MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
FUND LOGO
Annual Report
June 30, 1995
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
This report is not authorized for use as an offer of sale
or 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 re-
port 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.
Merrill Lynch
Global SmallCap
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Andrew John Bascand, Vice President
Donald C. Burke, Vice President
Kenneth Chiang, Vice President
Adrian Holmes, Vice President
Grace Pineda, Vice President
James Russell, Vice President
Dennis W. Stattman, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
<PAGE>
Merrill Lynch
Global SmallCap
Fund, Inc.
Management Team
Andrew John Bascand--Senior Portfolio Manager/Asset
Allocator. As the Fund's Asset Allocator, Mr. Bascand is
primarily responsible for determining the allocation of the
Fund's assets among equity markets in the United States,
Europe, the emerging markets and the Pacific Basin.
Kenneth Chiang--Co-Portfolio Manager--Emerging Markets
Investments. Mr. Chiang is primarily responsible for the Fund's
investments in emerging markets in Asia.
Adrian Holmes--Co-Portfolio Manager--European
Investments. Mr. Holmes is primarily responsible for the
Fund's European investments.
Grace Pineda--Co-Portfolio Manager--Emerging Markets
Investments. Ms. Pineda is primarily responsible for invest-
ments in emerging markets in Europe and Latin America.
James Russell--Co-Portfolio Manager--Japanese Investments.
Mr. Russell is primarily responsible for the Fund's Japanese
investments.
Dennis Stattman--Co-Portfolio Manager--US Investments.
Mr. Stattman is primarily responsible for the Fund's invest-
ments in the United States.
Worldwide
Investments
As of 6/30/95
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Kloeckner Werke AG Germany 1.6%
Greencore PLC Ireland 1.4
Cristaleria Espanola S.A. Spain 1.4
Daetwyler Holdings AG Switzerland 1.3
London International Group
(Ordinary) United Kingdom 1.3
Oesterreichische Elektrizitats
AG (Verbund) Austria 1.2
Boddington Group PLC United Kingdom 1.2
Svedala Industri AB Sweden 1.2
Swheizerische Industrie--
Gasellschaft Holdings AG (SIG) Switzerland 1.2
Papeles Nacionales C.A. (ADR) Colombia 1.2
<PAGE>
Percent of
Ten Largest Industries Net Assets
Engineering & Construction 5.9%
Insurance 5.6
Construction 2.8
Retail Specialty 2.7
Restaurants 2.4
Textiles 2.4
Automobile Parts 2.3
Banking & Finance 2.2
Diversified 1.8
Retailing 1.7
DEAR SHAREHOLDER
Global equity markets produced posi-
tive returns during the June 30, 1995
quarter. During this three-month period,
the US dollar total return of the unman-
aged Salomon Brothers World Equity
Index--Extended Market Index (EMI),
a global small cap index, was +4.1%.
Small cap issues performed broadly in
line with large cap issues during the
last three months. The US dollar total
return of the unmanaged Financial
Times--Actuaries World Index, an indi-
cator of large cap performance, was
+4.0% during the second quarter.
There was wide variation in small cap
stock market performance during the
June quarter. The best-performing mar-
kets were in continental Europe, with
Spain and Sweden returning 20.4% and
15.2%, respectively. The US market also
was strong, returning 9.0% during the
second quarter of 1995. According to
the International Finance Corp., emerg-
ing market equities rose 5.2% during
the June quarter, with the Latin Ameri-
can markets the best performers. Japan
was the worst-performing market dur-
ing the three-month period under
review, falling 10.4% in US dollar terms.
<PAGE>
For the three-month period ended June
30, 1995, total returns for Merrill Lynch
Global SmallCap Fund, Inc.'s Class A,
Class B, Class C and Class D Shares
were +2.53%, +2.31%, +2.31% and
+2.53%, respectively. (Results do not
reflect the deduction of sales charges,
and would be lower if sales charges
were included. Complete performance
information, including aggregate total
returns, can be found on pages 4, 5 and 6
of this report to shareholders.)
The Fund's underperformance during
the quarter ended June 30, 1995
reflected negative contributions from
an overweighted stance toward Japanese
small caps and an underweighted
position in the US market. Positive
contributions to Fund performance
came from our overweight positions in
continental European and emerging
market small caps. Currency manage-
ment was generally neutral for Fund
performance.
Portfolio Matters
Our strategic investment stance
remained unchanged during the June
quarter. We continued to favor the
Japanese equity market over the US
market. We added to our Japanese
position over the course of the June
quarter, as the relative weakness of the
Japanese equity market lowered the
Fund's weighting.
Tactically, we purchased futures on
Hong Kong equities during May and
June. The purchase reflected our
increasing uncertainty on the US eco-
nomic and interest rate outlook. Weak
US economic data raised the possibility
of official interest rate cuts in the
United States and further falls in US
bond yields. The Hong Kong market is
generally a beneficiary of falling US
interest rates. The ensuing rally in US
bonds drove US bond yields down to
very aggressive levels. We decided to
close out our Hong Kong futures posi-
tion on June 26, 1995.
<PAGE>
We maintained our overall exposure to
emerging markets at around 10% of
the Fund's total assets. However, we
reduced our exposure to Latin American
sovereign debt and purchased Latin
American equities instead. Our primary
motivation for the switch from Latin
American debt into equities was the
strong outperformance of debt versus
equities as US bonds rallied.
In terms of the Fund's currency expo-
sures, we retained our overweight US
dollar stance by hedging back the major-
ity of our Japanese yen exposure into
US dollars. We also hedged some of our
European currency exposure back into
US dollars.
Economic and Investment
Environment
The sharp slowing in US output and
employment indicators during the last
three months was associated with a
significant decline in US interest rate
expectations. The unexpected weakness
in economic activity significantly
impacted Merrill Lynch Global SmallCap
Fund, Inc.'s relative performance as the
Fund was positioned for a continued
US expansion and a stronger US dollar.
The crucial question currently is gaug-
ing the possible magnitude and direc-
tion of the US economy. Further weak-
ness in US economic indicators over
the next three months potentially would
be associated with greater risk for the
global economic cycle and with a fur-
ther rally in world bond markets.
However, we believe that US interest
rate expectations anticipate significant
weakness in the economy and aggres-
sive easing by the US Federal Reserve
Board. Although a modest cut in
interest rates by the Federal Reserve
Board cannot be ruled out, US financial
markets are now exposed to a pick-up
in consumer and business spending.
Stronger US economic output figures
would dampen bullish market senti-
ment for lower interest rates.
<PAGE>
Outside the United States, economic
indicators also show slowing growth in
Germany and Japan. Currency appreci-
ation has significantly affected business
confidence in both of these economies,
while the US slowdown will further
restrict foreign demand for their exports.
However, consumers and, increasingly,
corporations in both Germany and Japan
are generally in a strong financial posi-
tion to increase spending. As a result,
we expect domestic demand growth in
these economies to be expanding into
1996. Additionally, within Europe,
inventories are not excessive, so that a
resumption of demand growth may
translate relatively rapidly into stronger
output expansion. In general, the
downside risks to economic growth
outside the United States appear limited.
As the cyclical upswing in Europe
strengthens again, monetary policy
tightening will be necessary in the "soft
currency" economies of the United
Kingdom, Sweden, Spain and Italy. All
of these economies have been growing
strongly. Although interest rates in the
"hard currency" European bloc (for
example, Germany and Switzerland)
will not need to rise by nearly as much
as in the soft currency region, interest
rates across Europe will probably
increase over the next year or so.
Contrary to our earlier expectations,
Japanese economic data remain weak.
