266,767 and 314,471
Value: shares outstanding $ 10.39
============
Class B--Based on net assets of $15,990,641 and 1,539,363
shares outstanding $ 10.39
============
Class C--Based on net assets of $1,189,320 and 114,784
shares outstanding $ 10.36
============
Class D--Based on net assets of $6,035,392 and 581,916
shares outstanding $ 10.37
============
<FN>
(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.
**Covered Short Sales entered into as of January 31, 1998 were as
follows:
Shares Issue Value
25,100 Alaska Air Group, Inc. $(1,218,919)
-----------
Total (Proceeds--$859,122) $(1,218,919)
===========
</TABLE>
