MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1994
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
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.
Merrill Lynch
Global SmallCap
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
<PAGE>
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
<PAGE>
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
Ken 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
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Transfer Agent
Financial Data Services, Inc.
Transfer Agency Mutual Fund Operations
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
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 emerging markets in Asia.
<PAGE>
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
investments 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
investments in the United States.
DEAR SHAREHOLDER
We are pleased to provide you with
this first semi-annual report for
Merrill Lynch Global SmallCap Fund,
Inc. In this and future shareholder
reports, we will highlight the Fund's
performance, describe recent invest-
ment activities, and examine some of
the important market developments
that helped shape our investment
strategy during the period under
review.
Merrill Lynch Global SmallCap Fund,
Inc. seeks to provide shareholders
with long-term growth of capital by
investing primarily in equity securi-
ties of companies with relatively
small market capitalizations located
in various foreign countries and in
the United States.
Strong international growth contin-
ues to constrain the performance of
international bond and equity mar-
kets as investors fear that increasing
interest rates will eventually lead to
an economic slowdown. In the three
months ended December 31, 1994,
the total return for the unmanaged
Salomon Brothers Extended Market
Index (SEMI), a global small cap
index, was -2.8% in US dollar terms.
<PAGE>
Among the major markets' small cap
regional indexes, price weakness was
most evident in the Pacific Basin
(ex-Japan) region, where the total US
dollar return fell by about 11% in the
fourth quarter. Over the same period,
the International Finance Corpora-
tion's Emerging Markets Index fell
12%, with the Latin American compo-
nent down 21%. Europe (excluding
the United Kingdom) and US markets
both fell by 2% in the fourth quarter,
and the total return on Japanese
small cap issues fell by 3%. The United
Kingdom was the only major market
to rise, registering a 1% total return
during the fourth quarter. In the
foreign exchange markets, the US
dollar firmed toward the end of the
quarter, but the strongest gains were
seen in the peripheral US dollar-linked
currencies of the South African Rand
and Australian and New Zealand
dollars.
Total returns for Merrill Lynch Global
SmallCap Fund, Inc.'s Class B and
Class D Shares for the three-month
period ended December 31, 1994 were
- - - - -5.32% and -5.21%, respectively, and
for Class A and Class C Shares since
inception (October 21, 1994) through
December 31, 1994 were -4.53% and
- - - - -4.64%, 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 and
5 of this report to shareholders.)
During the fourth quarter, the Fund's
underperformance relative to the
SEMI benchmark mainly resulted
from an overweighted stance in
emerging markets. On average, during
the period, the Fund had about 7.3%
invested in small cap issues domiciled
in emerging markets. The SEMI has no
exposure to emerging markets.
<PAGE>
Since inception, we have steadily
built up core portfolio holdings across
all the major equity markets. The
Fund also diversified cash positions
into UK gilts, Canadian bonds, two-
year US Treasury notes and New
Zealand Treasury bills.
The Fund continued to receive signifi-
cant net cash inflows. Net assets
stood at $184 million at the end of
December, compared with $108 mil-
lion at the Fund's launch on August
8, 1994.
Portfolio Matters
The Fund's co-portfolio managers
achieved a 70% exposure to equities
within one month of the Fund's
start-up date. By September 30, 1994
we had made further purchases of
key portfolio positions, raising the
equity exposure close to 80%, and by
the end of the December quarter
net assets were 82% invested in
small cap issues.
The major investment category is
Japanese small caps, which currently
represent about 26% of Fund net
assets. In addition, the Fund had 20%
of net assets in Continental Europe,
18% in the United States, 8% in the
United Kingdom, 7% in emerging
markets and 8% in the Pacific Basin
(ex-Japan) as of December 31, 1994.
We also had exposure to Canadian
and South African equities.
Economic and Investment
Environment
Global economic growth has recovered
more rapidly than generally expected,
and monetary policy tightening has
extended further to a number of
countries. The Federal Reserve Board
lifted the Federal Funds rate by 75
basis points to 5.5% in November. We
expect further significant tightening
of US monetary policy during 1995.
Less widely publicized monetary
tightening also occurred over the
reporting period in Australia,
Malaysia, Hong Kong, South Africa,
New Zealand and the United King-
dom. Meanwhile, stronger-than-
expected growth is likely to induce
further tightening in the United
Kingdom.
<PAGE>
As growth strengthens above con-
sensus expectations and monetary
policies continue to tighten world-
wide, the environment for equity
markets is likely to remain mixed. In
part, the poor performance of most
equity markets in the past quarter
reflected increased pessimism about
higher interest rates. Against a back-
ground of rising economic growth and
interest rate expectations, we favor
commodity-producing economies and
those regions where capacity pres-
sures are least likely to cause central
banks to raise interest rates.
Small cap issues should benefit rela-
tive to large cap issues in a period of
rising growth because the small cap
universe is heavily weighted toward
cyclical issues. As a result, we still
favor a relatively high exposure to
Japanese small caps, as the domestic
economic recovery is at a relatively
early stage and is likely to surprise
the consensus by its strength. Addi-
tionally, among the larger equity
markets, Japanese corporate profits
are highly sensitive to economic
growth. As the domestic Japanese
economic recovery gathers strength,
we expect an improvement in investor
sentiment.
Mounting US inflationary pressures
and higher US bond yields signifi-
cantly inhibited performance of Euro-
pean financial markets in 1994. How-
ever, over the last three months,
European bond yields, particularly
UK gilt yields, managed to partly
decouple from rising US yields. In the
course of the next six months, rising
European capacity utilization is likely
to gradually place upward pressure
on European inflation. Already, fur-
ther interest rate increases are widely
expected in the United Kingdom.
Over the course of 1995, monetary
tightening also seems likely for the
"core" European countries of Germany,
Holland and France.
<PAGE>
The Mexican peso crisis has dramati-
cally altered the outlook for economic
policy in Latin America. In Mexico,
the peso devaluation will require a
much tighter domestic monetary and
fiscal policy stance. The Mexican
economic growth and inflation out-
look has deteriorated. The crisis in
Mexico has raised risk parameters in
the rest of Latin America, causing
interest rates to rise in other coun-
tries, notably Argentina. If the region's
interest rates stay higher for longer
than a few weeks, growth prospects
in Latin America will also deteriorate.
