MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
December 31, 1998
<PAGE>
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Worldwide Investments As of 12/31/98
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Four Seasons Hotels Inc. ....................... Canada 2.5%
DVI, Inc. ...................................... United States 2.4
IDG Books Worldwide, Inc. ...................... United States 2.2
Roland Corporation ............................. Japan 2.0
SPX Corporation ................................ United States 1.9
Cambridge Technology
Partners, Inc. ............................... United States 1.9
Sanyo Coca-Cola Bottling Co., Ltd. ............. Japan 1.5
Outback Steakhouse, Inc. ....................... United States 1.5
Arden Realty, Inc. ............................. United States 1.3
Union Tool Company ............................. Japan 1.3
Percent of
Ten Largest Industries Net Assets
Computer Software & Systems .................................. 9.4%
Financial Services ........................................... 4.6
Engineering & Construction ................................... 4.5
Media & Related .............................................. 4.1
Electronics .................................................. 3.8
Banking & Finance ............................................ 3.5
Insurance .................................................... 3.2
Restaurants .................................................. 2.7
Retail ....................................................... 2.6
Hotels ....................................................... 2.5
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
DEAR SHAREHOLDER
During the three-month period ended December 31, 1998, the North American equity
markets rebounded from the negative returns experienced during the September
quarter. To some extent this rebound was fueled by easier credit conditions
following interest rate cuts by many central banks. However,
small-capitalization issues in the United States continued to lag
large-capitalization stocks during the quarter ended December 31, 1998. The
price performance provided by the US segment of the unmanaged Morgan Stanley
Capital International (MSCI) World Small Cap Index was +18.05% for the quarter,
compared to a total return of +21.30% for the unmanaged Standard & Poor's 500
Composite Index, which includes dividend income.
Major European markets ended the quarter with mixed results, with
small-capitalization stocks underperforming relative to large-capitalization
issues. The best-performing markets were Italy and Switzerland, which posted
double-digit positive returns, while the weakest markets were Denmark, Germany
and the Netherlands, each of which had negative returns for the December
quarter. With the exception of Malaysia, markets across the Pacific Rim posted
strong gains. These gains were attributed to the reversal of Japanese yen
weakness and the relative weakening in Asian currencies against the yen and the
dollar. Asian stock markets responded to cuts in interest rates in most
countries and to expectations that the economies had seen their worst. Stock
markets also reacted to increasingly positive news in Japan, which included a
new fiscal package, revisions to mergers and acquisitions laws and banking
reforms. These moves seemed to signal Japan's seriousness about restructuring
its economy. Emerging markets rose in response to ample liquidity and declines
in interest rates worldwide.
During the December quarter, the Fund outperformed its benchmark, the unmanaged
MSCI World Small Cap Index. For the three months ended December 31, 1998, total
returns for Merrill Lynch Global SmallCap Fund, Inc.'s Class A, Class B, Class C
and Class D Shares were +17.77%, +17.53%, +17.47% and +17.65%, 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.) The price performance for the MSCI World Small Cap
Index was +15.13% for the same three-month period.
The Fund's performance for the quarter was hindered by overweighted positions in
the Netherlands and emerging markets and underweighted positions in the United
States, Japan and Singapore. Stock selection in the emerging markets and the
United Kingdom also reduced returns. The Fund's large cash position also limited
its appreciation; however, this effect was diminished as we acquired new equity
positions toward the latter part of the period. The Fund's performance benefited
from overweighted positions in Switzerland and underweighted positions in
Belgium and Finland. Also beneficial to performance was stock selection in the
United States, Germany, France and Norway.
In the United States, the Fund's overweighted positions in technology stocks and
underweighted positions in the materials sector improved returns relative to the
Fund's benchmark. Stock selection in the capital equipment, consumer goods and
multi-industry sectors further enhanced returns. In the major European markets,
an overweighted position in the finance sector produced positive returns, as did
an overweighted position in the service sector in Scandinavia. In Japan, the
Fund's overweighted position in the consumer goods sector reduced returns
relative to the benchmark.
Portfolio Matters and Investment Strategy
We expect global policymakers to continue to ease credit restrictions in their
ongoing efforts to avert a global credit crunch and ensure success of the euro
conversion in 1999. However, a more negative US political climate, combined with
Brazil's economic problems, are likely to continue to hang over global equity
markets early in the first half of 1999.
We believe European economies will experience positive effects from the
introduction of the euro. However, major risks may still exist since each
European nation will continue to maintain an independent fiscal policy and be
subject to local political pressure despite membership in the European Union. We
will be monitoring the transition carefully, since any disturbance to the
unified framework could result in dire consequences to the equity and bond
markets. We will continue to examine the technology and business services
sectors, which we believe will benefit from European union and from a single
currency. We expect 1998 earnings results to exceed expectations and stretch
equity valuations higher in a low interest rate environment. We have positioned
ourselves with some deep value cyclical holdings in order to hedge some of the
risk of commodity or cyclical upturns.
In the United States, lower interest rates have had a positive impact on stock
prices despite the negative news emanating from Washington, D.C. and Brazil.
However, the current account deficit has been steadily rising against a
narrowing differential between yields for the ten-year Treasury bond and the
benchmark Japanese government bond. This may give rise to speculative attacks
against the dollar, which would have negative effects on the equity and bond
markets in the United States. We will continue to emphasize quality healthcare
and technology companies, but remain cautious given the substantial increases in
the valuations of stocks in these sectors since the end of August. We will also
closely monitor stocks in the materials and energy sectors, since we are seeing
evidence of consolidation.
In the Pacific Basin, we expect continued negative earnings reports in Japan,
making that market less attractive despite low stock valuations. The Australian
and New Zealand markets are attractive as a result of their relatively stable
economic environments and inexpensive valuations. In Hong Kong and Singapore, we
expect to maintain our current weightings, but would consider adding to our
positions upon a market sell-off. We believe that progress toward economic
recovery for Asia will be slow and could extend out to at least four or five
years. However, once the recovery mechanism is visibly in place, we believe
investors will react favorably.
We will seek to be opportunistic in the emerging markets, but currently see
little opportunity given macroeconomic uncertainties. However, in Latin America,
valuations for some growth companies in the telecommunications sectors appear
very attractive.
In Conclusion
For investors with a long-term focus, we continue to believe there are good
opportunities in small-capitalization stocks globally. We believe a unified
European economic marketplace will provide continued impetus for earnings growth
for many small companies. In the US market, small stocks appear to be the most
attractive sector in terms of valuation and earnings growth prospects. 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
quarterly report to shareholders.
