MERRILL LYNCH
GLOBAL UTILITY
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
May 31, 1998
<PAGE>
MERRILL LYNCH GLOBAL UTILITY FUND, INC.
Sector
Diversification
As a Percentage of
Equities as of
May 31, 1998
[The following table was depicted as a pie chart in the printed material.]
Telecommunications 48.9%
Utilities -- Electric 32.7%
Utilities -- Gas 14.1%
Utilities -- Water 4.3%
Geographical
Diversification
As a Percentage of
Equities as of
May 31, 1998
[The following table was depicted as a pie chart in the printed material.]
Europe 47.3%
United States 35.9%
Americas (Ex-US) 9.9%
Asia/Pacific Basin 6.9%
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
DEAR SHAREHOLDER
Increasing volatility characterized the capital markets during the three-month
period ended May 31, 1998. At times, US stock and bond prices reflected
expectations that the slowdown in Asian economic growth would lead to a sharp
decline in US business activity and, ultimately, a deflationary environment. The
deterioration of economic conditions in Japan was of particular concern, and
caused a sharp drop in the yen's value relative to the US dollar. During other
periods, US investors appeared to expect that the positive trends of a
moderately expanding economy, declining unemployment, enhanced productivity and
corporate profits growth would continue, unimpeded by the developments in Asia.
To date, there have been only a few signs that Asia's troubles are influencing
US economic activity. In Europe, the major event was greater progress toward
achieving European Monetary Union, although concerns have arisen that interest
rates will have to be increased to curtail inflationary pressures.
As 1998 progresses, it is likely that investor focus will remain on developments
in Asia. For those economies that continue to expand, investors will watch for
signs that inflation is still not a threat. Evidence of ongoing, noninflationary
economic growth should continue to exert a positive influence on the capital
markets worldwide.
Portfolio Matters
For the three-month and six-month periods ended May 31, 1998, global utility
stocks outperformed both the broad-based US stock market and US utility stocks.
Specifically, during the May quarter, the total return of the unmanaged
benchmark Financial Times/Standard & Poor's (FT/S&P)--Actuaries World Utility
Index was +5.35%; for the six-month period, the unmanaged benchmark Index
provided a total return of +16.25%. This compares to total returns for the
unmanaged domestic US S&P Utility Index of +3.83% and +10.85% for the same
three-month and six-month periods, respectively. However, Merrill Lynch Global
Utility Fund, Inc. outperformed both of these indexes. For the quarter ended May
31, 1998, the Fund's Class A, Class B, Class C and Class D Shares had total
returns of +5.92%, +5.69%, +5.68% and +5.83%, respectively. For the six months
ended May 31, 1998, Class A, Class B, Class C and Class D Shares had total
returns of +16.97%, +16.46%, +16.46% and +16.82%, respectively. In addition, the
Fund outperformed the overall US stock market as measured by the unmanaged
Standard & Poor's 500 Index, which had total returns of +4.30% and +14.98% for
the same three-month and six-month periods, respectively. Furthermore, Merrill
Lynch Global Utility Fund, Inc. outperformed the +3.53% average total return for
105 utility funds tracked by Lipper Analytical Services, Inc. for the
three-month period ended May 31, 1998; the Fund also outperformed the +11.92%
total return for the 105 utility funds tracked for the six-month period ended
May 31, 1998. (Fund results shown do not reflect sales charges and would be
lower if sales charges were included. For complete performance information, see
pages 4 and 5 of this report to shareholders.)
For the quarter ended May 31, 1998, we continued to see significant strength
from several European stock markets and continuing weakness in the Pacific
Basin. Throughout the quarter, the US stock market exhibited positive results,
but was below world and European utility sector averages. The strengthening
value of the US dollar also had a negative impact on total returns when
converted from local currencies. In particular, weakening currencies in Japan,
Indonesia and New Zealand had the effect of turning positive local utility
returns into negative returns when converted to US dollar terms.
During the quarter ended May 31, 1998, we further reduced our holdings in Chile
and Argentina. The financial crisis in Asia continues to negatively influence
the Chilean market and economy because of the country's dependence on exports to
the Southeast Asian region. Our reduction in Argentina holdings was based more
on fundamentals than on macroeconomic factors, since competition in the
telecommunications market is now accelerating. In our opinion, Telecom Argentina
STET S.A. is more attractive and better-positioned to operate in a competitive
environment than Telefonica de Argentina S.A. We also eliminated two small
positions in South Korea and the Philippines. Korea Electric Power Corp. (KEPCO)
was removed from the Fund's portfolio as a result of the effects of the Asian
currency crisis on its foreign debt burden and because of the company's
difficulty in getting tariff increases to help supply much-needed capital.
Manila Electric Co. (MERALCO), a small position in the Philippines, was
eliminated when the risks appeared too high for the potential return because of
court-mandated rebates to its customers.
