MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
FUND LOGO
Annual Report
June 30, 1997
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
Hubert Aarts, Vice President
R. Elise Baum, Vice President
Donald C. Burke, Vice President
Grace Pineda, Vice President
James Russell, 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.
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
Printed on post-consumer recycled paper
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.
R. Elise Baum--Co-Portfolio Manager--North American Investments. Ms.
Baum is primarily responsible for the Fund's investments in the
United States and Canada.
Hubert Aarts--Co-Portfolio Manager--European Investments. Mr. Aarts
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 Latin America and Asia.
James Russell--Co-Portfolio Manager--Japanese Investments. Mr.
Russell is primarily responsible for the Fund's Japanese
investments.
Important Tax
Information
<TABLE>
The following information summarizes all per share distributions
paid by Merrill Lynch Global SmallCap Fund, Inc. during its fiscal
year ended June 30, 1997:
<CAPTION>
Qualifying Non-Qualifying Interest
Domestic Domestic from Foreign Total Foreign Taxes Long-Term
Record Payable Ordinary Ordinary Federal Source Ordinary Paid or Capital
Date Date Income Income Obligations Income Income Withheld Gains
<S> <S> <S> <C> <C> <C> <C> <C> <C>
Class A Shares 12/11/96 12/19/96 $.023388 $.532190 $.008089 $.146830 $.710497 $.019182 $.185242
Class B Shares 12/11/96 12/19/96 $.019780 $.450098 $.006841 $.124181 $.600900 $.019182 $.185242
Class C Shares 12/11/96 12/19/96 $.020111 $.457622 $.006956 $.126257 $.610946 $.019182 $.185242
Class D Shares 12/11/96 12/19/96 $.022492 $.511807 $.007779 $.141206 $.683284 $.019182 $.185242
The qualifying domestic ordinary income qualifies for the dividends
received deduction for corporations.
The foreign taxes paid or withheld represent taxes incurred by the
Fund on dividends received by the Fund from foreign sources. Foreign
taxes paid or withheld should be included as foreign source income
with an offsetting deduction from gross income or as a credit for
taxes paid to foreign governments. You should consult your tax
adviser regarding the appropriate treatment of foreign taxes paid.
<PAGE>
The law varies in each state as to whether and what percentage of
dividend income attributable to Federal obligations is exempt from
state income tax. We recommend that you consult your tax adviser to
determine if any portion of the dividends you received is exempt
from state income tax.
Please retain this information for your records.
</TABLE>
DEAR SHAREHOLDER
Global equity markets produced positive returns during the quarter
ended June 30, 1997, continuing the strong performance of the March
31, 1997 quarter. The US dollar total return of the unmanaged
Salomon Brothers Extended Market Index (SEMI), a global small cap
index, during the three months ended June 30, 1997 was +11.27%.
During the June quarter, small cap issues underperformed large cap
issues. The US dollar total return of the unmanaged Financial Times/
S&P--Actuaries World Index, an indicator of large cap performance,
was +15.07%.
In US dollar terms, the best performing small cap equity markets
were Spain, Japan, Hong Kong and Switzerland with returns of +22%,
+18%, +17% and +17%, respectively. After slipping early in the June
quarter, US small cap equities recovered and returned +15%.
According to the International Finance Corp., emerging markets
equities rose 5%, with Latin American equity markets increasing by
20%, during the June quarter.
For the three months ended June 30, 1997, total returns for Merrill
Lynch Global SmallCap Fund, Inc.'s Class A, Class B, Class C and
Class D Shares were +9.08%, +8.88%, +8.79% and +9.11%, 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--7
of this report to shareholders.)
The Fund's underperformance during the June quarter reflected the
negative impact of overweighted positions in Continental European
small caps and Asian emerging markets, especially Indonesia,
together with the underweighted position in the US market. However,
the outperformance of Japanese and Latin American equities enhanced
performance.
<PAGE>
Portfolio Matters and
Investment Stance
Our strategic investment stance was little changed during the June
quarter. We increased US small cap exposure in April, following a
period of US underperformance, although we continued to favor
emerging markets small cap equities over the US market. We reduced
overweighted positions in Continental Europe, Japan and Pacific
Basin small caps and increased the overweighted position in emerging
markets small cap issues. As of June 30, 1997, the Fund had 17% of
net assets invested in emerging markets small cap equities, with a
concentration in Indonesia, Brazil and Poland. The Fund was invested
approximately 26% in the US, 19% in Japan, 26% in Continental
Europe, and 7% in the United Kingdom.
During the three months ended June 30, 1997, US economic growth
slowed from the exceptionally strong pace of the March quarter. The
US Treasury yield curve shifted down, on average, by around 50 basis
points (0.50%), with the 10-year Treasury bond yield reaching 6.4%
in late June. However, leading indicators of US production, housing
and consumer confidence suggest the continuation of above-trend US
economic growth. It now appears that the US Treasury market largely
discounted the pause in economic activity that occurred in the June
quarter.
Against the backdrop of rising US wage pressures, there are signs in
the national accounts data of a decline in profit margins. We
believe that there is little scope for a further expansion for US
earnings relative to aggregate nominal gross domestic product
growth. US equities remain exposed to a tightening of monetary
policy and a downturn in corporate profitability. However, the
significant underperformance of US small caps relative to large
caps, especially for 1997-to-date, suggests that US smaller
companies may not be significantly exposed to the impact of tighter
monetary policy and a deterioration in profits growth.
Japanese economic indicators were recently distorted by the raising
of the consumption tax in April. However, investors gradually
accepted the view that the economy has gained sufficient momentum to
withstand the negative impact of tax increases. For example, the 10-
year Japanese government bond yield rose from an April low of 2.3%
to 2.6% over the quarter ended June 30, 1997, and the yen
appreciated sharply against both the US dollar and the Deutschemark.
Stronger economic conditions improved assisted equity investor
confidence and the performance of Japanese small caps.
Continental European economic indicators suggested a steady
improvement in the economic outlook. However, unemployment rates
remain too high against the backdrop of tightening fiscal positions.
The social implications of current economic conditions and policies
are increasingly evident in political outcomes. The increasing
likelihood of a broad, and possibly delayed, European Monetary Union
(EMU) continued to erode confidence in EMU currencies. Currency
weakness in Europe provided a much-needed impetus to earnings growth
expectations and, together with a likely maintenance of relatively
low interest rates, should continue to spur a gradual economic
recovery.
<PAGE>
Fiscal Year in Review
For the year ended June 30, 1997, total returns for the Fund's Class
A, Class B, Class C and Class D Shares were +7.53%, +6.47%, +6.38%
and +7.27%, respectively, while the unmanaged SEMI total return was
+10.19% over the same 12-month period in US dollar terms.
The year was marked by a significant recovery in economic activity
in the United States and a continued appreciation of the US dollar.
Another development that impacted international markets was the
continued anticipation of convergence in European monetary policy,
which drove many European equity markets to new highs in early 1997.
However, toward the end of the 12-month period, European markets
faced increasing uncertainty regarding the timetable for EMU. This
uncertainty contributed to market volatility. The Japanese equity
market performed poorly during the first three quarters of the
fiscal year. However, improving confidence in the economic recovery
and a stabilization in the yen encouraged fresh money flows into
Japanese equities toward the end of the fiscal year.
The Fund's performance was positively impacted by decisions early in
the year to hedge exposure back to US dollars. However, the
continued outperformance of US small caps over Japan and Europe
weighed against Fund performance.
In Conclusion
As we stated, our investment strategy continues to underweight US
small caps, while holding an overweighted stance toward Japanese,
Continental European and especially emerging markets small caps. The
Fund has adopted a more fully invested investment policy.
We believe the stronger economic environment should help small cap
equities to outperform large cap equities. Additionally, we continue
to believe that a diversified global fund that emphasizes foreign
small cap issues should provide a good long-term investment vehicle
for US investors.
