MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
September 30, 1998
<PAGE>
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Worldwide
Investments
As of 9/30/98
Country Percent of
Ten Largest Equity Holdings of Origin Net Assets
Sunrise Assisted Living, Inc. ................ United States 2.0%
Priority Healthcare Corporation
(Class B) .................................. United States 1.8
PSS World Medical, Inc. ...................... United States 1.8
Roland Corporation ........................... Japan 1.5
IDG Books Worldwide, Inc. (Class A) .......... United States 1.2
Four Seasons Hotels Ltd. ..................... Canada 1.1
Grands Magasins Jemoli Holding AG ............ Switzerland 1.1
Sanyo Coca-Cola Bottling Co., Ltd. ........... Japan 1.1
Falck A/S .................................... Denmark 1.1
American National Insurance Co. .............. United States 1.1
Percent of
Ten Largest Industries Net Assets
Computer Software & Systems .................. 8.2
Healthcare--Products & Services .............. 7.8
Media & Related .............................. 5.2
Engineering & Construction ................... 5.1
Banking & Finance ............................ 4.9
Insurance .................................... 2.8
Retail ....................................... 2.5
Energy ....................................... 2.2
Financial Services ........................... 1.9
Healthcare & Medical ......................... 1.7
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1998
DEAR SHAREHOLDER
For the quarter ended September 30, 1998, the price performance of the unmanaged
benchmark Morgan Stanley Capital International (MSCI) Developed Market Small Cap
Index was -20.70% in US dollar terms. (References to securities markets of all
countries in this letter to shareholders correspond to those countries' market
weightings in the MSCI Developed Market Small Cap Index and are for the
three-month period ended September 30, 1998.) North American equity markets
continued to be weak on concerns about global growth and the health of the
financial system. Small-capitalization issues in the United States continued to
lag large-capitalization stocks during the quarter ended September 30, 1998. The
European, Scandinavian and UK markets also ended sharply lower for the September
quarter. The best-performing market was Belgium, with a drop of 13.1%, while the
weakest markets were Finland, Norway and Sweden. The Pacific Basin continued to
lag, with Japan failing to provide economic leadership for stabilizing the
region after it was hit by the currency crisis. Hong Kong and Singapore declined
13.5% and 22.0%, respectively, as high local interest rates, domestic recessions
and fears of currency weakness resulted in sharply lower earnings expectations
and a higher risk premium for equity investors. The Japanese market fell 14.9%
as the country sank deeper into recession, and there seemed to be no political
will to either tackle the long-standing banking problems or provide fiscal
stimulus to revive the economy. Emerging markets in Europe and Latin America
fell as investors became cautious about the spread of the economic crisis, which
began in Asia. Russia's devaluation and debt default surprised investors, and
contagion effects pushed the Latin markets down.
In June, the Fund's benchmark was changed from the unmanaged Salomon Smith
Barney Extended Market Index (SEMI) to the unmanaged MSCI Developed Market Small
Cap Index. We believe that the new benchmark provides a better representation of
the small cap universe because it targets industry coverage. In addition, MSCI
data is more easily accessible, making it possible to incorporate benchmark
tracking into the daily operations of the Fund.
During the September quarter, the Fund's performance was in line with the
unmanaged MSCI Developed Market Small Cap Index. For the three months ended
September 30, 1998, total returns for Merrill Lynch Global SmallCap Fund, Inc.'s
Class A, Class B, Class C and Class D Shares were -20.21%, -20.47%, -20.43% and
- -20.30%, respectively. (Results shown do not reflect sales charges and would be
lower if sales charges were included. Complete performance information can be
found on pages 4 and 5 of this report to shareholders.)
Detrimental to performance were the Fund's overweighted positions in emerging
markets, the Netherlands and France. Stock selection in the emerging markets,
France and the United Kingdom also reduced returns. Beneficial to Fund
performance were the Fund's large cash position (30.7% of net assets at the end
of September), as well as its underweighted positions in the United States and
Japan. Overweighted positions and stock selection in Germany, Switzerland and
Sweden also enhanced Fund performance relative to the benchmark.