The situation in Latin America is
clearly negative for the countries'
equities. However, the substantial
corrections in Latin American debt
and equity markets suggest most of
the bad news may already be dis-
counted. Although financial market
returns in Latin America are likely to
remain volatile for some months, we
believe attractive returns will be
available in the region over the longer
term.
Overall, the global economic cycle
has now shifted into high gear and
may require more significant mone-
tary policy action to stem incipient
cyclical inflationary pressures. We
believe that tigher monetary condi-
tions will prevent inevitable cyclical
inflationary pressures from turning
into secular inflationary pressures.
Although we have become encour-
aged by recent monetary policy moves,
additional interest rate increases may
be required to sufficiently enhance
credibility in US and UK policy.
<PAGE>
In Conclusion
The investment cycle continues to
strike a balance between accelerating
global growth and the increasing
likelihood of more rapid monetary
policy tightening. Provided the long-
term prospect for subdued inflation
remains intact, we believe that an
internationally diversified portfolio
of small cap issues offers the poten-
tial for capital gains through the
current business expansion. We will
continue to emphasize laggard equity
markets and markets where mone-
tary policy is not likely to lead to
higher interest rates. The Japanese
small cap market is a good example.
We thank you for your continued
support of Merrill Lynch Global
SmallCap Fund, Inc., and we look
forward to reviewing our investment
strategy with you in our next report
to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(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
<PAGE>
(Grace Pineda)
Grace Pineda
Co-Portfolio Manager
Emerging Markets Investments--
Latin America and Europe
(James Russell)
James Russell
Co-Portfolio Manager
Japanese Investments
(Dennis Stattman)
Dennis Stattman
Co-Portfolio Manager
US Investments
February 8, 1995
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 simultaneously
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.
<PAGE>
*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 all of the Fund's shares are presented in
the "Recent Performance Results" and "Aggregate Total Return"
tables below.
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 and 3-month periods
ended December 31, 1994 and for Class A and Class C Shares
for the period since inception through December 31, 1994. All
data in this table assume imposition of the actual total expenses
incurred by each class of shares during the relevant period.
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.
Aggregate
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Inception (10/21/94)
through 12/31/94 -4.53% -9.54%
[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 12/31/94 -6.55% -10.28%
<PAGE>
[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 Without % Return With
Sales Charge Sales Charge**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -4.64% -5.59%
[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 % Return
Without CDSC With CDSC**
Class D Shares*
Inception (8/5/94)
through 12/31/94 -6.25% -11.17%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
Recent
Performance
Results*
<CAPTION>
Since
Inception 3 Month
12/31/94 9/30/94++ 8/5/94++++ % Change % Change++
<S> <C> <C> <C> <C> <C>
Class A Shares $9.37 $9.82 -- -4.53%(1) --
Class B Shares 9.34 9.87 $10.00 -6.55(1) -5.32%(1)
Class C Shares 9.34 9.80 -- -4.64(1) --
Class D Shares 9.37 9.89 10.00 -6.25(1) -5.21(1)
Class A Shares--Total Return -4.53(1) --
Class B Shares--Total Return -6.55(1) -5.32(1)
Class C Shares--Total Return -4.64(1) --
Class D Shares--Total Return -6.25(1) -5.21(1)
<PAGE>
<FN>
*Investment results shown do not reflect any sales charges;
results would be lower if a sales charge was included.
++Investment results shown for Class A and Class C Shares
are since inception (10/21/94).
++++Commencement of Operations.
(1)Percent change includes reinvestment of $0.005 per share
capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
EUROPE Industries Face Amount Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Austria Utilities--Electric 55,000 Oesterreichische Elektrizitats
AG (Verbund) $ 3,338,505 $ 3,177,442 1.7%
Total Investments in Austria 3,338,505 3,177,442 1.7
Belgium Building Materials 6,300 Glaverbel SA (Ordinary) 1,001,340 834,319 0.5
15,770 Terca Brick Industries 758,455 773,866 0.4
----------- ----------- ------
1,759,795 1,608,185 0.9
Total Investments in Belgium 1,759,795 1,608,185 0.9
Denmark Engineering & 24,000 FLS Industries A/S 1,732,729 1,938,796 1.1
Construction
Total Investments in Denmark 1,732,729 1,938,796 1.1
Finland Engineering & 75,000 Valmet Corporation 'A' 1,502,031 1,428,798 0.8
Construction
Machine Tools & 21,750 Fiskars OY AB 1,479,061 1,462,417 0.8
Machinery
Total Investments in Finland 2,981,092 2,891,215 1.6
France Multi-Industry 3,545 Societe EuraFrance S.A. 1,182,561 1,089,695 0.6