We thank you for your continued interest in Merrill Lynch Global
SmallCap Fund, Inc., and we look forward to reviewing our strategy
with you in our upcoming quarterly report to shareholders.
Sincerely,
<PAGE>
(Arthur Zeikel)
Arthur Zeikel
President
(Andrew Bascand)
Andrew Bascand
Senior Portfolio Manager/
Asset Allocator
(Hubert Aarts)
Hubert Aarts
Co-Portfolio Manager
European Investments
(R. Elise Baum)
R. Elise Baum
Co-Portfolio Manager
US Investments
(Grace Pineda)
Grace Pineda
Co-Portfolio Manager
Emerging Markets Investments
<PAGE>
(James Russell)
James Russell
Co-Portfolio Manager
Japanese Investments
August 11, 1997
Effective August 5, 1997, Hubert Aarts became responsible for the
day-to-day management of the Fund's investments in Europe. Mr. Aarts
joined Merrill Lynch Global Asset Management U.K. Limited (an
affiliate of the Fund's Investment Adviser) as Portfolio Manager in
1995. Prior thereto, he was Portfolio Manager with Mees Pierson
Capital Management in the Netherlands from 1990 to 1995.
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 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. However, in the
case of certain eligible investors, the shares 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 approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
<PAGE>
* 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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of
all dividends and capital gains distributions at net asset value on
the ex-dividend date. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
Total Return
Based on a
$10,000
Investment
Class A & C Shares
A line graph depicting the growth of an investment in the Fund's
Class A and Class C Shares compared to growth of an investment in
the Salomon Brothers Extended Market Index. Beginning and ending
values are:
10/21/94** 6/97
Merrill Lynch Global SmallCap
Fund, Inc.++--Class A Shares* $ 9,475 $11,471
Merrill Lynch Global SmallCap
Fund, Inc.++--Class C Shares* $10,000 $11,768
Salomon Brothers Extended
Market Index++++ $10,000 $13,692
<PAGE>
Class B & D Shares
A line graph depicting the growth of an investment in the Fund's
Class B and Class D Shares compared to growth of an investment in
the Salomon Brothers Extended Market Index. Beginning and ending
values are:
8/05/94** 6/97
Merrill Lynch Global SmallCap
Fund, Inc.++--Class B Shares* $10,000 $11,343
Merrill Lynch Global SmallCap
Fund, Inc.++--Class D Shares* $ 9,475 $11,190
Salomon Brothers Extended
Market Index++++ $10,000 $13,710
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++Merrill Lynch Global SmallCap Fund, Inc. invests in a diversified
portfolio of equity securities of issuers with relatively small
market capitalizations located in various foreign countries and the
United States.
++++This unmanaged broad-based global small cap Index provides
returns from stocks in 22 markets.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/97 +7.53% +1.89%
Inception (10/21/94) through 6/30/97 +7.36 +5.23
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/97 +6.47% +2.51%
Inception (8/5/94) through 6/30/97 +5.07 +4.44
[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 6/30/97 +6.38% +5.39%
Inception (10/21/94) through 6/30/97 +6.24 +6.24
[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 6/30/97 +7.27% +1.64%
Inception (8/5/94) through 6/30/97 +5.90 +3.95
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Performance
Summary--
Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1996 9.27 9.81 0.185 0.710 +15.61
1/1/97--6/30/97 9.81 10.69 -- -- + 8.97
------ ------
Total $0.243 Total $0.815
Cumulative total return as of 6/30/97: +21.06%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Performance
Summary--
Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1996 9.19 9.72 0.185 0.601 +14.43
1/1/97--6/30/97 9.72 10.54 -- -- + 8.44
------ ------
Total $0.243 Total $0.653
Cumulative total return as of 6/30/97: +15.43%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $9.80 $ 9.34 $0.005 -- - 4.64%
1995 9.34 9.19 0.053 $0.052 - 0.46
1996 9.19 9.71 0.185 0.611 +14.43
1/1/97--6/30/97 9.71 10.52 -- -- + 8.34
------ ------
Total $0.243 Total $0.663
<PAGE>
Cumulative total return as of 6/30/97: +17.68%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not reflect deduction of any sales charge; results
would be lower if sales charge was deducted.
</TABLE>
<TABLE>
Performance
Summary--
Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1996 9.25 9.79 0.185 0.683 +15.34
1/1/97--6/30/97 9.79 10.66 -- -- + 8.89
------ ------
Total $0.243 Total $0.776
Cumulative total return as of 6/30/97: +18.11%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month
6/30/97 3/31/97 6/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $10.69 $9.80 $10.86 +0.32%(1) +9.08%
Class B Shares 10.54 9.68 10.71 +0.31(1) +8.88
Class C Shares 10.52 9.67 10.71 +0.12(1) +8.79
Class D Shares 10.66 9.77 10.83 +0.32(1) +9.11
Class A Shares--Total Return +7.53(2) +9.08
Class B Shares--Total Return +6.47(3) +8.88
Class C Shares--Total Return +6.38(4) +8.79
Class D Shares--Total Return +7.27(5) +9.11
<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 $0.185 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.710 per share ordinary
income dividends and $0.185 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.601 per share ordinary
income dividends and $0.185 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.611 per share ordinary
income dividends and $0.185 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.683 per share ordinary
income dividends and $0.185 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> <C> <C> <C> <C>
Denmark Investment Banking 20,492 Finansierings Instituttet for
Industri og Handvarek A/S (FIH)
(Class B) $ 518,093 $ 522,369 0.4%
Publishing 12,150 Sondagsavisen A/S 517,141 535,137 0.4
Textiles 8,882 Carli Grey International A/S 267,698 502,398 0.3
Total Investments in Denmark 1,302,932 1,559,904 1.1
Finland Computer Software 4,560 TT Tieto OY 298,105 395,726 0.3
Diversified 21,240 ASKO OY (Class A) 423,261 392,408 0.3
Holding Company 8,716 Fiskars OY AB 451,050 739,584 0.5
17,600 Instrumentarium OY (Group A) 635,762 661,858 0.5
------------- ------------- ------
1,086,812 1,401,442 1.0
Household Products 7,244 Huhtamaki OY 325,534 312,229 0.2
Total Investments in Finland 2,133,712 2,501,805 1.8
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Value Percent of
(continued) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <C> <C> <C> <C>
France Apparel 640 Damart S.A. $ 524,338 $ 480,526 0.3%
Automobile Parts 6,981 Bertrand Faure S.A. 341,645 367,771 0.3
Computer Software 2,588 Altran Technologies S.A. 745,400 845,795 0.6
Electrical 12,000 Cofidur 488,534 332,942 0.2
Components
