MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 1995
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>
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
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.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Global SmallCap
Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Merrill Lynch
Global SmallCap
Fund, Inc.
Management Team
<PAGE>
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 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.
Worldwide
Investments
As of 12/31/95
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Organo Corp. Japan 1.3%
Fotolabo SA Switzerland 1.3
Ahrend Groep NV Netherlands 1.3
Getinge Industrier AB ('B' Shares) Sweden 1.2
Japan Foundation Engineering Japan 1.2
PXRE Corp. United States 1.2
Ohsho Food Service Corp. Japan 1.1
Acorn Computer Group PLC United Kingdom 1.1
ADO Electric Industrial Co., Ltd. Japan 1.1
Kloeckner Werke AG Germany 1.1
<PAGE> Percent of
Ten Largest Industries Net Assets
Insurance 4.1%
Retail Specialty 3.9
Construction 3.3
Engineering & Construction 3.2
Holding Company 2.7
Restaurants 2.6
Diversified 2.5
Manufacturing 2.4
Beverages 2.4
Natural Resources 2.1
DEAR SHAREHOLDER
The second half of 1995 was marked by cuts in official interest
rates around the world as the result of weakening economic growth
and inflation indicators. Monetary policy easings were supportive of
global financial markets. Small market capitalization issues
benefited from the favorable environment, with the unmanaged Salomon
Brothers Extended Market Index (SEMI) posting a +9.0% return in US
dollar terms during the last six months of 1995. For the six-month
period ended December 31, 1995, total returns for Merrill Lynch
Global SmallCap Fund, Inc.'s Class A, Class B, Class C and Class D
Shares were +5.74%, +5.18%, +5.17% and +5.48%, respectively.
(Results shown do not reflect sales charges, and would be lower if
sales charges were included. Complete performance information,
including average annual total returns, can be found on pages 4 and
5 of this report to shareholders.)
Small cap issues underperformed large cap issues, as evidenced by
the +10.7% return in US dollar terms by the Financial Times/S&P--
Actuaries World Index, a predominantly large cap index. The other
notable feature of the last six months was the depreciation of the
Japanese yen versus the US dollar from a rate of 85 on June 30, 1995
to 103 at year-end.
In US dollar terms, the best-performing major small cap stock market
was the United States, up 12.8%. Virtually all other small cap stock
markets underperformed the overall index during the six-month period
ended December 31, 1995, as the recovery of the US dollar depressed
the US dollar returns of non-US markets. For example, the Japanese
small cap index rose 31.8% in yen terms during the six-month period
ended December 31, 1995, but this translated into only an 8.5%
return in US dollars. Elsewhere, UK, Japan and Pacific Basin
(excluding Japan) small cap issues rose 11.0%, 8.5% and 6.4%,
respectively, for the same period while small cap issues in
Continental Europe fell by 1.4%.
<PAGE>
The key contributions to the Fund's underperformance as compared to
the SEMI benchmark were our significantly underweighted position in
US small cap issues and our overweighted positions in Continental
Europe and emerging markets. However, we added value as com-
pared to the SEMI benchmark through the Fund's hedging currency
exposures embedded in non-US portfolio positions back into US
dollars, particularly at the expense of the Japanese yen.
Portfolio Changes
The Fund remains significantly weighted in Japan, with Japanese
small cap equities comprising 28.1% of net assets. During the
December quarter, we increased the Fund's equity exposure in other
Pacific Basin markets, especially Hong Kong. Overall, approximately
8.4% of the Fund's net assets are invested in the Pacific Basin
(excluding Japan) equity markets.
Economic and Investment
Environment
For the developed economies, leading economic indicators continued
to point toward a mixed outlook for economic growth and diminishing
inflationary pressures. In the United States, despite a strong
rebound in activity in the third quarter, inflationary indicators
generally remained subdued. Across Europe, economic data signaled a
virtual stagnation of activity in the second half of 1995 as
companies struggled to cut back excessive inventories. Japanese
economic data improved during the December quarter but the pace of
recovery was slow, at best.
The weakness of the economic data prompted interest rate cuts in all
the major economies. The US Federal Reserve Board cut the key
Federal Funds rate by 50 basis points (0.50%), and the German
Bundesbank allowed call rates to fall by around 70 basis points. The
Bundesbank's actions led to generalized interest rate cuts across
Europe. The Japanese authorities undertook the most dramatic policy
easing, cutting the target for call rates by 80 basis points,
implementing an expansionary fiscal package and engineering a
devaluation of the Japanese yen versus the US dollar.
The portfolio is biased toward a strong revival in Japanese economic
activity as well as a resumption of economic growth in Europe.
Although the US economic backdrop looks set to remain favorable for
US financial assets over the coming months, we believe that the US
bond and equity markets are generally fully priced. We expect that
lower US interest rates will benefit other equity markets relative
to the United States, particularly emerging markets equities.
<PAGE>
In Conclusion
During the last six months, lower interest rates have boosted most
global equity markets and small cap issues have benefited from the
easier liquidity conditions. However, weaker economic growth
expectations have seen small cap issues underperform the more liquid
and interest rate-sensitive large cap issues. A turnaround in global
growth expectations will help small cap performance. We favor
Japanese and emerging markets, as well as European markets over US
and UK small caps. We also believe the US dollar may continue to
appreciate against other currencies, and will accordingly look for
opportunities to hedge the Fund's portfolio holdings.
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
(Grace Pineda)
Grace Pineda
Co-Portfolio Manager
Emerging Markets Investments--
Europe and Latin America
<PAGE>
(James Russell)
James Russell
Co-Portfolio Manager
Japanese Investments
(Dennis Stattman)
Dennis Stattman
Co-Portfolio Manager
US Investments
January 31, 1996
EQUITY PORTFOLIO CHANGES
For the Quarter Ended December 31, 1995
Additions
AGCO Corp.
*Amisys Managed Care Systems,
Inc.
*Arbor Software Corp.
Asas Dunia BHD
*Boston Beer Co., Inc.
Cafe de Coral Holdings Limited
Charming Shoppes, Inc.
*Citrix Systems, Inc.
*Clarify, Inc.
Fernz Corporation Limited
Fotolabo SA
Getinge Industrier AB (B Shares)
Hellaby Holdings Ltd.
*IDX Systems Corp.
Inspec Group PLC
<PAGE>
JCG Holdings, Ltd. (Warrants)
Kiwi Income
Korea Electric Power Corp. (ADR)
Landmark Graphics Corp.
