MERRILL LYNCH
GLOBAL UTILITY
FUND, INC.
FUND LOGO
Annual Report
November 30, 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 Utility Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH GLOBAL UTILITY FUND, INC.
Sector
Diversification
As a Percentage of
Equities as of
November 30, 1996
(unaudited)
A pie chart depicting the following industries:
Utilities--Electric 39.9%
Telecommunications 37.8%
Utilities--Gas 17.7%
Utilities--Water 4.6%
<PAGE>
Geographical
Diversification
As a Percentage of
Equities as of
November 30, 1996
(unaudited)
A pie chart depicting the following countries:
United States 41.2%
Europe 35.2%
Americas (Ex-US) 12.6%
Asia/Pacific 11.0%
DEAR SHAREHOLDER
Investor perceptions regarding the direction of the US economy
became increasingly positive over the course of the three-month
period ended November 30, 1996. The impetus for the shift was the
mounting evidence that inflationary pressures were still under
control. This trend was underscored when the Federal Reserve Board
did not tighten monetary policy at its September 24, 1996 meeting.
These developments, coupled with several economic data releases that
showed growth was at or below expectations, helped to assuage
investors' concerns about an overheating economy. Stock and bond
prices improved, with most broad-based stock market averages
reaching historic high levels. However, one factor potentially
overshadowing investor enthusiasm is the possibility that corporate
profits may have peaked for this economic cycle.
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product (GDP) growth is
slowing, labor-cost pressures are subsiding and commodity prices are
dropping. Investors are also anticipating that President Clinton's
re-election, combined with continued Republican majorities in the
House of Representatives and the Senate, will prove positive for
containing the nation's budget deficit. As 1996 draws to a close,
investors are likely to continue to focus on the economy. Evidence
of continued growth at a non-inflationary pace would be positive for
the US capital markets.
<PAGE>
Portfolio Matters
For the quarter ended November 30, 1996, Merrill Lynch Global
Utility Fund, Inc.'s Class A, Class B, Class C and Class D Shares
provided total returns of +9.39%, +9.20%, +9.20% and +9.32%,
respectively. This performance exceeded that of the Lipper
Analytical Services Utility Funds Average and that of the unmanaged
Financial Times/Standard & Poor's (S&P)--Actuaries World Utility
Index, which had total returns of +8.16% and +8.77%, respectively,
for the November quarter. (Fund 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--8 of this report to shareholders.)
The principal factor affecting the Fund's returns during the
November quarter was the performance of several non-US markets. More
specifically, Europe outperformed with a total return of +15.37%,
according to the Financial Times/S&P--Actuaries World Utility Index.
Performance in the European region was led by France, Italy and
Spain with returns of +22.85%, +22.39% and +18.07%, respectively.
The second best-performing region was North America, with a return
of +9.93%. The performance in this region was driven by strong
Canadian and US utility markets, with total returns of +21.59% and
+9.41%, respectively. The region with the weakest return was the
Pacific Basin. For the November quarter, the markets with negative
returns in the region were the Philippines, Japan, Singapore and
Thailand. Markets in the region that showed positive results were
Australia, New Zealand, Malaysia, Hong Kong and Indonesia. In terms
of the Fund's net assets, our underweighting in the Pacific Basin
region and our overweighting in Europe were beneficial to the Fund's
total return. More specifically, the Fund was overweighted in both
Australia and New Zealand as compared to the Index. Thus, country
selection was an important factor for global utility investing in
the three-month period ended November 30, 1996.
The three largest Fund holdings as of the end of November were
Telefonica de Espana S.A., Australian Gas & Light Co., Ltd. and
Generale des Eaux S.A. (For a complete listing of the Fund's top ten
holdings, see page 22 of this report to shareholders.) The price
performance of these three stocks during the November quarter was
+17.91%, +15.43% and +27.71%, respectively. The largest non-US
regional exposure in the Fund was Europe. The four largest country
exposures were Italy, Spain, France and the United Kingdom (as
mentioned earlier, the best-performing utility markets).
During the November quarter, we added only one new holding to the
Fund's portfolio. We purchased Deutsche Telekom AG on an initial
public offering of shares sold by the German government. It was an
extremely large offering, raising over $10 billion. Deutsche Telekom
is the largest European telephone company. The opportunity for
productivity improvements exists as does improved revenue growth.
The company has made investments outside of Germany, and expects to
continue an international investment strategy. Currently, the
company services over 43 million telephone lines in Germany.
<PAGE>
We eliminated three holdings during the November quarter. They were:
Enersis S.A. of Chile, CESC Ltd. of India and Bell Cablemedia PLC
debentures (11.95% coupon due 7/15/2004) in the United Kingdom. In
addition to these three portfolio eliminations, we made numerous
partial sales, primarily of US-based utility stocks. The partial
reductions in some of our foreign holdings were the result of price
appreciation that resulted in the stocks being too heavily weighted
in the portfolio.
Fiscal Year in Review
For the 12-month period ended November 30, 1996, global utility
investors fared better than domestic-only utility investors. The
unmanaged Financial Times/S&P--Actuaries World Utility Index had a
total return of +9.64% versus the +5.69% total return for the United
States. Merrill Lynch Global Utility Fund, Inc.'s Class A, Class B,
Class C and Class D Shares provided total returns of +17.94%,
+17.07%, +17.03% and +17.45%, respectively. The 12-month total
return for the Lipper Analytical Services, Inc. Utility Funds
average, which includes both domestic and global utility funds, was
+13.35%. Thus, total returns for all classes of Fund shares
significantly outperformed both the World Utility Index and the
Lipper Utility Funds average.