In the United States, the Fund's overweighted positions in technology stocks and
underweighted positions in the energy sector reduced returns relative to the
benchmark. Technology stocks were weak during the September quarter as a result
of continued concerns about slow ing demand and competitive pricing from
Southeast Asian manufacturers. In Europe, overweighted retail and technology
positions produced positive returns, while overweighted positions in the
industrial sector reduced returns as compared to the benchmark. In Japan, the
Fund's overweighted position in consumer goods also produced positive returns
relative to the benchmark.
Portfolio Matters and Investment Strategy
We expect benign interest rate environments in the major economies to support
the valuations and performance of equity markets, provided that corporate
earnings do not collapse. Small-capitalization stock performance continues to be
constrained by the risk of earnings deceleration of large-capitalization stocks
and the liquidity premium and perceived safety in large-capitalization
companies. Recently, some of the US and European large-capitalization stocks
have collapsed while stocks in the Asia/Pacific region, including
small-capitalization stocks, declined at a slower rate. We believe that this is
because substantial selling had already occurred in small-capitalization stocks
and in the Asia/Pacific region. However, until earnings downgrades slow and the
fears of bank credit exposure to the emerging markets and hedge funds are
clarified, we do not believe there will be much impetus for a sustainable
small-capitalization market rally.
In the United States, we will continue to overweight the software technology
sector, although we are looking to upgrade holdings. Several technology and
financial stocks have declined recently, and many appear even more attractive
based on valuation and fundamental measures.
Our European country exposure is in line with the MSCI Developed Market Small
Cap Index, except for the United Kingdom, where we are underweighted. We will
continue to shift assets from the software and services sectors to the
healthcare and financial sectors, while avoiding cyclicals because of continued
earnings downgrades.
In the Pacific Basin, we are assessing potential buy candidates with strong
balance sheets that may be beneficiaries of lower interest costs resulting from
the global declining interest rate environment. Although Asian markets have not
dropped as sharply as Western markets, our low exposure to the region has helped
us to preserve capital for our shareholders. There have been several positive
developments emerging from Asia. At the security level, we are finding good
companies selling at close to their asset values. On the political front,
governments are progressing toward restructuring economies. Finally, the cash
levels in mutual funds that are invested in Asia are believed to be high.
However, we believe the Asian debt restructuring problem to be long term, with
further earnings downgrades and general uncertainty to remain an overhang to
this region.
In Conclusion
For investors with a long-term focus, we believe there are good opportunities in
small company stocks globally. We believe a unified Europe will provide
continued impetus for earnings growth for many small companies. In the US
market, small stocks are the most attractive sector in terms of valuation and
earnings growth prospects in recent history. We believe the Pacific Basin will
continue to encounter short-term adjustments, but the long-term fundamentals are
in place for sustained equity growth.
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
semi-annual report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Kenneth Chiang
Kenneth Chiang
Senior Vice President and
Senior Portfolio Manager
November 4, 1998
2 & 3
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1998
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:
o 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.
o 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.)
o 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.
o 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 "Recent Performance Results" and
"Average Annual Total Return" 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.