We also eliminated the Fund's small holdings in Indonesia as the currency,
political and financial risks outweighed the potential returns. In the United
States, we eliminated one natural gas stock, K N Energy, Inc., since potential
excess gas supplies in the Midwest threatened to impact its recently increased
exposure to this region. The Virginia-based electric utility, Dominion
Resources, Inc., was also eliminated from the Fund's portfolio in light of
increased regulatory uncertainty.
Cable & Wireless PLC was added to the Fund's portfolio during the May quarter.
The company, a global telecommuni cations provider with a significant presence
in the United Kingdom and Hong Kong, also has significant operations in the US
long-distance market as well as the telecommunications markets in the Caribbean.
We believe that management will refocus from owning just a collection of
telephone properties to emphasizing revenue growth and cost-cutting, as well as
a strategic thrust toward the Internet and fiber networks.
Transactions during the quarter ended May 31, 1998 have been implemented in
order to modestly increase the Fund's short-term investments, lower its
weighting in the Pacific Basin region and reduce its exposure in South American
markets. (See pie charts on page 1 of this report to shareholders for sector and
geographical breakdowns of the equity portion of the Fund's portfolio.) We
continue to believe that European and US-based utility stocks currently offer
the best value for the level of market risk. Restructuring news, coupled with
merger/acquisition activity, continue to drive the various sectors of the US
utility industry, while deregulation, increasing growth rates for services and
cost-cutting measures continue to drive the European utility market.
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
our next report to shareholders.
Sincerely
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Walter D. Rogers
Walter D. Rogers
Senior Vice President and
Portfolio Manager
July 9, 1998
2 & 3
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
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
Walter D. Rogers, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Thomas D. Jones, III, Secretary
Custodian
The Chase Manhattan Bank, N.A.
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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:
o 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.
o 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
share conversions.)
o 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.
o 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. Figures shown in the "Average Annual Total Return"
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.
Average Annual Total Return
% Return Without %Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/98 +40.30% +34.69%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 +15.38 +14.44
- --------------------------------------------------------------------------------
Inception (12/28/90)
through 3/31/98 +15.30 +14.65
- --------------------------------------------------------------------------------
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/98 +39.23% +35.23%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/98 +14.50 +14.50
- --------------------------------------------------------------------------------
Inception (12/28/90)
through 3/31/98 +14.41 +14.41
- --------------------------------------------------------------------------------
*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 3/31/98 +39.07% +38.07%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/98 +20.29 +20.29
- --------------------------------------------------------------------------------
*Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
**Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without Sales Charge With Sales Charge
================================================================================
Class D Shares*
================================================================================
Year Ended 3/31/98 +39.89% +34.30%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/98 +20.97 +19.54
- --------------------------------------------------------------------------------
*Maximum sales charge is 4%.
**Assuming maximum sales charge.
Recent Performance Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
=======================================================================================================
<S> <C> <C> <C>
ML Global Utility Fund, Inc. Class A Shares +28.10% +5.92% +171.34%
- -------------------------------------------------------------------------------------------------------
ML Global Utility Fund, Inc. Class B Shares +27.09 +5.69 +156.19
- -------------------------------------------------------------------------------------------------------
ML Global Utility Fund, Inc. Class C Shares +27.04 +5.68 + 82.22
- -------------------------------------------------------------------------------------------------------
ML Global Utility Fund, Inc. Class D Shares +27.70 +5.83 + 85.98
=======================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception dates are: Class A and
Class B Shares, 12/28/90; and Class C and Class D Shares, 10/21/94.
4 & 5
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Argentina Telecommunications 137,400 Telecom Argentina STET S.A. (ADR) (b) $ 2,769,582 $ 4,259,400 1.1%
42,500 Telefonica de Argentina S.A. (ADR) (b) 1,174,145 1,383,906 0.4
----------- ----------- ----
3,943,727 5,643,306 1.5
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 6,600 Central Costanera S.A. (ADR) (b)(c) 158,400 192,814 0.1
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Argentina 4,102,127 5,836,120 1.6
==================================================================================================================================
Australia Telecommunications 548,000 Telstra Corporation Ltd. 1,068,597 1,290,891 0.3
---------------------------------------------------------------------------------------------------------------------
Utilities--Gas 2,000,000 Australian Gas & Light Co., Ltd. (The) 5,280,752 14,046,130 3.8
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Australia 6,349,349 15,337,021 4.1
==================================================================================================================================
Austria Utilities--Gas 41,820 Energie-Versorgung Niederoesterreich AG (EVN) 3,050,015 6,454,115 1.7
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Austria 3,050,015 6,454,115 1.7
==================================================================================================================================
Brazil Telecommunications 45,000 Telecomunicacoes Brasileiras S.A.--
Telebras (ADR) (b) 2,176,897 4,798,125 1.3
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 300,000 Companhia Paranaense de Energia (Copel) (ADR) (b) 5,400,000 2,981,250 0.8
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Brazil 7,576,897 7,779,375 2.1
==================================================================================================================================
Canada Telecommunications 109,200 BC Telecom, Inc. 2,011,806 4,076,980 1.1
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 369,100 Nova Scotia Power Co. 3,476,309 4,821,851 1.3
---------------------------------------------------------------------------------------------------------------------
Utilities--Gas 200,000 Transcanada Pipeline Co. Ltd. (ADR) (b) 3,147,485 4,650,000 1.2
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Canada 8,635,600 13,548,831 3.6
==================================================================================================================================
Chile Utilities--Electric 98,100 Distribuidora Chilectra Metropolitana S.A.
