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MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Quarterly Report
September 30, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this re-port should not be considered a representation of
future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worthmore 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 #18177 -- 9/97
[RECYCLE LOGO}
Printed on post-consumer recycled paper
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Merrill Lynch
Global SmallCap
Fund, Inc.
Management Team
Andrew John Bascand -- Senior Portfolio Manager/Asset Allocator. As
the Fund's Asset Allocator, Mr. Bascand is primarily responsible for
determining the allocation of the Fund's assets among equity markets
in the United States, Europe, the emerging markets and the Pacific
Basin.
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.
Hubertus 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 Europe and Latin America.
James Russell -- Co-Portfolio Manager -- Japanese Investments. Mr.
Russell is primarily responsible for the Fund's Japanese investments.
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
Hubertus Aarts, Vice President
Andrew John Bascand, Vice President
R. Elise Baum, Vice President
Donald C. Burke, Vice President
Grace Pineda, Vice President
James E. Russell, Vice President
Gerald M. Richard, Treasurer
Philip M. Mandel, Secretary
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
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1997
DEAR SHAREHOLDER
In aggregate, global small cap issues outperformed large cap issues
during the three months ended September 30, 1997. The unmanaged
Salomon Brothers Extended Market Index (SEMI), a global small cap
benchmark, returned +6.3% (in US dollar terms) for the September
quarter, compared with a 3.2% rise in the unmanaged Financial
Times/Standard & Poor's Actuaries World Index, a large-capitalization
global index.
During the September quarter, the US dollar appreciated against major
currencies, rising from (yen)114.5 to (yen)121.6 and from DM1.75 to
DM1.77 in Japan and Germany, respectively. However, by September 30,
1997, the US dollar was down significantly from its highs in early
August.
In US dollar terms, the best-performing small cap markets in the
September quarter were in Europe. Total returns in US dollar terms
were strongest in Norway (+22.4%), followed by Italy (+20.0%) and
Finland (+14.1%). Among the other major markets, the worst-performing
market was Japan, falling 25.1% and reversing the outperformance of
the June quarter. The US small cap market returned +15.4% for the
September quarter.
For the three-month period ended September 30, 1997, total returns for
Merrill Lynch Global SmallCap Fund, Inc.'s Class A, Class B, Class C
and Class D Shares were -0.84%, -1.14%, -1.14% and -0.94%,
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 -- 6
of this report to shareholders.) A key factor associated with the
Fund's underperformance relative to the SEMI was stock selection in
emerging Asia where the sub-portfolio significantly underperformed an
Asian region unmanaged index of small cap stocks.
Our investment strategy is to maintain a broadly diversified exposure
to companies with a market capitalization of between $50 million and
$750 million (in US dollar terms). By geographic region, our strategic
exposure targets are North America, 34% of net assets; Europe, 25%;
Japan, 17%; developed countries in the Pacific Basin (ex-Japan), 6%;
and emerging markets, 15%. We aim to maintain a cash reserve position
of 3% of net assets. During the September quarter, an unmanaged global
market capitalization average of small cap stocks, with each region
weighted by these proportions, returned -0.6%.
We continued to increase the Fund's exposure to the US market during
the September quarter. At the end of September, US small cap
investments comprised 33% of the Fund's net assets, up from 28% during
the June quarter. The counterpart to the increase in US exposure was a
reduction in the Japanese weighting, which declined to 14% of net
assets from 19%.
Economic and Investment Environment
For several months we have maintained a view that global economic
activity is accelerating. With the exception of the Japanese economy,
the September quarter's data strengthened this view. In general, a
stronger global growth environment should support small cap
performance relative to large cap issues, and the recent
outperformance of small companies in both the United States and Europe
supports this, in our view. We plan to maintain a relatively fully
invested stance in small cap equities.
In the United States, economic indicators generally suggest that
business activity is expanding above trend growth rates. Employment
and income growth in the United States have also been robust, while
retail and vehicle sales growth rates are trending higher. Consistent
with these indicators, the Conference Board's US Consumer Confidence
Index remains near 25-year highs.
In Europe, economic recovery is broadening in terms of the number of
sectors and countries participating. Dollar strength has benefited
large cap issues relative to small cap issues, but attention is likely
to gradually switch to companies geared to a recovery in domestic
demand, in our view.
Weakness in the Japanese economy following the April rise in the
consumption tax hit small cap issues particularly hard. Larger
companies tend to have a greater export bias, so the weak yen was a
bigger support for them. Negative sentiment toward the whole market,
and small cap issues in particular, is probably conditional on the
reception given to government plans for corporate tax reform and
deregulation.
In emerging markets, the key development was the Southeast Asian
currency crisis which followed a period of weakness in the Thai baht.
The collapse of the major Southeast Asian currencies and higher local
interest rates significantly lowered expectations of future profit
growth and equally impacted equity prices, particularly in Malaysia,
Indonesia and the Philippines.
Looking out over the next six months, key issues for all equity
markets will be the investor response to a likely further firming of
US interest rates, which continues to be foreshadowed by Federal
Reserve Board Chairman Alan Greenspan. In conjunction with stronger
global activity, a rise in US interest rates could serve to lift small
cap returns relative to large cap returns. As a result, we are likely
to maintain a fully invested stance in expectation of a period of
small cap outperformance.