The best-performing region for utility investments was Europe and
the worst-performing was the Pacific Basin, based on the data
compiled by the Financial Times/S&P--Actuaries World Utility Index.
The five best-performing utility markets for the 12 months ended
November 30, 1996 were Australia, Italy, Canada, Spain and Brazil.
The five worst-performing utility markets were Thailand, Mexico,
Japan, Denmark and the United States. The Fund was positioned to
take advantage of these returns since it was overweighted in Europe
and underweighted in both the Pacific Basin and the United States
relative to the Index. More notable was the fact that the Fund was
positioned in the best-performing countries in the European and
Pacific Basin regions. Italy and Spain combined accounted for 17.5%
of the Fund's net assets as of November 30, 1996. Just 10% of the
Fund's net assets was invested in the Pacific Basin, with a zero
weighting in Japan and a nearly 3% weighting in Australia.
<PAGE>
Improving fundamentals, declining interest rates, an upward trend in
most stock markets around the globe and several attractively priced
stock offerings led the way for the performance of the global
utility sector. We made an important shift in the investment
strategy of the Fund during the year. We de-emphasized US-based
utility holdings in favor of foreign utility investments.
Furthermore, we reduced the Fund's exposure to the domestic
telecommunications sector through the elimination of one holding and
the reduction of several others. The net result, including price
action, was that the percentage of the Fund's net assets invested in
this sector dropped from 14.4% of net assets at November 30, 1995 to
6.5% at November 30, 1996. This action is significant in that
telecommunications was the worst-performing domestic utility sector
for the 12-month period. The reduction in our holdings in this
sector resulted from our concern over the implementation and
interpretation of the 1996 Telecommunications Act. To date, our
concerns have proved to be correct, in that uncertainty still exists
in terms of the timing and the rules with regard to the allocation
of costs and pricing of the Regional Bell Holding Companies entering
the long distance market. This uncertainty has caused investors to
be cautious about the group, even though valuation levels are low.
As a result of this group's attractive valuation, we have
underweighted the group but not eliminated it from the Fund's
portfolio.
Portfolio Strategy and Outlook
We expect the flow of stock offerings in the utility sector to
increase in the coming fiscal year. Several countries and
governments were waiting for the sale of the mammoth Deutsche
Telekom AG to take place before bringing their initial public
offering or secondary issuance of shares to the market. We expect to
see several transactions from emerging markets during the year, most
notably from Brazil and Peru, in the electric sector. We will
continue to analyze these new issues and to assess their risk/reward
prospects versus existing holdings. Overall local market performance
will play a significant role in the flow of new issues to the
market.
On the domestic side of the Fund's portfolio, if the uncertainty
begins to diminish or valuation levels move much lower, there may be
an opportunity to reassess our position in the telecommunications
sector. The natural gas sector, where the Fund is currently
overweighted, is likely to continue to be a strong performer as more
mergers between gas and electric companies are announced. In
addition, the likelihood of a colder-than-normal winter coupled with
low storage levels are likely to give support to the sector. The
outlook for the domestic electric utilities appears to be improving.
Cash flows are rising and are, for the most part, being invested in
utility plant and equipment. Individual states and companies
continue to release their competitive proposals. To date, it does
not appear as if equity holders will bear the total burden of the
transition cost of the industry moving from a monopolistic
environment to a competitive one. Finally, the group has
historically benefited from declining long-term interest rates.
While this trend may change over the longer term, to date this still
appears to be the case.
<PAGE>
In Conclusion
We thank you for your investment in Merrill Lynch Global Utility
Fund, Inc., and we look forward to discussing our investment
strategy and outlook with you in future shareholder reports.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Walter D. Rogers)
Walter D. Rogers
Vice President and Portfolio Manager
January 6, 1997
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 4% 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 0.50% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 10 years. (There is no initial
sales charge for automatic sales conversions.)
<PAGE>
* Class C Shares are subject to a distribution fee of 0.55% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 4% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
11/30/96 8/31/96 11/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $15.09 $13.92 $13.52 +13.63%(1) +8.41%
Class B Shares 15.05 13.88 13.47 +13.76(1) +8.43
Class C Shares 15.03 13.86 13.46 +13.69(1) +8.44
Class D Shares 15.10 13.93 13.55 +13.45(1) +8.40
Class A Shares--Total Return +17.94(2) +9.39(3)
Class B Shares--Total Return +17.07(4) +9.20(5)
Class C Shares--Total Return +17.03(6) +9.20(7)
Class D Shares--Total Return +17.45(8) +9.32(9)
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.245 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.527 per share ordinary
income dividends and $0.245 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.130 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.406 per share ordinary
income dividends and $0.245 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.101 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.409 per share ordinary
income dividends and $0.245 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.100 per share ordinary
income dividends.