Recent
Performance
Results*
<TABLE>
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
==============================================================================================
<S> <C> <C> <C>
ML Global SmallCap Fund, Inc. Class A Shares -25.29% -20.21% -10.31%
- ----------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class B Shares -26.12 -20.47 -15.69
- ----------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class C Shares -26.10 -20.43 -14.03
- ----------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class D Shares -25.52 -20.30 -12.86
==============================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's inception periods are Class A
Shares & Class CShares, from 10/21/94 to 9/30/98 and Class B Shares &
Class D Shares, from 8/05/94 to 9/30/98.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/98 -25.29% -29.21%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 - 2.72 - 4.04
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/98 -26.12% -28.94%
- --------------------------------------------------------------------------------
Inception (8/5/94) through 9/30/98 - 4.03 - 4.03
- --------------------------------------------------------------------------------
* 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 9/30/98 -26.10% -26.81%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 9/30/98 - 3.76 - 3.76
- --------------------------------------------------------------------------------
* 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 9/30/98 -25.52% -29.43%
- --------------------------------------------------------------------------------
Inception (8/5/94) through 9/30/98 - 3.26 - 4.51
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Shares Percent of
EUROPE Industries Held Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Denmark Engineering & Construction 7,800 Falck A/S $ 393,022 $ 546,399 1.1%
-------------------------------------------------------------------------------------------------------------------
Total Investments in Denmark 393,022 546,399 1.1
====================================================================================================================================
Finland Diversified Manufacturing 2,066 Fiskars OYJ AB (Class A) 106,683 277,768 0.5
-------------------------------------------------------------------------------------------------------------------
Total Investments in Finland 106,683 277,768 0.5
====================================================================================================================================
France Chemicals 3,832 Compagnie Plastic Omnium S.A. 489,696 378,072 0.7
-------------------------------------------------------------------------------------------------------------------
Electronics & 1,291 Altran Technologies S.A. 107,807 234,706 0.4
Electrical Equipment 4,814 Compagnie des Signaux S.A. 250,106 258,092 0.5
----------- ----------- -----
357,913 492,798 0.9
-------------------------------------------------------------------------------------------------------------------
Financial Services 862 Societe EuraFrance S.A. 260,859 420,158 0.8
-------------------------------------------------------------------------------------------------------------------
Healthcare & Medical 20,370 LVL Medical S.A. 474,090 262,575 0.5
-------------------------------------------------------------------------------------------------------------------
Information Processing 2,983 GFI Informatique 337,769 296,437 0.6
-------------------------------------------------------------------------------------------------------------------
Restaurants 3,000 Leon de Bruxelles S.A. 238,620 243,479 0.5
-------------------------------------------------------------------------------------------------------------------
Retail 2,562 Guilbert S.A. 400,987 316,308 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in France 2,559,934 2,409,827 4.6
====================================================================================================================================
Germany Healthcare & Medical 1,958 Fresenius AG (Preferred) 387,399 337,667 0.7
2,920 Rhoen Klinikum AG 271,722 267,521 0.5
----------- ----------- -----
659,121 605,188 1.2
-------------------------------------------------------------------------------------------------------------------
Machine Tools & Machinery 9,090 Walter AG 267,472 337,473 0.6
-------------------------------------------------------------------------------------------------------------------
Machinery & Equipment 1,007 Jungheinrich AG (Preferred) 204,236 148,337 0.3
-------------------------------------------------------------------------------------------------------------------
Media & Related 1,306 EM.TV & Merchandising AG 202,496 437,940 0.8
-------------------------------------------------------------------------------------------------------------------
Steel 6,833 Kloeckner Werke AG 615,477 347,787 0.7
-------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 3,157 Escada AG (Preferred) 524,402 406,440 0.8
-------------------------------------------------------------------------------------------------------------------
Transportation 31,680 Koegel Fahrzeugwerke AG (Preferred) 409,978 540,647 1.0
-------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 2,883,182 2,823,812 5.4
====================================================================================================================================
</TABLE>
4 & 5
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
EUROPE Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Italy Banking & Finance 12,000 Banca Popolare di Bergamo Credito
Varesino S.p.A. $ 253,121 $ 242,905 0.5%
-------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 54,500 Societa Italiana Manufatti
(SIMINT) S.p.A. 476,020 392,466 0.7
-------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 729,141 635,371 1.2
====================================================================================================================================
Netherlands Computer Software & 29,384 ICT Automatisering NV 284,666 537,883 1.0
Systems
-------------------------------------------------------------------------------------------------------------------
Financial Services 12,626 Internatio-Mueller NV 291,895 301,464 0.6