(ADR) (b)(c) 1,221,280 2,389,157 0.6
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Chile 1,221,280 2,389,157 0.6
==================================================================================================================================
Denmark Telecommunications 160,000 Tele Danmark A/S (ADR) (b) 3,764,160 7,420,000 2.0
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Denmark 3,764,160 7,420,000 2.0
==================================================================================================================================
France Utilities--Water 68,074 Generale des Eaux S.A. 7,476,968 13,692,260 3.7
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in France 7,476,968 13,692,260 3.7
==================================================================================================================================
Germany Telecommunications 24,300 Deutsche Telekom AG 462,162 652,500 0.2
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 40,000 RWE AG 1,799,334 2,125,701 0.6
4,000 VIAG AG 1,764,306 2,244,669 0.6
70,000 Veba AG 2,284,445 4,603,816 1.2
----------- ----------- ----
5,848,085 8,974,186 2.4
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Germany 6,310,247 9,626,686 2.6
==================================================================================================================================
Hong Kong Utilities--Gas 158,455 Hong Kong and China Gas Co. Ltd. (The) 178,364 207,565 0.1
7,202 Hong Kong and China Gas Co. Ltd. (The) (Warrants) (a) 0 539 0.0
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks & Warrants in Hong Kong 178,364 208,104 0.1
==================================================================================================================================
Italy Telecommunications 2,775,000 Telecom Italia Mobile S.p.A. 2,012,515 16,427,178 4.4
1,505,555 Telecom Italia S.p.A. 2,746,349 11,390,261 3.1
2,891,700 + Telecom Italia S.p.A. (Registered
Non-Convertible) 5,447,174 15,611,228 4.2
----------- ----------- ----
10,206,038 43,428,667 11.7
---------------------------------------------------------------------------------------------------------------------
Utilities--Gas 1,786,300 Italgas Torino S.p.A. 5,169,953 8,239,767 2.2
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Italy 15,375,991 51,668,434 13.9
==================================================================================================================================
Japan Telecommunications 290 Nippon Telegraph and Telephone Corporation (NTT) 2,475,448 2,388,038 0.6
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Japan 2,475,448 2,388,038 0.6
==================================================================================================================================
Mexico Telecommunications 35,000 Telefonos de Mexico, S.A. de C.V. (ADR) (b) 1,924,311 1,660,313 0.4
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Mexico 1,924,311 1,660,313 0.4
==================================================================================================================================
New Zealand Telecommunications 56,000 Telecom Corporation of New Zealand Ltd. (ADR) (b) 1,230,138 2,047,500 0.5
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in New Zealand 1,230,138 2,047,500 0.5
==================================================================================================================================
Peru Telecommunications 195,000 Telefonica del Peru S.A. (ADR) (b) 3,997,500 4,216,875 1.1
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Peru 3,997,500 4,216,875 1.1
==================================================================================================================================
Phillippines Telecommunications 188,000 Philippine Long Distance Telephone Co. (ADR) (b) 4,077,062 4,770,500 1.3
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the Philippines 4,077,062 4,770,500 1.3
==================================================================================================================================
Portugal Telecommunications 205,740 Portugal Telecom, S.A. (ADR) (b) 4,576,844 10,852,785 2.9
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 10,820 EDP--Electricidade de Portugal, S.A. (ADR) (b) 279,589 572,108 0.2
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Portugal 4,856,433 11,424,893 3.1
==================================================================================================================================
Spain Telecommunications 477,300 Telefonica de Espana, S.A. 5,492,570 21,348,580 5.7
---------------------------------------------------------------------------------------------------------------------
Utilities--Electric 259,200 Empresa Nacional de Electricidad, S.A. (Endesa)
(ADR) (b) 2,556,672 6,220,800 1.7
46,000 HidroElectrica Del Cantabrico, S.A. 1,553,961 2,157,770 0.6
808,500 Iberdrola I, S.A. 4,998,321 13,353,924 3.6
----------- ----------- ----
9,108,954 21,732,494 5.9
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks in Spain 14,601,524 43,081,074 11.6
==================================================================================================================================
United Telecommunications 671,000 British Telecommunications PLC 4,688,465 6,995,366 1.9
Kingdom 225,000 Cable & Wireless PLC 2,867,544 2,543,916 0.7
88,000 Vodafone Group PLC (ADR) (b) 2,605,300 9,669,000 2.6
----------- ----------- ----
10,161,309 19,208,282 5.2