Total Investments in France 1,182,561 1,089,695 0.6
<PAGE>
Germany Machinery & 39,100 Kloeckner Werke AG 3,734,471 3,119,412 1.7
Engineering
Total Investments in Germany 3,734,471 3,119,412 1.7
Ireland Banking & Financial 700,000 Anglo Irish Bank Corp. PLC 607,595 605,248 0.3
Foods 131,000 Greencore PLC 805,658 819,169 0.4
Total Investments in Ireland 1,413,253 1,424,417 0.7
Italy Building & 434,600 Fochi Filippo S.p.A. (Ordinary) 1,346,030 950,671 0.5
Construction 250,000 Fochi Filippo S.p.A. (Warrants) (b) 138,508 100,271 0.1
----------- ----------- ------
1,484,538 1,050,942 0.6
Diversified Companies 1,850,000 Compagnie Industriali Riunite S.p.A. (CIR) 2,071,370 2,157,534 1.2
Home Furnishings 205,000 Merloni Elettrodomestici S.p.A. 337,062 360,515 0.2
Total Investments in Italy 3,892,970 3,568,991 2.0
Nether- Capital Goods 19,000 Ahrend Groep NV 1,547,278 1,992,961 1.1
lands
Retail Trade 48,600 Deboer Winkelbedrijven 1,897,601 1,934,803 1.1
Total Investments in the Netherlands 3,444,879 3,927,764 2.2
Spain Forest Products 45,000 Empresa National de Celulosas S.A. 1,008,393 1,070,696 0.6
Real Estate 98,000 Vallehermoso S.A. 1,603,094 1,702,242 0.9
Total Investments in Spain 2,611,487 2,772,938 1.5
Sweden Automobile Parts 47,000 Autoliv AB 1,524,195 1,812,616 1.0
Engineering & 104,100 ++Svedala Industri AB 2,243,493 2,428,504 1.3
Construction
Forest Products/ 1,120,000 Rottneros Bruks AB Free 1,536,254 1,412,120 0.8
Paper & Packaging 1,120,000 Rottneros Bruks AB Free (Rights) (c) 0 0 0.0
----------- ----------- ------
1,536,254 1,412,120 0.8
Total Investments in Sweden 5,303,942 5,653,240 3.1
<PAGE>
Switzer- Engineering & 1,160 Daetwyler Holdings AG 2,025,613 1,774,379 1.0
land Construction 1,725 SIG Swheizerische Industrie-Gasellschaft
Holdings AG 1,802,127 1,583,174 0.9
----------- ----------- ------
3,827,740 3,357,553 1.9
Metal Fabricating 1,300 Georg Fisher AG 1,486,977 1,521,224 0.8
Total Investments in Switzerland 5,314,717 4,878,777 2.7
Turkey Beverages 183,500 Erciyas Biracilik Ve Malt Sanayii A.S. 140,618 135,838 0.1
Building & 258,500 Alarko Holdings A.S. 190,265 221,571 0.1
Construction
Building Materials 53,400 Cimentas Izmir Cimento Fabrikasi T.A.S. 41,435 37,449 0.0
Insurance 477,000 Aksigorta A.S. 119,250 96,639 0.1
Steel 1,295,000 Izmir Demir Celik Sanayii A.S. 97,129 70,636 0.0
Total Investments in Turkey 588,697 562,133 0.3
United Automobile Parts 150,000 Croda International PLC (Ordinary) 868,394 906,714 0.5
Kingdom
Brewery 300,000 Boddington Group PLC 1,197,132 1,188,594 0.6
Building & 450,000 Amec PLC 820,536 493,290 0.3
Construction 1,000,000 Costain Group PLC (Ordinary) 435,213 336,690 0.2
----------- ----------- ------
1,255,749 829,980 0.5
Diversified 680,000 Howden Group PLC 1,006,478 1,022,285 0.6
Food & Beverage 250,000 Hazlewood Foods PLC 554,983 442,395 0.2
Foreign Government United Kingdom Gilt:
Obligations Pound 1,100,000 10.50% due 2/21/1997 1,791,649 1,796,349 1.0
Sterling
Pound 2,000,000 8.75% due 9/01/1997 3,305,188 3,157,447 1.7
Sterling ----------- ----------- ------
5,096,837 4,953,796 2.7
Health/Personal Care 930,000 London International Group (Ordinary) 1,333,025 1,339,870 0.7
Manufacturing 260,000 Low & Bonar PLC (Ordinary) 1,718,738 1,620,497 0.9
Media/Publishing 300,000 International Business Communications
(Ordinary) 1,043,116 1,085,238 0.6
Transportation 230,000 Ocean Group PLC (Ordinary) 981,019 1,019,309 0.6
Total Investments in the United Kingdom 15,055,471 14,408,678 7.9
<PAGE>
Total Investments in Europe 52,354,569 51,021,683 28.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
LATIN Shares Held/ Value Percent of
AMERICA Industries Face Amount Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Argentina Oil & Related 645,000 Compania Argentina de Petroleo S.A. $ 1,450,852 $ 1,064,250 0.6%
Tobacco 100,126 Nobleza Piccardo S.A. 501,811 425,536 0.2
Total Investments in Argentina 1,952,663 1,489,786 0.8
Brazil Appliances 210,000 Brasmotor Group S.A. (Preferred) 78,321 85,142 0.0
36,800,000 Refrigeracao Parana S.A. (Preferred) 120,025 121,797 0.1
------------ ------------ ------
198,346 206,939 0.1
Automotive 47,000 Capco Automotive Products Corp. S.A. 625,040 564,000 0.3
Foods 77,500,000 Ceval Alimentos S.A. (Preferred) 1,317,795 1,145,095 0.6
Telecommunications 2,400 Telecommunicacoes Brasileiras S.A.--
Telebras (ADR) (a) 99,600 106,800 0.1
Total Investments in Brazil 2,240,781 2,022,834 1.1
Chile Banking 59,000 Banco Osorno Y La Union S.A. (ADR) (a) 796,500 634,250 0.3
Beverages 16,200 Vina Concha Y Toro S.A. 300,672 267,300 0.1
Total Investments in Chile 1,097,172 901,550 0.4
Colombia Computer Services 200,000 Papeles Nacional C.A. 3,600,000 2,400,000 1.3
Total Investments in Colombia 3,600,000 2,400,000 1.3
Mexico Banking 41,300 Servicios Financieros Quadrum, S.A.
de C.V. (ADR) (a) 656,389 258,125 0.1
Broadcasting & 253,000 Grupo Fernandez Editores, S.A. de
Publishing C.V.--BCP 404,963 75,718 0.1
<PAGE>
Financial Services 75,500 Grupo Financiero (GBM) Atlantico, S.A.