Although interest rates continue to
decline and fiscal policy remains stimu-
latory, Japanese industry struggles to
adjust to the impacts of currency
strength, the short-term decline in
production caused by the Kobe earth-
quake, and the influence of subway gas
attacks and rising unemployment on
consumer sentiment. Over the next few
months we expect a further deteriora-
tion in Japanese economic activity, but
we believe Japanese financial markets
<PAGE>
have probably now fully discounted this
short-term poor growth outlook. For
example, five-year Japanese bond yields
fell below 2%, and one-year interest
rates are now less than 1%. The con-
sensus on Japanese gross domestic
product (GDP) growth in 1995 fell from
1.8% at the turn of the year to just 1.3%
currently. We believe that a further
fiscal expansion package, a very loose
monetary policy and some reversal of
the yen's recent strength will lift
Japanese growth expectations from
their current low levels. Japanese
corporate earnings could potentially
double in the next two years, even with
modest GDP growth.
Fiscal Year in Review
Since the Fund's inception on August 5,
1994 through June 30, 1995, total returns
for the Fund's Class B and Class D
Shares were -11.55% and -10.85%,
respectively. Total returns for Class A
and Class C Shares were -9.11% and
-9.75%, respectively, since inception
(October 21, 1994) through June 30, 1995.
The Fund's first year was marked by a
number of notable market factors. First,
Japanese small caps fell approximately
30% (in yen terms). Second, the Mexican
peso crisis erupted and undermined
investor confidence in emerging mar-
kets, as well as in some developed
economies with high debt burdens.
Finally, the US dollar depreciated
sharply in March 1995 against the yen
and the Deutschemark. Furthermore,
all of these crises contributed to a
marked downgrading of global growth
expectations over the last few months.
Weaker growth expectations have
harmed small cap performance relative
to large caps. These three factors
resulted in dramatic portfolio volatility
and contributed to the Fund's poor
performance since inception.
<PAGE>
Overall asset allocation across equity
markets detracted from performance.
Our underweighted stance in the US
market detracted about 3.6% from rela-
tive performance, while our over-
weighted stance towards Japanese small
caps and Latin America detracted
approximately 0.9% and 1.9%, respec-
tively, from Fund performance relative
to the benchmark.
Stock selection also detracted from
performance in Japan. Another signifi-
cant negative factor for Fund perform-
ance was its overweighted position in
the US dollar.
In Conclusion
Our investment strategy continues to
underweight US small caps while hold-
ing an overweighted stance towards
Japanese, Continental European and
emerging market small caps. We con-
tinue to hedge a portion of our Japanese
and European equity exposures back
into US dollars. The Fund currently
retains a 10% position in cash and
fixed-income investments.
We anticipate some retracement of
recent gains in equity markets, particu-
larly the United States, as stronger
economic numbers in the United States
cause bond yields to back up. However,
our expectations of a stronger US dollar
relative to the yen should be a positive
factor for the Japanese equity market.
We thank you for your continued inter-
est in Merrill Lynch Global SmallCap
Fund, Inc., and we look forward to
reviewing our strategy with you in our
upcoming quarterly shareholder letter.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Andrew Bascand)
Andrew Bascand
Senior Portfolio Manager/
Asset Allocator
(Kenneth Chiang)
Kenneth Chiang
Co-Portfolio Manager
Emerging Markets Investments--Asia
(Adrian Holmes)
Adrian Holmes
Co-Portfolio Manager
European Investments
(Grace Pineda)
Co-Portfolio Manager
Emerging Markets Investments--
Europe and Latin America
(James Russell)
James Russell
Co-Portfolio Manager
Japanese Investments
(Dennis Stattman)
Dennis Stattman
Co-Portfolio Manager
US Investments
July 31, 1995
<PAGE>
PERFORMANCE DATA
About Fund
Performance
Since October 21, 1994, investors have been able to purchase
shares of the Fund through the Merrill Lynch Select Pricing SM
System, which offers four pricing alternatives:
*Class A Shares incur a maximum initial sales charge (front-
end load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors, as detailed in the Fund's prospectus. If you were a
Class A shareholder prior to October 21, 1994, your Class A
Shares were redesignated to Class D Shares on October 21, 1994,
which, in the case of certain eligible investors, were simultane-
ously exchanged for Class A Shares.
*Class B Shares are subject to a maximum contingent deferred
sales charge of 4% if redeemed during the first year, decreasing
1% each year thereafter to 0% after the fourth year. In addition,
Class B Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. These shares automatically
convert to Class D Shares after 8 years.
*Class C Shares are subject to a distribution fee of 0.75% and
an account maintenance fee of 0.25%. In addition, Class C
Shares are subject to a 1% contingent deferred sales charge
if redeemed within one year of purchase.
*Class D Shares incur a maximum initial sales charge of
5.25% and an account maintenance fee of 0.25% (but no
distribution fee).
Performance data for the Fund's Class B and Class D Shares are
presented in the "Total Return Based on a $10,000 Investment"
graph on page 5. Performance data for all of the Fund's shares are
presented in the "Recent Performance Results" and "Aggregate
Total Return" tables on pages 5 and 6.
The "Recent Performance Results" table shows investment
results before the deduction of any sales charges for Class B
and Class D Shares for the since inception (August 5, 1994) and
3-month periods ended June 30, 1995 and for Class A and
Class C Shares for the since inception (October 21, 1994) and
3-month periods ended June 30, 1995. All data in this table
assume imposition of the actual total expenses incurred by each
class of shares during the relevant period.
<PAGE>
None of the past results shown should be considered a represen-
tation 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.
Total Return
Based on a
$10,000
Investment
A line graph depicting the growth of an investment in the Fund's
Class B and Class D Shares compared to growth of an investment in
the Salomon Brothers World Equity Index--Extended Market Index
(EMI). Beginning and ending values are:
8/05/94** 6/95
Merrill Lynch Global
SmallCap Fund++--Class B Shares* $10,000 $ 8,501
Merrill Lynch Global
SmallCap Fund++--Class D Shares* $ 9,475 $ 8,447
Salomon Brothers World Equity Index--
Extended Market Index (EMI)++++ $10,000 $10,403
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Merrill Lynch Global SmallCap Fund, Inc. invests primarily
in a diversified portfolio of equity securities of issuers
with relatively small market capitalizations located in
various foreign countries and the United States.
++++This unmanaged broad-based global small cap Index provides
returns from stocks in 22 markets.
<PAGE>
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94) through 6/30/95 -9.11% -13.89%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Inception (8/5/94) through 6/30/95 -11.55% -15.09%
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to
0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94) through 6/30/95 -9.75% -10.65%
[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*
Inception (8/5/94) through 6/30/95 -10.85% -15.53%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Recent
Performance
Results*
<CAPTION>
Since
Inception 3 Month
6/30/95 3/31/95 Inception++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $8.92 $8.70 $ 9.82 - 9.11%(1) +2.53%
Class B Shares 8.84 8.64 10.00 -11.55(1) +2.31
Class C Shares 8.84 8.64 9.80 - 9.75(1) +2.31
Class D Shares 8.91 8.69 10.00 -10.85(1) +2.53
Class A Shares--Total Return - 9.11(1) +2.53
Class B Shares--Total Return -11.55(1) +2.31
Class C Shares--Total Return - 9.75(1) +2.31
Class D Shares--Total Return -10.85(1) +2.53
<FN>
*Investment results shown do not reflect sales charges;
results shown would be lower if a sales charge was included.
++Class A and Class C Shares commenced operations on
October 21, 1994. Class B and Class D Shares commenced
operations on August 5, 1994.
(1)Percent change includes reinvestment of $0.005 per share
capital gains distributions.
</TABLE>
IMPORTANT TAX INFORMATION (unaudited)
During the fiscal year ended June 30, 1995, Merrill Lynch Global
SmallCap Fund, Inc. distributed long-term capital gains of $0.005134
per share to shareholders of record as of December 13, 1994.