(8)Percent change includes reinvestment of $0.491 per share ordinary
income dividends and $0.245 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.121 per share ordinary
income dividends.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Total Return
Based on a
$10,000
Investment
Line graphs depicting the growth of an investment in the Fund's
Class A, Class B, Class C, and Class D Shares compared to the growth
of an investment in the Financial Times/Standard & Poor's--
Actuaries World Index and the Financial Times/Standard & Poor's--
Actuaries World Utility Index. Beginning and ending values are:
12/28/90** 11/96
ML Global Utility Fund++--
Class A Shares* $ 9,600 $18,612
ML Global Utility Fund++--
Class B Shares* $10,000 $18,521
Financial Times/Standard & Poor's--
Actuaries World Index++++ $10,000 $20,272
Financial Times/Standard & Poor's--
Actuaries World Utility Index++++++ $10,000 $18,603
10/21/94** 11/96
ML Global Utility Fund++--
Class C Shares* $10,000 $13,186
ML Global Utility Fund++--
Class D Shares* $ 9,600 $12,807
Financial Times/Standard & Poor's--
Actuaries World Index++++ $10,000 $13,250
Financial Times/Standard & Poor's--
Actuaries World Utility Index++++++ $10,000 $12,331
<PAGE>
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Global Utility Fund, Inc. invests at least 65% of its total
assets in common stocks (including preferred or debt securities
convertible into common stocks), preferred stocks and debt
securities issued by domestic and foreign companies in the utilities
industries.
++++This unmanaged market capitalization-weighted Index is comprised
of nearly 2,200 equities from 24 countries in 12 regions, including
the United States.
++++++This unmanaged market capitilization-weighted Index is
comprised of utility stocks from any of the 24 countries that make
up the Financial Times/Standard & Poor's--Actuaries World Index.
Past perfomance is not predictive of future performance.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/96 +10.82% +6.39%
Five Years Ended 9/30/96 +10.78 +9.88
Inception (12/28/90)
through 9/30/96 +10.74 +9.95
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/96 +10.07% +6.07%
Five Years Ended 9/30/96 + 9.92 +9.92
Inception (12/28/90)
through 9/30/96 + 9.89 +9.89
[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 + 9.94% + 8.94%
Inception (10/21/94)
through 9/30/96 +10.99 +10.99
[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 +10.42% +6.00%
Inception (10/21/94)
through 9/30/96 +11.63 +9.31
[FN]
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
<TABLE>
Performance
Summary-
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
12/28/90--12/31/90 $10.00 $10.01 -- -- + 0.10%
1991 10.01 10.93 -- $0.508 +14.74
1992 10.93 11.40 $0.012 0.469 + 8.97
1993 11.40 13.67 0.027 0.424 +24.13
1994 13.67 11.83 -- 0.480 -10.00
1995 11.83 13.86 0.245 0.483 +23.74
1/1/96--11/30/96 13.86 15.09 -- 0.410 +12.05
------ ------
Total $0.284 Total $2.774
Cumulative total return as of 11/30/96: +93.87%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Performance
Summary-
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
12/28/90--12/31/90 $10.00 $10.01 -- -- + 0.10%
1991 10.01 10.92 -- $0.435 +13.84
1992 10.92 11.38 $0.012 0.391 + 8.12
1993 11.38 13.63 0.027 0.337 +23.17
1994 13.63 11.81 -- 0.379 -10.62
1995 11.81 13.83 0.245 0.380 +22.73
1/1/96--11/30/96 13.83 15.05 -- 0.316 +11.26
------ ------
Total $0.284 Total $2.238
Cumulative total return as of 11/30/96: +85.21%**
<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 C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $12.34 $11.81 -- $0.117 - 3.35%
1995 11.81 13.82 $0.245 0.383 +22.67
1/1/96--11/30/96 13.82 15.03 -- 0.318 +11.22
------ ------
Total $0.245 Total $0.818
<PAGE>
Cumulative total return as of 11/30/96: +31.86%**
<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**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $12.37 $11.84 -- $0.124 - 3.29%
1995 11.84 13.90 $0.245 0.445 +23.62
1/1/96--11/30/96 13.90 15.10 -- 0.382 +11.58
------ ------
Total $0.245 Total $0.951
Cumulative total return as of 11/30/96: +33.39%**
<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>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Telecommunications 100,000 Telecom Argentina STET S.A.
(ADR) (b) $ 3,770,294 $ 3,937,500 1.0%
200,000 Telefonica de Argentina S.A.
(ADR) (b) 4,140,594 5,100,000 1.3
------------ ------------ ------
7,910,888 9,037,500 2.3
Utilities--Electric 6,600 Central Costanera S.A. (ADR) (b)++++ 158,400 204,600 0.1
<PAGE>
Total Common Stocks in Argentina 8,069,288 9,242,100 2.4
Australia Utilities--Gas 2,000,000 Australian Gas & Light Co., Ltd. 5,280,752 11,144,950 2.9
Total Common Stocks in Australia 5,280,752 11,144,950 2.9
Austria Utilities--Gas 41,820 Energie-Versorgung Niederoesterreich
AG (EVN) 3,050,014 6,102,373 1.6
Total Common Stocks in Austria 3,050,014 6,102,373 1.6
Brazil Telecommunications 45,000 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) (b) 2,176,897 3,408,750 0.9
Total Common Stocks in Brazil 2,176,897 3,408,750 0.9
Canada Telecommunications 140,000 BC Telecom, Inc. 2,593,297 3,200,000 0.9
Utilities--Electric 369,100 Nova Scotia Power Co. 3,476,309 3,862,197 1.0
Utilities--Gas 200,000 Transcanada Pipeline Co. Ltd. 3,147,485 3,575,000 0.9
Total Common Stocks in Canada 9,217,091 10,637,197 2.8
Chile Telecommunications 51,000 Compania de Telecomunicaciones de
Chile S.A. (ADR) (b) 3,711,460 4,851,375 1.3
Utilities--Electric 65,000 Chilgener S.A. (ADR) (b) 1,495,000 1,373,125 0.3
156,000 Distribuidora Chilectra Metropolitana
S.A. (ADR) (b)++++ 4,249,463 8,424,000 2.2
------------ ------------ ------
5,744,463 9,797,125 2.5
Total Common Stocks in Chile 9,455,923 14,648,500 3.8
Denmark Telecommunications 160,000 Tele Danmark A/S (ADR) (b) 3,764,160 4,000,000 1.0
Total Common Stocks in Denmark 3,764,160 4,000,000 1.0
France Utilities--Water 89,715 Generale des Eaux S.A. 9,668,083 11,054,945 2.9
40,000 Lyonnaise des Eaux S.A. (f) 3,989,365 3,805,369 1.0
------------ ------------ ------
13,657,448 14,860,314 3.9
Total Common Stocks in France 13,657,448 14,860,314 3.9
Germany Telecommunications 24,300 ++Deutsche Telekom AG 462,162 528,673 0.2
Utilities--Electric 140,000 Veba AG 4,568,890 8,190,569 2.1
<PAGE>
Total Common Stocks in Germany 5,031,052 8,719,242 2.3
Hong Kong Utilities--Gas 1,200,000 The Hong Kong & China Gas Co., Ltd. 1,627,410 2,382,461 0.6
100,000 The Hong Kong & China Gas Co., Ltd.