Lane Walker Rudkin Industries,
Ltd.
Magellan Health Services, Inc.
Matthew Clark PLC
*Mecon, Inc.
Medex, Inc.
*Meta Group, Inc.
*Metatools, Inc.
Misys PLC
Moebel Walther AG
Movie Gallery, Inc.
North American Biologicals Inc.
PT Tambang Timah (GDR)
PT Wicaksana Overseas
International
Pharmacopeia, Inc.
*Pixar, Inc.
Quanex Corp.
*Scopus Technology, Inc.
Sequus Pharmaceuticals, Inc.
Skellerup Group Ltd.
Smith (A.O.) Corporation
Su-Raj Diamonds Ltd.
*Sync Research, Inc.
*Visio Corp.
*Visioneer, Inc.
Wrightson Ltd.
Zodiac S.A.
Deletions
*Amisys Managed Care Systems, Inc.
Anglo Irish Bank Corp. PLC
*Arbor Software Corp.
Arcadian Corp.
Bankers Corp.
Boddington Group PLC
*Boston Beer Co., Inc.
CAPCO Automotive Products Corp.
S.A. (ADR)
Capital Guaranty Corp.
Carr Realty Corp.
<PAGE>
Celsius Industrier AB
Charter Medical Corp.
*Citrix Systems, Inc.
*Clarify, Inc.
The Co-Operative Bank of Concord
Croda International PLC (Ordinary)
FLS Industries A/S
Fochi Filippo S.p.A. (Warrants)
Greencore PLC
Grupo Fernandez Editores, S.A.
de C.V.--BCP
*IDX Systems Corp.
Komatsu Seiren Co., Ltd.
*Mecon, Inc.
*Meta Group, Inc.
*Metatools, Inc.
Ming Pao Enterprise Corp. Ltd.
Mory Industries, Inc.
Ocean Group PLC (Ordinary)
Oesterreichische Elektrizitats AG
(Verbund)
*Pixar, Inc.
Pohang Iron & Steel Company,
Ltd.
SHL Systemhouse, Inc.
*Scopus Technology, Inc.
*Sync Research, Inc.
Univax Biologics, Inc.
Videocon International Ltd.
(GDR)
*Visio Corp.
*Visioneer, Inc.
Winton Holdings Ltd.
[FN]
*Added and deleted in the same quarter.
PERFORMANCE DATA
About Fund
Performance
<PAGE>
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors, 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.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/95 +0.66% -4.63%
Inception (10/21/94) through 12/31/95 -3.28 -7.55
<PAGE>
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/95 -0.45% -4.39%
Inception (8/5/94) through 12/31/95 -5.01 -7.02
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 12/31/95 -0.46% -1.45%
Inception (10/21/94) through 12/31/95 -4.27 -4.27
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/95 +0.31% -4.96%
Inception (8/5/94) through 12/31/95 -4.28 -7.88
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.82 $9.37 $0.005 -- -4.53%
1995 9.37 9.27 0.053 $0.105 +0.66
------ ------
Total $0.058 Total $0.105
Cumulative total return as of 12/31/95: -3.90%**
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<C> <C> <C> <C> <C> <C>
8/5/94--12/31/94 $10.00 $9.34 $0.005 -- -6.55%
1995 9.34 9.19 0.053 $0.052 -0.45
------ ------
Total $0.058 Total $0.052
Cumulative total return as of 12/31/95: -6.97%***
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change***
<C> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.80 $9.34 $0.005 -- -4.64%
1995 9.34 9.19 0.053 $0.052 -0.46
------ ------
Total $0.058 Total $0.052
Cumulative total return as of 12/31/95: -5.08%***
</TABLE>
<PAGE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
8/5/94-- 12/31/94 $10.00 $9.37 $0.005 -- -6.25%
1995 9.37 9.25 0.053 $0.093 +0.31
------ ------
Total $0.058 Total $0.093
Cumulative total return as of 12/31/95: -5.96%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
***Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
12/31/95 9/30/95 12/31/94 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $9.27 $9.48 $9.37 -0.49%(1) -1.64%(1)
Class B Shares 9.19 9.37 9.34 -1.02(1) -1.34(1)
Class C Shares 9.19 9.37 9.34 -1.02(1) -1.34(1)
Class D Shares 9.25 9.46 9.37 -0.70(1) -1.65(1)
Class A Shares--Total Return +0.66(2) -0.51(2)
Class B Shares--Total Return -0.45(3) -0.77(3)
Class C Shares--Total Return -0.46 3) -0.78(3)
Class D Shares--Total Return +0.31(4) -0.65(4)
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
(1)Percent change includes reinvestment of $0.053 per share share
capital gains distributions.