In Conclusion
We remain concerned about the short-term outlook for larger
capitalization stocks in many major stock markets. However, stronger
global activity may tend to favor smaller capitalization stocks whose
earnings tend to be more geared to the economic cycle. We will
continue to invest in a diversified regional selection of small cap
stocks, including those in emerging markets.
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 annual report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/ANDREW BASCAND
Andrew Bascand
Senior Portfolio Manager/Asset
Allocator
/S/HUBERTUS AARTS
Hubertus Aarts
Co-Portfolio Manager
European Investments
/S/R. ELISE BAUM
R. Elise Baum
Co-Portfolio Manager
US Investments
/S/GRACE PINEDA
Grace Pineda
Co-Portfolio Manager
Emerging Markets Investments
/S/JAMES RUSSELL
James Russell
Co-Portfolio Manager
Japanese Investments
October 29, 1997
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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.
[bullet] 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.)
[bullet] 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.
[bullet] 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.
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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 -- 9/30/97 9.81 10.60 -- -- + 8.05
Total $0.243 Total $0.815
Cumulative total return as of 9/30/97: +20.05%**
* 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>
<CAPTION>
Performance Summary -- Class B Shares
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 -- 9/30/97 9.72 10.42 -- -- + 7.20
Total $0.243 Total $0.653
Cumulative total return as of 9/30/97: +14.12%**
* 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>
<CAPTION>
Performance Summary -- Class C Shares
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 -- 9/30/97 9.71 10.40 -- -- + 7.11
Total $0.243 Total $0.663
Cumulative total return as of 9/30/97: +16.33%**
* 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>
<CAPTION>
Performance Summary -- Class D Shares
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 -- 9/30/97 9.79 10.56 -- -- + 7.87
Total $0.243 Total $0.776
Cumulative total return as of 9/30/97: +17.00%**
* 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>
<CAPTION>
Recent Performance Results*
12 Month 3 Month
9/30/97 6/30/97 9/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
Class A Shares $10.60 $10.69 $10.66 +1.34%(1) -0.84%
Class B Shares 10.42 10.54 10.48 +1.35(1) -1.14
Class C Shares 10.40 10.52 10.48 +1.15(1) -1.14
Class D Shares 10.56 10.66 10.61 +1.44(1) -0.94
Class A Shares -- Total Return +8.63(2) -0.84
Class B Shares -- Total Return +7.57(3) -1.14
Class C Shares -- Total Return +7.48(4) -1.14
Class D Shares -- Total Return +8.47(5) -0.94
* 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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +8.63% +2.93%
Inception (10/21/94) through 9/30/97 +6.41 +4.47
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +7.57% +3.57%
Inception (8/5/94) through 9/30/97 +4.28 +3.99
* 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 9/30/97 +7.48% +6.48%
Inception (10/21/94) through 9/30/97 +5.28 +5.28
* 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 9/30/97 +8.47% +2.77%
Inception (8/5/94) through 9/30/97 +5.10 +3.32
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS (in US dollars)
Percent of
EUROPE Industries Shares Held Investments Cost Value Net Assets
<S> <C> <C> <C> <C> <C> <C>
Denmark Investment Banking 20,492 Finansierings Instituttet for
Industri og Handvarek A/S
(FIH) (Class B) $518,093 $533,217 0.4%
Textiles 8,882 Carli Grey International A/S 267,698 503,358 0.4
------------ ------------ ------------
Total Investments in Denmark 785,791 1,036,575 0.8
============ ============ ============
Finland Diversified 21,240 ASKO OY (Class A) 423,261 385,875 0.3
Holding Company 7,016 Fiskars OY AB (Class A) 363,016 736,891 0.6
17,600 Instrumentarium OY (Group A) 635,762 599,523 0.4
------------ ------------ ------------
998,778 1,336,414 1.0
Household Products 7,244 Huhtamaki OY 325,534 285,143 0.2
------------ ------------ ------------
Total Investments in Finland 1,747,573 2,007,432 1.5
============ ============ ============
France Apparel 242 Damart S.A. 197,679 146,877 0.1
Computer Software 1,788 Altran Technologies S.A. 537,046 485,622 0.4
Electrical Components 12,000 Cofidur 488,534 382,365 0.3
Holding Company 2,482 Societe EuraFrance S.A. 751,104 1,046,110 0.8
Home Furnishings 4,896 Castorama Dubois
Investissements S.C.A. 664,530 526,620 0.4