Sincerely,
/s/ Arthur Zeikel
Arthur Zeikel
President
/s/ Kenneth Chiang
Kenneth Chiang
Senior Vice President and
Senior Portfolio Manager
February 10, 1999
2 & 3
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
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:
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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/98 +4.35% -1.13%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 12/31/98 +1.32 +0.02
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/98 +3.26% -0.74%
- --------------------------------------------------------------------------------
Inception (8/5/94) through 12/31/98 -0.21 -0.21
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 12/31/98 +3.17% +2.17%
- --------------------------------------------------------------------------------
Inception (10/21/94) through 12/31/98 +0.23 +0.23
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 12/31/98 +4.05% -1.41%
- --------------------------------------------------------------------------------
Inception (8/5/94) through 12/31/98 +0.57 -0.66
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
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 +4.35% +17.77% +5.63%
- -----------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class B Shares +3.26 +17.53 -0.90
- -----------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class C Shares +3.17 +17.47 +0.99
- -----------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class D Shares +4.05 +17.65 +2.52
=========================================================================================
</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 since inception periods are
Class A & Class CShares, from 10/21/94 to 12/31/98 and Class B & Class D
Shares, from 8/05/94 to 12/31/98.
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Value Percent of
EUROPE Industries Shares Held Investments Cost (Note 1a) Net Assets
=======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Denmark Engineering & Construction 7,800 Falck A/S $ 393,022 $ 631,405 1.2%
--------------------------------------------------------------------------------------------------------------
Total Investments in Denmark 393,022 631,405 1.2
=======================================================================================================================
Finland Diversified Manufacturing 12,396 Fiskars Corporation OY (Class A) 106,683 250,523 0.5
--------------------------------------------------------------------------------------------------------------
Total Investments in Finland 106,683 250,523 0.5
=======================================================================================================================
France Chemicals 1,900 Compagnie Plastic Omnium SA 260,486 181,885 0.4
--------------------------------------------------------------------------------------------------------------
Commercial Services 920 Penauille Polyservices 209,544 256,804 0.5
--------------------------------------------------------------------------------------------------------------
Electronics & Electrical 4,814 Cie des Signaux S.A. 250,106 353,166 0.7
Equipment
--------------------------------------------------------------------------------------------------------------
Financial Services 802 Societe EuraFrance S.A. 231,202 531,097 1.0
--------------------------------------------------------------------------------------------------------------
Healthcare & Medical 20,370 LVL Medical S.A. 474,090 338,607 0.6
--------------------------------------------------------------------------------------------------------------
Information Processing 2,983 +GFI Informatique S.A. 337,769 330,928 0.6
--------------------------------------------------------------------------------------------------------------
Restaurants 3,000 Leon de Bruxelles S.A. 238,620 225,455 0.4
--------------------------------------------------------------------------------------------------------------
Retail 2,562 Guilbert S.A. 400,987 343,819 0.7
--------------------------------------------------------------------------------------------------------------
Total Investments in France 2,402,804 2,561,761 4.9
=======================================================================================================================
Germany Food Services 5,775 +Kamps AG 275,439 374,370 0.7
--------------------------------------------------------------------------------------------------------------
Healthcare & Medical 1,958 Fresenius AG (Preferred) 387,399 412,520 0.8
2,920 Rhoen-Klinikum AG 271,722 290,072 0.5
---------- ---------- ---
659,121 702,592 1.3
--------------------------------------------------------------------------------------------------------------
</TABLE>
4 & 5
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
EUROPE Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Germany Machine Tools & Machinery 9,090 Walter AG $ 267,472 $ 256,441 0.5%
(concluded) --------------------------------------------------------------------------------------------------------------------
Machinery & Equipment 10,070 Jungheinrich AG (Preferred) 204,236 151,110 0.3
--------------------------------------------------------------------------------------------------------------------
Steel 6,833 +Kloeckner-Werke AG 615,477 355,185 0.7
--------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 3,157 Escada AG (Preferred) 524,402 521,113 1.0
--------------------------------------------------------------------------------------------------------------------
Transportation 21,215 Koegel Fahrzeugwerke AG (Preferred) 274,548 337,453 0.6
--------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 2,820,695 2,698,264 5.1
====================================================================================================================================
Ireland Banking & Finance 136,800 Anglo Irish Bank Corporation PLC 352,252 394,319 0.7
--------------------------------------------------------------------------------------------------------------------
Computer Software & Systems 10,000 +Savile Systems PLC (ADR) (a) 180,000 189,375 0.4
--------------------------------------------------------------------------------------------------------------------
Total Investments in Ireland 532,252 583,694 1.1
====================================================================================================================================
Italy Banking & Finance 16,000 Banca Popolare di Bergamo Credito
Varesino S.p.A. 330,476 388,143 0.8
--------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 54,500 Simint S.p.A. 476,020 385,094 0.7
--------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 806,496 773,237 1.5
====================================================================================================================================
Netherlands Computer Software & Systems 29,384 ICT Automatisering N.V. 284,666 617,870 1.2
--------------------------------------------------------------------------------------------------------------------
Financial Services 12,626 Internatio-Mueller N.V. 291,895 312,541 0.6
--------------------------------------------------------------------------------------------------------------------
Human Resources 16,310 Unique International N.V. 311,111 373,346 0.7
--------------------------------------------------------------------------------------------------------------------
Manufacturing 40,260 +DOCdata N.V. 459,298 411,494 0.8
--------------------------------------------------------------------------------------------------------------------
Media & Related 21,430 Wegener Arcade N.V. 456,475 389,014 0.7
--------------------------------------------------------------------------------------------------------------------
Petroleum Equipment & 10,857 Koninklijke Pakhoed N.V. 419,795 273,954 0.5
Services
--------------------------------------------------------------------------------------------------------------------
Telecommunications & 7,799 Twentsche Kabel Holding N.V. 309,938 242,045 0.5
Equipment
--------------------------------------------------------------------------------------------------------------------
Total Investments in the
Netherlands 2,533,178 2,620,264 5.0
====================================================================================================================================
Norway Computer Software & Systems 47,653 Merkantildata ASA 294,082 469,241 0.9
--------------------------------------------------------------------------------------------------------------------
Computer Technology 108,500 +Agresso Group ASA 487,587 462,975 0.9
--------------------------------------------------------------------------------------------------------------------
Total Investments in Norway 781,669 932,216 1.8
====================================================================================================================================
Spain Engineering & Construction 13,228 Abengoa S.A. 305,427 379,419 0.7
--------------------------------------------------------------------------------------------------------------------
Machinery 15,210 Azkoyen S.A. 390,077 546,005 1.0
--------------------------------------------------------------------------------------------------------------------
Total Investments in Spain 695,504 925,424 1.7
====================================================================================================================================
Sweden Diversified 37,000 Grupen Mandator AB 164,270 290,643 0.6
--------------------------------------------------------------------------------------------------------------------
Engineering & Construction 17,546 Svedala Industri AB 230,417 256,121 0.5
--------------------------------------------------------------------------------------------------------------------
Forest Products/ 472,500 Rottneros Bruks AB Free 729,456 185,872 0.3
Paper & Packaging
--------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 1,124,143 732,636 1.4
====================================================================================================================================
Switzerland Advertising 1,620 Edipresse S.A. (Bearer) 351,247 466,230 0.9
--------------------------------------------------------------------------------------------------------------------
Banking & Finance 1,715 Banque Cantonale de Geneve S.A.