(2)Percent change includes reinvestment of $0.105 per share ordinary
income dividends and $0.053 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.052 per share ordinary
income dividends and $0.053 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.093 per share ordinary
income dividends and $0.053 per share capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Value Percent of
EUROPE Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Belgium Building Materials 20,420 Terca Brick Industries $ 1,016,106 $ 924,391 0.7%
Total Investments in Belgium 1,016,106 924,391 0.7
Finland Airlines 152,000 Finnair OY 1,039,087 1,138,170 0.8
Chemicals 24,500 Kemira OY 174,230 206,034 0.2
Holding Company 60,000 ++America Group Ltd. 1,079,450 938,645 0.7
29,000 Fiskars OY AB 1,479,062 1,416,492 1.0
------------ ------------ ------
2,558,512 2,355,137 1.7
Total Investments in Finland 3,771,829 3,699,341 2.7
France Advertising 14,500 Euro RSCG Worldwide, S.A. 1,314,199 1,185,658 0.8
Holding Company 3,722 Societe EuraFrance S.A. 1,182,561 1,251,623 0.9
Leisure Time 9,400 Zodiac S.A. 1,277,075 1,468,089 1.1
Equipment
Total Investments in France 3,773,835 3,905,370 2.8
<PAGE>
Germany Machinery & 39,100 ++Kloeckner Werke AG 3,734,471 1,477,688 1.1
Engineering
Retail Specialty 27,000 ++Moebel Walther AG 1,155,318 886,483 0.6
Total Investments in Germany 4,889,789 2,364,171 1.7
Greece Banking 6,970 Ergo Bank S.A. (Registered) 325,290 278,205 0.2
Building & 7,990 Titan Cement Co. S.A. 302,811 335,970 0.3
Construction
Foods 17,129 Delta Dairy S.A. (Ordinary) 395,650 322,123 0.2
Total Investments in Greece 1,023,751 936,298 0.7
Italy Building & 434,600 ++Fochi Filippo S.p.A. (Ordinary) 1,346,030 82,259 0.1
Construction
Consumer Goods 205,000 Merloni Elettrodomestici S.p.A 337,062 192,584 0.1
Diversified 1,850,000 ++Compagnie Industriali Riunite
S.p.A. (CIR) 2,071,370 1,237,224 0.9
Total Investments in Italy 3,754,462 1,512,067 1.1
Netherlands Capital Goods 53,000 Ahrend Groep NV 1,093,079 1,747,362 1.3
Retail Trade 26,250 Deboer Winkelbedrijven 1,044,419 1,294,880 0.9
Total Investments in the Netherlands 2,137,498 3,042,242 2.2
Poland Engineering & 131,800 Elektrim Towarzystwo Handlowe S.A. 462,537 446,644 0.3
Construction
Tire & Rubber 30,000 T.C. Debica S.A. 399,679 452,922 0.3
Total Investments in Poland 862,216 899,566 0.6
Portugal Building & 47,000 Efacec Fabril de Maquinas
Construction Electricas S.A. 556,813 317,865 0.2
Retail Sales 12,600 Estabelecimentos Jeronimo Martins &
Filho S.A. 644,835 700,281 0.5
Total Investments in Portugal 1,201,648 1,018,146 0.7
<PAGE>
Spain Glass 22,800 ++Cristaleria Espanola S.A. 1,004,426 1,278,680 0.9
Real Estate 71,446 Vallehermoso S.A. 1,185,398 1,331,695 1.0
Textiles 115,000 ++Algodonera de San Antonio 1,269,666 728,412 0.5
Total Investments in Spain 3,459,490 3,338,787 2.4
Sweden Engineering & 44,200 Lundbergforetagen AB (B Shares) 524,487 486,880 0.3
Construction 56,900 Svedala Industri AB 1,407,169 1,468,199 1.1
------------ ------------ ------
1,931,656 1,955,079 1.4
Forest Products/ 1,153,500 Rottneros Bruks AB Free 1,779,027 1,218,406 0.9
Paper &
Packaging
Manufacturing 37,500 Getinge Industrier AB (B Shares) 1,500,852 1,711,722 1.2
Total Investments in Sweden 5,211,535 4,885,207 3.5
Switzerland Engineering & 400 Daetwyler Holdings AG 679,000 747,371 0.5
Construction 1,165 Swheizerische Industrie-
Gasellschaft Holdings AG (SIG) 1,217,718 1,184,540 0.9
------------ ------------ ------
1,896,718 1,931,911 1.4
Photography 4,500 Fotolabo SA 1,510,036 1,798,905 1.3
Total Investments in Switzerland 3,406,754 3,730,816 2.7
Turkey Beverages 62,475 Erge Biracilik Ve Malt Sanayii A.S. 24,973 29,430 0.0
Building & 726,882 Alarko Holdings A.S. 280,927 294,357 0.2
Construction
Insurance 596,250 Aksigorta A.S. 119,250 46,813 0.0
Total Investments in Turkey 425,150 370,600 0.2
United Beverages 75,000 Matthew Clark PLC 786,287 782,309 0.6
Kingdom
Chemicals 260,000 Inspec Group PLC 1,478,306 1,321,698 1.0
<PAGE>
Computer Services 150,000 Misys PLC 1,505,297 1,327,131 1.0
Computers 400,000 ++Acorn Computer Group PLC 569,441 1,521,156 1.1
Diversified 889,000 Howden Group PLC 1,262,630 910,738 0.6
Food & Beverage 667,000 Hazlewood Foods PLC 1,271,988 1,040,494 0.7
Health/Personal Care 570,000 London International Group (Ordinary) 910,747 1,141,333 0.8
Manufacturing 197,500 Low & Bonar PLC (Ordinary) 1,296,675 1,416,305 1.0
Media/Publishing 300,000 International Business
Communications (Ordinary) 1,043,116 1,317,818 1.0
Total Investments in the
United Kingdom 10,124,487 10,778,982 7.8
Total Investments in Europe 45,058,550 41,405,984 29.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
LATIN Value Percent of
AMERICA Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Brazil Appliances 3,200,000 Brasmotor Group S.A. (Preferred) $ 641,325 $ 635,587 0.5%
363,400,000 Refrigeracao Parana S.A. (Preferred) 734,319 725,528 0.5
------------ ------------ ------
1,375,644 1,361,115 1.0
Textiles 2,054,000 Companhia de Tecidos Norte de
Minas S.A. (Preferred) 652,560 686,992 0.5
Total Investments in Brazil 2,028,204 2,048,107 1.5
Colombia Retail 27,000 Gran Cadena de Almacenes Colombianos
S.A. (CADENALCO) (ADR)(a)(d) 472,500 310,500 0.2
Total Investments in Colombia 472,500 310,500 0.2
<PAGE>
Mexico Building & 38,500 ++Corporacion Geo, S.A. de C.V. 'B'
Construction (ADR)(a)(d) 476,532 441,210 0.3
Retail Stores 75,000 ++Sears Roebuck de Mexico, S.A. de
(C.V. 'B' ADR)(a)(d) 491,550 337,500 0.2
Total Investments in Mexico 968,082 778,710 0.5
Peru Foods 356,300 ++Companhia Industrial Peru
Pacifico S.A. 383,299 400,024 0.3
Total Investments in Peru 383,299 400,024 0.3