Gaming 1,386 Groupe Partouche S.A. 124,296 94,368 0.1
Holding Company 2,482 Societe EuraFrance S.A. 751,104 1,018,165 0.7
Home Furnishings 2,148 Castorama Dubois Investissements
S.C.A. 334,672 302,370 0.2
Manufacturing 17,170 Sommer Allibert S.A. 510,514 602,056 0.4
Total Investments in France 3,820,503 4,043,993 2.8
Germany Auto & Truck 4,800 Koegel Fahrzeugwerke AG
(Preferred) 621,179 688,626 0.5
Machine Tools 2,036 Plettac AG 447,858 468,516 0.3
& Machinery 2,190 Walter AG 556,006 842,018 0.6
------------- ------------- ------
1,003,864 1,310,534 0.9
Machinery & 21,220 ++Kloeckner Werke AG 1,897,517 1,473,442 1.0
Engineering
Manufacturing 3,680 Escada AG (Preferred) 610,130 588,133 0.4
3,087 KSB AG (Preferred) 442,057 761,741 0.5
------------- ------------- ------
1,052,187 1,349,874 0.9
Retail Specialty 18,000 Moebel Walther AG 770,212 1,094,916 0.8
Total Investments in Germany 5,344,959 5,917,392 4.1
<PAGE>
Greece Building & 15,980 Titan Cement Co. S.A. 302,811 788,640 0.6
Construction
Total Investments in Greece 302,811 788,640 0.6
Hungary Banking 35,123 OTP Bank (GDR) (b) 837,618 930,760 0.6
Total Investments in Hungary 837,618 930,760 0.6
Ireland Containers 68,000 Clondalkin Group PLC 667,110 657,935 0.5
Foods 59,608 Greencore Group PLC 299,101 294,410 0.2
Total Investments in Ireland 966,211 952,345 0.7
Italy Diversified 890,000 ++Compagnie Industriali Riunite
S.p.A. (CIR) 996,497 566,949 0.4
Total Investments in Italy 996,497 566,949 0.4
Netherlands Building & 15,441 NBM-Amstelland NV 410,332 411,771 0.3
Construction
Computer Software 47,655 ++DOCdata NV 645,299 619,622 0.4
Electrical Equipment 19,251 Twentsche Kabel Holding NV 760,165 1,045,396 0.7
Engineering & 37,034 Volker Wessels Stevin NV 780,063 1,040,491 0.7
Construction
Holding Company 20,500 Internatio-Muller NV 413,160 647,027 0.5
Industrial Services 11,234 Koninklijke Pakhoed NV 405,048 396,386 0.3
Instruments/ 11,000 ++Elsag Bailey Process Automation
Photo--Optical NV (ADR) (a) 174,650 202,125 0.2
Printing & 12,000 Roto Smeets de Boer NV 563,281 589,231 0.4
Publishing
Total Investments in the
Netherlands 4,151,998 4,952,049 3.5
Norway Computer Software 22,320 Merkantildata ASA 516,760 441,932 0.3
Newspaper/Publishing 27,744 Schibsted ASA 572,146 549,326 0.4
Total Investments in Norway 1,088,906 991,258 0.7
<PAGE>
Poland Engineering & 131,800 Elektrim Towarzystwo Handlowe S.A. 462,537 1,147,483 0.8
Construction
Tire & Rubber 30,000 T.C. Debica S.A. 399,679 616,438 0.4
Total Investments in Poland 862,216 1,763,921 1.2
Portugal Retail Sales 18,950 Estabelecimentos Jeronimo Martins
& Filho S.A. 531,828 1,324,335 0.9
Total Investments in Portugal 531,828 1,324,335 0.9
Russia Cellular Telephones 25,600 ++Vimpel-Communications (ADR) (a) 767,821 972,800 0.7
Total Investments in Russia 767,821 972,800 0.7
Spain Automotive & Equipment 32,000 Estacionamientos Subterraneos,
S.A. (Ordinary) 614,689 701,935 0.5
Steel 2,485 Acerinox S.A. 444,465 465,948 0.3
Telecommunications 12,150 Amper S.A. 307,003 345,728 0.3
Total Investments in Spain 1,366,157 1,513,611 1.1
Sweden Biotechnology 33,200 ++Biora AB 347,898 309,181 0.2
Engineering & 23,853 Svedala Industri AB 313,241 496,719 0.4
Construction
Forest Products/ 819,500 Rottneros Bruks AB Free 1,265,254 900,969 0.6
Paper & Packaging
Hotels 28,350 ++Scandic Hotels AB 514,574 447,358 0.3
Investment 48,819 Bure Investment AB 419,935 615,652 0.4
Management
Special Services 32,000 ++Mandator AB (B Shares) 530,278 366,298 0.3
Total Investments in Sweden 3,391,180 3,136,177 2.2
Switzerland Advertising 3,200 Edipresse S.A. (Bearer) 679,120 757,357 0.5
Building Products 1,800 Belimo Automation AG 423,875 518,625 0.4
Distribution 3,070 ++TEGE S.A. 253,281 434,901 0.3
Industrials 9,175 Oerlikon-Buehrle Holdings AG 989,278 1,076,302 0.7
Machine Tools 4,100 ++Agie Charmilles Holdings
& Machinery (Registered) 398,671 407,834 0.3
<PAGE>
Machinery 1,031 Saurer AG (Registered) 449,610 683,938 0.5
Paper & Forest 24,800 Mercer International, Inc.
Products (ADR) (a) 422,910 234,050 0.2
Photography 2,694 Fotolabo S.A. 904,008 859,374 0.6
Retailing 1,075 Grands Magasins Jelmoli S.A. 620,093 671,091 0.5
Total Investments in Switzerland 5,140,846 5,643,472 4.0
United Aerospace 17,700 ++DONCASTERS PLC (ADR) (a) 323,541 409,313 0.3
Kingdom
Beverages 131,500 Matthew Clark PLC 1,188,993 529,216 0.4
Chemicals 390,000 Inspec Group PLC 1,844,704 1,284,169 0.9
Commercial Services 40,000 Serco Group PLC (Ordinary) 417,691 465,640 0.3
Computer Services 70,770 Misys PLC 705,945 1,589,999 1.1
Computers 158,600 ++Acorn Computer Group PLC 231,981 487,941 0.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
EUROPE Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <C> <C> <C> <C>
United Electronic 36,455 Fairey Group PLC $ 309,973 $ 293,423 0.2%
Kingdom Components
(concluded)
Employee Services 200,000 Corporate Services Group PLC 594,020 621,962 0.4
Home Furnishings 220,000 ++Limelight Group PLC 654,727 193,906 0.1
Media/Publishing 82,000 International Business
Communications PLC (Ordinary) 298,340 535,918 0.4
Merchandising 36,947 Smith (W.H.) Group PLC 230,419 221,809 0.2
Metals 15,504 Johnson Matthey PLC 126,265 148,511 0.1
Oil Services 40,000 Expro International Group PLC 330,488 302,666 0.2
<PAGE>
Pharmaceuticals 43,300 ++Celltech Group PLC 429,955 191,541 0.1
162,300 ++Oxford Molecular Group PLC 828,101 763,831 0.6
------------- ------------- ------
1,258,056 955,372 0.7
Rental Services 82,000 Ashtead Group PLC 422,736 377,052 0.3
133,588 Thorn PLC 325,868 377,667 0.3
------------- ------------- ------
748,604 754,719 0.6
Textiles 215,220 Dewhirst Group PLC 601,484 762,350 0.5
Total Investments in the United
Kingdom 9,865,231 9,556,914 6.7
Total Investments in Europe 42,871,426 47,116,325 33.1
LATIN
AMERICA
Argentina Retailing 24,889 ++Grimoldi S.A. 95,150 98,327 0.1
Total Investments in Argentina 95,150 98,327 0.1
Brazil Metals 42,000 ++Latas de Aluminio S.A. (GDR) (b) 672,000 640,500 0.4
Textiles 2,054,000 Companhia de Tecidos Norte de
Minas S.A. (Preferred) 652,560 801,375 0.6
2,054,000 Empresa Nacional de Comercio 0 0 0.0
------------- ------------- ------
652,560 801,375 0.6
Utilities--Electric 879,478 Centrais Electricas de Santa
Catarina S.A. (CELESC) 'B'
(Preferred) 780,981 1,307,167 0.9
Total Investments in Brazil 2,105,541 2,749,042 1.9
Chile Supermarkets 42,000 ++Supermercados Unimarc S.A.
(ADR) (a) 703,500 787,500 0.6
Total Investments in Chile 703,500 787,500 0.6
Colombia Banking 41,300 Banco Ganadero S.A. (Class A)
(Preferred) (ADR) (a) 811,698 1,073,800 0.7
Total Investments in Colombia 811,698 1,073,800 0.7
Mexico Banking 350,850 ++Grupo Financiero Banorte, S.A.
de C.V. 387,614 364,760 0.2
<PAGE>
Broadcasting--Media 129,000 Grupo Radio Centro, S.A. de C.V.