(Warrants) (a) 0 63,054 0.0
------------ ------------ ------
1,627,410 2,445,515 0.6
Total Common Stocks & Warrants
in Hong Kong 1,627,410 2,445,515 0.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Indonesia Telecommunications 5,500 PT Indonesian Satellite Corp.
(Indosat) (ADR) (b) $ 176,275 $ 151,938 0.0%
29,600 PT Telekomunikasi Indonesia
(Persero) (ADR) (b) 532,800 973,100 0.3
------------ ------------ ------
709,075 1,125,038 0.3
Total Common Stocks in Indonesia 709,075 1,125,038 0.3
Italy Telecommunications 2,891,700 Societa Finanziara Telefonica S.p.A.
(STET) 5,447,174 8,890,905 2.3
3,900,000 Telecom Italia Mobile S.p.A. 2,605,057 9,173,413 2.4
3,700,000 Telecom Italia S.p.A 3,497,148 8,715,188 2.3
------------ ------------ ------
11,549,379 26,779,506 7.0
Utilities--Gas 1,786,300 Italgas Torino S.p.A. 5,169,953 7,425,091 1.9
Total Common Stocks in Italy 16,719,332 34,204,597 8.9
Korea Utilities--Electric 114,200 Korea Electric Power Corp. (KEPCO)
(ADR) (b) 2,298,275 2,012,775 0.5
Total Common Stocks in Korea 2,298,275 2,012,775 0.5
Malaysia Telecommunications 860,000 Telekom Malaysia BHD 6,389,867 7,829,012 2.0
Total Common Stocks in Malaysia 6,389,867 7,829,012 2.0
Mexico Telecommunications 105,000 Telefonos de Mexico, S.A. de C.V.
(ADR) (b) 5,594,445 3,189,375 0.8
<PAGE>
Total Common Stocks in Mexico 5,594,445 3,189,375 0.8
New Telecommunications 89,000 Telecom Corporation of New Zealand
Zealand Ltd. (ADR) (b) 3,564,658 7,487,125 2.0
Total Common Stocks in New Zealand 3,564,658 7,487,125 2.0
Peru Telecommunications 195,000 Telefonica del Peru (ADR) (b) 3,997,500 3,778,125 1.0
Total Common Stocks in Peru 3,997,500 3,778,125 1.0
Philippines Telecommunications 94,000 Philippine Long Distance Telephone
Co. (ADR) (b) 4,077,062 5,405,000 1.4
Utilities---Electric 74,100 Manila Electric Co. (MERALCO) 'B' 497,246 549,745 0.2
Total Common Stocks in the
Philippines 4,574,308 5,954,745 1.6
Portugal Telecommunications 205,740 Portugal Telecom, S.A. (ADR) (b) 4,576,844 5,452,110 1.4
Total Common Stocks in Portugal 4,576,844 5,452,110 1.4
Spain Telecommunications 537,300 Telefonica de Espana S.A. 6,164,064 11,781,439 3.1
Utilities--Electric 129,800 Empresa Nacional de Electricidad,
S.A. (ADR) (b) 4,566,202 8,647,925 2.3
92,000 HidroElectrica Del Cantabrico, S.A. 3,107,921 3,100,525 0.8
808,500 Iberdrola I S.A. 4,998,321 9,332,207 2.4
------------ ------------ ------
12,672,444 21,080,657 5.5
Total Common Stocks in Spain 18,836,508 32,862,096 8.6
Switzerland Utilities--Electric 4,300 Elektrowatt AG 1,687,158 1,727,398 0.5
Total Common Stocks in Switzerland 1,687,158 1,727,398 0.5
Thailand Telecommunications 15,000 ++TelecomAsia Corporation Public
Co., Ltd. PLC (ADR) (b) 328,050 300,000 0.1
Utilities--Electric 332,000 Electricity Generating Company of
Thailand (EGCOMP) 296,433 1,027,019 0.2
Total Common Stocks in Thailand 624,483 1,327,019 0.3
United Telecommunications 671,000 British Telecommunications PLC 4,688,465 4,246,230 1.1
Kingdom 180,000 Vodafone Group PLC (ADR) (b) 5,355,931 7,785,000 2.0
------------ ------------ ------
10,044,396 12,031,230 3.1
<PAGE>
Utilities--Electric 208,000 National Power PLC 1,723,671 1,615,182 0.4
445,000 PowerGen PLC 3,253,482 4,341,885 1.2
------------ ------------ ------
4,977,153 5,957,067 1.6
Total Common Stocks in the
United Kingdom 15,021,549 17,988,297 4.7
United Telecommunications 31,000 AT&T Corp. 1,255,940 1,216,750 0.3
States 70,000 Ameritech Corp. 2,996,450 4,121,250 1.1
91,800 BellSouth Corp. 2,702,773 3,706,425 1.0
108,000 Frontier Corp. 2,193,480 2,835,000 0.7
85,000 GTE Corp. 3,145,450 3,814,375 1.0