Venezuela Building Materials 32,165 ++Corimon C.A. S.A.C.A. (ADR) (a) 222,099 120,619 0.1
Total Investments in Venezuela 222,099 120,619 0.1
Total Investments in Latin America 4,074,184 3,657,960 2.6
MIDDLE EAST/
AFRICA
Israel Financial Services 60,000 Ampal-American Israel Corp. 418,839 315,000 0.2
Total Investments in Israel 418,839 315,000 0.2
South Diversified 37,616 Morgan Stanley Africa Investment Fund 413,776 484,306 0.4
Africa 29,000 New South Africa Fund, Inc. 398,675 435,000 0.3
29,000 Southern Africa Fund, Inc. 409,625 474,875 0.3
------------ ------------ ------
1,222,076 1,394,181 1.0
Mining 38,000 Kinross Mines Ltd. 407,226 357,113 0.3
Total Investments in South Africa 1,629,302 1,751,294 1.3
Zimbabwe Beverages 249,000 Delta Corporation 396,017 417,453 0.3
Total Investments in Zimbabwe 396,017 417,453 0.3
Total Investments in the
Middle East/Africa 2,444,158 2,483,747 1.8
NORTH
AMERICA
<PAGE>
Canada Leisure 100,384 Four Seasons Hotels Ltd. 1,144,986 1,398,003 1.0
Mining 67,925 Cambior Inc. 987,616 738,684 0.5
Total Investments in Canada 2,132,602 2,136,687 1.5
United Aerospace 110,000 UNC, Inc. 637,625 660,000 0.5
States
Apparel 115,000 ++Farah, Inc. 1,148,408 546,250 0.4
15,000 ++Marisa Christina, Inc. 168,950 251,250 0.2
44,700 ++Norton McNaughton, Inc. 657,437 480,525 0.3
------------ ------------ ------
1,974,795 1,278,025 0.9
Banking & Finance 35,000 Charter One Financial, Inc. 708,525 1,063,125 0.8
15,000 Roosevelt Financial Group, Inc. 242,463 286,875 0.2
9,200 Walden Bancorp Inc.+++ 132,250 170,200 0.1
------------ ------------ ------
1,083,238 1,520,200 1.1
Biotechnology 15,000 ++COR Therapeutics, Inc. 168,375 121,875 0.1
16,000 ++Cytel Corp. 96,656 98,000 0.1
9,500 ++Pharmacopeia, Inc. 152,000 228,000 0.2
15,000 ++Scios Nova, Inc. 74,025 61,875 0.0
------------ ------------ ------
491,056 509,750 0.4
Building & Building 18,000 Oakwood Homes Corporation 475,817 690,750 0.5
Materials 41,000 ++Redman Industries, Inc. 735,125 1,373,500 1.0
15,300 Ryland Group, Inc. 206,581 214,200 0.2
39,800 ++Washington Homes, Inc. 199,396 218,900 0.2
------------ ------------ ------
1,616,919 2,497,350 1.9
Business Services 110,000 ++Applied Bioscience International, Inc. 634,001 742,500 0.5
Computer Software 32,000 ++Information Resources, Inc. 452,000 388,000 0.3
16,000 ++Progress Software Corporation 469,730 592,000 0.4
28,000 ++VMARK Software, Inc. 439,368 259,000 0.2
------------ ------------ ------
1,361,098 1,239,000 0.9
Computers 20,000 ++Storage Technology Corporation 473,697 477,500 0.4
25,000 ++Stratus Computer, Inc. 787,870 865,625 0.6
------------ ------------ ------
1,261,567 1,343,125 1.0
Consumer--Goods 75,000 Charming Shoppes, Inc. 192,187 210,938 0.2
<PAGE>
Data Processing 10,000 Cognos, Inc. 121,250 446,250 0.3
31,700 ++Landmark Graphics Corp. 645,690 737,025 0.6
5,000 ++Sterling Software, Inc. 177,175 311,875 0.2
------------ ------------ ------
944,115 1,495,150 1.1
Electrical Equipment 20,000 ++Comptek Research, Inc. 238,700 168,750 0.1
Electronics 10,000 Analogic Corporation 171,250 175,000 0.1
Environmental Control 21,000 Newpark Resources, Inc. 342,500 467,250 0.3
Healthcare-- 60,000 ++Beverly Enterprises, Inc. 810,553 637,500 0.5
Products/Services 53,800 ++Ramsay Health Care, Inc. 330,777 168,125 0.1
14,038 ++Ramsay Managed Care, Inc. 31,585 26,321 0.0
------------ ------------ ------
1,172,915 831,946 0.6
</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>
United Home Furnishing 20,400 Crown Crafts, Inc. $ 303,212 $ 234,600 0.2%
States
(concluded) Hospital Management 50,000 ++Magellan Health Services, Inc. 874,658 1,200,000 0.9
Insurance 25,000 Ace, Ltd. 553,100 993,750 0.7
40,000 First Colony Corp. 841,337 1,015,000 0.7
22,500 Harleysville Group, Inc. 459,037 714,375 0.5
60,000 PXRE Corp. 1,375,075 1,590,000 1.2
24,000 Security-Connecticut Corp. 530,815 651,000 0.5
------------ ------------ ------
3,759,364 4,964,125 3.6
Iron & Steel 10,000 Quanex Corp. 200,566 193,750 0.1
Machinery 6,000 AGCO Corp. 266,610 306,000 0.2
Manufacturing 14,000 Smith (A.O.) Corporation 293,290 290,500 0.2
Medical Equipment 20,000 Medex, Inc. 214,677 220,000 0.2
Natural Resources 42,300 Brown (Tom), Inc. 500,075 608,062 0.4
100,000 ++Coho Resources, Inc. 466,689 487,500 0.4
4,000 ++Core Laboratories N.V. 48,000 48,000 0.0
35,000 ++Plains Resources, Inc. 218,750 315,000 0.2
75,000 Total Petroleum of North America 848,625 731,250 0.6
55,000 ++TransTexas Gas Corp. 605,000 742,500 0.5
------------ ------------ ------
2,687,139 2,932,312 2.1
<PAGE>
Pharmaceuticals 48,000 ++NeoRx Corp. 323,331 300,000 0.2
11,850 ++North American Biologicals Inc. 103,584 127,387 0.1
4,000 ++Sequus Pharmaceuticals, Inc. 44,000 56,000 0.0
10,000 ++Vical, Inc. 81,077 117,500 0.1
------------ ------------ ------
551,992 600,887 0.4
Real Estate 50,000 Crown American Realty Trust 726,750 393,750 0.3
Investment Trust
Restaurants 67,500 ++TPI Enterprises, Inc. 377,458 194,062 0.1
Retail Specialty 4,500 ++Movie Gallery, Inc. 114,251 137,250 0.1
Retailing 55,000 Baker (J.), Inc. 970,300 295,625 0.2
70,000 ++Catherines Stores Corp. 596,740 560,000 0.4
40,000 Hancock Fabrics, Inc. 371,281 360,000 0.2
21,000 Pier 1 Imports, Inc. 166,000 238,875 0.2
15,000 ++Rex Stores Corp. 195,900 266,250 0.2
80,000 ++Service Merchandise Co., Inc. 437,637 400,000 0.3
------------ ------------ ------
2,737,858 2,120,750 1.5
Textiles 75,000 ++Burlington Industries, Inc. 873,330 984,375 0.7
Transportation 20,000 ++Kirby Corp. 318,656 325,000 0.2
Utilities--Water 10,000 American Water Works Company, Inc. 276,850 388,750 0.3
Total Investments in the