(ADR) (a) 1,527,535 1,515,750 1.1
Building Materials 47,890 ++Internacional de Ceramica, S.A de
C.V. (ADR) (a) 355,919 401,079 0.3
Engineering & 207,450 Grupo Profesional Planeacion y
Construction Proyectos, S.A. de C.V. (Class B) 924,041 966,098 0.7
Total Investments in Mexico 3,195,109 3,247,687 2.3
Peru Foods 250,947 ++Consorcio Alimentos Fabril
Pacifico S.A. 268,537 421,402 0.3
Total Investments in Peru 268,537 421,402 0.3
Total Investments in Latin America 7,179,535 8,377,758 5.9
MIDDLE EAST/
AFRICA
South Building & 171,443 Murray & Roberts Holding Ltd. 427,734 402,706 0.3
Africa Construction
Newspaper/Publishing 19,100 Nasionale Pers Beperk 215,694 220,109 0.2
Retailing 468,000 Metro Cash & Carry Ltd. 450,022 412,880 0.3
Total Investments in South Africa 1,093,450 1,035,695 0.8
Zimbabwe Beverages 767,619 Delta Corporation Ltd. 412,821 1,178,880 0.8
Total Investments in Zimbabwe 412,821 1,178,880 0.8
Total Investments in the Middle
East/Africa 1,506,271 2,214,575 1.6
NORTH
AMERICA
Canada Leisure 42,384 Four Seasons Hotels Inc. 495,789 1,259,691 0.9
Mining 32,925 Cambior Inc. 457,703 372,464 0.3
Natural Resources 20,000 Total Petroleum of North
America Ltd. 188,500 197,500 0.1
Total Investments in Canada 1,141,992 1,829,655 1.3
<PAGE>
United Aerospace 110,000 ++UNC, Inc. 637,625 1,608,750 1.1
States
Airlines 28,000 ++Reno Air, Inc. 215,504 238,000 0.2
Apparel 13,200 ++Farah, Inc. 111,210 84,150 0.1
70,100 ++Norton McNaughton, Inc. 850,711 341,738 0.2
------------- ------------- ------
961,921 425,888 0.3
Automobile Parts 27,000 Walbro Corp. 494,287 529,875 0.4
Banking & Finance 6,750 Charter One Financial, Inc. 117,321 363,656 0.3
24,000 ++Civic Bancorp 294,750 318,000 0.2
8,300 Haven Bancorp, Inc. 235,863 307,100 0.2
------------- ------------- ------
647,934 988,756 0.7
Biotechnology 16,000 ++COR Therapeutics, Inc. 157,250 170,000 0.1
10,000 ++Gilead Sciences, Inc. 284,341 276,250 0.2
33,575 ++NeoRx Corp. 227,195 148,989 0.1
6,200 ++Ostex International, Inc. 53,275 13,950 0.0
7,700 ++Scios, Inc. 38,438 47,163 0.1
------------- ------------- ------
760,499 656,352 0.5
Broadcasting 65,500 ++Paxson Communications Corp. 691,960 835,125 0.6
Building & Building 24,200 ++Giant Cement Holding, Inc. 329,963 444,675 0.3
Materials 27,700 Oakwood Homes Corporation 588,398 664,800 0.5
22,300 Ryland Group, Inc. 303,251 314,988 0.2
8,200 ++Toll Brothers, Inc. 158,483 150,675 0.1
------------- ------------- ------
1,380,095 1,575,138 1.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
NORTH AMERICA Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <C> <C> <C> <C>
United Cable 13,100 ++General Cable Corp. $ 275,100 $ 335,688 0.2%
States
(concluded) Communication 12,800 ++Dynatech Corporation 389,064 457,600 0.3
Equipment
Computer Software 75,000 ++Phoenix Technologies Ltd. 988,585 975,000 0.7
12,700 ++Premenos Technology Corp. 109,394 107,950 0.1
34,900 ++Software Spectrum, Inc. 612,425 444,975 0.3
7,163 ++Sterling Commerce, Inc. 101,474 235,484 0.2
35,400 ++Structural Dynamics Research Corp. 708,579 929,250 0.7
------------- ------------- ------
2,520,457 2,692,659 2.0
<PAGE>
Computers & Computer 16,250 ++Boole & Babbage, Inc. 335,969 339,219 0.2
Services 20,950 ++Storage Technology Corporation 743,230 932,275 0.7
10,800 ++Vanstar Corporation 96,537 152,550 0.1
25,500 ++Wang Laboratories, Inc. 545,387 543,469 0.4
------------- ------------- ------
1,721,123 1,967,513 1.4
Data Processing 72,500 ++Metromail Corporation 1,297,337 1,794,375 1.3
37,100 ++Platinum Technology, Inc. 485,504 491,575 0.3
69,000 ++Sybase, Inc. 1,160,081 1,017,750 0.7
117,300 ++VMARK Software, Inc. 1,115,086 909,075 0.6
------------- ------------- ------
4,058,008 4,212,775 2.9
Diversified 18,000 ++ACX Technologies, Inc. 383,079 405,000 0.3
Electronics 45,900 ++Alpha Industries, Inc. 346,984 381,544 0.3
15,000 ++BI, Inc. 163,785 108,750 0.1
66,500 ++C.P. Clare Corp. 565,288 1,030,750 0.7
4,000 ++CHS Electronics Inc. 72,454 105,500 0.1
16,100 ++DII Group, Inc. 349,947 708,400 0.5
6,600 ++Marshall Industries 195,530 245,850 0.2
31,800 ++Nu Horizons Electronics Corp. 282,957 258,375 0.2
14,700 ++Triumph Group, Inc. 366,858 455,700 0.3
6,100 Wyle Electronics 221,793 240,950 0.2
------------- ------------- ------
2,565,596 3,535,819 2.6
Environmental 41,514 BHA Group Inc. (Class A) 532,342 768,009 0.5
Control 59,200 ++Envirosource Inc. 225,921 118,400 0.1
------------- ------------- ------
758,263 886,409 0.6
Gaming 16,000 ++WMS Industries, Inc. 298,927 401,000 0.3
Healthcare-- 21,200 ++Magellan Health Services, Inc. 578,874 625,400 0.5
Products/Services 53,800 ++Ramsay Health Care, Inc. 330,777 161,400 0.1
------------- ------------- ------
909,651 786,800 0.6
Insurance 2,300 ++ARM Financial Group, Inc.
(Class A) 34,500 46,000 0.0
4,000 American National Insurance Co. 328,116 349,000 0.2
35,000 ++Gryphon Holdings, Inc. 494,289 533,750 0.4
37,000 PXRE Corp. 838,025 1,137,750 0.8
7,600 Security-Connecticut Corp. 178,106 418,475 0.3
------------- ------------- ------
1,873,036 2,484,975 1.7
<PAGE>
Iron & Steel 28,800 Quanex Corporation 631,528 883,800 0.6
Machinery 12,000 AGCO Corporation 266,610 431,250 0.3
22,200 Stewart & Stevenson Services, Inc. 532,085 577,200 0.4
------------- ------------- ------
798,695 1,008,450 0.7
Medical 4,000 Analogic Corporation 68,500 136,000 0.1
19,400 ++Biomatrix, Inc. 285,121 358,900 0.2
17,200 ++Physician Computer Network, Inc. 98,652 115,025 0.1
12,000 ++Sierra Health Services Inc. 381,993 375,000 0.3
22,100 ++VISX, Inc. 562,135 524,875 0.4
18,200 ++Vivus, Inc. 417,401 432,250 0.3
------------- ------------- ------
1,813,802 1,942,050 1.4
Metals 5,500 Applied Industrial Technologies,
Inc. 157,324 198,000 0.1
15,800 Castle (A.M) & Company 291,876 348,588 0.2
17,700 ++Citation Corporation 238,490 303,112 0.2
6,500 Commonwealth Industries, Inc. 109,901 131,625 0.1
29,700 ++Shiloh Industries, Inc. 401,507 579,150 0.4
------------- ------------- ------
1,199,098 1,560,475 1.0
Natural Resources 20,300 ++Brown (Tom), Inc. 236,050 428,838 0.3
25,000 ++Plains Resources, Inc. 156,250 368,750 0.3
23,500 ++TransTexas Gas Corp. 258,500 358,375 0.2
39,474 ++Zemex Corporation 344,674 305,923 0.2
------------- ------------- ------
995,474 1,461,886 1.0
Restaurants 26,500 ++Au Bon Pain Company, Inc.