(BCG) 540,989 431,093 0.8
--------------------------------------------------------------------------------------------------------------------
Electronics & Electrical 160 Kudelski S.A. (Bearer) 128,122 442,987 0.8
Equipment
--------------------------------------------------------------------------------------------------------------------
Merchandising 932 Valora Holding AG 235,972 252,268 0.5
--------------------------------------------------------------------------------------------------------------------
Retail 2,040 The Selecta Group 405,088 564,809 1.1
--------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 1,661,418 2,157,387 4.1
====================================================================================================================================
United Kingdom Computer Software & Systems 73,000 +Micro Focus Group PLC 747,180 127,477 0.2
--------------------------------------------------------------------------------------------------------------------
Computer Technology 25,520 Misys PLC 51,018 185,791 0.4
--------------------------------------------------------------------------------------------------------------------
Electronics 48,028 Johnson Matthey PLC 518,113 324,294 0.6
--------------------------------------------------------------------------------------------------------------------
Energy 57,553 Expro International Group PLC 476,994 263,220 0.5
--------------------------------------------------------------------------------------------------------------------
Engineering & Construction 136,400 Ashtead Group PLC 415,934 310,780 0.6
52,946 Jarvis PLC 374,312 588,204 1.1
26,000 WS Atkins PLC 236,635 218,365 0.4
----------- ----------- ----
1,026,881 1,117,349 2.1
--------------------------------------------------------------------------------------------------------------------
Food Processing 59,608 Greencore Group PLC 299,101 267,662 0.5
--------------------------------------------------------------------------------------------------------------------
Insurance 66,000 Independent Insurance Group PLC 289,689 282,095 0.5
--------------------------------------------------------------------------------------------------------------------
Medical Supplies 23,000 Seton Scholl Healthcare Group PLC 281,321 321,311 0.6
--------------------------------------------------------------------------------------------------------------------
Multi--Industry 13,582 Bodycote International PLC 239,313 185,788 0.4
--------------------------------------------------------------------------------------------------------------------
Services 22,500 AEA Technology PLC 280,168 276,906 0.5
--------------------------------------------------------------------------------------------------------------------
Total Investments in the United
Kingdom 4,209,778 3,351,893 6.3
====================================================================================================================================
Total Investments in Europe 18,067,642 18,218,704 34.6
====================================================================================================================================
NORTH
AMERICA
====================================================================================================================================
Canada Hotels 45,384 Four Seasons Hotels Inc. 724,074 1,329,131 2.5
--------------------------------------------------------------------------------------------------------------------
Total Investments in Canada 724,074 1,329,131 2.5
====================================================================================================================================
United States Banking & Finance 15,000 Commercial Federal Corporation 354,332 347,812 0.7
11,000 +Golden State Bancorp Inc. 190,840 182,875 0.3
7,000 Independence Community Bank
Corporation 90,562 110,250 0.2
----------- ----------- ----
635,734 640,937 1.2
--------------------------------------------------------------------------------------------------------------------
Biotechnology 6,000 +Guilford Pharmaceuticals Inc. 87,000 85,875 0.2
--------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
United States Building & Construction 10,000 +U.S. Home Corporation $ 297,520 $ 332,500 0.6%
(concluded) ---------------------------------------------------------------------------------------------------------------------
Cement 9,800 +Giant Cement Holding, Inc. 138,237 242,550 0.5
---------------------------------------------------------------------------------------------------------------------
Chemicals 22,000 Crompton & Knowles Corporation 408,100 455,125 0.9
---------------------------------------------------------------------------------------------------------------------
Computer Equipment 20,000 +Cadence Design Systems, Inc. 501,182 595,000 1.1
---------------------------------------------------------------------------------------------------------------------
Computer Software & Systems 45,000 +Cambridge Technology Partners,
Inc. 878,438 992,812 1.9
8,000 +Iron Mountain Incorporated 211,338 284,000 0.6
20,000 The Learning Company, Inc. 490,987 518,750 1.0
5,000 Network Associates, Inc. 184,930 331,563 0.6
16,900 +Platinum Technology, Inc. 347,969 324,269 0.6
3,963 +Sterling Commerce, Inc. 56,142 178,335 0.3
15,000 +Visio Corporation 363,094 540,000 1.0
----------- ----------- ----
2,532,898 3,169,729 6.0
---------------------------------------------------------------------------------------------------------------------
Electrical Instruments & 9,000 +Sanmina Corporation 390,375 560,250 1.1
Controls
---------------------------------------------------------------------------------------------------------------------
Electronics 30,000 +Gentex Corporation 390,000 600,000 1.1
10,000 +SCI Systems, Inc. 410,600 577,500 1.1
18,000 Tektronix, Inc. 401,112 541,125 1.0
----------- ----------- ----
1,201,712 1,718,625 3.2
---------------------------------------------------------------------------------------------------------------------
Energy 28,000 +Louis Dreyfus Natural Gas Corp. 452,388 399,000 0.8
18,300 +Tom Brown, Inc. 210,967 183,000 0.3
----------- ----------- ----
663,355 582,000 1.1
---------------------------------------------------------------------------------------------------------------------
Entertainment & Recreation 42,000 Dover Downs Entertainment, Inc. 578,704 506,625 1.0
---------------------------------------------------------------------------------------------------------------------
Financial Services 70,000 +DVI, Inc. 1,198,045 1,268,750 2.4
---------------------------------------------------------------------------------------------------------------------
Healthcare--Products & 5,000 +PSS World Medical, Inc. 74,219 114,688 0.2
Services 10,000 +SangStat Medical Corporation 210,000 212,500 0.4
5,000 +Sunrise Assisted Living, Inc. 174,610 257,500 0.5
----------- ----------- ----
458,829 584,688 1.1
---------------------------------------------------------------------------------------------------------------------
Insurance 2,700 American National Insurance
Company 251,405 222,750 0.4
5,000 AmerUs Life Holdings, Inc.