---------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Common Stocks & Warrants Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United Utilities--Electric 208,000 National Power PLC $ 1,723,671 $ 1,934,306 0.5%
Kingdom 370,000 PowerGen PLC 2,705,142 4,672,290 1.3
(concluded) ----------- ----------- ----
4,428,813 6,606,596 1.8
------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United Kingdom 14,590,122 25,814,878 7.0
=================================================================================================================================
United States Telecommunications 46,000 AT&T Corporation 1,848,510 2,800,250 0.7
140,000 Ameritech Corp. 2,996,450 5,941,250 1.6
47,616 Bell Atlantic Corporation 2,819,654 4,362,816 1.2
91,800 BellSouth Corp. 2,702,773 5,921,100 1.6
108,000 Frontier Corp. 2,193,480 3,287,250 0.9
85,000 GTE Corp. 3,145,450 4,956,563 1.3
139,800 SBC Communications, Inc. 2,939,711 5,434,725 1.5
68,000 U S West Communications Group 1,895,186 3,451,000 0.9
108,000 + WorldCom Inc. 3,572,937 4,914,000 1.3
----------- ----------- ----
24,114,151 41,068,954 11.0
------------------------------------------------------------------------------------------------------------------
Utilities--Electric 156,000 Allegheny Energy Corp. 4,213,210 4,377,750 1.2
87,200 Boston Edison Co. 2,722,264 3,537,050 0.9
166,962 CINergy Corp. 4,045,124 5,394,960 1.4
84,200 Consolidated Edison Company of New York 2,991,744 3,604,813 1.0
118,900 DTE Energy Co. 4,092,463 4,703,981 1.3
85,000 Duke Energy Co. 3,180,276 4,898,125 1.3
86,000 Edison International 1,925,397 2,537,000 0.7
127,300 GPU, Inc. 4,047,821 4,901,050 1.3
75,200 Houston Industries, Inc. 1,840,708 2,152,600 0.6
239,500 NIPSCO Industries, Inc. 3,715,746 6,436,563 1.7
124,000 New Century Energies Corp. 3,798,642 5,704,000 1.5
106,000 New York State Electric & Gas Corp. 3,787,564 4,306,250 1.2
140,500 PECO Energy Co. 4,344,731 3,969,125 1.1
183,000 PacifiCorp 3,657,980 4,220,437 1.1
91,200 Southern Co. 2,022,770 2,422,500 0.6
68,000 TECO Energy, Inc. 1,789,080 1,780,750 0.5
100,000 Texas Utilities Holding Co. 3,506,000 3,950,000 1.1
----------- ----------- ----
55,681,520 68,896,954 18.5
------------------------------------------------------------------------------------------------------------------
Utilities--Gas 47,500 Coastal Corp. (The) 1,262,602 3,348,750 0.9
40,000 Enron Corporation 1,842,108 2,005,000 0.5
130,000 Keyspan Energy Corporation 3,371,550 4,379,375 1.2
84,000 Questar Corp. 2,475,460 3,407,250 0.9
46,300 Sonat, Inc. 1,537,769 1,814,381 0.5
60,000 Williams Companies, Inc. (The) 1,978,230 1,946,250 0.5
----------- ----------- ----
12,467,719 16,901,006 4.5
------------------------------------------------------------------------------------------------------------------
Utilities--Water 86,200 Philadelphia Suburban Corporation 1,869,462 1,697,062 0.5
------------------------------------------------------------------------------------------------------------------
Total Common Stocks in the United States 94,132,852 128,563,976 34.5
=================================================================================================================================
Total Investments in Common Stocks & Warrants 205,926,388 357,928,150 96.1
=================================================================================================================================
Face
Amount Short-Term Securities
=================================================================================================================================
Commercial Paper* $5,279,000 General Motors Acceptance Corp., 5.69%
due 6/01/1998 5,277,331 5,277,331 1.4
------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities 5,277,331 5,277,331 1.4
=================================================================================================================================
Total Investments $211,203,719 363,205,481 97.5
Other Assests Liabilities ============ 9,085,296 2.5
----------- -----
Net Assets $372,290,777 100.0%
=========== =====
====================================================================================================================================
</TABLE>
(a) 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 and are
non-income producing.
(b) American Depositary Receipts (ADR).
(c) The security may be offered and sold to "qualified institutional buyers"
under Rule 144A of the Securities Act of 1933.
* Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the Fund.
+ Non-income producing security.
See Notes to Financial Statements.
PORTFOLIO INFORMATION
Worldwide Investments as of May 31, 1998
Ten Largest Holdings Percent of
(Equity Investments) Net Assets
Telefonica de Espana, S.A ........................................... 5.7%
Telecom Italia Mobile S.p.A ......................................... 4.4
Telecom Italia S.p.A. (Registered Non-Convertible) .................. 4.2
Australian Gas & Light Co., Ltd. (The) .............................. 3.8
Generale des Eaux S.A ............................................... 3.7
Iberdrola I, S.A .................................................... 3.6
Telecom Italia S.p.A ................................................ 3.1
Portugal Telecom, S.A. (ADR) ........................................ 2.9
Vodafone Group PLC (ADR) ............................................ 2.6
Italgas Torino S.p.A ................................................ 2.2
Addition
Cable & Wireless PLC
Deletions
Chilgener S.A. (ADR)
Compania de Telefonos de Chile S.A. (ADR)
Dominion Resources, Inc.