Manufacturing 17,170 Sommer Allibert S.A. 510,514 651,311 0.5
Steel 8,800 Vallourec S.A. 549,943 595,370 0.4
------------ ------------ ------------
Total Investments in France 3,699,350 3,834,275 2.9
============ ============ ============
Germany Auto & Truck 4,800 Koegel Fahrzeugwerke AG
(Preferred) 621,179 576,348 0.4
Machine Tools &
Machinery 2,738 Plettac AG 609,205 567,574 0.4
2,120 Walter AG 574,925 714,431 0.5
------------ ------------ ------------
1,184,130 1,282,005 0.9
Machinery &
Engineering 14,468 Kloeckner Werke AG 1,293,913 930,882 0.7
Manufacturing 3,680 Escada AG (Preferred) 610,130 487,721 0.4
3,087 KSB AG (Preferred) 442,057 924,911 0.7
------------ ------------ ------------
1,052,187 1,412,632 1.1
Retail Specialty 13,794 Moebel Walther AG 590,239 726,576 0.6
------------ ------------ ------------
Total Investments in Germany 4,741,648 4,928,443 3.7
============ ============ ============
Greece Building &
Construction 14,016 Titan Cement Co. S.A. 265,595 847,245 0.6
------------ ------------ ------------
Total Investments in Greece 265,595 847,245 0.6
============ ============ ============
Hungary Banking 20,819 OTP Bank (GDR)(b) 499,259 674,015 0.5
------------ ------------ ------------
Total Investments in Hungary 499,259 674,015 0.5
============ ============ ============
Ireland Containers 68,000 Clondalkin Group PLC 667,110 604,156 0.5
Foods 59,608 Greencore Group PLC 299,101 278,642 0.2
------------ ------------ ------------
Total Investments in Ireland 966,211 882,798 0.7
============ ============ ============
Netherlands Building &
Construction 15,441 NBM-Amstelland NV 410,332 441,748 0.3
Computer Software 69,655 DOCdata NV 966,223 1,138,211 0.9
Electrical Equipment 14,249 Twentsche Kabel Holding NV 563,763 831,054 0.6
Engineering &
Construction 11,056 Volker Wessels Stevin NV 235,136 356,878 0.3
Holding Company 16,972 Internatio-Muller NV 342,789 547,842 0.4
Industrial Services 21,563 Koninklijke Pakhoed NV 805,805 764,338 0.6
------------ ------------ ------------
Total Investments in the
Netherlands 3,324,048 4,080,071 3.1
============ ============ ============
Norway Computer Software 22,320 Merkantildata ASA 516,760 651,564 0.5
Newspaper/Publishing 27,744 Schibsted ASA 572,146 485,158 0.4
------------ ------------ ------------
Total Investments in Norway 1,088,906 1,136,722 0.9
============ ============ ============
Poland Engineering &
Construction 131,800 Elektrim Towarzystwo Handlowe
S.A. 462,537 1,477,518 1.1
------------ ------------ ------------
Total Investments in Poland 462,537 1,477,518 1.1
============ ============ ============
Portugal Retail Sales 18,950 Estabelecimentos Jeronimo
Martins & Filho S.A. 531,828 1,459,476 1.1
------------ ------------ ------------
Total Investments in Portugal 531,828 1,459,476 1.1
============ ============ ============
Russia Cellular Telephones 24,360 Vimpel-Communications (ADR)(a) 733,336 1,017,030 0.9
Electrical
Instruments 41,000 Lenenergo 45,100 40,221 0.0
Telecommunications 15,200 Bashinformsvyaz 42,560 35,720 0.0
5,850 Nizhny Novgorod Sviazinform 43,875 35,100 0.0
6,100 Tyumentelecom 43,005 43,920 0.0
------------ ------------ ------------
129,440 114,740 0.0
Utilities --
Communications 652 Nizhnovenergo 42,380 33,252 0.0
------------ ------------ ------------
Total Investments in Russia 950,256 1,205,243 0.9
============ ============ ============
Spain Automotive &
Equipment 32,000 Estacionamientos Subterraneos,
S.A. (Ordinary) 614,689 675,875 0.5
------------ ------------ ------------
Total Investments in Spain 614,689 675,875 0.5
============ ============ ============
Sweden Engineering 36,500 Kalmar Industries AB 767,070 731,945 0.5
Engineering &
Construction 20,203 Svedala Industri AB 265,309 471,771 0.4
Forest Products/ 629,500 Rottneros Bruks AB Free 970,956 755,752 0.6
Paper & Packaging
Hotels 28,350 Scandic Hotels AB 514,574 568,511 0.4
Special Services 15,200 Mandator AB (B Shares) 251,882 252,672 0.2
------------ ------------ ------------
Total Investments in Sweden 2,769,791 2,780,651 2.1
============ ============ ============
Switzerland Advertising 1,920 Edipresse S.A. (Bearer) 413,501 556,656 0.4
Building Products 1,800 Belimo Automation AG 423,875 598,719 0.4
Distribution 4,912 TEGE S.A. 202,625 348,417 0.3
Industrials 7,645 Oerlikon-Buehrle Holdings AG 824,308 992,413 0.8
Machine Tools &
Machinery 4,100 Agie Charmilles Holdings
(Registered) 398,671 367,055 0.3
Machinery 987 Saurer AG (Registered) 420,375 783,700 0.6
Paper & Forest
Products 24,800 Mercer International, Inc.