United States 26,698,627 28,625,095 20.7
Total Investments in North America 28,831,229 30,761,782 22.2
PACIFIC
BASIN
Australia Insurance 152,054 QBE Insurance Group 587,506 703,279 0.5
Merchandising 25,800 Amway Asia Pacific Ltd. 806,761 919,125 0.7
Mining 559,351 QCT Resources Ltd. 650,305 628,059 0.4
Total Investments in Australia 2,044,572 2,250,463 1.6
<PAGE>
Hong Kong Banking 1,084,333 JCG Holdings, Ltd. (Warrants)(e) 804,659 792,354 0.6
Financial Services $ 420,000 Goldlion Capital Corp., 4.875%
due 2/01/1999 318,914 453,600 0.3
Food Chain 1,137,000 Cafe de Coral Holdings Ltd. 289,354 258,810 0.2
Packaging 3,772,600 Sinocan Holdings Ltd. 1,254,878 1,341,781 1.0
Total Investments in Hong Kong 2,667,805 2,846,545 2.1
Indonesia Banking--International 163,000 PT Bank Bali (Foreign) 337,016 321,147 0.2
Consumer--Goods 130,000 PT Wicaksana Overseas International 336,175 347,198 0.3
Mining 10,400 PT Tambang Timah (GDR)(b)(d) 132,392 120,952 0.1
Telecommunications 204,000 PT Kabelmetal Indonesia 287,351 167,469 0.1
& Equipment
Total Investments in Indonesia 1,092,934 956,766 0.7
Japan Apparel 100,000 Goldwin Inc. 1,289,360 774,893 0.6
Automobile Parts 58,300 Murakami Corp. 1,156,073 722,821 0.5
61,000 Sanoh Industrial 824,290 478,594 0.3
110,000 Showa Corp. 1,098,685 842,793 0.6
89,000 Yamakawa Industrial Co. 1,085,484 741,379 0.5
------------ ------------ ------
4,164,532 2,785,587 1.9
Banks 17,000 Bank of the Ryukyus, Ltd. 988,951 625,726 0.5
Beverages 79,000 Hokkaido Coca-Cola Bottling Co., Ltd. 1,298,058 956,509 0.7
74,800 Sanyo Coca-Cola Bottling Co., Ltd 1,130,306 1,086,788 0.8
------------ ------------ ------
2,428,364 2,043,297 1.5
Chemicals 70,000 Katakura Chikkarin Co., Ltd. 830,212 616,331 0.4
Computer Services 47,080 TKC Corp. 1,376,809 1,336,153 1.0
Construction 81,590 Japan Foundation Engineering 1,738,080 1,707,036 1.2
75,920 Tsuchiya Home Co. 1,667,047 1,250,136 0.9
20,200 USK Corp. 340,690 328,710 0.2
157,000 Yondenko Corp. 1,518,456 1,421,881 1.0
------------ ------------ ------
5,264,273 4,707,763 3.3
<PAGE>
Consumer Electricals 59,000 Roland Corp. 1,429,975 1,074,390 0.8
Electrical Equipment 44,000 Energy Support Corp. 337,384 528,477 0.4
30,600 Maspro Denkoh Corp. 850,043 426,811 0.3
26,000 Shinmei Electric Co. 1,340,491 322,356 0.2
52,000 Sukegawa Electric Co. 682,343 473,964 0.3
------------ ------------ ------
3,210,261 1,751,608 1.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC BASIN Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C>
Japan Foods/Food Processing 36,000 Ariake Japan Co., Ltd. $ 1,533,040 $ 1,237,892 0.9%
(concluded)
Health Services 40,000 Kanto Biomedical Laboratory 845,365 519,179 0.4
26,000 SRL Inc. 557,018 549,012 0.4
------------ ------------ ------
1,402,383 1,068,191 0.8
Industrials 27,000 Roki Techno Co., Ltd. 870,024 632,894 0.5
Iron & Steel 199,000 Nippon Chutesukan 1,262,444 992,687 0.7
Leasing 28,000 Marufuji Sheet Piling Co., Ltd. 301,153 193,375 0.1
51,700 Nissho Iwai Steel Leasing Co. 624,366 290,950 0.2
------------ ------------ ------
925,519 484,325 0.3
Machinery 54,102 Giken Seisakusho Co. Inc. 1,454,121 932,793 0.7
Metal Fabrication 124,000 Toyo Kohan Co., Ltd 1,057,406 915,227 0.7
Packaging 45,800 Chuo Kagaku Co. Ltd. 1,931,203 931,616 0.7
Paper 79,000 Tomoku Co., Ltd. 623,965 421,629 0.3
Pharmaceuticals 11,600 Towa Pharmaceutical Co. 761,975 426,966 0.3
Pollution Control 168,000 Organo Corp. 1,844,463 1,838,822 1.3
Real Estate 53,000 Keihanshin Real Estate Co. Ltd. 525,507 406,073 0.3
56,000 TOC Corp. 596,958 558,698 0.4
------------ ------------ ------
1,122,465 964,771 0.7
<PAGE>
Restaurants 47,000 Aim Services Co., Ltd. 1,405,610 819,450 0.6
41,500 Mos Food Services, Inc. 1,468,614 1,061,217 0.8
83,800 Ohsho Food Service Corp. 2,268,651 1,574,700 1.1
------------ ------------ ------
5,142,875 3,455,367 2.5
Retail Specialty 60,000 ADO Electric Industrial Co., Ltd. 1,956,905 1,511,042 1.1
50,000 Arcland Sakamoto 964,197 619,915 0.4
91,000 Daika Corporation 1,444,684 701,627 0.5
53,900 Home Wide Corp. 1,078,769 636,943 0.5
34,800 Nitori Co. 1,257,950 977,528 0.7
------------ ------------ ------
6,702,505 4,447,055 3.2
Retail Stores 119,000 Sotetsu Rosen Co., Ltd. 1,112,252 944,024 0.7
Services 63,800 Ichinen Co., Ltd. 1,690,116 1,285,393 0.9
Trading 31,000 Japan CBM Corp. 1,200,936 786,711 0.6
Trucking 108,000 Nippon Konpo Unyu Soko 1,045,185 920,573 0.7
95,000 Tonami Transportation Co., Ltd. 743,587 605,482 0.4
------------ ------------ ------
1,788,772 1,526,055 1.1
Total Investments in Japan 53,409,201 39,008,166 28.1
Malaysia Broadcasting 158,000 Sistem Televisyen Malaysia BHD 477,231 569,510 0.4
Engineering & 47,000 Asas Dunia BHD 126,420 133,307 0.1
Construction
Newspaper/Publishing 132,000 New Straits Times Press BHD 541,189 441,993 0.3
Total Investments in Malaysia 1,144,840 1,144,810 0.8
New Zealand Agriculture 296,500 Wrightson Ltd. 232,533 224,730 0.1
Broadcasting & 229,000 Independent News Ltd. 711,948 695,773 0.5
Publishing
Chemicals 146,000 Fernz Corporation Limited 439,021 385,401 0.3
Diversified 23,900 Hellaby Holdings Ltd. 22,974 27,797 0.0
<PAGE>
Electronics 49,800 PDL Industries Ltd. 236,391 276,584 0.2
Holding Company 60,000 Skellerup Group Ltd. 79,431 92,129 0.1
Real Estate 135,000 Kiwi Income 94,514 97,030 0.1
Textiles 31,000 Lane Walker Rudkin Industries, Ltd. 37,482 34,434 0.0
Transportation-- 102,933 Ports of Auckland Ltd. 236,826 332,919 0.3
Marine
Total Investments in New Zealand 2,091,120 2,166,797 1.6
South Korea Electronic Components 4,590 Samsung Electronics Co. (GDR)(b) 435,574 444,052 0.3
Telecommunications 29,000 Korea Mobile Telecommunications Corp.