de C.V. (Class L) 1,549,260 528,500 0.3
Leisure 80,000 ++Grupo Posadas, S.A. de C.V. (ADR) (a) 1,431,600 1,220,000 0.7
Steel 70,000 ++Hylsamex, S.A. de C.V.--BCP 1,505,000 1,172,500 0.6
Total Investments in Mexico 5,547,212 3,454,843 1.8
Total Investments in Latin America 14,437,828 10,269,013 5.4
MIDDLE EAST/
AFRICA
South
Africa Diversified 2,000 Morgan Stanley Africa Investment Fund 21,745 22,750 0.0
1,000 New South Africa Fund, Inc. 14,185 14,125 0.0
1,000 Southern Africa Fund, Inc. 13,935 13,875 0.0
------------ ------------ ------
49,865 50,750 0.0
Total Investments in the Middle East/Africa 49,865 50,750 0.0
NORTH
AMERICA
Canada Foreign Government C$ 2,500,000 Canadian Government Bond,
Obligations 7.75% due 9/15/1996 1,746,680 1,757,554 1.0
Insurance 115,300 Cambior Inc. 1,678,622 1,311,538 0.7
Leisure 117,984 Four Seasons Hotels Ltd. 1,336,590 1,366,919 0.7
Utilities--Gas 161,400 British Columbia Gas Inc. 1,754,547 1,553,472 0.9
Total Investments in Canada 6,516,439 5,989,483 3.3
United Aerospace 110,000 UNC Inc. 637,625 660,000 0.4
States
Apparel 100,000 Farah Inc. 1,022,033 712,500 0.4
10,000 Jones Apparel Group Inc. 221,850 257,500 0.1
------------ ------------ ------
1,243,883 970,000 0.5
<PAGE>
Banks & Finance 7,500 Bankers Corp. 113,737 97,500 0.1
59,000 Charter One Financial Inc. 1,225,870 1,098,875 0.6
50,000 The Co-Operative Bank of Concord 833,688 650,000 0.4
70,000 Roosevelt Financial Group Inc. 1,134,338 1,041,250 0.6
------------ ------------ ------
3,307,633 2,887,625 1.7
Biotechnology 61,000 Cephalon, Inc. 531,242 488,000 0.3
10,000 Genetic Therapy, Inc. 100,050 65,000 0.0
------------ ------------ ------
631,292 553,000 0.3
Building 12,000 Blount, Inc. (Class A) 523,696 558,000 0.3
50,000 Clayton Homes, Inc. 692,400 787,500 0.4
------------ ------------ ------
1,216,096 1,345,500 0.7
Business Services 117,600 Applied Bioscience International Inc. 682,980 646,800 0.4
Computer Services 15,000 Sterling Software, Inc. 462,292 551,250 0.3
65,000 Symantec Corp. 869,250 1,137,500 0.6
40,000 VLSI Technology, Inc. 470,000 475,000 0.3
------------ ------------ ------
1,801,542 2,163,750 1.2
Computer Software 70,000 Cognos, Inc. 848,750 1,251,250 0.7
Computers 10,000 Stratus Computer, Inc. 364,920 380,000 0.2
Data Processing 16,300 Landmark Graphics Corp. 294,474 289,325 0.2
25,000 SHL Systemhouse, Inc. 125,000 125,000 0.1
------------ ------------ ------
419,474 414,325 0.3
Electrical Equipment 20,000 Comptek Research, Inc. 238,700 350,000 0.2
Healthcare-- 90,000 Beverly Enterprises, Inc.++++ 1,194,853 1,293,750 0.7
Products/Services 20,000 Charter Medical Corp. 397,858 430,000 0.2
53,800 Ramsay Health Care Inc. 330,777 349,700 0.2
------------ ------------ ------
1,923,488 2,073,450 1.1
Home--Builders 39,800 Washington Homes Inc. 199,396 134,325 0.1
Home Furnishing 30,000 Crown Crafts, Inc. 447,788 453,750 0.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Shares Held/ Value Percent of
(concluded)Industries Face Amount Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Insurance 54,000 Ace, Ltd. $ 1,236,340 $ 1,262,250 0.7%
States 53,700 Capital Guaranty Corp. 809,747 758,512 0.4
(concluded) 50,000 First Colony Corp. 1,052,037 1,118,750 0.6
22,500 Harleysville Group, Inc. 459,037 528,750 0.3
40,000 PXRE Corp. 936,450 1,130,000 0.6
56,000 PartnerRe Holdings Ltd. 1,141,426 1,155,000 0.6
47,500 Security-Connecticut Corp. 1,003,162 1,068,750 0.6
------------ ------------ ------
6,638,199 7,022,012 3.8
Manufactured Housing 51,000 Redman Industries, Inc. 913,875 828,750 0.5
Medical 7,000 Coram Healthcare Corp. 91,858 115,500 0.1
Natural Resources 40,000 Brown (Tom) Inc. 478,300 445,000 0.2
75,000 Burlington Industries, Inc. 873,330 740,625 0.4
100,000 Coho Resources Inc. 466,689 512,500 0.3
51,600 Plains Resources, Inc. 322,500 283,800 0.2
50,000 Total Petroleum (North America) Ltd. 613,000 625,000 0.3
55,000 TransTexas Gas Corp. 605,000 618,750 0.3
------------ ------------ ------
3,358,819 3,225,675 1.7
Pharmaceutical-- 8,500 Cor Therapeutics, Inc. 105,000 91,375 0.0
Diversified
Real Estate Investment 27,000 Carr Realty Corp. 539,996 486,000 0.3
Trust 50,000 Crown American Realty Trust 726,750 675,000 0.4
------------ ------------ ------
1,266,746 1,161,000 0.7
Restaurants 80,000 TPI Enterprises Inc. 456,270 300,000 0.2
Retail Stores 55,000 Baker (J.) Inc. 970,300 804,375 0.4
70,000 Catherine Stores Corp. 596,740 560,000 0.3
8,300 OfficeMax, Inc. 157,700 219,950 0.1
20,000 Pier 1 Imports, Inc. 166,000 187,500 0.1
165,000 Service Merchandise Co., Inc. 890,012 763,125 0.4
4,050 The Sports Authority, Inc. 76,950 85,050 0.0
------------ ------------ ------
2,534,002 2,212,550 1.1
<PAGE>
Transportation 11,300 Kirby Corp. 185,715 223,175 0.1
Utilities--Water 10,000 American Water Works Company, Inc. 276,850 270,000 0.1
US Government US$ 1,800,000 US Treasury Note, 7.50% due 12/31/1996 1,793,813 1,793,250 1.0
Obligations
Total Investments in the United States 31,908,414 31,934,512 17.5
Total Investments in North America 38,424,853 37,923,995 20.8
PACIFIC
BASIN
Australia Merchandising 49,250 Amway Asia Pacific Ltd. 1,430,192 1,600,625 0.9
Total Investments in Australia 1,430,192 1,600,625 0.9
Hong Kong Broadcasting & 1,347,000 Ming Pao Enterprise Corp. Ltd. 1,015,477 809,663 0.4
Publishing
Financial Services 2,860,000 Winton Holdings Ltd. 1,040,875 724,612 0.4
Machinery 1,347,000 Beiren Printing Machinery Holdings Ltd.