(ADR)(a) 422,910 279,000 0.2
Photography 2,165 Fotolabo S.A. 726,495 601,596 0.5
Retailing 860 Grands Magasins Jelmoli S.A. 487,840 692,927 0.5
------------ ------------ ------------
Total Investments in
Switzerland 4,320,600 5,220,483 4.0
============ ============ ============
United Kingdom Aerospace 17,700 DONCASTERS PLC (ADR)(a) 323,541 531,000 0.4
Beverages 131,500 Matthew Clark PLC 1,188,993 514,737 0.4
Chemicals 281,246 Inspec Group PLC 1,225,057 1,100,895 0.8
Commercial Services 40,000 Serco Group PLC (Ordinary) 417,691 540,245 0.4
Computer Services 38,871 Misys PLC 384,343 977,688 0.7
11,106 Misys PLC (Rights) 0 13,024 0.0
------------ ------------ ------------
384,343 990,712 0.7
Computers 158,600 Acorn Computer Group PLC 231,981 371,976 0.3
Electronic
Components 36,455 Fairey Group PLC 309,973 371,486 0.3
Employee Services 250,000 Corporate Services Group PLC 748,564 857,275 0.6
Merchandising 61,958 Smith (W.H.) Group PLC 378,619 370,803 0.3
Metals 48,000 Johnson Matthey PLC 523,701 525,235 0.4
Oil Services 40,000 Expro International Group PLC 330,488 349,380 0.3
Pharmaceuticals 43,300 Celltech Group PLC 429,955 236,728 0.2
162,300 Oxford Molecular Group PLC 828,101 758,684 0.6
------------ ------------ ------------
1,258,056 995,412 0.8
Rental Services 164,000 Ashtead Group PLC 807,219 830,295 0.6
Textiles 215,220 Dewhirst Group PLC 601,484 793,710 0.6
------------ ------------ ------------
Total Investments in the
United Kingdom 8,729,710 9,143,161 6.9
============ ============ ============
Total Investments in Europe 35,497,792 41,389,983 31.3
============ ============ ============
LATIN
AMERICA
Argentina Retailing 24,889 Grimoldi S.A. 95,150 97,086 0.1
------------ ------------ ------------
Total Investments in Argentina 95,150 97,086 0.1
============ ============ ============
Brazil Metals 42,000 Latas de Aluminio S.A. (GDR)(b) 672,000 462,000 0.3
Textiles 2,054,000 Companhia de Tecidos Norte de
Minas S.A. (Preferred) 652,560 787,585 0.6
2,054,000 Empresa Nacional de Comercio 0 2 0.0
------------ ------------ ------------
652,560 787,587 0.6
Utilities --
Electric 822,478 Centrais Eletricas de Santa
Catarina S.A. (CELESC) 'B'
(Preferred) 729,222 1,156,305 0.9
------------ ------------ ------------
Total Investments in Brazil 2,053,782 2,405,892 1.8
============ ============ ============
Colombia Banking 31,701 Banco Ganadero S.A. (Class A)
(Preferred) (ADR)(a) 621,492 915,366 0.7
------------ ------------ ------------
Total Investments in Colombia 621,492 915,366 0.7
============ ============ ============
Mexico Banking 350,850 Grupo Financiero Banorte, S.A.
de C.V. 387,614 675,684 0.5
Broadcasting --
Media 129,000 Grupo Radio Centro, S.A. de
C.V. (ADR)(a) 1,527,535 2,233,313 1.7
Engineering &
Construction 207,450 Grupo Profesional Planeacion y
Proyectos, S.A. de C.V.
(Class B) 924,041 854,583 0.6
------------ ------------ ------------
Total Investments in Mexico 2,839,190 3,763,580 2.8
============ ============ ============
Peru Foods 250,947 Consorcio Alimentos Fabril
Pacifico S.A. 268,537 332,386 0.3
------------ ------------ ------------
Total Investments in Peru 268,537 332,386 0.3
============ ============ ============
Venezuela Textiles 61,500 Sudamtex de Venezuela C.A.,
S.A.C.A. (ADR)(a) 984,000 984,000 0.7
------------ ------------ ------------
Total Investments in Venezuela 984,000 984,000 0.7
============ ============ ============
Total Investments in Latin
America 6,862,151 8,498,310 6.4
============ ============ ============
MIDDLE EAST/
AFRICA
Egypt Industrial -- Other 83,200 Paints & Chemical Industrial
(GDR)(b) 977,600 969,280 0.7
------------ ------------ ------------
Total Investments in Egypt 977,600 969,280 0.7
============ ============ ============
South Africa Newspaper/Publishing 41,035 Nasionale Pers Beperk 468,429 435,793 0.3
Retailing 468,000 Metro Cash & Carry Ltd. 450,022 466,896 0.4
------------ ------------ ------------
Total Investments in South
Africa 918,451 902,689 0.7
============ ============ ============
Zimbabwe Beverages 160,570 Delta Corporation Ltd. 101,603 224,798 0.2
------------ ------------ ------------
Total Investments in Zimbabwe 101,603 224,798 0.2
============ ============ ============
Total Investments in the
Middle East/Africa 1,997,654 2,096,767 1.6
============ ============ ============
NORTH
AMERICA
Canada Leisure 42,384 Four Seasons Hotels Inc. 495,789 1,747,478 1.3
Mining 32,925 Cambior Inc. 457,703 370,406 0.3
------------ ------------ ------------
Total Investments in Canada 953,492 2,117,884 1.6
============ ============ ============
United States Air Transportation 13,950 Air Express International
Corporation 252,271 507,431 0.4
Airlines 25,000 Reno Air, Inc. 192,703 178,125 0.1
Apparel 13,200 Farah, Inc. 111,210 90,750 0.1
70,100 Norton McNaughton, Inc. 850,711 376,788 0.3
------------ ------------ ------------
961,921 467,538 0.4
Automobile Parts 27,000 Walbro Corp. 494,287 587,250 0.4