Please retain this information for your records.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
EUROPE Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Austria Capital Goods 15,000 Bohler Uddeholm A.G. $ 849,543 $ 1,038,254 0.6%
Utilities--Electric 27,400 Oesterreichische Elektrizitats AG
(Verbund) 1,688,207 2,009,099 1.2
Total Investments in Austria 2,537,750 3,047,353 1.8
Belgium Building Materials 20,420 Terca Brick Industries 1,016,106 1,150,018 0.7
Total Investments in Belgium 1,016,106 1,150,018 0.7
Denmark Engineering & 12,500 FLS Industries A/S 901,389 1,239,114 0.7
Construction
Foreign DKK 8,800,000 Denmark Government Bond,
Government 9% due 11/15/2000 1,694,284 1,688,583 1.0
Obligations
Total Investments in Denmark 2,595,673 2,927,697 1.7
Finland Airlines 225,000 Finnair OY 1,533,951 1,491,392 0.9
Chemicals 140,000 Kemira OY 995,598 1,164,071 0.7
Engineering & 75,000 Valmet Corporation 'A' 1,502,031 1,695,163 1.0
Construction
Holding Company 29,000 Fiskars OY AB 1,479,062 1,290,549 0.8
Total Investments in Finland 5,510,642 5,641,175 3.4
France Advertising 14,500 Euro RSCG Worldwide, S.A. 1,314,199 1,517,024 0.9
Holding Company 3,722 Societe EuraFrance S.A. 1,182,561 1,230,426 0.7
Total Investments in France 2,496,760 2,747,450 1.6
<PAGE>
Germany Machinery & 39,100 ++Kloeckner Werke AG 3,734,471 2,615,148 1.6
Engineering
Total Investments in Germany 3,734,471 2,615,148 1.6
Greece Banking 6,970 Ergo Bank S.A. (Registered) 325,290 320,791 0.2
Building & 7,990 Titan Cement Co. S.A. 302,811 303,427 0.2
Construction
Foods 2,776 Delta Dairy S.A. (Ordinary) 56,327 57,772 0.0
Total Investments in Greece 684,428 681,990 0.4
Ireland Banking & Finance 700,000 Anglo Irish Bank Corp. PLC 607,595 595,577 0.4
Foods 314,100 Greencore PLC 2,140,602 2,374,359 1.4
Total Investments in Ireland 2,748,197 2,969,936 1.8
Italy Automotive 45,000 ++Brembo S.p.A. 312,011 310,819 0.2
Building & 434,600 Fochi Filippo S.p.A. (Ordinary) 1,346,030 26,565 0.0
Construction 250,000 Fochi Filippo S.p.A. (Warrants) (b) 138,508 1,528 0.0
------------ ------------ ------
1,484,538 28,093 0.0
Consumer Goods 205,000 Merloni Elettrodomestici S.p.A. 337,062 273,166 0.2
Diversified 1,850,000 Compagnie Industriali Riunite S.p.A. (CIR) 2,071,370 1,413,509 0.8
Companies
Total Investments in Italy 4,204,981 2,025,587 1.2
Netherlands Capital Goods 13,000 Ahrend Groep NV 1,340,569 1,716,601 1.0
Retail Trade 26,250 Deboer Winkelbedrijven 1,044,419 1,330,551 0.8
Total Investments in the Netherlands 2,384,988 3,047,152 1.8
<PAGE>
Spain Glass 40,800 ++Cristaleria Espanola S.A. 1,797,393 2,323,731 1.4
Real Estate 98,000 Vallehermoso S.A. 1,603,094 1,678,498 1.0
Textiles 115,000 ++Algodonera de San Antonio 1,269,666 1,262,485 0.8
Total Investments in Spain 4,670,153 5,264,714 3.2
Sweden Engineering & 34,600 Celsius Industrier AB 509,836 525,771 0.3
Construction 72,900 Svedala Industri AB (d) 1,742,255 1,964,906 1.2
Total Investments in Sweden 2,252,091 2,490,677 1.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Switzerland Engineering & 1,210 Daetwyler Holdings AG $ 2,108,607 $ 2,207,646 1.3%
Construction 1,725 Swheizerische Industrie--Gasellschaft
Holdings AG (SIG) 1,802,127 1,948,306 1.2
------------ ------------ ------
3,910,734 4,155,952 2.5
Metal Fabricating 1,300 George Fisher AG 1,486,977 1,750,652 1.0
Total Investments in Switzerland 5,397,711 5,906,604 3.5
Turkey Beverages 135,975 Erciyas Biracilik Ve Malt Sanayii A.S. 54,354 116,955 0.1
Building & 333,432 Alarko Holdings A.S. 272,405 294,338 0.2
Construction
Insurance 477,000 Aksigorta A.S. 119,250 92,852 0.1
Total Investments in Turkey 446,009 504,145 0.4
United Automobile Parts 195,000 Croda International PLC (Ordinary) 1,118,968 1,106,839 0.7
Kingdom
Brewery 467,000 Boddington Group PLC 1,845,711 1,990,606 1.2
Computers 400,000 ++Acorn Computer Group PLC 569,441 569,399 0.3
89,900 ++Micro Focus Group PLC 1,123,032 1,100,992 0.7
------------ ------------ ------
1,692,473 1,670,391 1.0
<PAGE>
Diversified 889,000 Howden Group PLC 1,262,630 1,159,443 0.7
Food & Beverage 667,000 Hazlewood Foods PLC 1,271,988 1,124,515 0.7
Health/ 1,230,000 London International Group (Ordinary) 1,862,069 2,161,728 1.3
Personal Care
Manufacturing 221,500 Low & Bonar PLC (Ordinary) 1,458,747 1,780,855 1.1
Media/Publishing 300,000 International Business Communications
(Ordinary) 1,043,116 1,336,020 0.8
Transportation 230,000 Ocean Group PLC (Ordinary) 977,405 1,137,685 0.7
Total Investments in the United Kingdom 12,533,107 13,468,082 8.2
Total Investments in Europe 53,213,067 54,487,728 32.8
LATIN
AMERICA
Brazil Appliances 3,200,000 Brasmotor Group S.A. (Preferred) 641,325 590,662 0.4
337,400,000 Refrigeracao Parana S.A. (Preferred) 678,464 655,750 0.4
------------ ------------ ------
1,319,789 1,246,412 0.8
Automotive 14,700 Capco Automotive Products Corp.
S.A. (ADR) (a) 124,950 113,925 0.1
Foreign BRL 500,000 Republic of Brazil, 6.687% due 4/15/2024 275,000 285,000 0.2
Government
Obligations
Textiles 2,054,000 Companhia de Tecidos Norte de Minas S.A.
(Preferred) 652,560 646,754 0.4
Total Investments in Brazil 2,372,299 2,292,091 1.5
Chile Banking 49,400 Banco Osorno y La Union S.A. (ADR) (a) 666,900 685,425 0.4
Total Investments in Chile 666,900 685,425 0.4
<PAGE>
Colombia Paper 185,000 ++Papeles Nacionales C.A. (ADR) (a) 3,330,000 1,942,500 1.2
Retail 27,000 Gran Cadena de Almacenes Colombianos S.A.