(Class H) 687,070 374,360 0.2
Total Investments in Hong Kong 2,743,422 1,908,635 1.0
Indonesia Banking--International 241,000 PT Bank Bali 693,604 680,109 0.4
Consumer--Goods 17,000 PT Wicaksana Overseas International 29,430 48,748 0.0
Total Investments in Indonesia 723,034 728,857 0.4
Japan Apparel 95,000 Goldwin Inc. 1,239,795 945,226 0.5
Automobile Parts 21,000 Murakami Corp. 656,093 612,060 0.3
71,000 Sanoh Industrial 963,400 813,467 0.4
110,000 Showa Corp. 1,098,685 1,072,362 0.6
74,000 Yamakawa Industrial Co. 916,360 1,004,020 0.6
------------ ------------ ------
3,634,538 3,501,909 1.9
Banks 16,000 Bank of the Ryukyus, Ltd. 940,624 821,709 0.4
<PAGE>
Beverages 79,000 Hokkaido Coca-Cola Bottling Co., Ltd. 1,298,058 1,071,859 0.6
74,800 Sanyo Coca-Cola Bottling Co., Ltd. 1,130,306 1,120,121 0.6
------------ ------------ ------
2,428,364 2,191,980 1.2
Chemicals 70,000 Katakura Chikkarin Co., Ltd. 830,212 773,869 0.4
Computer Services 37,800 TKC Corp. 1,253,015 1,181,487 0.6
Construction 56,900 Japan Foundation Engineering 1,385,819 1,172,312 0.6
117,000 Yondenko Corp. 1,136,840 1,102,975 0.6
------------ ------------ ------
2,522,659 2,275,287 1.2
Consumer Electricals 59,000 Roland Corp. 1,429,975 1,191,859 0.6
Electrical Equipment 84,000 Energy Support Corp. 642,525 659,337 0.4
38,000 Maspro Denkoh Corp. 1,272,483 1,015,879 0.6
26,000 Shinmei Electric Co. 1,340,491 783,920 0.4
52,000 Sukegawa Electric Co. 682,343 653,266 0.4
------------ ------------ ------
3,937,842 3,112,402 1.8
Foods/Food Processing 33,000 Ariake Japan Co. Ltd. 1,408,764 1,336,583 0.7
108,000 Fuji Oil Co., Ltd. 983,191 938,894 0.5
------------ ------------ ------
2,391,955 2,275,477 1.2
Health Services 40,000 Kanto Biomedical Laboratory 845,365 747,739 0.4
58,000 SRL Inc. 1,343,559 1,049,246 0.6
------------ ------------ ------
2,188,924 1,796,985 1.0
Home--Builders 55,400 Tsuchiya Home Co. 1,593,910 1,364,121 0.7
21,000 USK Corp. 423,913 417,889 0.2
------------ ------------ ------
2,017,823 1,782,010 0.9
Industrials 22,000 Roki Techno Co., Ltd. 757,111 769,447 0.4
Iron & Steel 154,000 Nippon Chutesukan 1,025,613 916,261 0.5
Leasing 56,000 Marufuji Sheet Piling Co., Ltd. 617,486 466,573 0.3
47,000 Nissho Iwai Steel Leasing Co. 624,366 382,613 0.2
------------ ------------ ------
1,241,852 849,186 0.5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN Shares Held/ Value Percent of
(concluded)Industries Face Amount Stocks, Bonds, Warrants & Rights Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Japan Machinery 46,640 Giken Seisakusho Co. Inc. $ 1,454,121 $ 1,054,673 0.6%
(concluded)
Metal Fabrication 111,000 Mory Industries Inc. 923,139 874,613 0.5
86,000 Toyo Kohan Co., Ltd. 775,891 737,266 0.4
------------ ------------ ------
1,699,030 1,611,879 0.9
Packaging 40,800 Chuo Kagaku Co. Ltd. 1,796,532 1,517,186 0.8
Paper 109,000 Tomoku Co., Ltd. 859,183 733,970 0.4
Pharmaceuticals 16,000 Towa Pharmaceutical Co. 1,335,217 1,284,824 0.7
Pollution Control 107,000 Organo Corp. 1,254,931 1,161,407 0.6
Real Estate 53,000 Keihanshin Real Estate Co. Ltd. 525,507 474,070 0.3
28,000 TOC Corp. 596,958 562,814 0.3
------------ ------------ ------
1,122,465 1,036,884 0.6
Restaurants 32,000 Aim Services Co., Ltd. 1,042,382 955,176 0.5
34,000 Mos Food Services, Inc. 1,357,004 1,291,658 0.7
57,000 Ohsho Food Service Corp. 1,808,206 1,575,377 0.9
------------ ------------ ------
4,207,592 3,822,211 2.1
Retail Specialty 56,000 ADO Electric Industrial Co., Ltd. 1,853,144 1,795,377 1.0
37,000 Arcland Sakamoto 890,661 911,055 0.5
91,000 Daika Corporation 1,444,684 969,447 0.5
48,000 Home Wide Corp. 1,060,753 873,166 0.5
29,000 Nitori Co. 1,257,950 1,194,975 0.6
------------ ------------ ------
6,507,192 5,744,020 3.1
Retail Stores 119,000 Sotetsu Rosen Co., Ltd. 1,112,252 1,018,975 0.6
Services 56,000 Ichinen Co., Ltd. 1,634,426 1,575,879 0.9
Textiles 77,000 Komatsu Seiren Co., Ltd. 1,179,255 1,067,940 0.6
Trading 31,000 Japan CBM Corp. 1,200,936 1,152,764 0.6
Trucking 108,000 Nippon Konpo Unyu Soko 1,045,185 987,739 0.5
65,000 Tonami Transportation Co., Ltd. 518,492 522,613 0.3
------------ ------------ ------
1,563,677 1,510,352 0.8
Total Investments in Japan 54,767,111 48,678,058 26.4
<PAGE>
Malaysia Broadcasting 178,000 Sistem Televisyen Malaysia BHD 536,830 387,032 0.2
Foods 92,000 Nestle (Malaysia) BHD 600,581 612,733 0.3
Newspaper/Publishing 307,000 New Straits Times Press BHD 1,258,675 986,249 0.5
Total Investments in Malaysia 2,396,086 1,986,014 1.0