10,046 Lucent Technologies, Inc. (c) 493,515 514,858 0.1
62,000 NYNEX Corp. 2,819,654 2,875,250 0.7
69,900 SBC Communications, Inc. 2,939,711 3,678,487 1.0
68,000 U S West Communications Group (d) 1,895,186 2,125,000 0.6
------------ ------------ ------
20,442,159 24,887,395 6.5
Utilities--Electric 241,000 Allegheny Power System, Inc. 6,450,560 7,320,375 1.9
87,200 Boston Edison Co. 2,722,264 2,234,500 0.6
202,962 CINergy Corp. 4,891,811 6,799,227 1.8
84,200 Consolidated Edison Co. of New York 2,991,744 2,441,800 0.6
118,900 DTE Energy Co. (e) 4,092,463 3,804,800 1.0
95,250 Dominion Resources, Inc. 3,965,452 3,631,406 1.0
127,000 Duke Power Co. 4,961,185 5,889,625 1.5
283,000 Edison International 6,379,546 5,624,625 1.5
188,300 GPU, Inc. (g) 5,864,594 6,331,587 1.6
265,200 Houston Industries, Inc. 6,491,433 5,834,400 1.5
184,800 NIPSCO Industries, Inc. 5,394,297 7,161,000 1.9
159,000 New York State Electric & Gas Corp. 5,705,686 3,438,375 0.9
140,500 PECO Energy Co. 4,344,731 3,582,750 0.9
323,000 PacifiCorp 6,465,176 6,783,000 1.8
192,000 Public Service Co. of Colorado 5,832,890 7,488,000 1.9
304,200 Southern Co. 5,575,899 6,768,450 1.8
97,300 Western Resources Co. 3,260,997 3,077,112 0.8
------------ ------------ ------
85,390,728 88,211,032 23.0
Utilities--Gas 95,100 AGL Resources Inc. 1,781,042 2,008,987 0.5
130,000 The Brooklyn Union Gas Co. 3,371,550 4,062,500 1.1
226,000 The Coastal Corp. 6,038,593 10,876,250 2.9
236,000 Questar Corp. 6,554,436 9,233,500 2.4
127,300 Sonat, Inc. 3,309,934 6,587,775 1.7
------------ ------------ ------
21,055,555 32,769,012 8.6
Utilities--Water 86,000 American Water Works Co., Inc. 1,617,875 1,698,500 0.4
<PAGE>
Total Common Stocks in the
United States 128,506,317 147,565,939 38.5
Total Investments in Common Stocks
& Warrants 274,430,354 357,712,592 93.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Australia Telecommuni- US$ 7,960,000 Telstra Corp., Ltd., 6.50% due
cations 7/31/2003++++ $ 8,115,578 $ 7,974,806 2.1%
Total Fixed-Income Securities in
Australia 8,115,578 7,974,806 2.1
Korea Telecommunications 2,500,000 Korea Telecom, 7.40% due 12/01/1999 2,499,500 2,579,925 0.7
Total Fixed-Income Securities in
Korea 2,499,500 2,579,925 0.7
United Telecommunications 4,000,000 Rochester Telephone Corp., 9.25% due
States 6/01/2000 4,111,200 4,370,800 1.1
Utilities--Electric 4,000,000 Consumer Power Co., 8.875% due
11/15/1999 4,190,000 4,219,160 1.1
Total Fixed-Income Securities in the
United States 8,301,200 8,589,960 2.2
Total Investments in Fixed-Income
Securities 18,916,278 19,144,691 5.0
Short-Term Securities
US Government & 6,140,000 Federal Home Loan Mortgage Corp.,
Agency Obligations* 5.70% due 12/02/1996 6,138,056 6,138,056 1.6
Total Investments in Short-Term
Securities 6,138,056 6,138,056 1.6
Total Investments $299,484,688 382,995,339 99.9
============
Other Assets Less Liabilities 236,953 0.1
------------ ------
Net Assets $383,232,292 100.0%
============ ======
<PAGE>
<FN>
*Certain US Government & Agency Obligations are traded on a discount
basis; the interest rate shown is the discount rate paid at the time
of purchase by the Fund.
(a)These warrants were acquired through a corporate action. Warrants
entitle the Fund to purchase a predetermined number of shares of
Common Stock. The purchase price and number of shares are subject to
adjustment under certain conditions until the expiration date.
(b)American Depositary Receipts (ADR).
(c)Lucent Technologies, Inc. was acquired through a spinoff of AT&T.
(d)U S West Inc. spun off U S West Media Group and changed its name
to U S West Communications Group.
(e)Formerly Detroit Edison Co.