(CADENALCO) (ADR) (a) 472,500 567,000 0.3
Total Investments in Colombia 3,802,500 2,509,500 1.5
Mexico Broadcasting & 253,000 ++Grupo Fernandez Editores, S.A. de
Publishing C.V.--BCP 404,963 95,456 0.1
Paper & Forest 75,000 Kimberly-Clark de Mexico, S.A. de C.V. 567,404 860,911 0.5
Products
Total Investments in Mexico 972,367 956,367 0.6
Peru Foods 356,300 Companhia Industrial Peru Pacifico S.A. 383,299 399,082 0.2
Total Investments in Peru 383,299 399,082 0.2
Venezuela Building 60,000 Corimon C.A.S.A.C.A. (ADR) (a) 367,200 390,000 0.2
Materials
Total Investments in Venezuela 367,200 390,000 0.2
Total Investments in Latin America 8,564,565 7,232,465 4.4
MIDDLE EAST/
AFRICA
South Africa Diversified 37,616 Morgan Stanley Africa Investment Fund 413,776 432,584 0.3
42,000 New South Africa Fund, Inc. 582,635 603,750 0.4
42,000 Southern Africa Fund, Inc. 592,838 593,250 0.4
Total Investments in South Africa 1,589,249 1,629,584 1.1
Total Investments in the Middle East/Africa 1,589,249 1,629,584 1.1
NORTH
AMERICA
Canada Insurance 67,925 Cambior Inc. 987,616 832,081 0.5
Leisure 116,384 Four Seasons Hotels Ltd. 1,319,172 1,441,025 0.9
Utilities--Gas 131,400 British Columbia Gas Inc. 1,425,996 1,387,691 0.8
Total Investments in Canada 3,732,784 3,660,797 2.2
<PAGE>
United Aerospace 110,000 UNC, Inc. 637,625 591,250 0.4
States
Apparel 115,000 Farah, Inc. 1,148,408 747,500 0.4
5,000 Jones Apparel Group, Inc. 110,925 149,375 0.1
15,000 Marisa Christina, Inc. 168,950 210,000 0.1
------------ ------------ ------
1,428,283 1,106,875 0.6
Banking & Finance 7,500 Bankers Corp. 113,738 121,875 0.1
59,000 Charter One Financial, Inc. 1,225,870 1,445,500 0.9
9,200 The Co-Operative Bank of Concord 132,250 154,100 0.1
66,100 Roosevelt Financial Group, Inc. 1,071,451 1,090,650 0.7
------------ ------------ ------
2,543,309 2,812,125 1.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH
AMERICA Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Biotechnology 15,000 ++Cor Therapeutics, Inc. $ 168,375 $ 133,125 0.1%
States 10,000 ++Genetic Therapy, Inc. 100,050 143,750 0.1
(concluded) 15,000 ++Scios Nova, Inc. 74,025 60,938 0.0
------------ ------------ ------
342,450 337,813 0.2
Building & 12,000 Blount, Inc. (Class A) 523,696 535,500 0.3
Building 33,000 Oakwood Homes Corporation 869,607 845,625 0.5
Materials 51,000 ++Redman Industries, Inc. 913,875 1,083,750 0.6
15,300 Ryland Group, Inc. 206,581 246,713 0.1
39,800 Washington Homes, Inc. 199,396 179,100 0.1
------------ ------------ ------
2,713,155 2,890,688 1.6
Business Services 123,300 ++Applied Bioscience International, Inc. 713,757 631,913 0.4
Computers 15,000 ++Storage Technology Corporation 295,425 369,375 0.2
25,000 ++Stratus Computer, Inc. 787,870 775,000 0.5
------------ ------------ ------
1,083,295 1,144,375 0.7
<PAGE>
Data Processing 10,000 ++Cognos, Inc. 121,250 285,000 0.2
10,000 ++Landmark Graphics Corp. 181,756 255,000 0.2
25,000 ++SHL Systemhouse, Inc. 125,000 175,000 0.1
20,000 ++Sterling Software, Inc. 639,468 770,000 0.5
25,000 ++Symantec Corp. 432,423 718,750 0.4
------------ ------------ ------
1,499,897 2,203,750 1.4
Electrical 20,000 ++Comptek Research, Inc. 238,700 360,000 0.2
Equipment
Electronics 10,000 Analogic Corporation 171,250 167,500 0.1
5,000 ++VLSI Technology, Inc. 58,750 149,375 0.1
------------ ------------ ------
230,000 316,875 0.2
Healthcare-- 60,000 ++Beverly Enterprises, Inc. 810,553 742,500 0.4
Products/Services 50,000 Charter Medical Corp. 874,658 812,500 0.5
53,800 ++Ramsay Health Care, Inc. 330,777 221,925 0.1
14,038 ++Ramsey Managed Care, Inc. 31,586 50,888 0.0
------------ ------------ ------
2,047,574 1,827,813 1.0
Home Furnishing 30,000 Crown Crafts, Inc. 447,788 495,000 0.3
Insurance 54,000 Ace, Ltd. 1,236,340 1,566,000 0.9
63,700 Capital Guaranty Corp. 957,847 1,146,600 0.7
50,000 First Colony Corp. 1,052,038 1,200,000 0.7
22,500 Harleysville Group, Inc. 459,038 540,000 0.3
73,200 PXRE Corp. 1,684,275 1,711,050 1.0
16,000 PartnerRe Holdings Ltd. 316,750 416,000 0.2
60,000 Security-Connecticut Corp. 1,296,100 1,545,000 0.9
------------ ------------ ------
7,002,388 8,124,650 4.7
Natural Resources 30,000 Brown (Tom), Inc. 364,775 438,750 0.3
100,000 ++Coho Resources, Inc. 466,689 500,000 0.3
35,000 ++Plains Resources, Inc. 218,750 306,250 0.2
50,000 Total Petroleum of North America Ltd. 613,000 550,000 0.3
55,000 ++TransTexas Gas Corp. 605,000 811,250 0.5
------------ ------------ ------
2,268,214 2,606,250 1.6
Pharmaceuticals 10,000 ++Vical, Inc. 81,077 97,500 0.1
Real Estate 27,000 Carr Realty Corp. 539,996 465,750 0.3
Investment 50,000 Crown American Realty Trust 726,750 631,250 0.4
Trust ------------ ------------ ------
1,266,746 1,097,000 0.7
<PAGE>
Restaurants 67,500 ++TPI Enterprises, Inc. 377,458 282,656 0.2
Retailing 55,000 Baker (J.), Inc. 970,300 543,125 0.3
70,000 ++Catherines Stores Corp. 596,740 735,000 0.4
40,000 Hancock Fabrics, Inc. 371,281 365,000 0.2
8,300 OfficeMax, Inc. 157,700 231,363 0.1
21,000 Pier 1 Imports, Inc. 166,000 194,250 0.1
15,000 ++Rex Stores Corp. 195,900 210,000 0.1
165,000 ++Service Merchandise Co., Inc. 890,012 866,250 0.5
------------ ------------ ------
3,347,933 3,144,988 1.7
Textiles 75,000 ++Burlington Industries, Inc. 873,330 862,500 0.5
Transportation 11,300 ++Kirby Corp. 185,715 179,388 0.1
Utilities--Water 10,000 American Water Works Company, Inc. 276,850 317,500 0.2
Total Investments in the United States 29,605,544 31,430,909 18.6
Total Investments in North America 33,338,328 35,091,706 20.8
PACIFIC
BASIN
Australia Insurance 146,734 QBE Insurance Group 564,034 574,675 0.3
Merchandising 33,300 Amway Asia Pacific Ltd. 1,021,139 1,207,125 0.7
Mining 227,660 QCT Resources Ltd. 225,663 222,904 0.1
Total Investments in Australia 1,810,836 2,004,704 1.1
Hong Kong Broadcasting & 1,347,000 Ming Pao Enterprise Corp. Ltd. 1,015,477 713,776 0.4
Publishing
Financial US$ 920,000 Goldlion Capital Corp., 4.875%
Services due 2/01/1999 698,199 763,600 0.5
2,860,000 Winton Holdings Ltd. 1,040,875 694,919 0.4
------------ ------------ ------
1,739,074 1,458,519 0.9
Machinery 17,000 Beiren Printing Machinery Holdings Ltd.