Banking & Finance 6,750 Charter One Financial, Inc. 117,321 399,094 0.3
26,600 Civic Bancorp 330,916 438,900 0.3
8,300 Haven Bancorp, Inc. 235,863 347,563 0.3
------------ ------------ ------------
684,100 1,185,557 0.9
Biotechnology 16,000 COR Therapeutics, Inc. 157,250 265,000 0.2
6,700 Gilead Sciences, Inc. 185,341 297,313 0.3
33,575 NeoRx Corp. 227,194 232,927 0.2
6,200 Ostex International, Inc. 53,275 20,925 0.0
18,500 Scios, Inc. 118,538 178,063 0.1
------------ ------------ ------------
741,598 994,228 0.8
Broadcasting 72,300 Paxson Communications Corp. 778,234 840,488 0.6
Building &
Building Materials 24,200 Giant Cement Holding, Inc. 329,963 589,875 0.4
19,300 Oakwood Homes Corporation 404,983 547,638 0.4
26,800 Ryland Group, Inc. 376,002 475,700 0.4
12,300 Toll Brothers, Inc. 247,648 285,975 0.2
------------ ------------ ------------
1,358,596 1,899,188 1.4
Cable 13,100 General Cable Corp. 275,100 465,050 0.4
Communication
Equipment 14,000 Dynatech Corporation 429,936 574,875 0.4
Computer Software 9,400 Cylink Corporation 134,739 147,463 0.1
51,400 Mentor Graphics Corporation 512,527 620,013 0.5
26,700 Premenos Technology Corp. 246,561 383,813 0.3
28,800 Software Spectrum, Inc. 493,185 511,200 0.4
4,763 Sterling Commerce, Inc. 67,475 171,170 0.1
35,400 Structural Dynamics Research
Corp. 708,579 907,125 0.7
------------ ------------ ------------
2,163,066 2,740,784 2.1
Computers &
Computer Services 9,600 BISYS Group, Inc. (The) 312,561 307,800 0.2
17,850 Boole & Babbage, Inc. 378,569 513,188 0.4
2,800 National Data Corporation 115,391 114,800 0.1
75,000 Phoenix Technologies Ltd. 988,585 1,106,250 0.8
16,150 Storage Technology Corporation 613,939 772,172 0.6
10,800 Vanstar Corporation 96,537 164,700 0.1
19,000 Wang Laboratories, Inc. 411,092 399,000 0.3
------------ ------------ ------------
2,916,674 3,377,910 2.5
Data Processing 40,600 Axiom, Inc. 504,861 477,050 0.4
44,100 Metromail Corporation 736,430 890,269 0.7
33,400 Platinum Technology, Inc. 423,919 720,188 0.5
19,400 Primark Corp. 530,426 573,512 0.4
73,000 Sybase, Inc. 1,214,081 1,314,000 1.0
106,300 VMARK Software, Inc. 942,477 1,076,287 0.8
------------ ------------ ------------
4,352,194 5,051,306 3.8
Diversified 18,000 ACX Technologies, Inc. 383,079 479,250 0.4
Electronics 30,900 Alpha Industries, Inc. 217,967 571,650 0.4
55,500 C.P. Clare Corp. 464,913 1,068,375 0.8
13,500 CHS Electronics, Inc. 285,750 367,875 0.3
26,200 DII Group, Inc. 290,567 856,412 0.7
6,600 Marshall Industries 195,530 255,750 0.2
15,800 Nu Horizons Electronics Corp. 131,707 130,350 0.1
16,300 Triumph Group, Inc. 414,554 544,012 0.4
------------ ------------ ------------
2,000,988 3,794,424 2.9
Entertainment 2,700 Dover Downs Entertainment, Inc. 55,174 56,531 0.0
Environmental
Control 24,514 BHA Group, Inc. (Class A) 339,690 422,866 0.3
55,200 Envirosource, Inc. 209,452 138,000 0.1
------------ ------------ ------------
549,142 560,866 0.4
Gaming 17,600 WMS Industries, Inc. 339,836 531,300 0.4
Healthcare -- 8,400 Magainin Pharmaceuticals, Inc. 94,168 94,500 0.1
Products/Services 27,400 Magellan Health Services, Inc. 776,534 869,950 0.7
51,800 Ramsay Health Care, Inc. 318,527 284,900 0.2
12,000 Sierra Health Services, Inc. 381,993 439,500 0.3
------------ ------------ ------------
1,571,222 1,688,850 1.3
Insurance 6,600 American National Insurance
Co. 570,555 655,050 0.5
42,000 Gryphon Holdings, Inc. 611,539 687,750 0.5
27,000 PXRE Corp. 610,525 852,187 0.6
8,496 Reliastar Financial
Corporation+ 135,132 338,247 0.3
------------ ------------ ------------
1,927,751 2,533,234 1.9
Iron & Steel 12,700 Quanex Corporation 288,913 445,294 0.4
Machinery 14,000 AGCO Corporation 328,730 443,625 0.3
25,500 Stewart & Stevenson Services,
Inc. 617,389 613,594 0.5
------------ ------------ ------------
946,119 1,057,219 0.8
Medical 4,000 Analogic Corporation 68,500 142,500 0.1
9,050 Biomatrix, Inc. 127,299 317,881 0.2
12,600 Genome Therapeutics Corp. 107,721 108,675 0.1
13,500 NABI, Inc. 109,399 97,875 0.1
42,600 Physician Computer Network,
Inc. 277,090 308,850 0.2
2,700 Sequana Therapeutics, Inc. 29,419 36,450 0.0
25,200 VISX, Inc. 633,282 642,600 0.5
26,200 Vivus, Inc. 664,401 971,037 0.8
------------ ------------ ------------
2,017,111 2,625,868 2.0
Metals 8,250 Applied Industrial
Technologies, Inc. 157,324 284,109 0.2
15,800 Castle (A.M.) & Company 291,876 410,800 0.3
17,700 Citation Corporation 238,490 342,937 0.3
23,700 Commonwealth Industries, Inc. 428,461 456,225 0.3
28,000 Shiloh Industries, Inc. 377,537 504,000 0.4
6,700 Wolverine Tube, Inc. 192,590 210,212 0.2
------------ ------------ ------------
1,686,278 2,208,283 1.7
Natural Resources 20,300 Brown (Tom), Inc. 236,050 497,350 0.4
25,000 Plains Resources, Inc. 156,250 450,000 0.3
23,500 TransTexas Gas Corp. 258,500 358,375 0.3
39,474 Zemex Corporation 344,674 375,003 0.3
------------ ------------ ------------
995,474 1,680,728 1.3
Restaurants 26,500 Au Bon Pain Company, Inc.