New Broadcasting & 229,000 Independent News Ltd. 711,948 769,200 0.4
Zealand Publishing
Foreign Government NZ $6,000,000 New Zealand Treasury Bonds, 7.54%
Obligation due 1/11/1995 (d) 3,610,270 3,832,128 2.1
Total Investments in New Zealand 4,322,218 4,601,328 2.5
Thailand Household Products 53,000 Srithai Superware Public Company Ltd. 320,257 337,916 0.2
Real Estate 193,000 Bangkok Land Co., Ltd. 623,766 480,673 0.3
Telecommunications 43,600 United Communication Industry Ltd. (Foreign) 598,730 608,089 0.3
Total Investments in Thailand 1,542,753 1,426,678 0.8
Total Investments in the Pacific Basin 67,924,816 60,930,195 33.0
SOUTHEAST
ASIA
India Broadcasting/Publishing 13,000 Videocon International Ltd. (ADR) (a) 113,750 60,190 0.0
Tobacco 35,000 Indian Tobacco Co. Ltd. 450,625 350,000 0.2
Total Investments in India 564,375 410,190 0.2
Total Investments in Southeast Asia 564,375 410,190 0.2
SHORT-TERM
SECURITIES Issue
Commercial Paper* 5,992,000 General Electric Capital Corp., 5.80%
due 1/03/1995 5,989,104 5,989,104 3.3
<PAGE>
Total Investments in Commercial Paper 5,989,104 5,989,104 3.3
US Government &
Agency Obligations* 5,000,000 Federal Home Loan Mortgage Association,
5.92% due 1/19/1995 4,984,378 4,984,378 2.7
15,000,000 Federal National Mortgage Association,
5.74% due 1/30/1995 14,928,250 14,928,250 8.1
US Treasury Bills:
175,000 5.21% due 3/30/1995 172,746 172,589 0.1
1,400,000 5.53% due 3/30/1995 1,380,860 1,380,708 0.7
145,000 5.63% due 3/30/1995 142,982 143,002 0.1
Total Investments in US Government &
Agency Obligations 21,609,216 21,608,927 11.7
Total Investments in Short-Term Securities 27,598,320 27,598,031 15.0
<CAPTION>
OPTIONS Number of Contracts/ Premiums
PURCHASED Face Amount Paid
<S> <C> <S> <C> <C> <C>
Call Options Purchased 85,839 Topix, 2nd Section, expiring September
1995 at YEN2311.31 200,000 90,049 0.0
Currency Put Options YEN 7,000,000 Japanese Yen, expiring February 1995
Purchased at YEN100 146,300 68,600 0.0
YEN10,000,000 Japanese Yen, expiring February 1995
at YEN101 200,000 61,000 0.0
YEN 4,000,000 Japanese Yen, expiring March 1995
at YEN98.5 62,800 73,200 0.0
Total Options Purchased 609,100 292,849 0.0
Total Investments 201,963,726 188,496,706 102.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
OPTIONS Number of Contracts/ Premiums Value Percent of
WRITTEN Face Amount Issue Recieved (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Put Options Written 1,000 FTSE 100, expiring January 1995
at YEN2800 $ (42,141) $ (5,293) 0.0%
Currency Call YEN 7,000,000 Japanese Yen, expiring February 1995
Options Written at YEN94.60 (146,300) (10,500) 0.0
YEN10,000,000 Japanese Yen, expiring February 1995
at YEN95.75 (200,000) (33,000) 0.0
YEN 4,000,000 Japanese Yen, expiring March 1995
at YEN93.06 (62,800) (6,800) 0.0
Total Options Written (451,241) (55,593) 0.0
<PAGE>
Total Investments, Net of Options Written $201,512,485 188,441,113 102.4
============
Variation Margin on Stock Index Futures Contracts** 5,449 0.0
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (51,211) 0.0
Liabilities in Excess of Other Assets (4,376,552) (2.4)
------------ ------
Net Assets $184,018,799 100.0%
============ ======
(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)The rights may be exercised until 1//20//1995.
(d)Represents the yield-to-maturity on this zero coupon issue.
*Commercial Paper and certain 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 December 31, 1994 were
as follows:
Number of Expiration Value
Contracts Issue Exchange Date (Note 1c)
28 FTSE 100 LIFFE March 1995 $3,389,450
18 Nikkei CME March 1995 1,779,300
19 Nikkei SIMEX March 1995 1,887,588
Total Stock Index Futures Contracts Purchased
(Total Contract Price--$6,911,902) $7,056,338
==========
The market value of pledged securities is $374,764.
***Forward foreign exchange contracts as of December 31, 1994 were as follows:
Unrealized
Foreign Expiration Appreciation
Currency Sold Date (Depreciation)
(Note 1c)
Chf 4,742,600 March 1995 $(42,567)
DM 5,760,497 March 1995 (33,510)
Nlg 4,738,905 March 1995 (40,035)
YEN 1,484,125,000 February 1995 26,284
YEN 348,546,250 March 1995 (18,308)
YEN 971,600,000 June 1995 56,925
<PAGE>
Total Unrealized Depreciation on Forward
Foreign Exchange Contracts (US$ Commitment--$38,508,489)$(51,211)
========
++Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $4,821,000, representing 2.62% of
net assets.
Acquisition Value
Issue Dates Cost (Note 1a)
Grupo Posadas, S.A.