(Class H) 7,804 3,493 0.0
Packaging 42,700 Sinocan Holdings Ltd. 12,191 12,141 0.0
Total Investments in Hong Kong 2,774,546 2,187,929 1.3
<PAGE>
Indonesia Banking-- 163,000 PT Bank Bali 337,016 413,724 0.2
International
Telecommuni- 204,000 ++PT Kabelmetal Indonesia 287,351 343,666 0.2
cations &
Equipment
Total Investments in Indonesia 624,367 757,390 0.4
Japan Apparel 100,000 Goldwin Inc. 1,289,360 714,201 0.4
Automobile Parts 53,300 Murakami Corp. 1,089,531 736,170 0.4
71,000 Sanoh Industrial 963,400 553,181 0.3
110,000 Showa Corp. 1,098,685 727,187 0.4
89,000 Yamakawa Industrial Co. 1,085,484 782,729 0.5
------------ ------------ ------
4,237,100 2,799,267 1.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC
BASIN Shares Held/ Value Percent of
(concluded) Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Banks 17,000 Bank of the Ryukyus, Ltd. $ 988,951 $ 732,499 0.4%
(concluded)
Beverages 79,000 Hokkaido Coca-Cola Bottling Co., Ltd. 1,298,058 1,156,416 0.7
74,800 Sanyo Coca-Cola Bottling Co., Ltd. 1,130,306 1,218,557 0.7
------------ ------------ ------
2,428,364 2,374,973 1.4
Chemicals 70,000 Katakura Chikkarin Co., Ltd. 830,212 614,803 0.4
Computer Services 42,800 TKC Corp. 1,376,809 1,010,506 0.6
Construction 77,590 Japan Foundation Engineering 1,657,836 1,511,315 0.9
75,920 Tsuchiya Home Co. 1,667,047 1,209,916 0.7
35,200 USK Corp. 597,627 656,546 0.4
133,000 Yondenko Corp. 1,299,139 1,303,152 0.8
------------ ------------ ------
5,221,649 4,680,929 2.8
<PAGE>
Consumer 59,000 Roland Corp. 1,429,975 905,442 0.5
Electricals
Electrical 84,000 Energy Support Corp. 642,525 475,977 0.3
Equipment 38,000 Maspro Denkoh Corp. 1,272,483 762,602 0.5
26,000 Shinmei Electric Co. 1,340,491 395,939 0.2
52,000 Sukegawa Electric Co. 682,343 524,849 0.3
------------ ------------ ------
3,937,842 2,159,367 1.3
Engineering & 24,000 Kyowa Engineering Consulting 479,335 283,320 0.2
Construction
Foods/Food 36,000 Ariake Japan Co. Ltd. 1,533,040 1,444,930 0.9
Processing 108,000 Fuji Oil Co., Ltd. 983,191 810,861 0.5
------------ ------------ ------
2,516,231 2,255,791 1.4
Health Services 40,000 Kanto Biomedical Laboratory 845,365 566,639 0.3
62,000 SRL Inc. 1,416,697 922,205 0.6
------------ ------------ ------
2,262,062 1,488,844 0.9
Industrials 27,000 Roki Techno Co., Ltd. 870,024 608,783 0.4
Iron & Steel 197,000 Nippon Chutesukan 1,253,043 918,605 0.6
Leasing 28,000 Marufuji Sheet Piling Co., Ltd. 301,153 177,830 0.1
51,700 Nissho Iwai Steel Leasing Co. 624,366 317,365 0.2
------------ ------------ ------
925,519 495,195 0.3
Machinery 46,640 Giken Seisakusho Co. Inc. 1,454,121 743,289 0.4
Metal Fabrication 115,000 Mory Industries Inc. 953,698 719,514 0.4
124,000 Toyo Kohan Co., Ltd. 1,057,406 933,916 0.6
------------ ------------ ------
2,011,104 1,653,430 1.0
Packaging 45,800 Chuo Kagaku Co. Ltd. 1,931,203 1,081,336 0.6
Paper 109,000 Tomoku Co., Ltd. 859,183 681,974 0.4
Pharmaceuticals 21,600 Towa Pharmaceutical Co. 1,529,792 1,175,493 0.7
Pollution Control 148,000 Organo Corp. 1,642,912 1,380,238 0.8
Real Estate 53,000 Keihanshin Real Estate Co. Ltd. 525,507 356,628 0.2
56,000 TOC Corp. 596,958 509,031 0.3
------------ ------------ ------
1,122,465 865,659 0.5
<PAGE>
Restaurants 47,000 Aim Services Co., Ltd. 1,405,610 904,380 0.5
41,500 Mos Food Services, Inc. 1,468,614 1,053,299 0.6
83,800 Ohsho Food Service Corp. 2,268,651 1,879,589 1.1
------------ ------------ ------
5,142,875 3,837,268 2.2
Retail Specialty 60,000 ADO Electric Industrial Co., Ltd. 1,956,905 1,296,187 0.8
50,000 Arcland Sakamoto 964,197 767,324 0.5
91,000 Daika Corporation 1,444,684 699,339 0.4
53,900 Home Wide Corp. 1,078,769 605,110 0.4
34,800 Nitori Co. 1,257,950 940,763 0.6
------------ ------------ ------
6,702,505 4,308,723 2.7
Retail Stores 119,000 Sotetsu Rosen Co., Ltd. 1,112,252 1,025,499 0.6
Services 63,800 Ichinen Co., Ltd. 1,690,116 1,513,847 0.9
Textiles 92,000 Komatsu Seiren Co., Ltd. 1,364,484 1,162,082 0.7
Trading 31,000 Japan CBM Corp. 1,200,936 706,292 0.4
Trucking 108,000 Nippon Konpo Unyu Soko 1,045,185 988,077 0.6
95,000 Tonami Transportation Co., Ltd. 743,587 695,313 0.4
------------ ------------ ------
1,788,772 1,683,390 1.0
Total Investments in Japan 59,599,196 43,861,045 26.1
Malaysia Broadcasting 158,000 Sistem Televisyen Malaysia BHD 477,231 421,333 0.3
Newspaper/ 266,000 New Straits Times Press BHD 1,090,579 823,918 0.5
Publishing
Total Investments in Malaysia 1,567,810 1,245,251 0.8
New Zealand Broadcasting & 229,000 Independent News Ltd. 711,948 711,213 0.4
Publishing
Electronics 46,500 PDL Industries Ltd. 218,223 232,930 0.1
Foreign NZ$ 2,825,000 New Zealand Government Bonds, 8%
Government due 11/15/1995 1,760,873 1,879,827 1.1
Obligations
Transportation 154,400 Ports of Auckland Ltd. 270,171 304,215 0.2
--Marine
<PAGE>
Total Investments in New Zealand 2,961,215 3,128,185 1.8
South Korea Electronics 4,456 Samsung Electronics Co. 435,574 428,890 0.3
Iron/Steel 15,385 Pohang Iron & Steel Company, Ltd. 442,780 453,858 0.3
Total Investments in South Korea 878,354 882,748 0.6
Total Investments in the Pacific Basin 70,216,324 54,067,252 32.1
SOUTHEAST
ASIA
India Hotels 61,000 ++East India Hotels Ltd. 887,000 953,430 0.6
Media 100,000 Videocon International, Ltd. (GDR) (c) 385,000 355,000 0.2
Tobacco 30,500 Indian Tobacco Co. Ltd. (ADR) (a) 392,687 213,500 0.1
Total Investments in India 1,664,687 1,521,930 0.9
Total Investments in Southeast Asia 1,664,687 1,521,930 0.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
SHORT-TERM Face Value Percent of
SECURITIES Amount Issue Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Commercial US$ 1,531,000 General Electric Capital Corp., 6.20%
Paper* due 7/03/1995 $ 1,530,473 $ 1,530,473 0.9%
Total Investments in Commercial Paper 1,530,473 1,530,473 0.9
Commercial Pound 1,500,000 General Electric Capital Corp., 6.65%
Paper*-- Sterling due 7/10/1995++++++ 2,381,648 2,373,032 1.4
Foreign ThB 38,294,380 Siam City Bank Ltd., 12.25% due 9/04/1995 1,514,677 1,514,704 0.9
Total Investments in Commercial Paper--
Foreign 3,896,325 3,887,736 2.3
<PAGE>
Foreign C$ 2,600,000 Canadian Treasury Bill, 6.540% due
Government 8/17/1995 1,867,538 1,876,505 1.1
Obligations* NZ$ 6,300,000 New Zealand Treasury Bill, 7.3864%
due 9/06/1995++++++ 4,166,504 4,142,550 2.5
Total Investments in Foreign
Government Obligations 6,034,042 6,019,055 3.6
US Government & US Treasury Bills++++:
Agency US$ 600,000 5.51% due 7/27/1995 597,612 597,556 0.4
Obligations* 125,000 5.59% due 7/27/1995 124,495 124,491 0.1
50,000 5.62% due 7/27/1995 49,797 49,796 0.0
Total Investments in US Government &
Agency Obligations 771,904 771,843 0.5
Total Investments in
Short-Term Securities 12,232,744 12,209,107 7.3
OPTIONS Number of Contracts/ Premiums
PURCHASED Face Amount Issue Paid
<S> <S> <C> <S> <C> <C> <C>
Call Options 85,839 Topix, 2nd Section, expiring September
Purchased 1995 at YEN 231.31 200,000 0 0.0
Currency Put YEN 17,000,000 Japanese Yen, expiring August 1995
Options at YEN 99 219,250 0 0.0
Purchased YEN 2,000,000 Japanese Yen, expiring January 1996
at YEN 86.15 66,456 38,326 0.0
------------ ------------ ------
285,706 38,326 0.0
Total Options Purchased 485,706 38,326 0.0
Total Investments 181,304,670 166,278,098 99.4
OPTIONS Premiums
WRITTEN Received
<PAGE>
Currency Call YEN 7,000,000 Japanese Yen, expiring August 1995
Options at YEN 91.29 (88,550) (597,800) (0.3)
Written YEN 10,000,000 Japanese Yen, expiring August 1995
at YEN 91.38 (130,700) (850,730) (0.5)
YEN 2,000,000 Japanese Yen, expiring January 1996