(Class A) 172,691 178,875 0.1
52,100 ++TPI Enterprises, Inc. 5,816 7,294 0.0
------------- ------------- ------
178,507 186,169 0.1
Retailing 58,500 Baker (J.), Inc. 751,804 460,687 0.3
102,300 CML Group, Inc. 255,765 185,419 0.1
25,000 ++Catherines Stores Corp. 202,020 93,750 0.1
21,700 ++Chico's Fashions, Inc. 157,663 113,925 0.1
20,300 ++Department 56, Inc. 460,150 450,406 0.3
2,200 Fingerhut Companies, Inc. 37,235 38,362 0.0
------------- ------------- ------
1,864,637 1,342,549 0.9
<PAGE>
Telecommunications 124,100 ++Applied Digital Access, Inc. 693,077 961,775 0.7
36,900 ++Comdial Corporation 227,438 309,037 0.2
45,900 ++Metromedia International
Group, Inc. 582,537 582,356 0.4
51,300 ++Network Equipment Technologies,
Inc. 738,108 923,400 0.7
800 ++Primark Corp. 20,434 21,300 0.0
------------- ------------- ------
2,261,594 2,797,868 2.0
Transportation 10,300 Air Express International Corp. 278,291 407,494 0.3
6,100 ++Landair Services, Inc. 82,120 86,925 0.1
------------- ------------- ------
360,411 494,419 0.4
Transportation 22,043 ++Aramex International, Limited 165,901 209,408 0.1
Services
Wire & Cable Products 8,000 ++Anixter International Inc. 109,298 137,500 0.1
Total Investments in the
United States 31,921,074 37,048,696 26.1
Total Investments in North
America 33,063,066 38,878,351 27.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<CAPTION>
PACIFIC Shares Held/ Value Percent of
BASIN Industries Face Amount Investments Cost (Note 1a) Net Assets
<S> <S> <C> <C> <C> <C> <C>
Australia Entertainment 1,188,000 Burswood Property Trust $ 1,567,077 $ 1,558,210 1.1%
Publishing 283,000 West Australian Newspaper
Holdings Ltd. 1,034,360 1,257,803 0.9
Total Investments in Australia 2,601,437 2,816,013 2.0
Hong Kong Banking 315,333 JCG Holdings, Ltd. 254,871 254,406 0.2
Electronic 109,000 QPL International Holdings Ltd. 88,423 92,161 0.0
Components
Financial US$ 420,000 Goldlion Capital Corp., 4.875%
Services due 2/01/1999 318,914 390,600 0.3
Foods/Food 6,892,000 Tingyi (Cayman Islands)
Processing Holdings Co. 1,575,707 1,717,039 1.2
<PAGE>
Packaging 3,772,600 Sinocan Holdings Ltd. 1,254,878 1,862,730 1.3
Telecommunications 301,000 ++Smartone Telecommunications 587,939 683,844 0.5
Total Investments in Hong Kong 4,080,732 5,000,780 3.5
Indonesia Banking-- 303,000 PT Bank Bali (Foreign) 634,023 810,494 0.6
International
Consumer--Goods 2,006,500 PT Wicaksana Overseas
International 2,517,754 2,456,517 1.7
Real Estate 474,000 PT Ciputra Development (Foreign) 463,436 473,025 0.3
Textiles & Apparel 1,093,500 PT Great River Industries 496,241 686,250 0.5
Total Investments in Indonesia 4,111,454 4,426,286 3.1
Japan Automobile Parts 11,700 Exedy Corporation 199,379 149,227 0.1
58,000 Murakami Corporation 1,148,025 633,354 0.4
50,000 Showa Corporation 502,169 424,129 0.3
55,000 Yamakawa Industrial Co. 695,828 208,046 0.2
------------- ------------- ------
2,545,401 1,414,756 1.0
Beverages 79,000 Hokkaido Coca-Cola Bottling Co.,
Ltd. 1,298,058 1,083,515 0.7
74,000 Sanyo Coca-Cola Bottling Co., Ltd. 1,118,168 976,151 0.7
------------- ------------- ------
2,416,226 2,059,666 1.4
Chemicals 50,000 Canon Chemicals, Inc. 934,042 1,070,149 0.8
Computer Services 15,000 Sumisho Computer Systems Corp. 249,015 300,079 0.2
51,700 TKC Corporation 1,374,367 1,296,226 0.9
------------- ------------- ------
1,623,382 1,596,305 1.1
Construction 89,600 Japan Foundation Engineering Co.,
Ltd. 1,735,016 978,422 0.7
157,000 Yondenko Corp. 1,518,456 1,071,171 0.7
------------- ------------- ------
3,253,472 2,049,593 1.4
Consumer Electricals 59,000 Roland Corporation 1,429,975 1,453,481 1.0
Electrical Equipment 26,000 Shinmei Electric Co. 1,340,491 515,594 0.4
48,000 Sukegawa Electric Co. 630,495 211,759 0.1
------------- ------------- ------
1,970,986 727,353 0.5
<PAGE>
Electronic Components 35,000 Chiyoda Integre Co., Ltd. 220,393 244,606 0.2
Foods/Food Processing 43,000 Ariake Japan Co., Ltd. 1,525,975 1,645,322 1.2
Health Services 25,000 Kanto Biomedical Laboratory Co. 528,125 386,564 0.3
26,000 SRL Inc. 557,018 399,755 0.3
------------- ------------- ------
1,085,143 786,319 0.6
Industrials 14,500 Nitto Kohki Company Ltd. 488,740 485,149 0.3
Iron & Steel 218,000 Nippon Chutetsukan K.K. 1,367,147 818,905 0.6
Machinery 27,000 Miura Co., Ltd. 449,645 382,109 0.3
Metal Fabrication 124,000 Toyo Kohan Co., Ltd. 1,057,406 1,059,422 0.7
Pollution Control 168,000 Organo Corporation 1,844,463 1,386,914 1.0
Real Estate 53,000 Keihanshin Real Estate Co. Ltd. 525,507 358,828 0.2
56,000 TOC Company Ltd. 596,958 665,327 0.5
------------- ------------- ------
1,122,465 1,024,155 0.7
Restaurants 47,000 Aim Services Co., Ltd. 1,405,610 681,576 0.5
49,000 Mos Food Services, Inc. 1,431,739 907,487 0.6
83,000 Ohsho Food Service Corp. 2,244,318 1,261,641 0.9
------------- ------------- ------
5,081,667 2,850,704 2.0
Retail Specialty 66,000 ADO Electric Industrial Co., Ltd. 1,956,905 1,602,865 1.1
60,000 Arcland Sakamoto Co., Ltd. 964,197 728,575 0.5
30,000 Nitori Co. 906,611 393,116 0.3
------------- ------------- ------
3,827,713 2,724,556 1.9
Services 66,000 Ichinen Co., Ltd. 1,663,714 789,901 0.6
Trading 34,000 Japan CBM Corp. 1,197,480 1,054,425 0.7
Trucking 108,000 Nippon Konpo Unyu Soko Co. 1,045,185 786,861 0.6
Total Investments in Japan 36,150,620 26,410,651 18.6
Malaysia Advertising 221,000 Seni Jaya Corporation BHD 708,918 998,296 0.7
Chemicals 109,000 Chemical Company of Malaysia BHD 340,194 295,855 0.2
<PAGE>
Consumer Products 290,000 Amway (Malaysia) Holdings BHD 1,781,860 1,723,660 1.2
& Services
Engineering & 378,000 Asas Dunia BHD 1,355,969 1,220,708 0.9
Construction