(Class A) 164,375 111,875 0.2
20,000 +Gryphon Holdings, Inc. 307,500 372,500 0.7
11,600 HCC Insurance Holdings, Inc. 202,496 204,450 0.4
----------- ----------- ----
925,776 911,575 1.7
---------------------------------------------------------------------------------------------------------------------
Internet Software 500 +Lycos, Inc. 19,469 27,750 0.1
---------------------------------------------------------------------------------------------------------------------
Machine Tools & Machinery 15,000 +SPX Corporation 681,174 1,005,000 1.9
---------------------------------------------------------------------------------------------------------------------
Media & Related 70,000 +IDG Books Worldwide, Inc. 1,114,528 1,181,250 2.2
---------------------------------------------------------------------------------------------------------------------
Metals 10,000 +Stillwater Mining Company 310,600 410,000 0.8
---------------------------------------------------------------------------------------------------------------------
Oil--Domestic 15,000 Cabot Oil & Gas Corporation 264,187 225,000 0.4
---------------------------------------------------------------------------------------------------------------------
Paper & Forest Products 12,000 Bowater Inc. 510,880 497,250 0.9
---------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 6,000 Biomatrix, Inc. 164,374 349,500 0.7
11,900 +COR Therapeutics, Inc. 132,024 158,419 0.3
8,800 +Scios Inc. 64,850 91,300 0.2
----------- ----------- ----
361,248 599,219 1.2
---------------------------------------------------------------------------------------------------------------------
Real Estate 30,000 Arden Realty, Inc. 646,800 695,625 1.3
7,000 Boston Properties, Inc. 202,545 213,500 0.4
----------- ----------- ----
849,345 909,125 1.7
---------------------------------------------------------------------------------------------------------------------
Restaurants 20,000 +Outback Steakhouse, Inc. 651,250 795,000 1.5
---------------------------------------------------------------------------------------------------------------------
Retail 10,000 +Department 56, Inc. 274,992 375,625 0.7
500 +uBid, Inc. 22,500 53,344 0.1
----------- ----------- ----
297,492 428,969 0.8
---------------------------------------------------------------------------------------------------------------------
Technology 11,000 +IMRglobal Corporation 214,893 323,812 0.6
---------------------------------------------------------------------------------------------------------------------
Transport Services 5,000 CNF Transportation Inc. 145,612 187,812 0.4
---------------------------------------------------------------------------------------------------------------------
Total Investments in the United
States 15,438,145 18,244,416 34.6
====================================================================================================================================
Total Investments in North America 16,162,219 19,573,547 37.1
====================================================================================================================================
PACIFIC
BASIN
====================================================================================================================================
Australia Insurance 132,000 QBE Insurance Group Limited 516,506 546,450 1.0
---------------------------------------------------------------------------------------------------------------------
Media & Related 300,000 John Fairfax Holdings Limited 526,772 616,367 1.2
---------------------------------------------------------------------------------------------------------------------
Telecommunications 112,500 +AAPT Limited 242,833 289,784 0.6
88,800 +Cable & Wireless Optus Limited 120,967 186,801 0.3
----------- ----------- ----
363,800 476,585 0.9
---------------------------------------------------------------------------------------------------------------------
Total Investments in Australia 1,407,078 1,639,402 3.1
====================================================================================================================================
Hong Kong Beverages 300,000 Vitasoy International Holdings Ltd. 118,477 108,430 0.2
---------------------------------------------------------------------------------------------------------------------
Distribution 488,000 China Hong Kong Photo Products
Holdings, Ltd. 46,202 46,615 0.1
---------------------------------------------------------------------------------------------------------------------
Diversified 325,000 Dickson Concepts International
Limited 345,164 251,714 0.5
152,000 Jardine Strategic Holdings Limited 273,112 220,400 0.4
----------- ----------- ----
618,276 472,114 0.9
---------------------------------------------------------------------------------------------------------------------
Food 300,000 Cafe De Coral Holdings Limited 95,614 93,909 0.2
---------------------------------------------------------------------------------------------------------------------
Real Estate 600,000 China Overseas Land & Investment 107,777 80,548 0.1
---------------------------------------------------------------------------------------------------------------------
Total Investments in Hong Kong 986,346 801,616 1.5
====================================================================================================================================
Indonesia Telecommunications 7,500 PT Indosat (ADR)(a) 113,384 91,406 0.2
---------------------------------------------------------------------------------------------------------------------
Tobacco 600,000 +PT Hanjaya Mandala Sampoerna 405,629 405,769 0.8
---------------------------------------------------------------------------------------------------------------------
Total Investments in Indonesia 519,013 497,175 1.0
====================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
PACIFIC BASIN Value Percent of
(concluded) Industries Shares Held Investments Cost (Note 1a) Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Japan Beverages 67,800 Sanyo Coca-Cola Bottling Co., Ltd. $ 916,029 $ 811,796 1.5%
---------------------------------------------------------------------------------------------------------------------
Computer Software & Systems 14,000 Meitec Corp. 305,399 350,155 0.7
---------------------------------------------------------------------------------------------------------------------
Distribution 60,000 Amway Japan Limited (ADR)(a) 317,170 322,500 0.6
---------------------------------------------------------------------------------------------------------------------
Diversified 29,000 Tokyo Style Co., Ltd. 303,855 294,244 0.6
---------------------------------------------------------------------------------------------------------------------
Entertainment & Recreation 42,000 Roland Corporation 963,713 1,043,016 2.0
---------------------------------------------------------------------------------------------------------------------
Financial Services 12,000 Jafco Co., Ltd. 305,142 323,548 0.6
---------------------------------------------------------------------------------------------------------------------
Financial Services--Consumer 9,000 Sanyo Shinpan Finance Co., Ltd. 310,803 327,273 0.6
---------------------------------------------------------------------------------------------------------------------
Health Services 67,000 SRL, Inc. 309,180 309,002 0.6
---------------------------------------------------------------------------------------------------------------------
Machinery 13,500 Union Tool Company 513,306 676,497 1.3
---------------------------------------------------------------------------------------------------------------------
Manufacturing 10,000 Aderans Company Limited 293,172 311,308 0.6
45,000 Fujitec Co., Ltd. 311,039 290,554 0.6
23,000 Nichicon Corporation 299,238 287,627 0.5
----------- ----------- -----
903,449 889,489 1.7
---------------------------------------------------------------------------------------------------------------------
Medical Supplies 17,000 Kawasumi Laboratories, Inc. 295,001 334,723 0.6
---------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 19,000 Kissei Pharmaceutical Co., Ltd. 298,556 336,186 0.6
---------------------------------------------------------------------------------------------------------------------
Real Estate 680 TOC Co., Ltd. 6,748 6,176 0.0
---------------------------------------------------------------------------------------------------------------------
Restaurants 31,000 Mos Food Service, Inc. 791,233 395,920 0.8