(f)Formerly Lyonnaise des Eaux-Dumez S.A.
(g)Formerly General Public Utilities Corp.
++Non-income producing securities.
++++Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately $16,603,000,
representing 4.3% of net assets.
<CAPTION>
Acquisition Value
Issue Date(s) Cost (Note 1a)
<S> <S> <C> <C>
Central Costanera S.A. (ADR) 12/17/1993 $ 158,400 $ 204,600
Distribuidora Chilectra
Metropolitana S.A. (ADR) 2/12/1992-12/21/1993 4,249,463 8,424,000
Telstra Corp., Ltd., 6.50% due 7/31/2003 7/26/1993-9/29/1993 8,115,578 7,974,806
Total $12,523,441 $16,603,406
=========== ===========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
As of November 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$299,484,688) (Note 1a) $382,995,339
Cash 49,365
Receivables:
Dividends $ 1,097,642
Interest 339,223
Capital shares sold 44,047 1,480,912
------------
Prepaid registration fees and other assets (Note 1f) 29,263
------------
Total assets 384,554,879
------------
<PAGE>
Liabilities: Payables:
Capital shares redeemed 576,895
Distributor (Note 2) 202,208
Investment adviser (Note 2) 181,896 960,999
------------
Accrued expenses and other liabilities 361,588
------------
Total liabilities 1,322,587
------------
Net Assets: Net assets $383,232,292
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $ 265,429
Class B Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 2,229,154
Class C Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 22,128
Class D Shares of Common Stock, $0.10 par value, 100,000,000 shares
authorized 28,907
Paid-in capital in excess of par 284,570,115
Undistributed investment income--net 1,373,289
Undistributed realized capital gains on investments and foreign
currency transactions--net 11,235,313
Unrealized appreciation on investments and foreign currency
transactions--net 83,507,957
------------
Net assets $383,232,292
============
Net Asset Class A--Based on net assets of $40,054,901 and 2,654,294 shares
Value: outstanding $ 15.09
============
Class B--Based on net assets of $335,486,980 and 22,291,538 shares
outstanding $ 15.05
============
Class C--Based on net assets of $3,325,148 and 221,280 shares
outstanding $ 15.03
============
Class D--Based on net assets of $4,365,263 and 289,073 shares
outstanding $ 15.10
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
For the Year Ended November 30, 1996
<S> <S> <C> <C>
Investment Income Dividends (net of $1,037,124 foreign withholding tax) $ 15,939,897
(Notes 1d & 1e): Interest and discount earned 1,968,432
------------
Total income 17,908,329
------------
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 2,709,344
Investment advisory fees (Note 2) 2,463,017
Transfer agent fees--Class B (Note 2) 501,379
Custodian fees 136,543
Accounting services (Note 2) 104,641
Printing and shareholder reports 103,555
Registration fees (Note 1f) 89,829
Professional fees 51,887
Transfer agent fees--Class A (Note 2) 48,903
Account maintenance and distribution fees--Class C (Note 2) 23,394
Directors' fees and expenses 19,137
Account maintenance fees--Class D (Note 2) 7,906
Transfer agent fees--Class C (Note 2) 4,128
Transfer agent fees--Class D (Note 2) 3,313
Amortization of organization expenses (Note 1f) 1,741
Pricing fees 544
Other 17,783
------------
Total expenses 6,287,044
------------
Investment income--net 11,621,285
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 11,235,378
(Loss) on Foreign currency transactions--net (25,221) 11,210,157
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 41,383,405
(Notes 1b, 1c, Foreign currency transactions--net (14,406) 41,368,999
1e & 3): ------------ ------------
Net realized gain on investments and foreign currency
transactions 52,579,156
------------
Net Increase in Net Assets Resulting from Operations $ 64,200,441
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended November 30,
Increase (Decrease) in Net Assets: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 11,621,285 $ 14,205,177
Realized gain on investments and foreign currency
transactions--net 11,210,157 9,039,213
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 41,368,999 43,819,383
------------ ------------
Net increase in net assets resulting from operations 64,200,441 67,063,773
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (1,619,986) (1,952,696)
Shareholders Class B (10,429,834) (12,961,394)
(Note 1g): Class C (83,508) (47,650)
Class D (99,132) (39,117)
Realized gain on investments--net:
Class A (807,670) --
Class B (6,874,204) --
Class C (38,876) --
Class D (29,790) --
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (19,983,000) (15,000,857)
------------ ------------
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (90,445,913) (139,129,318)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (46,228,472) (87,066,402)
Beginning of year 429,460,764 516,527,166
------------ ------------
End of year* $383,232,292 $429,460,764
============ ============
<FN>
*Undistributed investment income--net (Note 1h) $ 1,373,289 $ 2,009,685
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<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 November 30,
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 $ 13.52 $ 12.08 $ 13.22 $ 11.23 $ 10.67
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .50 .51 .94 .40 .47
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.84 1.42 (1.57) 2.01 .57
-------- -------- -------- -------- --------
Total from investment operations 2.34 1.93 (.63) 2.41 1.04
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.53) (.49) (.47) (.41) (.48)
Realized gain on investments--net (.24) -- (.04) (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions (.77) (.49) (.51) (.42) (.48)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.09 $ 13.52 $ 12.08 $ 13.22 $ 11.23
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 17.94% 16.34% (4.89%) 21.80% 10.05%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses .84% .91% .86% .82% 1.01%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 3.51% 3.73% 3.58% 3.57% 4.47%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 40,055 $ 44,775 $ 56,659 $ 81,718 $ 29,772
Data: ======== ======== ======== ======== ========
Portfolio turnover 5.03% 2.92% 17.02% 8.92% 30.91%
======== ======== ======== ======== ========
Average commission rate paid+++++ $ .0328 -- -- -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
The following per share data and ratios have been derived Class B
from information provided in the financial statements.