K N Energy, Inc.
Korea Electric Power Corp. (KEPCO) (ADR)
Manila Electric Co. (MERALCO) `B'
P.T. Indonesian Satellite Corp. (Indosat) (ADR)
P.T. Telekomunikasi Indonesia (Persero) (ADR)
8 & 9
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of May 31, 1998
==========================================================================================================================
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$211,203,719) (Note 1a) .............. $363,205,481
Cash ......................................................................... 7,319
Foreign cash (Note 1b) ....................................................... 4
Receivables:
Securities sold ............................................................ $ 9,388,499
Dividends .................................................................. 710,970
Capital shares sold ........................................................ 299,070 10,398,539
Prepaid registration fees and other assets (Note 1f) ......................... ------------ 23,040
- ........................... ------------
Total assets ................................................................. 373,634,383
------------
==========================================================================================================================
Liabilities: Payables:
Capital shares redeemed 764,423
Distributor (Note 2) ....................................................... 196,628
Investment adviser (Note 2) ................................................ 180,430 1,141,481
Accrued expenses and other liabilities ....................................... ------------ 202,125
------------
Total liabilities ............................................................ 1,343,606
------------
==========================================================================================================================
Net Assets Net assets ................................................................... $372,290,777
============
==========================================================================================================================
Net Assets Class A Shares of Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized ............................................................ $ 232,771
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized ............................................................ 1,731,390
Class C Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized ............................................................ 32,698
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized ............................................................ 45,401
Paid-in capital in excess of par ............................................. 202,951,684
Undistributed investment income--net ......................................... 1,157,665
Undistributed realized capital gains on investments and foreign currency
transactions--net ............................................................ 14,137,342
Unrealized appreciation on investments and foreign currency transactions--net 152,001,826
------------
Net assets ................................................................... $372,290,777
============
==========================================================================================================================
Net Asset Class A--Based on net assets of $42,548,508 and 2,327,710
Value: shares outstanding ........................................................... $ 18.28
============
Class B--Based on net assets of $315,495,370 and 17,313,902
shares outstanding ........................................................... $ 18.22
============
Class C--Based on net assets of $5,944,470 and 326,981
shares outstanding ........................................................... $ 18.18
============
Class D--Based on net assets of $8,302,429 and 454,009
shares outstanding $ 18.29
============
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended May 31, 1998
==========================================================================================================================
<S> <C> <C> <C>
Investment Dividends (net of $422,525 foreign withholding tax) .......................... $ 5,284,021
Income Interest and discount earned ................................................. 161,557
(Notes 1d & ------------
1e): Total income ................................................................. 5,445,578
==========================================================================================================================
Expenses: Account maintenance and distribution fees--Class B (Note 2) .................. $ 1,180,742
Investment advisory fees (Note 2) ............................................ 1,110,444
Transfer agent fees--Class B (Note 2) ........................................ 184,134
Custodian fees ............................................................... 76,882
Accounting services (Note 2) ................................................. 38,109
Professional fees ............................................................ 35,312
Registration fees (Note 1f) .................................................. 33,394
Printing and shareholder reports ............................................. 32,139
Account maintenance and distribution fees--Class C (Note 2) .................. 23,332
Transfer agent fees--Class A (Note 2) ........................................ 20,307
Directors' fees and expenses ................................................. 10,085
Account maintenance fees--Class D (Note 2) ................................... 9,764
Transfer agent fees--Class D (Note 2) ........................................ 3,810
Transfer agent fees--Class C (Note 2) ........................................ 3,618
Pricing fees ................................................................. 1,111
Other ........................................................................ 6,911
------------
Total expenses ............................................................... 2,770,094
------------
Investment income--net ....................................................... 2,675,484
------------
==========================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Investments--net ........................................................... 14,197,585
gain (Loss) Foreign currency transactions--net ......................................... (60,201) 14,137,384