(Class A) 172,691 235,187 0.2
Retailing 35,100 Baker (J.), Inc. 348,619 324,675 0.3
20,300 Department 56, Inc. 460,150 587,431 0.4
18,200 Fingerhut Companies, Inc. 364,195 409,500 0.3
14,500 Micro Warehouse, Inc. 270,472 317,187 0.2
------------ ------------ ------------
1,443,436 1,638,793 1.2
Telecommunications 124,100 Applied Digital Access, Inc. 693,077 930,750 0.7
36,900 Comdial Corporation 227,437 371,306 0.3
57,600 Metromedia International
Group, Inc. 719,247 698,400 0.5
51,300 Network Equipment
Technologies, Inc. 738,108 894,544 0.7
------------ ------------ ------------
2,377,869 2,895,000 2.2
Transportation 10,000 Circle International Group,
Inc. 252,349 295,000 0.2
6,100 Landair Services, Inc. 82,120 120,475 0.1
------------ ------------ ------------
334,469 415,475 0.3
Transportation
Services 22,043 Aramex International, Limited 165,901 311,357 0.2
Wire & Cable
Products 21,500 Anixter International Inc. 338,367 369,531 0.3
------------ ------------ ------------
Total Investments in the
United States 33,194,500 42,396,920 32.1
============ ============ ============
Total Investments in
North America 34,147,992 44,514,804 33.7
============ ============ ============
PACIFIC
BASIN
Australia Entertainment 1,188,000 Burswood Property Trust 1,567,077 1,273,317 1.0
Publishing 278,000 West Australian Newspaper
Holdings Ltd. 1,016,406 1,320,709 1.0
------------ ------------ ------------
Total Investments in
Australia 2,583,483 2,594,026 2.0
============ ============ ============
Hong Kong Appliances 332,000 Guangdong Kelon Electrical
Holdings Company Ltd. 471,804 429,051 0.3
Electronic
Components 1,498,000 QPL International Holdings
Ltd. 1,592,944 1,355,131 1.0
Foods/Food
Processing 4,326,700 Tingyi (Cayman Islands)
Holdings Co. 927,864 861,090 0.7
Packaging 2,392,400 Sinocan Holdings Ltd. 860,560 881,150 0.7
Telecommunications 262,000 Smartone Telecommunications 510,017 799,070 0.6
------------ ------------ ------------
Total Investments in Hong Kong 4,363,189 4,325,492 3.3
============ ============ ============
Indonesia Banking --
International 303,000 PT Bank Bali (Foreign) 634,023 441,779 0.3
Consumer -- Goods 1,589,080 PT Wicaksana Overseas
International 1,186,891 630,780 0.5
Real Estate 474,000 PT Ciputra Development
(Foreign) 463,436 115,786 0.1
------------ ------------ ------------
Total Investments in Indonesia 2,284,350 1,188,345 0.9
============ ============ ============
Japan Automobile Parts 58,000 Murakami Corporation 1,148,025 388,878 0.3
50,000 Showa Corporation 502,169 348,086 0.3
------------ ------------ ------------
1,650,194 736,964 0.6
Beverages 79,000 Hokkaido Coca-Cola Bottling
Co., Ltd. 1,298,058 857,699 0.7
74,000 Sanyo Coca-Cola Bottling Co.,
Ltd 1,118,168 889,276 0.7
------------ ------------ ------------
2,416,226 1,746,975 1.4
Chemicals 50,000 Canon Chemicals, Inc. 934,042 675,452 0.5
Computer Services 15,000 Sumisho Computer Systems Corp. 249,015 298,359 0.2
51,700 TKC Corporation 1,374,367 968,357 0.7
----------- ----------- -----------
1,623,382 1,266,716 0.9
Construction 89,600 Japan Foundation Engineering
Co., Ltd. 1,735,016 883,673 0.7
164,850 Yondenko Corp. 1,518,456 751,430 0.5
------------ ------------ ------------
3,253,472 1,635,103 1.2
Consumer Electricals 59,000 Roland Corporation 1,429,975 1,300,680 1.0
Electrical Equipment 26,000 Shinmei Electric Co. 1,340,491 495,607 0.4
48,000 Sukegawa Electric Co. 630,495 119,344 0.1
------------ ------------ ------------
1,970,986 614,951 0.5
Electronic Components 35,000 Chiyoda Integre Co., Ltd. 220,393 165,051 0.1
Foods/Food Processing 43,000 Ariake Japan Co., Ltd. 1,525,975 1,603,680 1.2
Health Services 25,000 Kanto Biomedical Laboratory Co. 528,125 265,208 0.2
26,000 SRL Inc. 557,018 267,197 0.2
------------ ------------ ------------
1,085,143 532,405 0.4
Industrials 14,500 Nitto Kohki Company Ltd. 488,740 264,379 0.2
Iron & Steel 218,000 Nippon Chutetsukan K.K. 1,367,147 534,792 0.4
Machinery 27,000 Miura Co., Ltd. 449,645 335,654 0.3
Metal Fabrication 124,000 Toyo Kohan Co., Ltd. 1,057,406 878,667 0.7
Pollution Control 108,000 Organo Corporation 1,145,431 584,485 0.4
Real Estate 53,000 Keihanshin Real Estate Co. Ltd. 525,507 270,139 0.2
56,000 TOC Company Ltd. 596,958 547,655 0.4
------------ ------------ ------------
1,122,465 817,794 0.6
Restaurants 23,100 Aim Services Co., Ltd. 551,382 246,967 0.2
49,000 Mos Food Services, Inc. 1,431,739 605,089 0.5
83,000 Ohsho Food Service Corp. 2,244,318 928,642 0.7
------------ ------------ ------------