---------------------------------------------------------------------------------------------------------------------
Steel 80,000 Yodogawa Steel Works, Ltd. 311,996 302,262 0.6
---------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 6,851,580 6,722,787 12.8
====================================================================================================================================
New Zealand Entertainment & Recreation 75,000 Sky City Limited 258,964 285,012 0.6
---------------------------------------------------------------------------------------------------------------------
Paper & Forest Products 75,000 Carter Holt Harvey Limited 67,095 67,295 0.1
---------------------------------------------------------------------------------------------------------------------
Transportation 75,000 Tranz Rail Holdings Limited 139,447 172,195 0.3
---------------------------------------------------------------------------------------------------------------------
Total Investments in New Zealand 465,506 524,502 1.0
====================================================================================================================================
Singapore Beverages 40,000 Fraser & Neave Limited (Ordinary) 119,980 116,955 0.2
---------------------------------------------------------------------------------------------------------------------
Total Investments in Singapore 119,980 116,955 0.2
====================================================================================================================================
Total Investments in the Pacific
Basin 10,349,503 10,302,437 19.6
====================================================================================================================================
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial Paper* US$1,296,000 General Motors Acceptance Corp.,
5.13% due 1/04/1999 1,295,446 1,295,446 2.5
---------------------------------------------------------------------------------------------------------------------
US Government & 1,000,000 Federal Home Loan Mortgage
Agency Obligations* Corporation, 5.08% due 1/04/1999 999,577 999,577 1.9
500,000 US Treasury Bills, 4.42% due
3/18/1999(b) 495,334 495,580 0.9
----------- ----------- -----
1,494,911 1,495,157 2.8
---------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term
Securities 2,790,357 2,790,603 5.3
====================================================================================================================================
Total Investments $47,369,721 50,885,291 96.6
===========
Variation Margin on Financial Futures Contracts** 50,375 0.1
Unrealized Depreciation on Forward Foreign Exchange Contracts*** (124,905) (0.2)
Other Assets Less Liabilities 1,885,882 3.5
----------- -----
Net Assets $52,696,643 100.0%
=========== =====
====================================================================================================================================
</TABLE>
+ Non-income producing security.
* 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 December 31,
1998 were as follows:
*** Forward foreign exchange contracts as of December 31, 1998
were as follows:
- --------------------------------------------------------------------------------
Number of Expiration Value
Contracts Issue Exchange Date (Note 1a)
- --------------------------------------------------------------------------------
13 Russell 2000 CME March 1999 $2,764,125
- --------------------------------------------------------------------------------
Total Financial Futures Contracts Purchased
(Total Contract Price--$2,643,550) $2,764,125
==========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Unrealized
Foreign Expiration Depreciation
Currency Sold Date (Note 1c)
- --------------------------------------------------------------------------------
(Y)263,948,000 January 1999 $(124,905)
- --------------------------------------------------------------------------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net
(US$ Commitment--$2,222,009) $(124,905)
=========
- --------------------------------------------------------------------------------
(a) American Depositary Receipts (ADR).
(b) Security held as collateral in connection with open financial futures
contracts.
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 1998
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
Assets:
Investments, at value (identified cost--$47,369,721) (Note 1a) ........................... $ 50,885,291
Foreign cash (Note 1d) ................................................................... 210,758
Cash ..................................................................................... 707
Receivables:
Securities sold ........................................................................ $2,412,275
Dividends .............................................................................. 78,877
Variation margin (Note 1c) ............................................................. 50,375
Capital shares sold .................................................................... 13,815 2,555,342
----------
Deferred organization expenses (Note 1g) ................................................. 39,716
Prepaid registration fees and other assets (Note 1g) ..................................... 36,361
------------
Total assets ............................................................................. 53,728,175
------------
=====================================================================================================================
Liabilities:
Unrealized depreciation on forward foreign exchange contracts--net (Note 1c) ............. 124,905
Payables:
Capital shares redeemed ................................................................ 586,756
Investment adviser (Note 2) ............................................................ 37,309
Distributor (Note 2) ................................................................... 36,408 660,473
----------
Accrued expenses and other liabilities ................................................... 246,154
------------
Total liabilities ........................................................................ 1,031,532
------------
=====================================================================================================================
Net Assets:
Net assets ............................................................................... $ 52,696,643
============
=====================================================================================================================
Net Assets
Consist of:
Class A Common Stock, $0.10 par value, 100,000,000 shares authorized ..................... $ 42,905
Class B Common Stock, $0.10 par value, 100,000,000 shares authorized ..................... 446,177
Class C Common Stock, $0.10 par value, 100,000,000 shares authorized ..................... 37,426
Class D Common Stock, $0.10 par value, 100,000,000 shares authorized ..................... 81,769
Paid-in capital in excess of par ......................................................... 70,107,417
Undistributed investment income--net ..................................................... 1,330,598
Accumulated realized capital losses on investments and foreign currency
transactions--net (Note 6) ............................................................... (18,759,514)
Accumulated distributions in excess of realized capital gains--net (Note 1h) ............. (4,101,895)
Unrealized appreciation on investments and foreign currency transactions--net ............ 3,511,760
------------
Net assets ............................................................................... $ 52,696,643
============
=====================================================================================================================
Net Asset
Value:
Class A--Based on net assets of $3,722,667 and 429,051 shares outstanding ................ $ 8.68
============
Class B--Based on net assets of $38,665,492 and 4,461,774 shares outstanding ............. $ 8.67
============
Class C--Based on net assets of $3,215,637 and 374,260 shares outstanding ................ $ 8.59
============
Class D--Based on net assets of $7,092,847 and 817,691 shares outstanding ................ $ 8.67
============
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the Six Months Ended December 31, 1998
<TABLE>
<CAPTION>
=====================================================================================================================
<S> <C> <C>
Investment Interest and discount earned .......................................... $ 308,997