at YEN 81.75 (66,456) (57,056) (0.0)
Total Options Written (285,706) (1,505,586) (0.8)
Total Investments, Net of Options Written $181,018,964 164,772,512 98.6
============
Variation Margin on Stock Index Futures Contracts** 2,401 0.0
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 153,104 0.1
Other Assets Less Liabilities 2,211,655 1.3
------------ ------
Net Assets $167,139,672 100.0%
============ ======
<FN>
(a)American Depositary Receipt (ADR).
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and the number of
shares are subject to adjustment under certain conditions until
the expiration date.
(c)Global Depositary Receipt (GDR).
(d)Restricted security as to resale. The value of the Fund's
investments in restricted securities was approximately $1,965,000,
representing 1.2% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Svedala Industri AB 1/01/1994 $1,742,255 $1,964,906
Total $1,742,255 $1,964,906
========== ==========
++Non-income producing security.
++++Security represents collateral in connection with stock index
futures contracts.
++++++Security represents collateral in connection with open options.
*Commercial Paper, certain Foreign Government and US Government &
Agency Obligations are traded on a discount basis; the interest
rates shown are the discount rates paid at the time of purchase
by the Fund.
**Stock index futures contracts purchased as of June 30, 1995 were
as follows:
<PAGE>
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Note 1c)
<C> <S> <S> <S> <C>
15 Nikkei 225 CME September 1995 $1,088,250
7 Nikkei 225 SIMEX September 1995 599,309
Total Stock Index Futures Contracts Purchased
(Total Contract Price--$1,804,604) $1,687,559
==========
Stock index futures contracts sold as of June 30, 1995 were as follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Note 1c)
<C> <S> <S> <S> <C>
11 DAX DTB September 1995 $1,675,054
2 FTSE100 LIFFE September 1995 264,182
Total Stock Index Futures Contracts Sold
(Total Contract Price--$1,981,730) $1,939,236
==========
***Forward foreign exchange contracts as of June 30, 1995 were
as follows:
<CAPTION>
Unrealized
Appreciation
Foreign Currency Expiration (Depreciation)
Purchased Date (Note 1b)
<S> <C> <S> <C>
C$ 2,550,390 July 1995 $ (18,127)
Chf 4,638,762 July 1995 (29,959)
Pound 724,329 September 1995 (17,528)
Sterling
YEN 1,668,321,000 July 1995 7,550
Nlg 4,034,342 July 1995 (77,169)
Total (US$ Commitment--$29,499,469) $(135,233)
---------
Foreign Currency Sold
<PAGE>
Ats 21,193,600 July 1995 $(178,364)
Bf 34,000,000 September 1995 (31,903)
Chf 8,252,094 July 1995 (56,047)
DM 2,439,415 July 1995 (65,240)
Fmk 16,044,000 July 1995 (37,388)
Frf 4,956,510 July 1995 (39,232)
Nlg 4,187,470 July 1995 (125,695)
NZ$ 2,815,000 July 1995 (2,747)
YEN 3,229,257,225 July 1995 824,953
Total (US$ Commitment--$60,133,878) $ 288,337
---------
Total Unrealized Appreciation--Net on Forward Foreign
Exchange Contracts $ 153,104
=========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$180,818,964) (Note 1a) $166,239,772
Unrealized appreciation on forward foreign exchange contracts (Note 1c) 153,104
Options purchased, at value (cost--$485,706) (Notes 1a & 1c) 38,326
Foreign cash (Note 1c) 2,470,413
Receivables:
Securities sold $ 6,457,078
Dividends 415,772
Capital shares sold 240,271
Interest 137,266
Variation margin on stock index futures contracts (Notes 1a & 1c) 2,401 7,252,788
------------
Deferred organization expenses (Note 1g) 149,700
Prepaid registration fees and other assets (Note 1g) 84,411
------------
Total assets 176,388,514
------------
<PAGE>
Liabilities: Options written, at value (premiums received--$285,706) (Notes 1a & 1c) 1,505,586
Payables:
Securities purchased 6,902,125
Capital shares redeemed 360,291
Distributor (Note 2) 119,867
Investment adviser (Note 2) 118,623 7,500,906
------------
Accrued expenses and other liabilities 242,350
------------
Total liabilities 9,248,842
------------
Net Assets: Net assets $167,139,672
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 67,154
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 1,495,955
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized 55,687
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized 268,613
Paid-in capital in excess of par 186,984,460
Undistributed investment income--net 387,027
Accumulated realized capital losses on investments and foreign currency
transactions--net (5,854,788)
Accumulated distributions in excess of realized capital gains--net (99,763)
Unrealized depreciation on investments and foreign currency transactions--net (16,164,673)
------------
Net assets $167,139,672
============
Net Asset Class A--Based on net assets of $5,992,091 and 671,536 shares outstanding $ 8.92
Value: ============
Class B--Based on net assets of $132,296,170 and 14,959,548 shares outstanding $ 8.84
============
Class C--Based on net assets of $4,923,879 and 556,866 shares outstanding $ 8.84
============
Class D--Based on net assets of $23,927,532 and 2,686,134 shares outstanding $ 8.91
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period August 5, 1994++ to June 30, 1995
<S> <S> <C> <C>
Investment Interest and discount earned (net of $1,191 foreign withholding tax) $ 2,291,499
Income Dividends (net of $221,334 foreign withholding tax) 1,807,794
(Notes 1e & 1f): ------------
Total income 4,099,293
------------
Expenses: Investment advisory fees (Note 2) $ 1,300,660
Account maintenance and distribution fees--Class B (Note 2) 1,246,220
Transfer agent fees--Class B (Note 2) 307,627
Printing and shareholder reports 162,017
Registration fees (Note 1g) 153,461
Custodian fees 148,050
Accounting services (Note 2) 111,195
Account maintenance fees--Class D (Note 2) 58,337
Transfer agent fees--Class D (Note 2) 47,476
Directors' fees and expenses 35,833
Amortization of organization expenses (Note 1g) 33,606
Professional fees 32,103
Account maintenance and distribution fees--Class C (Note 2) 24,770
Transfer agent fees--Class C (Note 2) 7,171
Transfer agent fees--Class A (Note 2) 6,058
Pricing fees 5,162
Other 32,520
------------
Total expenses 3,712,266
------------
Investment income--net 387,027
------------
Realized & Realized loss from:
Unrealized Gain Investments--net (1,737,110)
(Loss) on Foreign currency transactions--net (4,117,678) (5,854,788)
Investments & ------------
Foreign Currency Unrealized appreciation (depreciation) on:
Transactions--Net Investments--net (16,321,003)
(Notes 1c, 1d, Foreign currency transactions--net 156,330 (16,164,673)
1f & 3): ------------ ------------
Net realized and unrealized loss on investments and foreign currency transactions (22,019,461)
------------
Net Decrease in Net Assets Resulting from Operations $(21,632,434)
============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
August 5, 1994++ to
Increase (Decrease) in Net Assets: June 30, 1995
<S> <S> <C>
Operations: Investment income--net $ 387,027
Realized loss on investments and foreign currency transactions--net (5,854,788)
Change in unrealized depreciation on investments and foreign currency transactions--net (16,164,673)
------------
Net decrease in net assets resulting from operations (21,632,434)
------------
Distributions to In excess of realized gain on investments--net:
Shareholders Class A (1,696)
(Note 1h): Class B (81,949)
Class C (1,158)
Class D (14,960)
------------
Net decrease in net assets resulting from distributions to shareholders (99,763)
------------
Capital Share Net increase in net assets derived from capital share transactions 188,771,869