-------------------------------------------------------------------------------------------------------------------
Manufacturing 11,955 DOCdata NV 174,393 202,982 0.4
-------------------------------------------------------------------------------------------------------------------
Media & Related 21,430 Wegener Arcade NV 456,475 420,709 0.8
-------------------------------------------------------------------------------------------------------------------
Petroleum Equipment 10,857 Koninklijke Pakhoed NV 419,795 244,825 0.5
& Services
-------------------------------------------------------------------------------------------------------------------
Telecommunications & 7,799 Twentsche Kabel Holding NV 309,938 240,007 0.5
Equipment
-------------------------------------------------------------------------------------------------------------------
Total Investments in the
Netherlands 1,937,162 1,947,870 3.8
====================================================================================================================================
Norway Computer Software 47,653 Merkantildata ASA 294,082 363,862 0.7
& Systems
-------------------------------------------------------------------------------------------------------------------
Computer Technology 108,500 Agresso Group ASA 487,587 293,263 0.6
-------------------------------------------------------------------------------------------------------------------
Media & Related 16,244 Schibsted ASA 337,559 201,966 0.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in Norway 1,119,228 859,091 1.7
====================================================================================================================================
Spain Engineering & Construction 6,458 Abengoa, S.A. 154,600 124,796 0.2
-------------------------------------------------------------------------------------------------------------------
Machinery 3,042 Azkoyen, S.A. 390,077 391,894 0.8
-------------------------------------------------------------------------------------------------------------------
Total Investments in Spain 544,677 516,690 1.0
====================================================================================================================================
Sweden Diversified 7,400 Grupen Mandator AB 164,270 255,140 0.5
11,900 Kinnevik AB (B Shares) (Rights) 56,439 50,907 0.1
----------- ----------- -----
220,709 306,047 0.6
-------------------------------------------------------------------------------------------------------------------
Engineering & Construction 17,546 Svedala Industri AB 230,417 268,870 0.5
-------------------------------------------------------------------------------------------------------------------
Forest Products/ 472,500 Rottneros Bruks AB Free 729,456 217,214 0.4
Paper & Packaging
-------------------------------------------------------------------------------------------------------------------
Hotels 9,395 Scandic Hotels AB 170,526 298,730 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 1,351,108 1,090,861 2.1
====================================================================================================================================
Switzerland Advertising 1,620 Edipresse S.A. (Bearer) 351,247 398,006 0.8
-------------------------------------------------------------------------------------------------------------------
Banking & Finance 1,715 Banque Cantonale de Geneve 540,989 408,953 0.8
-------------------------------------------------------------------------------------------------------------------
Electronics & Electrical 40 Kudelski S.A. 186,667 375,750 0.7
Equipment
-------------------------------------------------------------------------------------------------------------------
Retail 480 Grands Magasins Jemoli Holding AG 254,092 558,422 1.1
2,040 Selecta Group (The) 405,088 439,280 0.8
----------- ----------- -----
659,180 997,702 1.9
-------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 1,738,083 2,180,411 4.2
====================================================================================================================================
United Kingdom Computer Software & 73,000 Micro Focus Group PLC 747,180 359,424 0.7
Systems 94,118 Skillsgroup PLC 295,621 371,919 0.7
----------- ----------- -----
1,042,801 731,343 1.4
-------------------------------------------------------------------------------------------------------------------
Computer Technology 25,524 Misys PLC 51,018 224,907 0.4
-------------------------------------------------------------------------------------------------------------------
Electronics 48,028 Johnson Matthey PLC 518,113 255,226 0.5
-------------------------------------------------------------------------------------------------------------------
Energy 57,553 Expro International Group PLC 476,994 268,712 0.5
-------------------------------------------------------------------------------------------------------------------
Engineering & Construction 136,400 Ashtead Group PLC 415,934 342,738 0.7
52,946 Jarvis PLC 374,312 438,672 0.9
34,168 Select Appointments Holdings PLC 333,086 310,936 0.6
26,000 WS Atkins PLC 236,635 282,514 0.5
----------- ----------- -----
1,359,967 1,374,860 2.7
-------------------------------------------------------------------------------------------------------------------
Food Processing 59,608 Greencore Group PLC 299,101 222,645 0.4
-------------------------------------------------------------------------------------------------------------------
Insurance 66,000 Independent Insurance Group PLC 289,689 303,669 0.6
-------------------------------------------------------------------------------------------------------------------
Multi-Industry 27,165 Bodycote International PLC 478,643 329,763 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in the
United Kingdom 4,516,326 3,711,125 7.1
====================================================================================================================================
Total Investments in Europe 17,878,546 16,999,225 32.7
====================================================================================================================================
LATIN
AMERICA
====================================================================================================================================
Mexico Engineering & Construction 242,450 Grupo Profesional Planeacion
y Proyectos, S.A. de C.V.