4,227,439 1,780,698 1.4
Retail Specialty 62,000 ADO Electric Industrial Co.,
Ltd. 1,832,223 673,131 0.5
30,000 Nitori Co. 906,611 295,873 0.2
------------ ------------ ------------
2,738,834 969,004 0.7
Services 69,300 Ichinen Co., Ltd. 1,663,714 499,677 0.4
Trading 34,000 Japan CBM Corp. 1,197,480 969,335 0.7
Trucking 108,000 Nippon Konpo Unyu Soko Co. 1,045,185 715,167 0.5
------------ ------------ ------------
Total Investments in Japan 32,613,274 18,627,629 14.1
============ ============ ============
Malaysia Advertising 221,000 Seni Jaya Corporation BHD 708,918 715,541 0.5
Chemicals 109,000 Chemical Company of Malaysia
BHD 340,194 191,582 0.2
Consumer Products &
Services 330,000 Amway (Malaysia) Holdings BHD 1,883,204 834,413 0.6
Engineering &
Construction 756,000 Asas Dunia BHD 1,355,969 454,579 0.3
Newspaper/Publishing 143,000 New Straits Times Press BHD 602,724 432,131 0.4
------------ ------------ ------------
Total Investments in Malaysia 4,891,009 2,628,246 2.0
============ ============ ============
New Zealand Agriculture 1,090,500 Wrightson Ltd. 808,404 676,771 0.5
Chemicals 146,000 Fernz Corporation Ltd. 439,021 504,418 0.4
Textiles 176,150 Lane Walker Rudkin Industries,
Ltd. 196,618 166,797 0.1
------------ ------------ ------------
Total Investments in New
Zealand 1,444,043 1,347,986 1.0
============ ============ ============
Philippines Financial Services 46,128 Far East Bank & Trust Company 82,959 69,665 0.0
------------ ------------ ------------
Total Investments in the
Philippines 82,959 69,665 0.0
============ ============ ============
South Korea Banking 31,300 Cho-Hung Bank Co. Ltd. 205,921 148,444 0.1
Tire & Rubber 196,900 Korea Kumho Petrochemical Co. 1,385,732 1,143,012 0.9
------------ ------------ ------------
Total Investments in
South Korea 1,591,653 1,291,456 1.0
============ ============ ============
Thailand Financial Services 93,200 Industrial Finance Corporation
of Thailand 179,847 120,484 0.1
Transportation 62,000 Thoresen Thai Agency PLC
'Express' (Warrants)(c) 0 9 0.0
173,800 Thoresen Thai Agency PLC
Foreign 318,639 45,649 0.0
------------ ------------ ------------
318,639 45,658 0.0
Total Investments in Thailand 498,486 166,142 0.1
============ ============ ============
Total Investments in the
Pacific Basin 50,352,446 32,238,987 24.4
============ ============ ============
SOUTHEAST
ASIA
India Financial Services 24,764 Industrial Credit & Investment
Corporation of India Ltd.
(ICICI) (GDR)(b) 277,849 396,224 0.3
Hotels 43,753 EIH Limited (GDR)(b) 422,946 667,233 0.5
Recreation & Consumer
Goods 250,000 Su-Raj Diamonds Ltd. 346,583 85,778 0.1
------------ ------------ ------------
Total Investments in
Southeast Asia 1,047,378 1,149,235 0.9
============ ============ ============
<CAPTION>
SHORT-TERM
SECURITIES Issue
<S> <C> <C> <C> <C> <C>
Commercial Paper* US$ 2,572,000 General Motors Acceptance
Corp., 6.50% due 10/01/1997 2,572,000 2,572,000 2.0
------------ ------------ ------------
Total Investments in
Short-Term Securities 2,572,000 2,572,000 2.0
============ ============ ============
<CAPTION>
OPTIONS Nominal Value Covered Premiums
PURCHASED by Options Purchased Paid
<S> <C> <C> <C> <C> <C> <C>
Currency Put Options 3,900,000 German Deutschemark, expiring
Purchased November 1997 at DM1.80 30,537 11,680 0.0
2,000,000 German Deutschemark, expiring
February 1999 at DM1.90 13,500 3,000 0.0
7,000,000 Japanese Yen, expiring October
1997 at (yen)122 48,300 43,400 0.0
5,200,000 Japanese Yen, expiring February
1998 at (yen)120 77,740 112,840 0.1
------------ ------------ ------------
Total Investments in Options
Purchased 170,077 170,920 0.1
============ ============ ============
<CAPTION>
<S> <C> <C> <C> <C>
Total Investments $132,647,490 132,631,006 100.4
============
Unrealized Appreciation on Forward Foreign Exchange Contracts** 545,692 0.4
Variation Margin on Stock Index Futures Contracts*** (7,150) 0.0
Liabilities in Excess of Other Assets (1,087,135) (0.8)
------------ ------------
Net Assets $132,082,413 100.0%
============ ============
<CAPTION>
<S> <C> <C> <C>
Net Asset Value: Class A -- Based on net assets of
$4,797,465 and 452,655 shares
outstanding $10.60
============
Class B -- Based on net assets of
$102,260,197 and 9,816,198 shares
outstanding $10.42
============
Class C -- Based on net assets of $5,626,074
and 540,900 shares outstanding $10.40
============
Class D -- Based on net assets of
$19,398,677 and 1,837,599 shares
outstanding $10.56
============
(a) American Depositary Receipts (ADR).