Transactions ------------
(Note 4):
Net Assets: Total increase in net assets 167,039,672
Beginning of period 100,000
------------
End of period* $167,139,672
============
<FN>
*Undistributed investment income--net $ 387,027
============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
For the For the For the For the
Period Period Period Period
October 21, August 5, October 21, August 5,
The following per share data and ratios 1994++ 1994++ 1994++ 1994
have been derived from information to June 30, to June 30, to June 30, to June 30,
provided in the financial statements. 1995 1995 1995 1995
Increase (Decrease) in Net Asset Value: Class A Class B Class C Class D
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 9.82 $ 10.00 $ 9.80 $ 10.00
Operating --------- --------- --------- ---------
Performance: Investment income--net .04 .01 .01 .08
Realized and unrealized loss on investments and
foreign currency transactions--net (.93) (1.16) (.96) (1.16)
--------- --------- --------- ---------
Total from investment operations (.89) (1.15) (.95) (1.08)
--------- --------- --------- ---------
Less distributions in excess of realized gain on
investments--net (.01) (.01) (.01) (.01)
--------- --------- --------- ---------
Net asset value, end of period $ 8.92 $ 8.84 $ 8.84 $ 8.91
========= ========= ========= =========
Total Based on net asset value per share (9.11%)+++ (11.55%)+++ (9.75%)+++ (10.85%)+++
Investment ========= ========= ========= =========
Return:**
Ratios to Expenses, excluding account maintenance and
Average distribution fees 1.62%* 1.56%* 1.66%* 1.52%*
Net Assets: ========= ========= ========= =========
Expenses 1.62%* 2.56%* 2.66%* 1.77%*
========= ========= ========= =========
Investment income--net 1.06%* .10%* .20%* .90%*
========= ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 5,992 $ 132,296 $ 4,924 $ 23,928
Data: ========= ========= ========= =========
Portfolio turnover 47.96% 47.96% 47.96% 47.96%
========= ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global SmallCap Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. Prior to commencement of
operations on August 5, 1994, the Fund had no operations other
than those relating to organizational matters and the issue of 5,000
Class B capital shares and 5,000 Class D capital shares of the Fund to
Merrill Lynch Asset Management, L.P. ("MLAM") for $100,000. 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 investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at the
last available bid price. Securities traded in the over-the-counter
market are valued at the last available bid price prior to the time of
valuation. In cases where securities are traded on more than one
exchange, the securities are valued on the exchange designated
by or under the authority of the Board of Directors as the primary
market. Securities which are traded both in the over-the-counter
market and on a stock exchange are valued according to the broad-
est and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or,
in the case of options traded in the over-the-counter market, the
last asked price. Options purchased are valued at the last sale price
in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the direction
of the Fund's Board of Directors.
<PAGE>
(b) Repurchase agreements--The Fund invests in US Government
securities pursuant to repurchase agreements with a member bank
of the Federal Reserve System or a primary dealer in US Govern-
ment securities. Under such agreements, the bank or primary dealer
agrees to repurchase the security at a mutually agreed upon time
and price. The Fund takes possession of the underlying securities,
marks to market such securities and, if necessary, receives addi-
tions to such securities daily to ensure that the contract is fully
collateralized.
NOTES TO FINANCIAL STATEMENTS (continued)
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity, debt and currency
markets. Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under the contract.
*Forward foreign exchange contracts--The Fund is authorized to
enter into forward foreign exchange contracts as a hedge against
either specific transactions or portfolio positions. Such contracts
are not entered on the Fund's records. However, the effect on opera-
tions 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.
*Options--The Fund is authorized to purchase and write call 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 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 transactions exceeds the premium paid or received).
<PAGE>
Written and purchased options are non-income producing
investments.
*Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures con-
tracts for the purpose of hedging the market risk on existing securi-
ties or the intended purchase of securities. Futures contracts are
contracts for delayed delivery of securities at a specific future date
and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as
required by the exchange on which the transaction is effected.
Pursuant to the contract, the Fund agrees to receive from or pay
to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as
variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time
it was closed.
(d) 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.
(e) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required. Under the applicable foreign tax law, a
withholding tax may be imposed on interest, dividends, and capital
gains at various rates.
(f) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Dividend income is recorded on the ex-dividend
date, except that if the ex-dividend date has passed, certain divi-
dends from foreign securities are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income (including amor-
tization of discount) is recognized on the accrual basis. Realized
gains and losses on security transactions are determined on the
identified cost basis.
(g) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are charged to expense on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
<PAGE>
(h) 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
MLAM. The general partner of MLAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund. For
such services, the Fund pays a monthly fee of 0.85%, on an annual
basis, of the average daily net assets of the Fund. MLAM has entered
into a Sub-Advisory Agreement with Merrill Lynch Asset Management
U.K., Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant to which
MLAM pays MLAM U.K. a fee in an amount to be determined from
time to time by the Investment Adviser and MLAM U.K. but in no
event in excess of the amount that the Investment Adviser actually
receives. For the period August 5, 1994 to June 30, 1995, MLAM
paid MLAM U.K. a fee of $133,021 pursuant to such Agreement.
Certain of the states in which the shares of the Fund are qualified
for sale impose limitations on the expenses of the Fund. The most
restrictive annual expense limitation requires that the Investment
Adviser reimburse the Fund to the extent the Fund's expenses
(excluding interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of the Fund's
first $30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average daily net
assets in excess thereof. MLAM's obligation to reimburse the Fund
is limited to the amount of the management fee. No fee payment will
be made to MLAM during any fiscal year which will cause such
expenses to exceed the most restrictive expense limitation at the
time of such payment.