on ivestments ------------
& Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net ........................................................... 39,288,026
Transactions Foreign currency transactions--net ......................................... 784 39,288,810
- --Net (Notes Net realized and unrealized gain on investments and foreign currency ------------ ------------
1b, 1c, 1e & transactions ................................................................ 53,426,194
3): ------------
Net Increase in Net Assets Resulting from Operations ......................... $ 56,101,678
============
==========================================================================================================================
</TABLE>
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
Increase (Decrease) in Net Assets: May 31, 1998 Nov. 30, 1997
===============================================================================================================================
<S> <C> <C> <C>
Operations: Investment income--net ......................................................... $ 2,675,484 $ 8,412,988
Realized gain on investments and foreign currency transactions--net ............ 14,137,384 25,279,564
Change in unrealized appreciation/depreciation on investments and foreign
currency transactions--net ..................................................... 39,288,810 29,205,060
------------- -------------
Net increase in net assets resulting from operations ........................... 56,101,678 62,897,612
------------- -------------
===============================================================================================================================
Dividends & Investment income--net:
Distributions Class A ...................................................................... (386,127) (1,226,228)
Shareholders Class B ...................................................................... (1,747,551) (7,470,524)
(Note 1g): Class C ...................................................................... (30,223) (104,297)
Class D ...................................................................... (61,050) (159,532)
Realized gain on investments--net:
Class A ...................................................................... (2,800,653) (1,172,347)
Class B ...................................................................... (21,708,174) (9,833,032)
Class C ...................................................................... (400,316) (98,232)
Class D ...................................................................... (489,776) (130,954)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders ................................................................ (27,623,870) (20,195,146)
------------- -------------
===============================================================================================================================
Capital Share Net decrease in net assets derived from capital share transactions ............. (8,892,166) (73,229,623)
Transactions ------------- -------------
(Note 4):
===============================================================================================================================
Net Assets: Total increase (decrease) in net assets ........................................ 19,585,642 (30,527,157)
Beginning of period ............................................................ 352,705,135 383,232,292
------------- -------------
End of period* ................................................................. $ 372,290,777 $ 352,705,135
============= =============
===============================================================================================================================
* Undistributed investment income--net ......................................... $ 1,157,665 $ 707,132
============= =============
===============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
------------------------------------------------------------
The following per share data and ratios have
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, ----------------------------------------------
Increase (Decrease) in Net Asset Value: 1998+ 1997+ 1996+ 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 16.97 $ 15.09 $ 13.52 $ 12.08 $ 13.22
Operating --------- -------- -------- ------- -------
Performance: Investment income--net ........................... .19 .47 .50 .51 .94
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 2.53 2.35 1.84 1.42 (1.57)
--------- -------- -------- ------- -------
Total from investment operations ................. 2.72 2.82 2.34 1.93 (.63)
--------- -------- -------- ------- -------
Less dividends and distributions:
Investment income--net ......................... (.17) (.49) (.53) (.49) (.47)
Realized gain on investments--net .............. (1.24) (.45) (.24) -- (.04)
--------- -------- -------- ------- -------
Total dividends and distributions ................ (1.41) (.94) (.77) (.49) (.51)
--------- -------- -------- ------- -------
Net asset value, end of period ................... $ 18.28 $ 16.97 $ 15.09 $ 13.52 $ 12.08
========= ======== ======== ======= =======
=================================================================================================================================
Total Based on net asset value per share ............... 16.97%++ 19.65% 17.94% 16.34% (4.89%)
Investment ========= ======== ======== ======= =======
Return:**
=================================================================================================================================
Ratios to Expenses ......................................... .82%* .82% .84% .91% .86%
Average ========= ======== ======== ======= =======
Net Assets: Investment income--net ........................... 2.12%* 2.98% 3.51% 3.73% 3.58%
========= ======== ======== ======= =======
=================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $ 42,549 $ 38,825 $ 40,055 $44,775 $56,659
Data: ========= ======== ======== ======= =======
Portfolio turnover ............................... 3.83% 6.23% 5.03% 2.92% 17.02%
========= ======== ======== ======= =======
Average commission rate paid++ ................... $ .0434 $ .0234 $ .0328 -- --
========= ======== ======== ======= =======
=================================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ 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.