(GDR)(b) 1,004,125 1,239,750 0.9
Utilities--Electric 22,700 Korea Electric Power Corp. (ADR)(a) 500,762 607,225 0.4
Total Investments in South Korea 1,940,461 2,291,027 1.6
Total Investments in the
Pacific Basin 64,390,933 50,664,574 36.5
SOUTHEAST
ASIA
India Hotels 49,000 East India Hotels Ltd. 713,000 869,750 0.6
Recreation & 250,000 Su-Raj Diamonds Ltd. 346,583 341,394 0.3
Consumer Goods
Total Investments in Southeast Asia 1,059,583 1,211,144 0.9
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $ 1,923,000 General Electric Capital Corp.,
Paper* 5.90% due 1/02/1996 1,922,055 1,922,055 1.4
Total Investments in Commercial Paper 1,922,055 1,922,055 1.4
<PAGE>
US Government & United States Treasury Bills (c):
Agency Obligations* 700,000 5.33% due 1/25/1996 697,305 697,197 0.5
50,000 5.345% due 1/25/1996 49,807 49,800 0.0
1,810,000 5.35% due 1/25/1996 1,803,006 1,802,751 1.3
90,000 5.36% due 1/25/1996 89,652 89,640 0.1
1,300,000 5.40% due 1/25/1996 1,294,930 1,294,794 0.9
Total Investments in US Government &
Agency Obligations 3,934,700 3,934,182 2.8
Total Investments in
Short-Term Securities 5,856,755 5,856,237 4.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
OPTIONS Premiums Value Percent of
PURCHASED Face Amount Issue Paid (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Currency Put YEN 2,000,000 Japanese Yen, expiring
Options January 1996 at YEN 86.15 $ 66,456 $ 320,362 0.2%
Purchased 7,000,000 Japanese Yen, expiring
June 1996 at YEN 108 61,950 89,600 0.1
5,000,000 Japanese Yen, expiring
September 1996 at YEN 105 117,500 127,000 0.1
Total Investments in
Options Purchased 245,906 536,962 0.4
Total Investments $151,961,298 136,578,390 98.4
============
Variation Margin on Stock Index Futures Contracts** 21,772 0.0
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 1,186,187 0.8
Other Assets Less Liabilities 1,058,261 0.8
------------ ------
Net Assets $138,844,610 100.0%
============ ======
<FN>
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)Security held as collateral in connection with open stock index
futures contracts.
(d)Restricted security as to resale. The value of the Fund's
investments in restricted securities was approximately $1,654,000,
representing 1.19% of net assets.
<PAGE>
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <C> <C> <C>
Corporacion Geo,
S.A. de C.V. 'B' (ADR) 7/07/1995 $ 476,532 $ 441,210
Gran Cadena de Almacenes
Colombianos S.A.
(CADENALCO) (ADR) 2/28/1995 472,500 310,500
PT Tambang Timah (GDR) 10/06/1995 132,392 120,952
Samsung Electronics Co.
(GDR) 6/28/1995 435,574 444,052
Sears Roebuck de
Mexico S.A. de C.V. 'B' (ADR) 7/20/1995 491,550 337,500
Total $2,008,548 $1,654,214
========== ==========
(e)Warrants entitle the Fund to purchase a predetermined number of
shares of Common Stock. The purchase price and number of shares are
subject to adjustment under certain circumstances until the
expiration date.
++Non-income producing security.
+++Formerly The Co-Operative Bank of Concord.