(Class B) 1,079,551 332,952 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in Latin America 1,079,551 332,952 0.6
====================================================================================================================================
NORTH
AMERICA
====================================================================================================================================
Canada Hotels 27,384 Four Seasons Hotels Ltd. 319,909 559,956 1.1
-------------------------------------------------------------------------------------------------------------------
Total Investments in Canada 319,909 559,956 1.1
====================================================================================================================================
United States Aerospace Technology 11,000 Triumph Group, Inc. 341,310 327,250 0.6
-------------------------------------------------------------------------------------------------------------------
Banking & Finance 10,000 Bank United Corp. (Class A) 374,598 355,000 0.7
14,882 Charter One Financial, Inc. 117,313 366,469 0.7
15,000 Commercial Federal Corp. 354,332 353,437 0.7
15,000 Golden State Bancorp Inc. 274,650 299,062 0.5
10,000 GreenPoint Financial Corp. 328,926 318,750 0.6
14,000 Independence Community Bank Corp. 180,562 196,000 0.4
----------- ----------- -----
1,630,381 1,888,718 3.6
-------------------------------------------------------------------------------------------------------------------
Building Materials 9,800 Giant Cement Holding, Inc. 138,238 198,450 0.4
-------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1998
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Unito States Computer Software 41,300 Ardent Software, Inc. $ 289,905 $ 508,506 1.0%
(concluded) & Systems 41,300 Giga Information Group, Inc. 520,000 165,200 0.3
19,400 Information Resources, Inc. 349,924 250,988 0.5
9,000 Iron Mountain Inc. 232,500 261,000 0.5
5,000 Learning Company, Inc. (The) 96,336 99,062 0.2
4,300 National Data Corporation 151,861 132,763 0.3
29,800 Phoenix Technologies Ltd. 396,580 167,625 0.3
11,900 Platinum Technology, Inc. 293,906 214,200 0.4
31,600 Rational Software Corporation 417,844 529,300 1.0
3,963 Sterling Commerce, Inc. 56,142 137,219 0.2
9,000 Visio Corp. 229,500 216,000 0.4
----------- ----------- -----
3,034,498 2,681,863 5.1
-------------------------------------------------------------------------------------------------------------------
Electronics 30,000 Gentex Corporation 390,000 446,250 0.9
-------------------------------------------------------------------------------------------------------------------
Energy 18,300 Brown (Tom), Inc. 210,967 224,175 0.4
7,600 Forcenergy Inc. 173,319 44,175 0.1
12,100 Louis Dreyfus Natural Gas Corp. 213,955 175,450 0.4
22,000 Plains Resources Inc. 137,500 371,250 0.7
15,500 TransTexas Gas Corp. 170,500 53,281 0.1
----------- ----------- -----
906,241 868,331 1.7
-------------------------------------------------------------------------------------------------------------------
Entertainment 21,000 Dover Downs Entertainment, Inc. 309,904 265,125 0.5
-------------------------------------------------------------------------------------------------------------------
Financial Services 18,000 DVI, Inc. 442,714 264,375 0.5
-------------------------------------------------------------------------------------------------------------------
Healthcare-- 38,100 HCIA Inc. 475,085 214,312 0.4
Products & Services 10,000 Invacare Corp. 258,906 235,000 0.5
16,700 Magellan Health Services, Inc. 486,659 180,569 0.3
50,000 PSS World Medical, Inc. 742,190 925,000 1.8
45,000 Priority Healthcare Corporation
(Class B) 945,938 956,250 1.8
46,800 Ramsay Health Care, Inc. 287,902 49,725 0.1
30,000 Sunrise Assisted Living, Inc. 1,047,657 1,029,375 2.0
15,000 Trigon Healthcare, Inc. 503,400 465,000 0.9
----------- ----------- -----
4,747,737 4,055,231 7.8
-------------------------------------------------------------------------------------------------------------------