Income Dividends (net of $35,289 foreign withholding tax) .................... 148,456
(Notes 1e & 1f): -----------
Total income .......................................................... 457,453
-----------
=====================================================================================================================
Expenses: Investment advisory fees (Note 2) ..................................... $ 249,183
Account maintenance and distribution fees--Class B (Note 2) ........... 217,468
Transfer agent fees--Class B (Note 2) ................................. 89,421
Custodian fees ........................................................ 67,566
Printing and shareholder reports ...................................... 58,164
Accounting services (Note 2) .......................................... 53,066
Registration fees (Note 1g) ........................................... 31,384
Professional fees ..................................................... 30,944
Account maintenance and distribution fees--Class C (Note 2) ........... 17,758
Amortization of organization expenses (Note 1g) ....................... 17,321
Directors' fees and expenses .......................................... 17,298
Transfer agent fees--Class D (Note 2) ................................. 14,326
Account maintenance fees--Class D (Note 2) ............................ 9,921
Pricing fees .......................................................... 8,320
Transfer agent fees--Class C (Note 2) ................................. 7,402
Transfer agent fees--Class A (Note 2) ................................. 6,601
Other ................................................................. 4,593
-----------
Total expenses ........................................................ 900,736
-----------
Investment loss--net .................................................. (443,283)
-----------
=====================================================================================================================
Realized & Realized loss from:
Unrealized Loss Investments--net .................................................... (2,977,149)
On Investments & Foreign currency transactions--net .................................. (143,061) (3,120,210)
Foreign Currency -----------
Transactions--Net Change in unrealized appreciation/depreciation on:
(Notes 1c, 1d, Investments--net .................................................... (2,307,974)
1f & 3): Foreign currency transactions--net .................................. (257,678) (2,565,652)
----------- -----------
Net realized and unrealized loss on investments and foreign
currency transactions ................................................. (5,685,862)
-----------
Net Decrease in Net Assets Resulting from Operations .................. $(6,129,145)
===========
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
Decrease in Net Assets: 1998 1998
====================================================================================================================
<S> <C> <C>
Operations:
Investment loss--net ................................................................. $ (443,283) $ (1,152,917)
Realized loss on investments and foreign currency transactions--net .................. (3,120,210) (13,369,173)
Change in unrealized appreciation/depreciation on investments and foreign currency
transactions--net .................................................................... (2,565,652) 2,345,451
------------ ------------
Net decrease in net assets resulting from operations ................................. (6,129,145) (12,176,639)
------------ ------------
====================================================================================================================
Dividends &
Distributions to
Shareholders
(Note 1h):
Investment income--net:
Class A ............................................................................. (79,308) --
Class B ............................................................................. (17,136) --
Class C ............................................................................. (20,213) --
Class D ............................................................................. (123,411) --
In excess of realized gain on investments--net:
Class A ............................................................................. -- (179,237)
Class B ............................................................................. -- (3,120,853)
Class C ............................................................................. -- (186,701)
Class D ............................................................................. -- (615,104)
------------ ------------
Net decrease in net assets resulting from dividends and distributions to shareholders (240,068) (4,101,895)
------------ ------------
====================================================================================================================
Capital Share
Transactions
(Note 4):
Net decrease in net assets derived from capital share transactions ................... (18,071,916) (48,755,903)
------------ ------------
====================================================================================================================
Net Assets:
Total decrease in net assets ......................................................... (24,441,129) (65,034,437)
Beginning of period .................................................................. 77,137,772 142,172,209
------------ ------------
End of period* ....................................................................... $ 52,696,643 $ 77,137,772
============ ============
====================================================================================================================
* Undistributed investment income--net ............................................... $ 1,330,598 $ 2,013,949
============ ============
====================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended June 30, 1994+ to
Dec. 31, --------------------------- June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1998++ 1997++ 1996 1995
======================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share
Operating
Performance:
Net asset value, beginning of period ............................ $ 9.45 $10.69 $10.86 $ 8.92 $ 9.82
------- ------ ------ ------ ------
Investment income (loss)--net ................................... (.03) (.01) .01 .13 .04
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net ...................................... (.55) (.81) .72 1.97 (.93)
------- ------ ------ ------ ------
Total from investment operations ................................ (.58) (.82) .73 2.10 (.89)
------- ------ ------ ------ ------
Less dividends and distributions:
Investment income--net ........................................ (.19) -- (.09) (.10) --
In excess of investment income--net ........................... -- -- (.22) -- --
Realized gain on investments--net ............................. -- -- (.59) (.06) --
In excess of realized gain on investments--net ................ -- (.42) -- -- (.01)
------- ------ ------ ------ ------
Total dividends and distributions ............................... (.19) (.42) (.90) (.16) (.01)
------- ------ ------ ------ ------
Net asset value, end of period .................................. $ 8.68 $ 9.45 $10.69 $10.86 $ 8.92
======= ====== ====== ====== ======
======================================================================================================================
Total Investment
Return:**
Based on net asset value per share .............................. (6.03%)@ (7.15%) 7.53% 23.87% (9.11%)@
======= ====== ====== ====== ======
======================================================================================================================
Ratios to
Average
Net Assets:
Expenses ........................................................ 2.20%* 1.63% 1.53% 1.55% 1.62%*
======= ====== ====== ====== ======
Investment income (loss)--net ................................... (.65%)* (.15%) .13% .46% 1.06%*
======= ====== ====== ====== ======
======================================================================================================================
Supplemental
Data:
Net assets, end of period (in thousands) ........................ $ 3,723 $4,376 $5,508 $3,083 $5,992
======= ====== ====== ====== ======
Portfolio turnover .............................................. 119.30% 52.73% 63.17% 60.33% 47.96%
======= ====== ====== ====== ======
======================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
@ Aggregate total investment return.