*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 December 31, 1995 were
as follows:
<CAPTION>
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
<C> <S> <S> <S> <C>
60 Hang Seng Hong Kong January 1996 $3,934,299
Securities
Exchange
Total Stock Index Futures Contracts Purchased
(Total Contract Price--$3,891,231 ) $3,934,299
==========
***Forward foreign exchange contracts as of December 31, 1995 were
as follows:
<PAGE>
<CAPTION>
Unrealized
Appreciation
Foreign Currency Expiration (Depreciation)
Purchased Date (Note 1b)
<S> <C> <S> <C>
YEN 72,300,000 January 1996 $ (28,475)
Total (US$ Commitment--$1,697,402) $ (28,475)
==========
Foreign Currency Sold
Chf 3,613,332 April 1996 $ 50,200
DM 3,872,070 January 1996 (5,032)
DM 2,439,415 April 1996 47,736
Fmk 16,044,000 April 1996 72,615
Frf 5,020,000 February 1996 (26,898)
Frf 15,414,738 April 1996 (8,217)
Nlg 1,171,258 April 1996 16,536
NZ$ 4,340,412 April 1996 (10,899)
YEN 2,428,520,650 April 1996 1,078,621
Total (US$ Commitment--$44,146,128) $1,214,662
----------
Total Unrealized Appreciation--Net on Forward
Foreign Exchange Contracts $1,186,187
==========
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of December 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$151,715,392) (Note 1a) $136,041,428
Unrealized appreciation on forward foreign exchange
contracts (Note 1c) 1,186,187
Options purchased, at value (cost--$245,906)(Notes 1a & 1c) 536,962
Foreign cash (Note 1d) 2,528,970
Cash 4,161
Receivables:
Securities sold $ 708,675
Dividends 281,080
Capital shares sold 182,264
Forward foreign exchange contracts (Note 1c) 28,474
Variation margin on stock index futures contracts
(Notes 1a & 1c) 21,772
Interest 8,402 1,230,667
<PAGE> ------------
Deferred organization expenses (Note 1g) 149,700
Prepaid registration fees and other assets (Note 1g) 198,732
------------
Total assets 141,876,807
------------
Liabilities: Payables:
Securities purchased 1,940,681
Capital shares redeemed 637,384
Distributor (Note 2) 96,186
Investment adviser (Note 2) 93,852
Forward foreign exchange contracts (Note 1c) 20,806 2,788,909
------------
Accrued expenses and other liabilities 243,288
------------
Total liabilities 3,032,197
------------
Net Assets: Net assets $138,844,610
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000
Consist of: shares authorized $ 19,847
Class B Common Stock, $0.10 par value, 100,000,000
shares authorized 1,215,334
Class C Common Stock, $0.10 par value, 100,000,000
shares authorized 44,300
Class D Common Stock, $0.10 par value, 100,000,000
shares authorized 229,854
Paid-in capital in excess of par 152,115,677
Accumulated investment loss--net (1,018,785)
Undistributed realized capital gains on investments and
foreign currency transactions--net 367,412
Unrealized depreciation on investments and foreign currency
transactions--net (14,129,029)
------------
Net assets $138,844,610
============
Net Asset Class A--Based on net assets of $1,839,707 and 198,469
Value: shares outstanding $ 9.27
============
Class B--Based on net assets of $111,669,517 and 12,153,342
shares outstanding $ 9.19
============
Class C--Based on net assets of $4,069,749 and 442,996
shares outstanding $ 9.19
============
Class D--Based on net assets of $21,265,637 and 2,298,541
shares outstanding $ 9.25
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Six Months Ended December 31, 1995
<S> <S> <C> <C>
Investment Dividends (net of $87,293 foreign withholding tax) $ 1,013,013
Income Interest and discount earned 406,520
(Notes 1e & 1f): ------------
Total income 1,419,533
------------
Expenses: Investment advisory fees (Note 2) $ 655,413
Account maintenance and distribution fees--Class B (Note 2) 615,444
Transfer agent fees--Class B (Note 2) 187,624
Printing and shareholder reports 110,429
Custodian fees 87,746
Registration fees (Note 1g) 62,079
Accounting services (Note 2) 54,319
Professional fees 33,427
Transfer agent fees--Class D (Note 2) 30,781
Account maintenance fees--Class D (Note 2) 29,597
Account maintenance and distribution fees--Class C (Note 2) 22,284
Directors' fees and expenses 19,698
Amortization of organization expenses (Note 1g) 18,504
Transfer agent fees--Class C (Note 2) 7,332
Pricing fees 4,776
Transfer agent fees--Class A (Note 2) 3,711
Other 5,969
------------
Total expenses 1,949,133
------------
Investment loss--net (529,600)
------------
Realized & Realized gain from:
Unrealized Gain on Investments--net 3,317,520
Investments & Foreign currency transactions--net 3,854,345 7,171,865
Foreign Currency ------------
Transactions--Net Change in unrealized appreciation/depreciation on:
(Notes 1c, 1d, Investments--net 690,107
1f & 3) Foreign currency transactions--net 1,345,537 2,035,644
------------ ------------
Net realized and unrealized gain on investments and foreign
currency transactions 9,207,509
------------
Net Increase in Net Assets Resulting from Operations $ 8,677,909
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the
For the Period
Six Months August 5,
Ended 1994++ to
December 31, June 30,
Increase (Decrease) in Net Assets: 1995 1995
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ (529,600) $ 387,027
Realized gain (loss) on investments and foreign
currency transactions--net 7,171,865 (5,854,788)
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 2,035,644 (16,164,673)
------------ ------------
Net increase (decrease) in net assets resulting from operations 8,677,909 (21,632,434)
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (19,859) --
Shareholders Class B (619,675) --
(Note 1h): Class C (22,117) --
Class D (214,561) --
Realized gain on investments--net:
Class A (10,675) --
Class B (682,938) --
Class C (24,845) --
Class D (131,444) --
In excess of realized gain on investments--net:
Class A -- (1,696)
Class B -- (81,949)
Class C -- (1,158)
Class D -- (14,960)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,726,114) (99,763)
<PAGE> ------------ ------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions (35,246,857) 188,771,869
(Note 4): ------------ ------------
Net Assets: Total increase (decrease) in net assets (28,295,062) 167,039,672
Beginning of period 167,139,672 100,000
------------ ------------
End of period* $138,844,610 $167,139,672
============ ============
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (1,018,785) $ 387,027
============ ============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
For the For the For the For the
Six Period Six Period
The following per share data and ratios have been derived Months Oct. 21, Months Aug. 5,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Dec. 31, June 30, Dec. 31, June 30,
Increase (Decrease) in Net Asset Value: 1995 1995 1995 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.92 $ 9.82 $ 8.84 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net .12 .04 (.04) .01
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .39 (.93) .50 (1.16)
-------- -------- -------- --------
Total from investment operations .51 (.89) .46 (1.15)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.10) -- (.05) --
Realized gain on investments--net (.06) -- (.06) --
In excess of realized gain on investments--net -- (.01) -- (.01)
-------- -------- -------- --------
Total dividends and distributions (.16) (.01) (.11) (.01)
-------- -------- -------- --------
Net asset value, end of period $ 9.27 $ 8.92 $ 9.19 $ 8.84
======== ======== ======== ========
<PAGE>
Total Investment Based on market price per share 5.74%+++ (9.11%)+++ 5.18%+++ (11.55%)+++
Return:** ======== ======== ======== ========
Ratios to Average Expenses, excluding account maintenance and
Net Assets: distribution fees 1.59%* 1.62%* 1.66%* 1.56%*
======== ======== ======== ========
Expenses 1.59%* 1.62%* 2.66%* .83%*
======== ======== ======== ========
Investment income (loss)--net .27%* 1.06%* (.82%)* .10%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 1,840 $ 5,992 $111,669 $132,296
Data: ======== ======== ======== ========
Portfolio turnover 24.22% 47.96% 24.22% 47.96%
======== ======== ======== ========
<CAPTION>
Class C Class D
For the For the For the For the
Six Period Six Period
The following per share data and ratios have been derived Months Oct. 21, Months Aug. 5,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
Dec. 31, June 30, Dec. 31, June 30,
Increase (Decrease) in Net Asset Value: 1995 1995 1995 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 8.84 $ 9.80 $ 8.91 $ 10.00
Operating -------- -------- -------- --------
Performance: Investment income (loss)--net (.04) .01 .01 .08
Realized and unrealized gain (loss) on investments
and foreign currency transactions--net .50 (.96) .48 (1.16)
-------- -------- -------- --------
Total from investment operations .46 (.95) .49 (1.08)
-------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.05) -- (.09) --
Realized gain on investments--net (.06) -- (.06) --
In excess of realized gain on investments--net -- (.01) -- (.01)
-------- -------- -------- --------
Total dividends and distributions (.11) (.01) (.15) (.01)
-------- -------- -------- --------
Net asset value, end of period $ 9.19 $ 8.84 $ 9.25 $ 8.91
======== ======== ======== ========
Total Investment Based on net asset value per share 5.17%+++ (9.75%)+++ 5.48%+++ (10.85%)+++
Return:** ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses, excluding account maintenance and
Net Assets: distribution fees 1.69%* 1.66%* 1.62%* 1.52%*
======== ======== ======== ========
Expenses 2.69%* 2.66%* 1.87%* 1.77%*
======== ======== ======== ========
Investment income (loss)--net (.84%)* .20%* (.07%)* .90%*
======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $ 4,070 $ 4,924 $ 21,266 $ 23,928
Data: ======== ======== ======== ========
Portfolio turnover 24.22% 47.96% 24.22% 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>
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund offers four classes of shares under the Merrill Lynch
Select 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.