Industrial Components 15,525 BHA Group Inc. (Class A) 198,583 182,419 0.4
-------------------------------------------------------------------------------------------------------------------
Insurance 6,600 American National Insurance Co. 570,555 545,325 1.1
5,000 AmerUs Life Holdings Inc. (Class A) 164,375 109,687 0.2
20,000 Gryphon Holdings, Inc. 307,500 270,000 0.5
11,600 HCC Insurance Holdings, Inc. 202,496 224,750 0.4
----------- ----------- -----
1,244,926 1,149,762 2.2
-------------------------------------------------------------------------------------------------------------------
Media & Related 15,000 ADVO, Inc. 436,050 366,562 0.7
60,000 IDG Books Worldwide, Inc. (Class A) 964,528 637,500 1.2
53,000 SITEL Corporation 474,296 162,313 0.3
----------- ----------- -----
1,874,874 1,166,375 2.2
-------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 6,000 Biomatrix, Inc. 164,374 234,000 0.4
11,900 COR Therapeutics, Inc. 132,024 89,994 0.2
8,800 Scios, Inc. 64,850 48,400 0.1
----------- ----------- -----
361,248 372,394 0.7
-------------------------------------------------------------------------------------------------------------------
Restaurants 43,100 Au Bon Pain Company, Inc. (Class A) 349,835 261,294 0.5
-------------------------------------------------------------------------------------------------------------------
Telecommunications & 44,200 Metromedia International Group, Inc. 503,928 171,275 0.3
Equipment
-------------------------------------------------------------------------------------------------------------------
Total Investments in the
United States 16,474,417 14,299,112 27.4
====================================================================================================================================
Total Investments in North America 16,794,326 14,859,068 28.5
====================================================================================================================================
PACIFIC
BASIN
====================================================================================================================================
Australia Media & Related 300,000 John Fairfax Holdings Limited 526,772 504,214 1.0
-------------------------------------------------------------------------------------------------------------------
Total Investments in Australia 526,772 504,214 1.0
====================================================================================================================================
Japan Beverages 61,400 Sanyo Coca-Cola Bottling Co., Ltd. 841,651 554,860 1.1
-------------------------------------------------------------------------------------------------------------------
Entertainment & 37,000 Roland Corporation 866,880 807,362 1.5
Recreation
-------------------------------------------------------------------------------------------------------------------
Machinery 11,000 Union Tool Co. 418,501 427,522 0.8
-------------------------------------------------------------------------------------------------------------------
Real Estate 680 TOC Company Ltd. 6,748 5,221 0.0
-------------------------------------------------------------------------------------------------------------------
Restaurants 25,000 Mos Food Services, Inc. 702,725 303,064 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 2,836,505 2,098,029 4.0
====================================================================================================================================
Philippines Financial Services 15,428 Far East Bank & Trust Company 24,243 12,236 0.0
-------------------------------------------------------------------------------------------------------------------
Total Investments in the Philippines 24,243 12,236 0.0
====================================================================================================================================
South Korea Telecommunications 60,000 SK Telecommunications Co., Ltd.