Newspaper/ 143,000 New Straits Times Press BHD 602,724 838,610 0.6
Publishing
Total Investments in Malaysia 4,789,665 5,077,129 3.6
New Zealand Agriculture 1,090,500 Wrightson Ltd. 808,404 694,485 0.5
Chemicals 146,000 Fernz Corporation Ltd. 439,021 494,575 0.4
Textiles 176,150 Lane Walker Rudkin Industries,
Ltd. 196,618 186,173 0.1
Total Investments in New Zealand 1,444,043 1,375,233 1.0
Philippines Banking 31,392 ++Security Bank Corporation 24,933 37,527 0.0
Financial Services 46,128 Far East Bank & Trust Company 83,473 115,539 0.1
Total Investments in the
Philippines 108,406 153,066 0.1
South Korea Banking 69,700 Cho-Hung Bank Co. Ltd. 461,958 473,425 0.3
Tire & Rubber 42,390 Korea Kumho Petrochemical Co. 302,607 294,721 0.2
Total Investments in South Korea 764,565 768,146 0.5
Thailand Transportation 62,000 Thoresen Thai Agency PLC 'Express'
(Warrants) (d) 0 61 0.0
322,800 Thoresen Thai Agency PLC 'Foreign' 783,253 209,003 0.1
Total Investments in Thailand 783,253 209,064 0.1
Total Investments in the Pacific
Basin 54,834,175 46,236,368 32.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
SOUTHEAST Value Percent of
ASIA Shares Held Investments Cost (Note 1a) Net Assets
<S> <S> <C> <C> <C> <C> <C>
India Financial Services 24,764 ++Industrial Credit & Investment
Corporation of India Ltd. (ICICI)
(GDR)(b) $ 277,849 $ 355,982 0.2%
<PAGE>
Hotels 59,400 EIH Limited (GDR)(b)(c) 576,350 980,100 0.7
Recreation & 250,000 Su-Raj Diamonds Ltd. 346,583 116,003 0.1
Consumer Goods
Total Investments in Southeast
Asia 1,200,782 1,452,085 1.0
OPTIONS Nominal Value Covered Premiums
PURCHASED by Options Purchased Paid
Currency Put 5,200,000 Japanese Yen, expiring February
Options Purchased 1998 at YEN 120 77,740 39,000 0.0
Total Investments in Options
Purchased 77,740 39,000 0.0
Total Investments $ 140,732,995 144,314,462 101.5
=============
Variation Margin on Stock Index Futures Contracts* 76,475 0.1
Unrealized Appreciation on Forward Foreign Exchange Contracts** 63,990 0.0
Liabilities in Excess of Other Assets (2,282,718) (1.6)
------------- ------
Net Assets $ 142,172,209 100.0%
============= ======
<FN>
(a)American Depositary Receipts (ADR).
(b)Global Depositary Receipts (GDR).
(c)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Securitites Act of 1933.
(d)Warrants entitle the Fund to purchase a predetermined number of
shares of stock/face amount of bonds at a predetermined price
until the expiration date.
++Non-income producing security.
*Stock index futures contracts sold as of June 30, 1997 were as
follows:
Number of Expiration Value
Contracts Issue Exchange Date (Notes 1a & 1c)
23 S&P Index CME September 1997 $10,237,875
Total Stock Index Futures Contracts Sold
(Total Contract Price--$10,331,025) $10,237,875
===========
<PAGE>
**Forward foreign exchange contracts sold as of June 30, 1997 were
as follows:
Unrealized
Foreign Currency Expiration Appreciation
Sold Date (Note 1c)
NZ$ 1,554,000 August 1997 $ 21,066
YEN 1,499,543,260 July 1997 42,924
Total Unrealized Appreciation on Forward Foreign
Exchange Contracts--Net
(US$ Commitment--$14,269,542) $ 63,990
===========
See Notes to Financial Statements.
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended June 30, 1997
Additions
ACX Technologies, Inc.
ARM Financial Group, Inc. (Class A)
ASKO OY (Class A)
Acerinox S.A.
American National Insurance Co.
Amper S.A.
Anixter International Inc.
Ashtead Group PLC
Belimo Automation AG
Bertrand Faure S.A.
Boole & Babbage, Inc.
*Charter PLC
Cho-Hung Bank Co. Ltd.
Cofidur
DOCdata NV
Dynatech Corporation
Fairey Group PLC
<PAGE>
Finansier Ingsintituttet for Industri og
Handvarek A/S (FIH) (Class B)
Fingerhut Companies, Inc.
General Cable Corp.
Greencore Group PLC
Groupe Partouche S.A.
Grupo Radio Centro, S.A. de C.V. (ADR)
Industrial Credit & Investment
Corporation of India Ltd. (ICICI) (GDR)
Johnson Matthey PLC
Koninklijke Pakhoed NV
Korea Kumho Petrochemical Co.
Latas de Aluminio S.A. (GDR)
Metro Cash & Carry Ltd.
Metromedia International Group, Inc.
Murray & Roberts Holding Ltd.
NBM-Amstelland NV
Nasionale Pers Beperk (N Shares)
OTP Bank (GDR)
*Olympic Steel, Inc.
PT Ciputra Development (Foreign)
Paxson Communications Corp.
Phoenix Technologies Ltd.
Physician Computer Network, Inc.
*Polo Ralph Lauren Corp.
Premenos Technology Corp.
Primark Corp.
QPL International Holdings Ltd.
Reno Air, Inc.
*Sixt AG
Smartone Telecommunications
Smith (W.H.) Group PLC
Sondagsavisen A/S
Sumisho Computer Systems Corp.
Supermercados Unimarc S.A. (ADR)
Thorn PLC
Vanstar Corporation
Vivus, Inc.
Volker Wessels Stevin NV
*WHG Resorts and Casinos Inc.
Deletions
<PAGE>
Advanced Semiconductor Materials
International NV
Allen Group, Inc.
Azkoyen S.A.
Brite Voice Systems, Inc.
Central European Media Enterprises
Ltd. (Class A)
*Charter PLC
Chuo Kagaku Co. Ltd.
Compuware Corporation
Daika Corporation
Disetronic Holdings AG
Erciyas Biracilik Ve Malt Sanayii A.S.
Gibraltar Steel Corp.
Giken Seisakusho Co. Inc.
Han Wha Corporation
Home Wide Corporation
Howden Group PLC
Hyperion Software Corp.
Irish Continental Group PLC
Isolyser Company, Inc.
Kiwi Income Property Trust
Kiwi Income Property Trust 'B'
Kondor Wessels Groep NV
M6 Metropole Television
Miquel y Costas & Miquel, S.A.
Newpark Resources Inc.
*Olympic Steel, Inc.
The Peak Technologies Group Inc.
*Polo Ralph Lauren Corp.
Rofin-Sinar Technologies, Inc.
Roki Techno Co., Ltd.
Shoney's, Inc.
Siderar S.A. (ADR)
*Sixt AG
Sofamor Danek Group, Inc.
Sotetsu Rosen Co., Ltd.
Sylea S.A.
Symantec Corp.
Titan Exploration, Inc.
Tonami Transportation Co., Ltd.
Tsuchiya Home Co.
*WHG Resorts and Casinos Inc.
[FN]
*Added and deleted in the same quarter.