For the Year Ended November 30,
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 $ 13.47 $ 12.04 $ 13.17 $ 11.20 $ 10.65
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .39 .38 .74 .33 .39
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net 1.84 1.44 (1.46) 1.98 .57
-------- -------- -------- -------- --------
Total from investment operations 2.23 1.82 (.72) 2.31 .96
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.41) (.39) (.37) (.33) (.41)
Realized gain on investments--net (.24) -- (.04) (.01) --
-------- -------- -------- -------- --------
Total dividends and distributions (.65) (.39) (.41) (.34) (.41)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.05 $ 13.47 $ 12.04 $ 13.17 $ 11.20
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 17.07% 15.38% (5.60%) 20.86% 9.20%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.61% 1.68% 1.63% 1.59% 1.77%
Net Assets: ======== ======== ======== ======== ========
Investment income--net 2.74% 2.95% 2.82% 2.81% 3.65%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $335,487 $381,098 $459,185 $596,455 $200,396
Data: ======== ======== ======== ======== ========
Portfolio turnover 5.03% 2.92% 17.02% 8.92% 30.91%
======== ======== ======== ======== ========
Average commission rate paid+++++ $ .0328 -- -- -- --
======== ======== ======== ======== ========
<PAGE>
<CAPTION>
Class C Class D
For the For the
The following per share data and ratios Period Period
have been derived from information provided For the Oct. 21, For the Oct. 21,
in the financial statements. Year Ended 1994++ to Year Ended 1994++ to
Nov. 30, Nov. 30, Nov. 30, Nov. 30,
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 $ 13.46 $ 12.05 $ 12.34 $ 13.55 $ 12.09 $ 12.37
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income--net .38 .39 .01 .50 .52 .02
Realized and unrealized gain (loss)
on investments and foreign
currency transactions--net 1.84 1.43 (.30) 1.79 1.40 (.30)
-------- -------- -------- -------- -------- --------
Total from investment operations 2.22 1.82 (.29) 2.29 1.92 (.28)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.41) (.41) -- (.50) (.46) --
Realized gain on investments--net (.24) -- -- (.24) -- --
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.65) (.41) -- (.74) (.46) --
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 15.03 $ 13.46 $ 12.05 $ 15.10 $ 13.55 $ 12.09
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 17.03% 15.38% (2.35%)+++17.45% 16.21% (2.26%)+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.66% 1.73% 1.60%* 1.07% 1.15% 1.08%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 2.65% 2.85% 3.01%* 3.30% 3.36% 3.25%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 3,325 $ 2,072 $ 445 $ 4,365 $ 1,516 $ 239
======== ======== ======== ======== ======== ========
Portfolio turnover 5.03% 2.92% 17.02% 5.03% 2.92% 17.02%
======== ======== ======== ======== ======== ========
Average commission rate
paid+++++ $ .0328 -- -- $ .0328 -- --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the year.
+++Aggregate total investment return.
+++++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.
<PAGE>
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global Utility Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund 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.
(a) Valuation of securities--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written 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.
<PAGE>
(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.
* Options--The Fund is authorized to write and purchase call options
and put options. When the Fund writes an option, an amount equal to
the premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
* 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.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends and capital gains at various
rates.
<PAGE>
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income (including amortization of
discount) is recognized on the accrual basis. Dividend income is
recorded on the ex-dividend date, except that if the ex-dividend
date has passed, certain dividends from foreign securities are
recorded as soon as the Fund is informed of the ex-dividend date.
Realized gains and losses on security transactions are determined on
the identified cost basis.
(f) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense over a five-
year period. Prepaid registration fees are charged to expense as the
related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$25,221 have been reclassified between undistributed net realized
capital gains and undistributed 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 operation of the Fund. For such
services, the Fund pays a monthly fee of 0.60%, on an annual basis,
of the average daily value of the Fund's net assets.
Pursuant to the distribution plans (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:
<PAGE>
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.50%
Class C 0.25% 0.55%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith 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.
For the year ended November 30, 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 $ 610 $ 6,158
Class D $1,510 $15,767
For the year ended November 30, 1996, MLPF&S received contingent
deferred sales charges of $754,651 and $1,659, relating to
transactions in Class B Shares and Class C Shares, respectively.
In addition, MLPF&S received $5,724 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
November 30, 1996.