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% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to
the Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance
services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for
providing shareholder and distribution-related services to Class B
and Class C shareholders.
For the period August 5, 1994 to June 30, 1995, 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 $ 8 $ 157
Class D $20,112 $1,084,067
For the period August 5, 1994 to June 30, 1995, MLPF&S received
contingent deferred sales charges of $390,517 and $2,540 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $17,207 in commissions on the execu-
tion of portfolio security transactions for the period ended June 30,
1995.
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, MLAM U.K., MLPF&S, MLFD, MLFDS and/
or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period ended June 30, 1995 were $237,582,805 and
$67,556,451, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of June 30, 1995
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ (1,652,993) $(14,555,555)
Short-term (2,139) (23,637)
Stock index futures contracts (124,119) (74,551)
Options purchased -- (447,380)
Option written 42,141 (1,219,880)
------------ ------------
Total investments (1,737,110) (16,321,003)
------------ ------------
Currency transactions:
Options written 409,100 --
Options purchased (429,100) --
Foreign currency transactions (1,229,663) 3,226
Forward foreign exchange contracts (2,868,015) 153,104
------------ ------------
Total currency transactions (4,117,678) 156,330
------------ ------------
Total $ (5,854,788) $(16,164,673)
============ ============
NOTES TO FINANCIAL STATEMENTS (concluded)
As of June 30, 1995, net unrealized depreciation for Federal income
tax purposes aggregated $14,934,493, of which $10,019,705 related
to appreciated securities and $24,954,198 related to depreciated
securities. The aggregate cost of investments, including options
purchased, at June 30, 1995 for Federal income tax purposes was
$181,174,266.
Transactions in call options written for the period ended June 30,
1995 were as follows:
<PAGE>
Par Value Covered By Premiums
Written Options Received
Outstanding call options written at
beginning of period -- --
Options written 40,000,000 $ 694,806
Options closed (17,000,000) (346,300)
Options expired (4,000,000) (62,800)
------------ ------------
Outstanding call options written at
end of period 19,000,000 $ 285,706
============ ============
Transactions in put options written for the period ended June 30,
1995 were as follows:
Par Value
Covered By Premiums
Written Options Paid
Outstanding put options written at
beginning of period -- --
Options written 1,000 $ 42,141
Options expired (1,000) (42,141)
------------ ------------
Outstanding put options written at
end of period -- $ --
============ ============
4. Capital Share Transactions:
Net increase in net assets derived from capital share trans-
actions was $188,771,869 for the period ended June 30, 1995.
Transactions in capital shares for each class were as follows:
Class A Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 940,965 $ 8,735,463
Shares issued to shareholders in
reinvestment of distributions 173 1,602
------------ ------------
Total issued 941,138 8,737,065
Shares redeemed (269,602) (2,410,041)
------------ ------------
Net increase 671,536 $ 6,327,024
------------ ------------
<PAGE>
[FN]
++Commencement of Operations.
Class B Shares for the Period Dollar
August 5, 1994++ to June 30, 1995 Shares Amount
Shares sold 19,401,309 $190,346,473
Shares issued to shareholders in
reinvestment of distributions 3,965 36,674
------------ ------------
Total issued 19,405,274 190,383,147
Automatic conversion of shares (120,766) (1,112,657)
Shares redeemed (4,329,960) (39,053,042)
------------ ------------
Net increase 14,954,548 $150,217,448
============ ============
[FN]
++Prior to August 5, 1994 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
Class C Shares for the Period Dollar
October 21, 1994++ to June 30, 1995 Shares Amount
Shares sold 688,727 $ 6,332,720
Shares issued to shareholders in
reinvestment of distributions 118 1,096
------------ ------------
Total issued 688,845 6,333,816
Shares redeemed (131,979) (1,171,764)
------------ ------------
Net increase 556,866 $ 5,162,052
============ ============
[FN]
++Commencement of Operations.
Class D Shares for the Period Dollar
August 5, 1994++ to June 30, 1995 Shares Amount
Shares sold 3,959,595 $ 39,101,204
Automatic conversion of shares 120,315 1,112,657
Shares issued to shareholders in
reinvestment of distributions 573 5,319
------------ ------------
Total issued 4,080,483 40,219,180
Shares redeemed (1,399,349) (13,153,835)
------------ ------------
Net increase 2,681,134 $ 27,065,345
============ ============
<PAGE>
[FN]
++Prior to August 5, 1994 (commencement of operations), the Fund
issued 5,000 shares to MLAM for $50,000.
As a result of the implementation of the Merrill Lynch Select
Pricing SM System, Class A Shares of the Fund outstanding prior to
October 21, 1994 have been redesignated Class D Shares. There
were 2,992,993 shares redesignated amounting to $29,891,279.
5. Commitments:
On June 30, 1995, the Fund had entered into foreign exchange
contracts under which it had agreed to purchase and sell various
foreign currencies with approximate values of $2,498,000, and
$3,834,000, respectively.
<AUDIT-REPORT>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors,
Merrill Lynch Global SmallCap Fund, Inc.:
We have audited the accompanying statement of assets and liabil-
ities, including the schedule of investments, of Merrill Lynch Global
SmallCap Fund, Inc. as of June 30, 1995, and the related statements
of operations and changes in net assets and the financial highlights
for the period August 5, 1994 (commencement of operations) to
June 30, 1995. These financial statements and the financial high-
lights are the responsibility of the Fund's management. Our respon-
sibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 June 30, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting princi-
ples used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audit provides 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 SmallCap Fund, Inc. as of June 30, 1995, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated period in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
July 31, 1995
</AUDIT-REPORT>
PORTFOLIO CHANGES (unaudited)
For the Quarter Ended June 30, 1995
Additions
Acorn Computer Group PLC
Algodonera de San Antonio
Analogic Corporation
Brasmotor Group S.A. (Preferred)
Brembo S.p.A.
Celsius Industrier AB
Companhia de Tecidos Norte de Minas S.A.
(Preferred)
Companhia Industrial Peru Pacifico S.A.
Cristaleria Espanola S.A.
Delta Dairy S.A. (Ordinary)
Denmark Government Bond, 9%
due 11/15/2000
Ergo Bank S.A. (Registered)
Finnair OY
Micro Focus Group PLC
Pohang Iron & Steel Company, Ltd.
QCT Resources Ltd.
Ramsey Managed Care, Inc.
Samsung Electronics Co.
Scios Nova, Inc.
Sinocan Holdings Ltd.
Titan Cement Co. S.A.
Vical, Inc.
Videocon International, Ltd. (GDR)
<PAGE>
Deletions
Amec PLC
Aragonesas
Buenos Aires Embotelladora, S.A.
(BAESA) (ADR)
Canadian Government Bond, 8% due 3/15/1997
Cephalon, Inc.
Cimentas Izmir Cimento Fabrikasi T.A.S.
Empresa National de Celulosas S.A.
Glaverbel SA (Ordinary)
Grupo Posadas, S.A. de C.V. (ADR)
Izmir Demir Celik Sanayii A.S.
Nestle (Malaysia) BHD
PT Supreme Cable Manufacturing Company
(Foreign)
PT Wicaksana Overseas International
Republic of Argentina, Floating Rate Bonds:
7.312% due 3/31/2005
7.125% due 3/31/2023
Republic of Argentina 'L', 5% due 3/31/2023
Srithai Superware Public Company Ltd.
US Treasury Note, 7.50% due 12/31/1996
United Communication Industry Ltd. (Foreign)
United Kingdom Gilt:
10.50% due 2/21/1997
8.75% due 9/01/1997
Vina Concha y Toro S.A. (ADR)