<PAGE>
(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
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
NOTES TO FINANCIAL STATEMENTS (continued)
(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 Funds' records. However, the effect on
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
<PAGE>
* 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).
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
contracts for the purpose of hedging the market risk on existing
securities 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.
<PAGE>
(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
transactions 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 dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date. Interest income
(including amortization 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.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM" or "Investment
Adviser"). 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.
<PAGE>
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 MLAM and MLAM U.K. but in no event in excess of the amount that
MLAM actually receives. For the six months ended December 31, 1995,
MLAM paid MLAM U.K. a fee of $76,603 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 MLAM 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% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the six months ended December 31, 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:
<PAGE>
MLFD MLPF&S
Class A $ 32 $ 320
Class D $2,304 $29,331
For the six months ended December 31, 1995, MLPF&S received
contingent deferred sales charges of $258,387 and $1,936 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $16,447 in commissions on the execution
of portfolio security transactions for the six months ended December
31, 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 1995 were $34,392,084 and
$60,423,303, respectively.
Net realized and unrealized gains (losses) as of December 31, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Investments:
Long-term $ 3,228,407 $(15,673,444)
Short-term (183) (520)
Stock index futures contracts 317,932 43,068
Options purchased (214,646) --
Options written (13,990) --
------------ ------------
Total investments 3,317,520 (15,630,896)
Currency transactions:
Options written 393,056 --
Options purchased (219,250) 291,056
Foreign currency transactions 2,586,584 24,624
Forward foreign exchange
contracts 1,093,955 1,186,187
------------ ------------
Total currency transactions 3,854,345 1,501,867
------------ ------------
Total $ 7,171,865 $(14,129,029)
============ ============
<PAGE>
As of December 31, 1995, net unrealized depreciation for Federal
income tax purposes aggregated $15,673,964, of which $10,909,255
related to appreciated securities and $26,583,219 related to
depreciated securities. The aggregate cost of investments, including
options purchased, at December 31, 1995 for Federal income tax
purposes was $151,961,298.
Transactions in call options written for the six months ended
December 31, 1995 were as follows:
Par Value
Covered by Premiums
Written Options Received
Outstanding call options
written at beginning of period 19,000,000 $ 285,706
Options written 5,000,000 108,250
Options exercised (2,000,000) (66,456)
Options expired (22,000,000) (327,500)
------------ ------------
Outstanding call options
written at end of period -- --
============ ============
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(35,246,857) and $188,771,869 for the six months
ended December 31, 1995 and for the period ended June 30, 1995,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended December 31, 1995 Shares Amount
Shares sold 167,448 $ 1,561,096
Shares issued to shareholders
in reinvestment of dividends and
distributions 3,060 27,820
------------ ------------
Total issued 170,508 1,588,916
Shares redeemed (643,575) (6,090,655)
------------ ------------
Net decrease (473,067) $ (4,501,739)
============ ============
<PAGE>
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
============ ============
[FN]
++Commencement of Operations.
Class B Shares for the Six Months Dollar
Ended December 31, 1995 Shares Amount
Shares sold 1,017,436 $ 9,398,885
Shares issued to shareholders
in reinvestment of dividends and
distributions 69,565 627,475
------------ ------------
Total issued 1,087,001 10,026,360
Automatic conversion of shares (22,487) (206,419)
Shares redeemed (3,870,720) (35,880,426)
------------ ------------
Net decrease (2,806,206) $(26,060,485)
============ ============
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
============ ============
<PAGE>
[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 Six Months Dollar
Ended December 31, 1995 Shares Amount
Shares sold 157,775 $ 1,457,044
Shares issued to shareholders
in reinvestment of dividends and
distributions 4,696 42,310
------------ ------------
Total issued 162,471 1,499,354
Shares redeemed (276,341) (2,573,610)
------------ ------------
Net decrease (113,870) $ (1,074,256)
============ ============
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 Six Months Dollar
Ended December 31, 1995 Shares Amount
Shares sold 234,640 $ 2,176,483
Automatic conversion of shares 22,271 206,419
Shares issued to shareholders
in reinvestment of dividends and
distributions 17,279 156,896
------------ ------------
Total issued 274,190 2,539,798
Shares redeemed (661,783) (6,150,175)
------------ ------------
Net decrease (387,593) $ (3,610,377)
============ ============
<PAGE>
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 decrease 2,681,134 $ 27,065,345
============ ============
[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 were redesignated Class D Shares. There were
2,992,993 shares redesignated amounting to $29,891,279.
5. Commitments:
On December 31, 1995, the Fund had entered into foreign exchange
contracts, in addition to the contracts listed on the Schedule of
Investments, under which it had agreed to purchase and sell various
foreign currencies with approximate values of $739,600 and $33,600,
respectively.