++ Aggregate total investment return.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
The following per share data and ratios have
been derived from information provided in For the Six
the financial statements. Months Ended For the Year Ended November 30,
May 31, -----------------------------------------------
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 16.93 $ 15.05 $ 13.47 $ 12.04 $ 13.17
Operating --------- -------- -------- -------- --------
Performance: Investment income--net ........................... .12 .35 .39 .38 .74
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 2.51 2.35 1.84 1.44 (1.46)
--------- -------- -------- -------- --------
Total from investment operations ................. 2.63 2.70 2.23 1.82 (.72)
--------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... (.10) (.37) (.41) (.39) (.37)
Realized gain on investments--net .............. (1.24) (.45) (.24) -- (.04)
--------- -------- -------- -------- --------
Total dividends and distributions ................ (1.34) (.82) (.65) (.39) (.41)
--------- -------- -------- -------- --------
Net asset value, end of period ................... $ 18.22 $ 16.93 $ 15.05 $ 13.47 $ 12.04
========= ======== ======== ======== ========
===============================================================================================================================
Total Based on net asset value per share ............... 16.46%++ 18.77% 17.07% 15.38% (5.60%)
Investment ========= ======== ======== ======== ========
Return:**
===============================================================================================================================
Ratios to Expenses ......................................... 1.59%* 1.59% 1.61% 1.68% 1.63%
Average ========= ======== ======== ======== ========
Net Assets: Investment income--net ........................... 1.35%* 2.22% 2.74% 2.95% 2.82%
========= ======== ======== ======== ========
===============================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $ 315,495 $301,459 $335,487 $381,098 $459,185
Data: ========= ======== ======== ======== ========
Portfolio turnover ............................... 3.83% 6.23% 5.03% 2.92% 17.02%
========= ======== ======== ======== ========
Average commission rate paid++ ................... $ .0434 $ .0234 $ .0328 -- --
========= ======== ======== ======== ========
===============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
===================================================================================================================================
Class C
----------------------------------------------------------------
For the
The following per share data and ratios have Period
been derived from information provided in For the Six For the Year Ended Oct. 21,
the financial statements. Months Ended November 30, 1994+
May 31, ----------------------------------- to Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $ 16.89 $ 15.03 $ 13.46 $ 12.05 $ 12.34
Operating --------- --------- -------- -------- --------
Performance: Investment income--net ........................... .11 .33 .38 .39 .01
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net ........... 2.50 2.35 1.84 1.43 (.30)
--------- --------- -------- -------- --------
Total from investment operations ................. 2.61 2.68 2.22 1.82 (.29)
--------- --------- -------- -------- --------
Less dividends and distributions:
Investment income--net ......................... (.08) (.37) (.41) (.41) --
Realized gain on investments--net .............. (1.24) (.45) (.24) -- --
--------- --------- -------- -------- --------
Total dividends and distributions ................ (1.32) (.82) (.65) (.41) --
--------- --------- -------- -------- --------
Net asset value, end of period ................... $ 18.18 $ 16.89 $ 15.03 $ 13.46 $ 12.05
========= ========= ======== ======== ========
================================================================================================================================
Total Based on net asset value per share ............... 16.46%++ 18.66% 17.03% 15.38% (2.35%)++
Investment ========= ========= ======== ======== ========
Return:**
================================================================================================================================
Ratios to Expenses ......................................... 1.65%* 1.63% 1.66% 1.73% 1.60%*
Average ========= ========= ======== ======== ========
Net Assets: Investment income--net ........................... 1.29%* 2.07% 2.65% 2.85% 3.01%*
========= ========= ======== ======== ========
================================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $ 5,945 $ 5,486 $ 3,325 $ 2,072 $ 445
Data: ========= ========= ======== ======== ========
Portfolio turnover ............................... $ 3.83% 3.23% 5.03% 2.92% 17.02%
========= ========= ======== ======== ========
Average commission rate paid++ ................... $ .0434 $ .0234 $ .0328 -- --
========= ========= ======== ======== ========
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==================================================================================================================================
Class D
------------------------------------------------------------
The following per share data and ratios have For the For the
been derived derived from information provided Six Months For the Year Ended Period
in the financial statements. Ended November 30, Oct. 21, 1994+
May 31, ----------------------------- to Nov. 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996++ 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ............. $16.98 $15.10 $13.55 $12.09 $12.37
Operating ------ ------ ------ ------ ------
Performance: Investment income--net ........................... .16 .43 .50 .52 .02
Realized and unrealized gain (loss) on
investments and foreign currency transactions--net 2.53 2.35 1.79 1.40 (.30)
------ ------ ------ ------ ------
Total from investment operations ................. 2.69 2.78 2.29 1.92 (.28)
------ ------ ------ ------ ------
Less dividends and distributions:
Investment income--net ......................... (.14) (.45) (.50) (.46) --
Realized gain on investments--net .............. (1.24) (.45) (.24) -- --
------ ------ ------ ------ ------
Total dividends and distributions ................ (1.38) (.90) (.74) (.46) --
------ ------ ------ ------ ------
Net asset value, end of period ................... $18.29 $ 16.98 $ 15.10 $ 13.55 $ 12.09
====== ====== ====== ====== ======
==============================================================================================================================
Total Based on net asset value per share ............... 16.82%++ 19.35% 17.45% 16.21% (2.26%)++
Investment ====== ====== ====== ====== ======
Return:**
==============================================================================================================================
Ratios to Expenses ......................................... 1.07%* 1.06% 1.07% 1.15% 1.08%*
Average ====== ====== ====== ====== ======
Net Assets: Investment income--net ........................... 1.88%* 2.70% 3.30% 3.36% 3.25%*
====== ====== ====== ====== ======
==============================================================================================================================
Supplemental Net assets, end of period (in thousands) ......... $8,302 $6,935 $4,365 $1,516 $ 239
Data: ====== ====== ====== ====== ======
Portfolio turnover ............................... 3.83% 6.23% 5.03% 2.92% 17.02%
====== ====== ====== ====== ======
Average commission rate paid+++ .................. $.0434 $.0234 $.0328 -- --
====== ====== ====== ====== ======
==============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ 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.
++ Aggregate total investment return.