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of June 30, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$140,655,255) (Note 1a) $144,275,462
Options purchased, at value (premiums paid--$77,740) (Notes 1a & 1c) 39,000
Unrealized appreciation on forward foreign exchange contracts
(Note 1c) 63,990
Foreign cash (Note 1d) 958,811
Cash on deposit for stock index futures contracts 500,000
Variation margin on stock index futures contracts (Note 1c) 76,475
Receivables:
Securities sold $ 5,399,278
Dividends 418,635
Capital shares sold 33,930
Interest 8,484 5,860,327
------------
Deferred organization expenses (Note 1g) 76,377
Prepaid registration fees and other assets (Note 1g) 206,540
------------
Total assets 152,056,982
------------
Liabilities: Payables:
Securities purchased 3,859,094
Capital shares redeemed 452,806
Distributor (Note 2) 103,318
Investment adviser (Note 2) 102,269 4,517,487
------------
Accrued expenses and other liabilities 5,367,286
------------
Total liabilities 9,884,773
------------
Net Assets: Net assets $142,172,209
============
Net Assets Class A Common Stock, $0.10 par value, 100,000,000 shares
Consist of: authorized $ 51,513
Class B Common Stock, $0.10 par value, 100,000,000 shares
authorized 1,055,848
Class C Common Stock, $0.10 par value, 100,000,000 shares
authorized 56,667
Class D Common Stock, $0.10 par value, 100,000,000 shares
authorized 182,421
Paid-in capital in excess of par 136,197,064
Undistributed realized capital gains on investments and
foreign currency transactions--net 896,735
Unrealized appreciation on investments and foreign currency
transactions--net 3,731,961
------------
Net assets $142,172,209
============
<PAGE>
Net Asset Class A--Based on net assets of $5,508,051 and 515,134
Value: shares outstanding $ 10.69
============
Class B--Based on net assets of $111,260,842 and 10,558,477
shares outstanding $ 10.54
============
Class C--Based on net assets of $5,962,238 and 566,674
shares outstanding $ 10.52
============
Class D--Based on net assets of $19,441,078 and 1,824,208
shares outstanding $ 10.66
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended June 30, 1997
<S> <S> <C> <C>
Investment Dividends (net of $206,666 foreign withholding tax) $ 1,849,337
Income Interest and discount earned 509,261
(Notes 1e & 1f): ------------
Total income 2,358,598
------------
Expenses: Investment advisory fees (Note 2) $ 1,260,012
Account maintenance and distribution fees--Class B (Note 2) 1,184,206
Transfer agent fees--Class B (Note 2) 271,529
Custodian fees 222,107
Printing and shareholder reports 138,849
Accounting services (Note 2) 123,555
Professional fees 76,527
Registration fees (Note 1g) 75,851
Account maintenance and distribution fees--Class C (Note 2) 56,970
Account maintenance fees--Class D (Note 2) 51,012
Transfer agent fees--Class D (Note 2) 39,059
Directors' fees and expenses 36,887
Amortization of organization expenses (Note 1g) 36,661
Pricing fees 29,498
Transfer agent fees--Class C (Note 2) 13,937
Transfer agent fees--Class A (Note 2) 6,970
Other 8,275
------------
Total expenses 3,631,905
------------
Investment loss--net (1,273,307)
------------
<PAGE>
Realized & Realized gain from:
Unrealized Gain Investments--net 3,622,812
(Loss) on Foreign currency transactions--net 1,630,794 5,253,606
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net 4,953,964
(Notes 1c, 1d, Foreign currency transactions--net (478,492) 4,475,472
1f & 3): ------------ ------------
Net realized and unrealized gain on investments and foreign
currency transactions 9,729,078
------------
Net Increase in Net Assets Resulting from Operations $ 8,455,771
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Year Ended
June 30,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment loss--net $ (1,273,307) $ (795,024)
Realized gain on investments and foreign currency transactions
--net 5,253,606 16,571,278
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 4,475,472 15,421,162
------------ ------------
Net increase in net assets resulting from operations 8,455,771 31,197,416
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (27,732) (19,859)
Shareholders Class B (680,759) (619,675)
(Note 1h): Class C (34,097) (22,117)
Class D (163,840) (214,561)
In excess of investment income--net:
Class A (66,906) --
Class B (1,642,412) --
Class C (82,264) --
Class D (395,284) --
Realized gain on investments--net:
Class A (179,170) (10,675)
Class B (6,808,450) (682,938)
Class C (324,707) (24,845)
Class D (1,160,558) (131,445)
------------ ------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (11,566,179) (1,726,115)
------------ ------------
<PAGE>
Capital Share Net decrease in net assets derived from capital share
Transactions transactions (17,802,460) (33,525,896)
(Note 4): ------------ ------------
Net Assets: Total decrease in net assets (20,912,868) (4,054,595)
Beginning of year 163,085,077 167,139,672
------------ ------------
End of year* $142,172,209 $163,085,077
============ ============
<FN>
*Undistributed investment income--net (Note 1i) $ -- $ 2,179,735
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
Class A Class B
The following per share data and For the For the
ratios have been derived from Period Period
information provided in the For the Oct. 21, For the Aug. 5,
financial statements. Year Ended 1994++ to Year Ended 1994++ to
June 30, June 30, June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++++ 1996 1995 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.86 $ 8.92 $ 9.82 $ 10.71 $ 8.84 $ 10.00
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .01 .13 .04 (.10) (.06) .01
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .72 1.97 (.93) .72 2.04 (1.16)
-------- -------- -------- -------- -------- --------
Total from investment operations .73 2.10 (.89) .62 1.98 (1.15)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.09) (.10) -- (.06) (.05) --
In excess of investment income--net (.22) -- -- (.14) -- --
Realized gain on investments--net (.59) (.06) -- (.59) (.06) --
In excess of realized gain on
investments--net -- -- (.01) -- -- (.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.90) (.16) (.01) (.79) (.11) (.01)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.69 $ 10.86 $ 8.92 $ 10.54 $ 10.71 $ 8.84
======== ======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 7.53% 23.87% (9.11%)+++ 6.47% 22.57% (11.55%)+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.53% 1.55% 1.62%* 2.58% 2.61% .83%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income (loss)--net .13% .46% 1.06%* (1.00%) (.66%) .10%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 5,508 $ 3,083 $ 5,992 $111,261 $131,656 $132,296
======== ======== ======== ======== ======== ========
Portfolio turnover 63.17% 60.33% 47.96% 63.17% 60.33% 47.96%
======== ======== ======== ======== ======== ========
Average commission rate paid+++++ $ .0104 $ .0011 -- $ .0104 $ .0011 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL HIGHLIGHTS (concluded)
<CAPTION>
Class C Class D
<PAGE>
The following per share data and For the For the
ratios have been derived from Period Period
information provided in the For the Oct. 21, For the Aug. 5,
financial statements. Year Ended 1994++ to Year Ended 1994++ to
June 30, June 30, June 30, June 30,
Increase (Decrease) in Net Asset Value: 1997++++ 1996 1995 1997++++ 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.71 $ 8.84 $ 9.80 $ 10.83 $ 8.91 $ 10.00
Operating -------- -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.10) (.05) .01 (.02) .02 .08
Realized and unrealized gain (loss)
on investments and foreign currency
transactions--net .71 2.03 (.96) .72 2.05 (1.16)
-------- -------- -------- -------- -------- --------
Total from investment operations .61 1.98 (.95) .70 2.07 (1.08)
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.06) (.05) -- (.08) (.09) --
In excess of investment income--net (.15) -- -- (.20) -- --
Realized gain on investments--net (.59) (.06) -- (.59) (.06) --
In excess of realized gain on
investments--net -- -- (.01) -- -- (.01)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (.80) (.11) (.01) (.87) (.15) (.01)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 10.52 $ 10.71 $ 8.84 $ 10.66 $ 10.83 $ 8.91
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 6.38% 22.56% (9.75%)+++ 7.27% 23.50% (10.85%)+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 2.60% 2.63% 2.66%* 1.80% 1.83% 1.77%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income (loss)--net (1.00%) (.64%) .20%* (.21%) .10% .90%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 5,962 $ 5,753 $ 4,924 $ 19,441 $ 22,593 $ 23,928
======== ======== ======== ======== ======== ========
Portfolio turnover 63.17% 60.33% 47.96% 63.17% 60.33% 47.96%
======== ======== ======== ======== ======== ========
Average commission rate paid+++++ $ .0104 $ .0011 -- $ .0104 $ .0011 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995,
the Fund is required to disclose its average commission rate
per share for purchases and sales of equity securities. The
"Average Commission Rate Paid" includes commissions paid in
foreign currencies, which have been converted into US
dollars using the prevailing exchange rate on the date of
the transaction. Such conversions may significantly affect
the rate shown.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
<PAGE>
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. The Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. Securities which are traded both in the over-the-
counter market and on a stock exchange are valued according to the
broadest and most representative market. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, are stated at market value. Securities and assets
for which market value quotations are not available are valued at
their fair value as determined in good faith by or under the
direction of the Fund's Board of Directors.