de C.V. (ADR) 8/05/1994 $1,431,600 $1,220,000
Hylsamex S.A.-BCP 10/27/1994 1,505,000 1,172,500
Svedala Industri AB 1/04/1994 2,243,493 2,428,504
Total $5,180,093 $4,821,004
========== ==========
<FN>
++++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$201,354,626) (Note 1a) $188,203,857
Options purchased, at value (cost--$609,100) (Notes 1a & 1c) 292,849
Foreign cash (Note 1c) 2,372,633
Cash 28,544
Receivables:
Capital shares sold $ 864,176
Dividends 137,865
Interest 110,692
Options written 42,141
Forward foreign exchange contracts (Note 1c) 11,774
Variation margin on stock index futures contracts (Notes 1a & 1c) 5,449 1,172,097
------------
Deferred organization expenses (Note 1g) 88,100
Prepaid registration fees and other assets (Note 1g) 109,700
------------
Total assets 192,267,780
------------
<PAGE>
Liabilities: Unrealized depreciation on forward foreign exchange contracts (Note 1c) 51,211
Options written, at value (cost--$451,241) (Notes 1a & 1c) 55,593
Payables:
Securities purchased 7,155,847
Capital shares redeemed 461,238
Distributor (Note 2) 129,911
Investment adviser (Note 2) 126,891
Forward foreign exchange contracts (Note 1c) 20,262 7,894,149
------------
Accrued expenses and other liabilities 248,028
------------
Total liabilities 8,248,981
------------
Net Assets: Net assets $184,018,799
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares authorized $ 35,300
Consist of: Class B Common Stock, $0.10 par value, 100,000,000 shares authorized 1,612,764
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized 28,695
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized 292,686
Paid-in capital in excess of par 193,826,239
Accumulated investment loss--net (3,888)
Undistributed realized capital gains on investments and foreign
currency transactions--net 1,265,964
Unrealized depreciation on investments and foreign currency transactions--net (13,038,961)
------------
Net assets $184,018,799
============
Net Asset Class A--Based on net assets of $3,308,761 and 352,997 shares outstanding $ 9.37
Value: ============
Class B--Based on net assets of $150,608,934 and 16,127,636 shares outstanding $ 9.34
============
Class C--Based on net assets of $2,679,268 and 286,947 shares outstanding $ 9.34
============
Class D--Based on net assets of $27,421,836 and 2,926,860 shares outstanding $ 9.37
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period August 5, 1994++ to December 31, 1994
<S> <S> <C> <C>
Investment
Income
(Notes 1e & 1f): Interest and discount earned $ 1,043,861
Dividends (net of $43,324 foreign withholding tax) 477,581
------------
Total income 1,521,442
------------
Expenses: Investment advisory fees (Note 2) $ 555,619
Distribution fees--Class B (Note 2) 539,567
Transfer agent fees--Class B (Note 2) 107,243
Custodian fees 98,768
Registration fees (Note 1g) 48,364
Printing and shareholder reports 39,467
Accounting services (Note 2) 27,016
Account maintenance fees--Class D (Note 2) 26,359
Transfer agent fees--Class D (Note 2) 17,133
Directors' fees and expenses 13,662
Professional fees 10,342
Amortization of organization expenses (Note 1g) 6,604
Distribution fees--Class C (Note 2) 3,157
Pricing fees 1,097
Transfer agent fees--Class A (Note 2) 897
Transfer agent fees--Class C (Note 2) 642
Other 29,393
------------
Total expenses 1,525,330
------------
Investment loss--net (3,888)
------------
Realized & Unrealized Realized gain (loss) from:
Gain (Loss) on Investments--net 1,486,519
Investments & Foreign Foreign currency transactions--net (120,792) 1,365,727
Currency Transactions ------------
- - - - --Net (Notes Unrealized appreciation/depreciation on:
1c, 1d, 1f & 3): Investments--net (13,079,436)
Foreign currency transactions--net 40,475 (13,038,961)
------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (11,673,234)
------------
Net Decrease in Net Assets Resulting from Operations $(11,677,122)
============
<FN>
++Commencement of Operations.
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
August 5, 1994++ to
Increase (Decrease) in Net Assets: December 31, 1994
<S> <S> <S>
Operations: Investment loss--net $ (3,888)
Realized gain on investments and foreign currency transactions--net 1,365,727
Unrealized depreciation on investments and foreign currency transactions--net (13,038,961)
------------
Net decrease in net assets resulting from operations (11,677,122)
------------
Distributions to 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 195,695,684
Transactions
(Note 4):
Net Assets: Total increase in net assets 183,918,799
Beginning of period 100,000
End of period* $184,018,799
*Accumulated investment loss--net $ (3,888)
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B Class C Class D
For the For the For the For the
The following per share data and ratios Period Period Period Period
have been derived from information provided Oct. 21 Oct. 21, Oct. 21, Oct. 21,
in the financial statements. 1994++ 1994++ 1994++ 1994++
to Dec. 31, to Dec. 31, to Dec. 31, to Dec. 31,
Increase (Decrease) in Net Asset Value: 1994 1994++++ 1994++++ 1994
<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 (loss)--net .01 (.01) (.01) .02
Realized and unrealized loss on investments
and foreign currency transactions--net (.45) (.64) (.44) (.64)
---------- ---------- -------- ----------
Total from investment operations (.44) (.65) (.45) (.62)
---------- ---------- -------- ----------
Less distributions:
Realized gain on investments--net
(.01) (.01) (.01) (.01)
---------- ---------- -------- ----------
Total distributions (.01) (.01) (.01) (.01)
---------- ---------- -------- ----------
Net asset value, end of period $ 9.37 $ 9.34 $ 9.34 $ 9.37
========== ========== ======== ==========
Total Investment Based on net asset value per share (4.53%)+++ (6.55%)+++ (4.64%)+++ (6.25%)+++
Return:** ========== ========== ======== ==========
Ratios to Average Expenses, excluding account maintenance
Net Assets: and distribution fees 1.43% 1.47%* 1.48%* 1.43%*
========== ========== ======== ==========
Expenses 1.43%* 2.47%* 2.48%* 1.68%*
========== ========== ======== ==========
Investment income (loss)--net .35%* (.14%)* (.69%)* .68%*
========== ========== ======== ==========
Supplemental Net assets, end of period (in thousands) $ 3,309 $ 150,609 $ 2,679 $ 27,422
Data: ========== ========== ======== ==========
Portfolio turnover 10.44% 10.44% 10.44% 10.44%
========== ========== ======== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
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 10,000
capital shares of the Fund to Merrill Lynch Asset Management, L.P.
("MLAM") for $100,000. These unaudited interim 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 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 and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund. Securities traded in the over-the-counter
market are valued at the last available bid price in the over-the-
counter market 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. Short-term securities are
valued at amortized cost, which approximates market value.
Options written by the Fund 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 average of the last asked price as
obtained from one or more dealers. Options purchased by the Fund
are valued at the last sale price in the case of the exchange-traded
options, or in the case of options traded in the over-the-counter
market, the average of the last bid price as obtained from two or
more dealers, unless there is only one dealer, in which case that
dealer's price is used.