(ADR) (a) 446,100 423,750 0.8
-------------------------------------------------------------------------------------------------------------------
Total Investments in South Korea 446,100 423,750 0.8
====================================================================================================================================
Total Investments in the Pacific
Basin 3,833,620 3,038,229 5.8
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial Paper* US$ 2,000,000 Concord Minutemen Capital Corp.,
5.55% due 10/09/1998 1,997,533 1,997,533 3.8
1,882,000 General Motors Acceptance Corp.,
5.88% due 10/01/1998 1,882,000 1,882,000 3.6
1,500,000 Lexington Parker Inc.,
5.56% due 10/07/1998 1,498,610 1,498,610 2.9
2,000,000 Park Avenue Receivables Corp.,
5.55% due 10/14/1998 1,995,992 1,995,992 3.8
1,500,000 Variable Funding Capital Corp.,
5.52% due 10/02/1998 1,499,770 1,499,770 2.9
----------- ----------- -----
8,873,905 8,873,905 17.0
-------------------------------------------------------------------------------------------------------------------
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., September 30, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
SHORT-TERM SECURITIES Face Percent of
(concluded) Amount Issue Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
US Government & US$ 6,000,000 Federal Home Loan Mortgage
Agency Obligations* Corporation, 5.20% due 10/07/1998 $ 5,994,800 $ 5,994,800 11.5%
US Treasury Bills (b):
100,000 4.93% due 10/08/1998 99,904 99,972 0.2
400,000 4.995% due 10/15/1998 399,223 399,456 0.8
600,000 4.75% due 12/24/1998 593,350 594,120 1.2
----------- ----------- -----
7,087,277 7,088,348 13.7
-------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 15,961,182 15,962,253 30.7
====================================================================================================================================
Total Investments $55,547,225 51,191,727 98.3
===========
Variation Margin on Financial Futures Contracts** (166,128) (0.3)
Unrealized Appreciation on Forward Foreign Exchange Contracts*** 55,847 0.1
Other Assets Less Liabilities 971,856 1.9
---------- -----
Net Assets $52,053,302 100.0%
=========== =====
====================================================================================================================================
Net Asset Value: Class A--Based on net assets of $3,295,472 and
437,280 shares outstanding $ 7.54
===========
Class B--Based on net assets of $38,442,754 and
5,208,862 shares outstanding $ 7.38
===========
Class C--Based on net assets of $3,269,210 and
444,098 shares outstanding $ 7.36
===========
Class D--Based on net assets of $7,045,866 and
939,466 shares outstanding $ 7.50
===========
====================================================================================================================================
</TABLE>
* Commercial Paper and certain US Government & Agency Obligations are traded
on a discount basis. The interest rates shown reflect the discount rates
paid at the time of purchase by the Fund.
** Financial futures contracts purchased as of September 30, 1998 were as
follows:
*** Forward foreign exchange contracts as of September 30, 1998 were as follows:
- ---------------------------------------------------------------------
Number of Expiration
Contracts Issue Exchange Date Value
- ---------------------------------------------------------------------
18 Standard &
Poor's 500 Index CME December 1998 $4,617,000
- ---------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price--$4,664,250) $4,617,000
==========
- ---------------------------------------------------------------------
Financial futures contracts sold as of September 30, 1998 were as
follows:
- ---------------------------------------------------------------------
Number of Expiration
Contracts Issue Exchange Date Value
- ---------------------------------------------------------------------
3 FTSE 100 LIFFE December 1998 $ 262,055
- ---------------------------------------------------------------------
Total Financial Futures Contracts Sold
(Total Contract Price--$263,736) $ 262,055
==========
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
Foreign Currency Expiration Unrealized
Sold Date Appreciation
- ---------------------------------------------------------------------
(Y) 263,948,000 October 1998 $55,847
- ---------------------------------------------------------------------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$2,000,000) $55,847
=======
- ---------------------------------------------------------------------
(a) American Depositary Receipts (ADR).
(b) Security held as collateral in connection with open financial futures
contracts.
EQUITY PORTFOLIO CHANGES
For the Quarter Ended September 30, 1998
Additions
ADVO, Inc.
* AO Tatneft (ADR)
* Aaron Rents, Inc.
* Actuate Software Corp.
* Adams Golf Inc.
Bank United Corp. (Class A)
Bodycote International PLC
* Broadcast.Com Inc.
* Carrier Access Corp.
* Chattem, Inc.
* Checkfree Holdings Corporation
* Clarify, Inc.
Commercial Federal Corp.
* Entrust Technologies
* Equant NV (NY Registered Shares)
Fresenius AG (Preferred)
GFI Informatique
* GN Store Nord A/S
Gentex Corporation
* Geocities
Giga Information Group, Inc.
Golden State Bancorp Inc.
GreenPoint Financial Corp.