<PAGE>
(b) 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
operations is recorded from the date the Fund enters into such
contracts. Premium or discount is amortized over the life of the
contracts.
* Foreign currency options and futures--The Fund may also purchase
or sell listed or over-the-counter foreign currency options, foreign
currency futures and related options on foreign currency futures as
a short or long hedge against possible variations in foreign
exchange rates. Such transactions may be effected with respect to
hedges on non-US dollar denominated securities owned by the Fund,
sold by the Fund but not yet delivered, or committed or anticipated
to be purchased by the Fund.
* 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.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
* 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.
(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 dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined 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.
<PAGE>
(h) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates. Distributions in
excess of investment are due primarily to differing tax treatments
for foreign currency transactions.
(i) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting for
foreign exchange transactions. Accordingly, current year's permanent
book/tax differences of $2,186,866 have been reclassified between
undistributed net realized capital gains and accumulated net
investment loss. These reclassifications have no effect on net
assets or net asset values per share.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Merrill Lynch Asset Management, L.P. ("MLAM" 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.
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 year ended June 30, 1997, MLAM paid
MLAM U.K. a fee of $144,451 pursuant to such Agreement.
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
<PAGE>
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 year ended June 30, 1997, 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 $ 4 $ 100
Class D $1,954 $29,612
For the year ended June 30, 1997, MLPF&S received contingent
deferred sales charges of $13,831 and $2,530 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $56,999 in commissions on the execution
of portfolio security transactions for the year ended June 30, 1997.
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., MLFD, MLFDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1997 were $87,919,940 and $100,594,474,
respectively.
Net realized and unrealized gains (losses) as of June 30, 1997 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
<PAGE>
Investments:
Long-term $ 4,855,377 $ 3,620,207
Short-term 29,464 --
Stock index futures contracts (1,124,529) 93,150
Options written (137,500) --
------------ ------------
Total investments 3,622,812 3,713,357
------------ ------------
Currency transactions:
Options purchased (169,509) (38,740)
Options written 13,143 --
Foreign currency transactions (274,830) (6,646)
Forward foreign exchange
contracts 2,061,990 63,990
------------ ------------
Total currency transactions 1,630,794 18,604
------------ ------------
Total $ 5,253,606 $ 3,731,961
============ ============
As of June 30, 1997, net unrealized appreciation for Federal income
tax purposes aggregated $3,076,987, of which $21,147,838 related to
appreciated securities and $18,070,851 related to depreciated
securities. The aggregate cost of investments, at June 30, 1997 for
Federal income tax purposes was $141,198,475.
Transactions in put options written for the year ended June 30, 1997
were as follows:
Nominal Value
Covered by Put Premiums
Options Written Paid
Outstanding put options written,
beginning of year -- --
Options written 780,000 $ 13,143
Options exercised (780,000) (13,143)
---------- ----------
Outstanding put options written,
end of year -- $ --
========== ==========
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $17,802,460 and $33,525,896 for the years ended June 30, 1997
and June 30, 1996, respectively.
Transactions in capital shares for each class were as follows:
<PAGE>
Class A Shares for the
Year Ended Dollar
June 30, 1997 Shares Amount
Shares sold 640,103 $ 6,302,473
Shares issued to shareholders in
reinvestment of dividends and
distributions 25,500 247,091
------------ ------------
Total issued 665,603 6,549,564
Shares redeemed (434,307) (4,334,013)
------------ ------------
Net increase 231,296 $ 2,215,551
============ ============
NOTES TO FINANCIAL STATEMENTS (concluded)
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 296,811 $ 2,900,817
Shares issued to shareholders in
reinvestment of dividends and
distributions 3,060 27,820
------------ ------------
Total issued 299,871 2,928,637
Shares redeemed (687,569) (6,547,134)
------------ ------------
Net decrease (387,698) $ (3,618,497)
============ ============
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 2,372,220 $ 24,001,485
Shares issued to shareholders in
reinvestment of dividends and
distributions 555,932 5,336,945
------------ ------------
Total issued 2,928,152 29,338,430
Automatic conversion of shares (31,361) (318,122)
Shares redeemed (4,628,694) (46,586,988)
------------ ------------
Net decrease (1,731,903) $(17,566,680)
============ ============
<PAGE>
Class B Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 3,191,120 $ 31,771,205
Shares issued to shareholders in
reinvestment of dividends and
distributions 69,565 627,475
------------ ------------
Total issued 3,260,685 32,398,680
Automatic conversion of shares (38,752) (370,604)
Shares redeemed (5,891,101) (56,152,670)
------------ ------------
Net decrease (2,669,168) $(24,124,594)
============ ============
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 251,158 $ 2,498,757
Shares issued to shareholders in
reinvestment of dividends and
distributions 41,482 397,810
------------ ------------
Total issued 292,640 2,896,567
Shares redeemed (263,160) (2,632,858)
------------ ------------
Net increase 29,480 $ 263,709
============ ============
Class C Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 368,083 $ 3,622,074
Shares issued to shareholders in
reinvestment of dividends and
distributions 4,696 42,310
------------ ------------
Total issued 372,779 3,664,384
Shares redeemed (392,451) (3,747,857)
------------ ------------
Net decrease (19,672) $ (83,473)
============ ============
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
<PAGE>
Shares sold 599,650 $ 6,180,271
Automatic conversion of shares 31,011 318,122
Shares issued to shareholders in
reinvestment of dividends and
distributions 99,660 963,719
------------ ------------
Total issued 730,321 7,462,112
Shares redeemed (992,678) (10,177,152)
------------ ------------
Net decrease (262,357) $ (2,715,040)
============ ============
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 1,341,253 $ 13,808,237
Automatic conversion of shares 38,393 370,604
Shares issued to shareholders in
reinvestment of dividends and
distributions 17,279 156,896
------------ ------------
Total issued 1,396,925 14,335,737
Shares redeemed (1,996,494) (20,035,069)
------------ ------------
Net decrease (599,569) $ (5,699,332)
============ ============
5. Commitments:
At June 30, 1997, 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 $1,416,000 and
$3,135,000, respectively.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors,
Merrill Lynch Global SmallCap Fund, Inc.:
<PAGE>
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Global SmallCap Fund, Inc. as of June 30, 1997, the related
statements of operations for the year then ended and changes in net
assets for each of the years in the two-year period then ended, and
the financial highlights for each of the years in the two-year
period then ended and for the period August 5, 1994 (commencement of
operations) to June 30, 1995. These financial statements and the
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at June 30,
1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Global SmallCap Fund, Inc. as of June 30, 1997, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 15, 1997
</AUDIT-REPORT>
PORTFOLIO INFORMATION (unaudited)
Worldwide
Investments
As of 6/30/97
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
<PAGE>
PT Wicaksana Overseas
International Indonesia 1.7%
Sinocan Holdings Ltd. Hong Kong 1.3
Metromail Corporation United States 1.3
Amway (Malaysia) Holdings BHD Malaysia 1.2
Tingyi (Cayman Islands)
Holdings Co. Hong Kong 1.2
Ariake Japan Co., Ltd. Japan 1.2
UNC,Inc. United States 1.1
ADO Electric Industrial Co., Ltd. Japan 1.1
Misys PLC United Kingdom 1.1
Burswood Property Trust Australia 1.1
Percent of
Ten Largest Industries Net Assets
Computer Software 3.6%
Engineering & Construction 3.5
Data Processing 2.9
Telecommunications 2.8
Retail Specialty 2.7
Beverages 2.6
Electronics 2.6
Food/Food Processing 2.4
Chemicals 2.3
Computer Services 2.3