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Aug. 5,
from information provided in the financial statements. Ended For the Year Ended June 30, 1994+ to
Dec. 31, ------------------------------- June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1998++ 1997++ 1996 1995
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share
Operating
Performance:
Net asset value, beginning of period ............................ $ 9.28 $ 10.54 $ 10.71 $ 8.84 $ 10.00
------- ------- -------- -------- --------
Investment income (loss)--net ................................... (.07) (.12) (.10) (.06) .01
Realized and unrealized gain (loss) on investments and foreign
currency transactions--net ...................................... (.54) (.78) .72 2.04 (1.16)
------- ------- -------- -------- --------
Total from investment operations ................................ (.61) (.90) .62 1.98 (1.15)
------- ------- -------- -------- --------
Less dividends and distributions:
Investment income-net ......................................... --+++ -- (.06) (.05) --
In excess of investment income-net ............................ -- -- (.14) -- --
Realized gain on investments-net .............................. -- -- (.59) (.06) --
In excess of realized gain on investments-net ................. -- (.36) -- -- (.01)
------- ------- -------- -------- --------
Total dividends and distributions ............................... -- (.36) (.79) (.11) (.01)
------- ------- -------- -------- --------
Net asset value, end of period .................................. $ 8.67 $ 9.28 $ 10.54 $ 10.71 $ 8.84
======= ======= ======== ======== ========
=============================================================================================================================
Total Investment
Return:**
Based on net asset value per share .............................. (6.53%)@ (8.15%) 6.47% 22.57% (11.55%)@
======= ======= ======== ======== ========
=============================================================================================================================
Ratios to
Average
Net Assets:
Expenses ........................................................ 3.24%* 2.67% 2.58% 2.61% 2.56%*
======= ======= ======== ======== ========
Investment income (loss)-net .................................... (1.69%)* (1.25%) (1.00%) (.66%) .10%*
======= ======= ======== ======== ========
=============================================================================================================================
Supplemental
Data:
Net assets, end of period (in thousands) ........................ $38,665 $57,424 $111,261 $131,656 $132,296
======= ======= ======== ======== ========
Portfolio turnover .............................................. 119.30% 52.73% 63.17% 60.33% 47.96%
======= ======= ======== ======== ========
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended June 30, 1994+ to
Dec. 31, ----------------------------- June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1998++ 1997++ 1996 1995
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share
Operating
Performance:
Net asset value, beginning of period ............................ $ 9.25 $10.52 $ 10.71 $ 8.84 $ 9.80
------- ------ ------- ------ ------
Investment income (loss)-net .................................... (.07) (.12) (.10) (.05) .01
Realized and unrealized gain (loss) on investments and foreign
currency transactions-net ....................................... (.54) (.79) .71 2.03 (.96)
------- ------ ------- ------ ------
Total from investment operations ................................ (.61) (.91) .61 1.98 (.95)
------- ------ ------- ------ ------
Less dividends and distributions:
Investment income-net ......................................... (.05) -- (.06) (.05) --
In excess of investment income-net ............................ -- -- (.15) -- --
Realized gain on investments-net .............................. -- -- (.59) (.06) --
In excess of realized gain on investments-net ................. -- (.36) -- -- (.01)
------- ------ ------- ------ ------
Total dividends and distributions ............................... (.05) (.36) (.80) (.11) (.01)
------- ------ ------- ------ ------
Net asset value, end of period .................................. $ 8.59 $ 9.25 $ 10.52 $10.71 $ 8.84
======= ====== ======= ====== ======
=========================================================================================================================
Total Investment
Return:**
Based on net asset value per share .............................. (6.53%)@ (8.19%) 6.38% 22.56% (9.75%)@
======= ====== ======= ====== ======
=========================================================================================================================
Ratios to
Average
Net Assets:
Expenses ........................................................ 3.25%* 2.69% 2.60% 2.63% 2.66%*
======= ====== ======= ====== ======
Investment income (loss)-net .................................... (1.69%)* (1.23%) (1.00%) (.64%) .20%*
======= ====== ======= ====== ======
=========================================================================================================================
Supplemental
Data:
Net assets, end of period (in thousands) ........................ $ 3,216 $4,312 $ 5,962 $5,753 $4,924
======= ====== ======= ====== ======
Portfolio turnover .............................................. 119.30% 52.73% 63.17% 60.33% 47.96%
======= ====== ======= ====== ======
=========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------------------------------
For the For the
Six Period
The following per share data and ratios have been derived Months Aug. 5,
from information provided in the financial statements. Ended For the Year Ended June 30, 1994+ to
Dec. 31, ------------------------------- June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1998++ 1997++ 1996 1995
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share
Operating
Performance:
Net asset value, beginning of period ............................ $ 9.41 $ 10.66 $ 10.83 $ 8.91 $ 10.00
------- ------- ------- ------- -------
Investment income (loss)-net .................................... (.04) (.05) (.02) .02 .08
Realized and unrealized gain (loss) on investments and foreign
currency transactions-net ....................................... (.56) (.79) .72 2.05 (1.16)
------- ------- ------- ------- -------
Total from investment operations ................................ (.60) (.84) .70 2.07 (1.08)
------- ------- ------- ------- -------
Less dividends and distributions:
Investment income-net ......................................... (.14) -- (.08) (.09) --
In excess of investment income-net ............................ -- -- (.20) -- --
Realized gain on investments-net .............................. -- -- (.59) (.06) --
In excess of realized gain on investments-net ................. -- (.41) -- -- (.01)
------- ------- ------- ------- -------
Total dividends and distributions ............................... (.14) (.41) (.87) (.15) (.01)
------- ------- ------- ------- -------
Net asset value, end of period .................................. $ 8.67 $ 9.41 $ 10.66 $ 10.83 $ 8.91
======= ======= ======= ======= =======
============================================================================================================================
Total Investment
Return:**
Based on net asset value per share .............................. (6.23%)@ (7.43%) 7.27% 23.50% (10.85%)@
======= ======= ======= ======= =======
============================================================================================================================
Ratios to
Average
Net Assets:
Expenses ........................................................ 2.45%* 1.88% 1.80% 1.83% 1.77%*
======= ======= ======= ======= =======
Investment income (loss)-net .................................... (.88%)* (.46%) (.21%) .10% .90%*
======= ======= ======= ======= =======
============================================================================================================================
Supplemental
Data:
Net assets, end of period (in thousands) ........................ $ 7,093 $11,026 $19,441 $22,593 $23,928
======= ======= ======= ======= =======
Portfolio turnover .............................................. 119.30% 52.73% 63.17% 60.33% 47.96%
======= ======= ======= ======= =======
============================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ Amount is less than $.01 per share.
@ Aggregate total investment return.
See Notes to Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
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's financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of management
accruals and estimates. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of shares under
the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(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
or purchased are valued at the last sale price in the case of exchange-traded
options. In the case of options traded in the over-the-counter market, valuation
is the last asked price (options written) or the last bid price (options
purchased). 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.
(b) Repurchase agreements--The Fund invests in US Government securities pursuant
to repurchase agreements. Under such agreements, the counterparty 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.
o 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.
o 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.
o 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.
o Financial futures contracts--The Fund may purchase or sell financial 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
period not exceeding five years. Prepaid registration fees are charged to
expense as the related shares are issued.
(h) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. Distributions in excess of investment
income and realized capital gains are due primarily to differing tax treatments
for foreign currency transactions.