* Horizon Organic Holdings Corporation
IDG Books Worldwide, Inc. (Class A)
* Idex Corp.
Independence Community Bank Corp.
Invacare Corp.
Iron Mountain Inc.
John Fairfax Holdings Limited
LVL Medical S.A.
PSS World Medical, Inc.
Priority Healthcare Corporation (Class B)
* Republic Services Group Inc. (Class A)
Rhoen Klinikum AG
SK Telecommunications Co., Ltd. (ADR)
Sunrise Assisted Living, Inc.
* Telebanc Financial Corp.
Trigon Healthcare, Inc.
Visio Corp.
WS Atkins PLC
Wegener Arcade NV
Deletions
ACX Technologies, Inc.
AGCO Corporation
* AO Tatneft (ADR)
APAC TeleServices, Inc.
AXA Colonia Konzern AG
* Aaron Rents, Inc.
* Actuate Software Corp.
* Adams Golf Inc.
Air Express International Corporation
Allen Telecom Inc.
Anixter International Inc.
Applied Digital Access, Inc.
Applied Industrial Technologies, Inc.
Atkins Carlyle Ltd.
BISYS Group, Inc. (The)
Benton Oil & Gas Company
Boole & Babbage, Inc.
* Broadcast.Com Inc.
Broderbund Software, Inc.
CHS Electronics, Inc.
C.P. Clare Corp.
Caribiner International, Inc.
* Carrier Access Corp.
Castle (A.M.) & Company
* Chattem, Inc.
* Checkfree Holdings Corporation
Circle International Group, Inc.
Citation Corporation
Civic Bancorp
* Clarify, Inc.
Commonwealth Industries, Inc.
Contextvision AB
DII Group, Inc.
DSP Communications, Inc.
Doncasters PLC (ADR)
Danka Business Systems PLC (ADR)
ESCO Electronics Corporation
* Entrust Technologies
Envirosource, Inc.
* Equant NV (NY Registered Shares)
Foamex International Inc.
* GN Store Nord A/S
General Cable Corporation
Genome Therapeutics Corporation
* Geocities
Hadco Corporation
Harbinger Corporation
Harmonic Lightwaves, Inc.
* Horizon Organic Holdings Corporation
Ichinen Co., Ltd.
* Idex Corp.
Inspec Group PLC
Kinnevik AB (B Shares)
Lane Walker Rudkin Industries, Ltd.
Magainin Pharmaceuticals, Inc.
MedPartners, Inc.
Mentor Graphics Corporation
Meritor Automotive, Inc.
Micro Warehouse, Inc.
Midway Games Inc.
Miller Industries, Inc.
Moebel Walther AG
NABI, Inc.
NeoRx Corp.
Network Equipment Technologies, Inc.
Neurogen Corporation
Newpark Resources, Inc.
Norton McNaughton, Inc.
Novamerican Steel Inc.
Oakwood Homes Corporation
Oerlikon-Buehrle Holdings AG
PXRE Corp.
Paxson Communications Corp.
Pharmacopeia, Inc.
Primark Corporation
* Republic Services Group Inc. (Class A)
Read-Rite Corporation
Ryland Group, Inc.
Shiloh Industries, Inc.
Sierra Health Services, Inc.
Software Spectrum, Inc.
Stewart & Stevenson Services, Inc.
Storage Technology Corporation
Structural Dynamics Research Corp.
Sybase, Inc.
TEGE S.A.
* Telebanc Financial Corp.
Toll Brothers, Inc.
TriQuint Semiconductor, Inc.
Unique International NV
Vimpel-Communications (ADR)
Volker Wessels Stevin NV
WMS Industries, Inc.
Walbro Corp.
Wolverine Tube, Inc.
Zemex Corporation
* Added and deleted in the same quarter.
10 & 11
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Kenneth Chiang, Senior Vice President
and Senior Portfolio Manager
Norman R. Harvey, Senior Vice President
Hubertus Aarts, Vice President
Donald C. Burke, 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
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 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 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 #18177--9/98
[RECYCLE LOGO] Printed on post-consumer recycled paper