(b) Global Depositary Receipts (GDR).
(c) 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.
+ Acquired shares of Security-Connecticut Corp.
* Commercial Paper is traded on a discount basis; the interest rate shown
is the discount rate paid at the time of purchase by the Fund.
** Forward foreign exchange contracts as of September 30, 1997 were
as follows:
Foreign Currency Expiration Unrealized
Purchased Date Appreciation
(yen) 525,310,000 October 1997 $44,720
Total (US$ Commitment -- $16,004,847) 44,720
----------
Foreign Currency
Sold
(yen) 1,865,385,260 October 1997 500,972
Total (US$ Commitment -- $4,318,373) 500,972
----------
Total Unrealized Appreciation -- Net on Forward
Foreign Exchange Contracts $545,692
==========
*** Stock index futures contracts sold as of September 30, 1997
were as follows:
Number of Expiration
Contracts Issue Exchange Date Value
11 S&P Index CME December 1997 $5,249,750
Total Stock Index Contracts Sold
(Total Contract Price -- $5,163,125) $5,249,750
==========
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended September 30, 1997
Additions
Axiom, Inc.
BISYS Group, Inc. (The)
Bashinformsvyaz
Circle International Group, Inc.
Cylink Corporation
Dover Downs Entertainment, Inc.
Genome Therapeutics Corp.
Guangdong Kelon Electrical Holdings Company Ltd.
Industrial Finance Corporation of Thailand
Kalmar Industries AB
Lenenergo
Magainin Pharmaceuticals, Inc.
Mentor Graphics Corporation
Micro Warehouse, Inc.
NABI, Inc.
* NV GTI Holding
National Data Corporation
Nizhnovenergo
Nizhny Novgorod Sviazinform
Paints & Chemical Industrial (GDR)
Sequana Therapeutics, Inc.
Sierra Health Services, Inc.
Sudamtex de Venezuela C.A., S.A.C.A. (ADR)
Tyumentelecom
Vallourec S.A.
Wolverine Tube, Inc.
Deletions
ARM Financial Group, Inc. (Class A)
Acerinox S.A.
Amper S.A.
Arcland Sakamoto Co., Ltd.
BI, Inc.
Bertrand Faure S.A.
Biora AB
Bure Investment AB
CML Group, Inc.
Catherines Stores Corp.
Chico's Fashions, Inc.
Compagnie Industriali Riunite S.p.A. (CIR)
Elsag Bailey Process Automation NV (ADR)
Exedy Corporation
Groupe Partouche S.A.
Internacional de Ceramica, S.A. de C.V. (ADR)
International Business Communications
PLC (Ordinary)
JCG Holdings, Ltd.
Limelight Group PLC
Murray & Roberts Holding Ltd.
* NV GTI Holding
PT Great River Industries
Roto Smeets de Boer NV
Security Bank Corporation
Sondagsavisen A/S
Supermercados Unimarc S.A. (ADR)
T.C. Debica S.A.
TPI Enterprises, Inc.
TT Tieto OY
Thorn PLC
Total Petroleum of North America Ltd.
UNC, Inc.
Wyle Electronics
Yamakawa Industrial Co.
* Added and deleted in the same quarter.
PORTFOLIO INFORMATION
Worldwide Investments As of 9/30/97
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Grupo Radio Centro, S.A.
de C.V. (ADR) Mexico 1.7%
Four Seasons Hotels Inc. Canada 1.3
Ariake Japan Co., Ltd. Japan 1.2
Elektrim Towarzystwo
Handlowe S.A. Poland 1.1
Estabelecimentos Jeronimo Martins
& Filho S.A. Portugal 1.1
QPL International Holdings Ltd. Hong Kong 1.0
West Australian Newspaper
Holdings Ltd. Australia 1.0
Sybase, Inc. United States 1.0
Roland Corporation Japan 1.0
Burswood Property Trust Australia 1.0
Percent of
Ten Largest Industries Net Assets
Computer Software 3.9%
Data Processing 3.8
Electronics 2.9
Telecommunications 2.8
Engineering & Construction 2.7
Computer & Computer Services 2.5
Textiles 2.4
Metals 2.4
Holding Company 2.2
Retailing 2.2
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