<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 Government
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 additions to such
securities daily to ensure that the contract is fully collateralized.
(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.
NOTES TO FINANCIAL STATEMENTS (continued)
* 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 sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis
of the security sold. When an option expires (or the Fund enters
into closing transactions), 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).
Written and purchased options are non-income producing
investments.
<PAGE>
* Futures contracts--The Fund may purchase or sell 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 transactions
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 and 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.
(h) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
<PAGE>
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. ("ML & Co."), which is a limited partner. The Fund has also
entered into a Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distributor").
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 December 31, 1994,
MLAM paid MLAM U.K. a fee of $45,050 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:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
<PAGE>
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 distribu-
tion 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 December 31, 1994, 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 $ 7 $ 151
Class D $17,601 $1,043,216
MLPF&S received contingent deferred sales charges of $84,323
relating to transactions in Class B Shares of beneficial interest,
$73 relating to transactions in Class C Shares of beneficial interest,
and $2,436 in commissions on the execution of portfolio security
transactions for the Fund for the period ended December 31, 1994.
Financial Data Services, Inc. ("FDS"), 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 directors
of MLAM, PSI, MLAM U.K., MLPF&S, MLFD, FDS and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period ended December 31, 1994 were $183,813,663 and
$11,122,513, respectively.
Net realized and unrealized gains (losses) as of December 31, 1994
were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Investments:
Long-term $ 1,000,766 $(13,150,480)
Short-term (2,166) (289)
Stock index futures contracts 487,919 144,436
Options purchased -- (109,951)
Option written -- 36,848
------------ ------------
Total investments 1,486,519 (13,079,436)
------------ ------------
<PAGE>
Currency Transactions:
Options written -- 358,800
Options purchased -- (206,300)
Foreign currency transactions (271,253) (60,814)
Forward foreign exchange contracts 150,461 (51,211)
------------ ------------
Total currency transactions (120,792) 40,475
------------ ------------
Total $ 1,365,727 $(13,038,961)
============ ============
As of December 31, 1994, net unrealized depreciation for Federal
income tax purposes aggregated $13,223,872, of which $4,322,633
related to appreciated securities and $17,546,505 related to depreci-
ated securities. The aggregate cost of investments, including call
options purchased less premiums received for put options written, at
December 31, 1994 for Federal income tax purposes was $201,512,485.
Transactions in call options written for the period ended December
31, 1994 were as follows:
Par Value
Covered By Premiums
Written Options Received
Outstanding call options written at
beginning of period -- --
Options written 21,000,000 $ 409,100
----------- ------------
Outstanding call options written at
end of period 21,000,000 $ 409,100
=========== ============
NOTES TO FINANCIAL STATEMENTS (concluded)
Transactions in put options written for the period ended December
31, 1994 were as follows:
Par Value
Written Options Premiums
Covered By Paid
Outstanding put options written at
beginning of period -- --
Options written 1,000 $ 42,141
----------- ------------
<PAGE>
Outstanding put options written at
end of period 1,000 $ 42,141
=========== ============
4. Beneficial Interest Transactions:
Net increase in net assets derived from beneficial interest trans-
actions was $195,695,684 for the period ended December 31, 1994.
Transactions in capital shares for each class were as follows:
Class A Shares for the Period Dollar
October 21, 1994++ to December 31, 1994 Shares Amount
Shares sold 368,133 $ 3,580,860
Shares issued to shareholders in
reinvestment of distributions 173 1,602
----------- ------------
Total issued 368,306 3,582,462
Shares redeemed (15,309) (145,903)
----------- ------------
Net increase 352,997 $ 3,436,559
=========== ============
[FN]
++Commencement of Operations.
Class B Shares for the Period Dollar
August 5, 1994++ to December 31, 1994 Shares Amount
Shares sold 17,143,013 $170,197,152
Shares issued to shareholders in
reinvestment of distributions 3,965 36,674
----------- ------------
Total issued 17,146,978 170,233,826
Shares redeemed (957,203) (9,246,889)
Conversion of shares (67,139) (639,996)
----------- ------------
Net increase 16,122,636 $160,346,941
=========== ============
[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 December 31, 1994 Shares Amount
<PAGE>
Shares sold 297,917 $ 2,848,789
Shares issued to shareholders in
reinvestment of distributions 118 1,095
----------- ------------
Total issued 298,035 2,849,884
Shares redeemed (11,088) (105,841)
----------- ------------
Net increase 286,947 $ 2,744,043
=========== ============
[FN]
++Commencement of Operations.
Class D Shares for the Period Dollar
August 5, 1994++ to December 31, 1994 Shares Amount
Shares sold 3,660,295 $ 36,416,365
Conversion of shares 66,984 639,996
Shares issued to shareholders in
reinvestment of distributions 573 5,320
----------- ------------
Total issued 3,727,852 37,061,681
Shares redeemed (805,992) (7,893,540)
----------- ------------
Net increase 2,921,860 $ 29,168,141
=========== ============
[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 2,997,993 shares redesignated amounting to $29,941,279.
5. Commitments:
On December 31, 1994, the Fund had entered into forward exchange
contracts under which it had agreed to purchase foreign currencies
with an approximate value of $4,730,000.
PORTFOLIO INFORMATION
Worldwide
Investments
As of 12/31/94
<PAGE>
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Oesterreichische Elektrizitats AG
(Verbund) Austria 1.7%
Kloeckner Werke AG Germany 1.7
Svedala Industri AB Sweden 1.3
Papeles Nacional C.A. Colombia 1.3
Compagnie Industriali Riunite
S.p.A. (CIR) Italy 1.2
Ahrend Groep NV Netherlands 1.1
FLS Industries A/S Denmark 1.1
Deboer Winkelbedrijven Netherlands 1.1
Autoliv AB Sweden 1.0
ADO Electric Industrial Co. Japan 1.0
Percent of
Ten Largest Industries Net Assets
Engineering & Construction 7.9%
Insurance 5.0
Automobile Parts 2.8
Capital Goods 2.8
Computer Services 2.5
Restaurants 2.3
Machinery 2.0
Manufacturing 1.9
Retail Stores 1.7
Natural Resources 1.7