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
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. These unaudited financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair statement of the results for
the interim period presented. All such adjustments are of a normal recurring
nature. The Fund offers four classes of shares under the Merrill Lynch Select
PricingSM 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.
(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.
o 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.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts. 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.
o 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.
o 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.
(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 dates. Dividends
from foreign securities where the ex-dividend date may have passed are
subsequently recorded when the Fund has determined the ex-dividend dates.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged to expense
as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM"). The general partner of MLAM is Princeton
Services, Inc. ("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch &
Co., Inc. ("ML & Co."), which is the limited partner. The Fund has also entered
into a Distribution Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the 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 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% 0.50%
Class C ........................ 0.25% 0.55%
Class D ........................ 0.25% --
- --------------------------------------------------------------------------------
16 & 17
<PAGE>
Merrill Lynch Global Utility Fund, Inc., May 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
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 six months ended May 31, 1998, MLFD earned underwriting discounts and
direct commissions 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 ........................ $173 $2,469
Class D ........................ $262 $2,701
- --------------------------------------------------------------------------------
For the six months ended May 31, 1998, MLPF&S received contingent deferred sales
charges of $79,442 and $1,087, relating to transactions in Class B Shares and
Class C Shares, respectively.
In addition, MLPF&S received $10,495 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended May 31,
1998.
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 six
months ended May 31, 1998 were $13,890,469 and $53,521,938, respectively.
Net realized gains (losses) for the six months ended May 31, 1998 and net
unrealized gains as of May 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized
Gains Unrealized
(Losses) Gains
- --------------------------------------------------------------------------------
Long-term investments .......... $ 14,197,585 $152,001,762
Foreign currency transactions .. (60,201) 64
------------ ------------
Total .......................... $ 14,137,384 $152,001,826
============ ============
- --------------------------------------------------------------------------------
As of May 31, 1998, net unrealized appreciation for Federal income tax purposes
aggregated $152,001,762, of which $155,683,864 related to appreciated securities
and $3,682,102 related to depreciated securities. The aggregate cost of
investments at May 31, 1998 for Federal income tax purposes was $211,203,719.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$8,892,166 and $73,229,623 for the six months ended May 31, 1998 and the year
ended November 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 199,556 $ 3,518,729
Shares issued to shareholders
in reinvestment of dividends
and distributions .................. 155,695 2,555,870
-------- ------------
Total issued ....................... 355,251 6,074,599
Shares redeemed .................... (314,997) (5,560,163)
-------- ------------
Net increase ....................... 40,254 $ 514,436
======== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 153,463 $ 2,379,323
Shares issued to shareholders
in reinvestment of dividends
and distributions .................. 129,136 1,920,920
-------- ------------
Total issued ....................... 282,599 4,300,243
Shares redeemed .................... (649,437) (10,126,477)
-------- ------------
Net decrease ....................... (366,838) $ (5,826,234)
======== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 551,199 $ 9,598,116
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 1,120,814 18,261,239
---------- -----------
Total issued ....................... 1,672,013 27,859,355
Automatic conversion of shares ..... (22,326) (393,542)
Shares redeemed .................... (2,144,304) (37,611,265)
---------- -----------
Net decrease ....................... (494,617) $(10,145,452)
========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 742,021 $ 11,572,951
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 907,341 13,394,936
---------- ------------
Total issued ....................... 1,649,362 24,967,887
Automatic conversion of shares ..... (116,073) (1,799,482)
Shares redeemed .................... (6,016,308) (94,007,577)
---------- ------------
Net decrease ....................... (4,483,019) $(70,839,172)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 44,607 $ 778,445
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 22,660 368,362
------- ------------
Total issued ....................... 67,267 1,146,807
Shares redeemed .................... (65,090) (1,139,354)
------- ------------
Net increase ....................... 2,177 $ 7,453
======= ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 203,432 $ 3,216,009
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 11,912 178,063
-------- ------------
Total issued ....................... 215,344 3,394,072
Shares redeemed .................... (111,820) (1,799,829)
-------- ------------
Net increase ....................... 103,524 $ 1,594,243
======== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended May 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 335,654 $ 5,668,654
Automatic conversion of shares ..... 22,253 393,542
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 27,875 457,400
-------- ------------
Total issued ....................... 385,782 6,519,596
Shares redeemed .................... (340,118) (5,788,199)
-------- ------------
Net increase ....................... 45,664 $ 731,397
======== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended November 30, 1997 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 240,150 $ 3,891,095
Automatic conversion of shares ..... 115,735 1,799,482
Shares issued to shareholders in
reinvestment of dividends and
distributions ...................... 16,802 252,302
-------- ------------
Total issued ....................... 372,687 5,942,879
Shares redeemed .................... (253,415) (4,101,339)
-------- ------------
Net increase ....................... 119,272 $ 1,841,540
======== ============
- --------------------------------------------------------------------------------
18 & 19
<PAGE>
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 Utility Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #11693--5/98
[RECYCLE LOGO] Printed on post-consumer recycled paper