For the year ended November 30, 1996, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of MLPF&S, $164 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, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended November 30, 1996 were $20,336,925 and
$115,129,275, respectively.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Net realized and unrealized gains (losses) as of November 30, 1996
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $11,235,378 $83,510,651
Foreign currency transactions (25,221) (2,694)
----------- -----------
Total $11,210,157 $83,507,957
=========== ===========
As of November 30, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $83,510,651, of which $93,801,484
related to appreciated securities and $10,290,833 related to
depreciated securities. The aggregate cost of investments at
November 30, 1996 for Federal income tax purposes was $299,484,688.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $90,445,913 and $139,129,318 for the years ended November 30,
1996 and November 30, 1995, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 178,410 $ 2,530,252
Shares issued to shareholders
in reinvestment of dividends
and distributions 135,223 1,872,625
------------- -------------
Total issued 313,633 4,402,877
Shares redeemed (971,846) (13,721,257)
------------- -------------
Net decrease (658,213) $ (9,318,380)
============= =============
<PAGE>
Class A Shares for the Year Dollar
Ended November 30, 1995 Shares Amount
Shares sold 165,580 $ 2,080,607
Shares issued to shareholders
in reinvestment of dividends 116,128 1,460,439
------------- -------------
Total issued 281,708 3,541,046
Shares redeemed (1,658,669) (20,944,113)
------------- -------------
Net decrease (1,376,961) $ (17,403,067)
============= =============
Class B Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,480,280 $ 20,727,309
Shares issued to shareholders
in reinvestment of dividends
and distributions 975,884 13,460,853
------------- -------------
Total issued 2,456,164 34,188,162
Automatic conversion of shares (110,150) (1,536,242)
Shares redeemed (8,345,774) (117,187,340)
------------- -------------
Net decrease (5,999,760) $ (84,535,420)
============= =============
Class B Shares for the Year Dollar
Ended November 30, 1995 Shares Amount
Shares sold 1,655,159 $ 20,831,069
Shares issued to shareholders
in reinvestment of dividends 796,753 9,996,426
------------- -------------
Total issued 2,451,912 30,827,495
Automatic conversion of shares (10,704) (138,527)
Shares redeemed (12,290,113) (154,903,079)
------------- -------------
Net decrease (9,848,905) $(124,214,111)
============= =============
<PAGE>
Class C Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 116,923 $ 1,634,417
Shares issued to shareholders
in reinvestment of dividends and
distributions 7,871 109,069
------------- -------------
Total issued 124,794 1,743,486
Shares redeemed (57,428) (802,893)
------------- -------------
Net increase 67,366 $ 940,593
============= =============
Class C Shares for the Year Dollar
Ended November 30, 1995 Shares Amount
Shares sold 259,375 $ 3,186,034
Shares issued to shareholders
in reinvestment of dividends 3,375 43,016
------------- -------------
Total issued 262,750 3,229,050
Shares redeemed (145,762) (1,797,850)
------------- -------------
Net increase 116,988 $ 1,431,200
============= =============
Class D Shares for the Year Dollar
Ended November 30, 1996 Shares Amount
Shares sold 1,906,770 $ 26,889,122
Automatic conversion of shares 109,766 1,536,242
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,595 106,392
------------- -------------
Total issued 2,024,131 28,531,756
Shares redeemed (1,846,953) (26,064,462)
------------- -------------
Net increase 177,178 $ 2,467,294
============= =============
Class D Shares for the Year Dollar
Ended November 30, 1995 Shares Amount
<PAGE>
Shares sold 2,762,874 $ 34,867,068
Automatic conversion of shares 9,840 138,527
Shares issued to shareholders
in reinvestment of dividends 1,912 24,419
------------- -------------
Total issued 2,774,626 35,030,014
Shares redeemed (2,682,472) (33,973,354)
------------- -------------
Net increase 92,154 $ 1,056,660
============= =============
5. Subsequent Event:
On December 1, 1996, the Fund's Board of Directors declared an
ordinary income dividend in the amount of $0.115190 per Class A
Share, $0.085793 per Class B Share, $0.084346 per Class C Share, and
$0.106208 per Class D Share, and a long-term capital gains
distribution of $0.446232 per share for each of the four classes,
payable on December 23, 1996 to shareholders on record as of
December 13, 1996.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Global Utility Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Global Utility Fund, Inc. as of November 30, 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 financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at November
30, 1996 by correspondence with the custodian. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global Utility Fund, Inc. as of November 30, 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
January 8, 1997
</AUDIT-REPORT>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
The following information summarizes the distributions paid by
Merrill Lynch Global Utility Fund, Inc. to all classes of shares
during the fiscal year ended November 30, 1996:
Domestic Domestic Foreign
Record Payable Qualifying Non-Qualifying Foreign Source Total Withholding Taxes
Date Date Ordinary Income Income Income Ordinary Income (Per Share)
<S> <S> <C> <C> <C> <C> <C>
12/14/95 12/22/95 86.98% 13.02% -- 100% --
4/02/96 4/11/96 77.44% 5.90% 16.66% 100% $.007765
7/02/96 7/11/96 77.44% 5.90% 16.66% 100% $.013890
10/03/96 10/11/96 77.44% 5.90% 16.66% 100% $.010116
</TABLE>
In addition, the Fund paid a long-term capital gain distribution of
$.244739 per share to shareholders of record on December 14, 1995.
Please retain this information for your records.
PORTFOLIO INFORMATION (unaudited)
Worldwide
Investments as of 11/30/96
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
<PAGE>
Telefonica de Espana S.A. 3.1%
Australian Gas & Light Co., Ltd. 2.9
Generale des Eaux S.A. 2.9
The Coastal Corp. 2.9
Iberdrola I S.A. 2.4
Questar Corp. 2.4
Telecom Italia Mobile S.p.A. 2.4
Societa Finanziara Telefonica S.p.A. (STET) 2.3
Telecom Italia S.p.A. 2.3
Empresa Nacional de Electricidad, S.A. (ADR) 2.3
Addition (Equity Investments)
Deutsche Telekom AG
Deletions (Equity Investments)
CESC Ltd. (GDR)
Enersis S.A. (ADR)
Telefonica de Espana S.A. (ADR)
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Walter D. Rogers, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