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 ("MLFD" or "Distributor"), a division of
Princeton Funds Distributor, Inc. ("PFD"), which is 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 six
months ended December 31, 1998, MLAM paid MLAM U.K. a fee of $28,939 pursuant to
such Agreement.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company
18 & 19
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Act of 1940, the Fund pays the Distributor ongoing account maintenance and
distribution fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
- ---------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
- ---------------------------------------------------------------------
Class B ............................ 0.25% 0.75%
Class C ............................ 0.25% 0.75%
Class D ............................ 0.25% --
- ---------------------------------------------------------------------
Pursuant to a sub-agreement with the Distributor, Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S"), a subsidiary of ML & Co., also provides account
maintenance and distribution services to the Fund. The ongoing account
maintenance fee compensates the Distributor and MLPF&S for providing account
maintenance services to Class B, Class C and Class D shareholders. The ongoing
distribution fee compensates the Distributor and MLPF&S for providing
shareholder and distribution-related services to Class B and Class C
shareholders.
For the six months ended December 31, 1998, 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 ............................ $22 $ 397
Class D ............................ $96 $1,659
- ---------------------------------------------------------------------
For the six months ended December 31, 1998, MLPF&S received contingent deferred
sales charges of $60,718 and $343 relating to transactions in Class B and Class
C Shares, respectively.
In addition, MLPF&S received $24,592 in commissions on the execution of
portfolio security transactions for the six months ended December 31, 1998.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
MLAM, PSI, MLAM U.K., PFD, MLFDS and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended December 31, 1998 were $56,179,177 and $62,078,140, respectively.
Net realized gains (losses) for the six months ended December 31, 1998 and net
unrealized gains (losses) as of December 31, 1998 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------
Investments:
Long-term ............................... $(3,048,859) $3,515,324
Short-term .............................. 182 246
Financial futures contracts ............. 71,528 120,575
----------- ----------
Total investments ........................... (2,977,149) 3,636,145
----------- ----------
Currency transactions:
Foreign currency transactions ........... (239,000) 520
Forward foreign exchange
contracts ............................... 95,939 (124,905)
----------- ----------
Total currency transactions ................. (143,061) (124,385)
----------- ----------
Total ....................................... $(3,120,210) $3,511,760
=========== ==========
- --------------------------------------------------------------------------------
As of December 31, 1998, net unrealized appreciation for Federal income tax
purposes aggregated $3,515,570, of which $7,567,718 related to appreciated
securities and $4,052,148 related to depreciated securities. The aggregate cost
of investments at December 31, 1998 for Federal income tax purposes was
$47,369,721.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions was
$18,071,916 and $48,755,903 for the six months ended December 31, 1998 and for
the year ended June 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 98,762 $ 839,638
Shares issued to shareholders
in reinvestment of dividends ................... 8,957 72,467
-------- -----------
Total issued ................................... 107,719 912,105
Shares redeemed ................................ (141,813) (1,175,355)
-------- -----------
Net decrease ................................... (34,094) $ (263,250)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 249,406 $ 2,387,315
Shares issued to shareholders
in reinvestment of distributions ............... 20,207 169,132
-------- -----------
Total issued ................................... 269,613 2,556,447
Shares redeemed ................................ (321,602) (3,143,854)
-------- -----------
Net decrease ................................... (51,989) $ (587,407)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Six Months Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 110,349 $ 904,922
Shares issued to shareholders
in reinvestment of dividends ................... 1,312 10,610
---------- ------------
Total issued ................................... 111,661 915,532
Automatic conversion of shares ................. (25,040) (280,329)
Shares redeemed ................................ (1,814,077) (14,663,675)
---------- ------------
Net decrease ................................... (1,727,456) $(14,028,472)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 806,805 $ 7,993,861
Shares issued to shareholders
in reinvestment of distributions ............... 232,743 1,922,455
---------- ------------
Total issued ................................... 1,039,548 9,916,316
Automatic conversion of shares ................. (67,577) (647,295)
Shares redeemed ................................ (5,341,218) (50,176,950)
---------- ------------
Net decrease ................................... (4,369,247) $(40,907,929)
========== ============
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Six Months Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 72,013 $ 602,651
Shares issued to shareholders
in reinvestment of dividends ................... 2,118 16,983
-------- -----------
Total issued ................................... 74,131 619,634
Shares redeemed ................................ (165,789) (1,305,473)
-------- -----------
Net decrease ................................... (91,658) $ (685,839)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 130,137 $ 1,244,803
Shares issued to shareholders
in reinvestment of distributions ............... 20,457 168,573
-------- -----------
Total issued ................................... 150,594 1,413,376
Shares redeemed ................................ (251,350) (2,376,441)
-------- -----------
Net decrease ................................... (100,756) $ (963,065)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Six Months Dollar
Ended December 31, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 42,376 $ 265,850
Automatic conversion of shares ................. 24,670 280,329
Shares issued to shareholders
in reinvestment of dividends ................... 9,020 72,971
-------- -----------
Total issued ................................... 76,066 619,150
Shares redeemed ................................ (430,246) (3,713,505)
-------- -----------
Net decrease ................................... (354,180) $(3,094,355)
======== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .................................... 900,213 $ 8,509,284
Automatic conversion of shares ................. 66,777 647,295
Shares issued to shareholders
in reinvestment of distributions ............... 46,481 387,646
--------- ------------
Total issued ................................... 1,013,471 9,544,225
Shares redeemed ................................ (1,665,808) (15,841,727)
--------- ------------
Net decrease ................................... (652,337) $ (6,297,502)
========= ============
- --------------------------------------------------------------------------------
5. Commitments:
At December 31, 1998, 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 sell various foreign currencies with an approximate value of
$357,000.
6. Capital Loss Carryforward:
At June 30, 1998, the Fund had a net capital loss carryforward of approximately
$1,632,000, all of which expires in 2006. This amount will be available to
offset like amounts of any future taxable gains.
20 & 21
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1998
EQUITY PORTFOLIO CHANGES
For the Quarter Ended December 31, 1998
Additions
AAPT Limited
AEA Technology PLC
Aderans Company Limited
Amway Japan Limited (ADR)
Anglo Irish Bank Corporation PLC
Arden Realty, Inc.
*Barclays Bank PLC
Boston Properties, Inc.
Bowater Inc.
CNF Transportation Inc.
Cable & Wireless Optus Limited
Cabot Oil & Gas Corporation
Cadence Design Systems, Inc.
Cafe De Coral Holdings, Ltd.
Cambridge Technology Partners, Inc.
Carter Holt Harvey Limited
China Hong Kong Photo Products Holdings, Ltd.
China Overseas Land & Investment
*Compagnie Financiere de Paribas
*Compania Anonima Nacional Telefonos de Venezuela SACA (CANTV) (ADR)
*Consolidated Freightways Inc.
*Credit Suisse Group (Registered)
Crompton & Knowles Corporation
Department 56, Inc.
Dickson Concepts International Limited
*Etek Dynamics Inc.
*Fortum Corporation, the IVO-Neste Group
*Fox Entertainment Group, Inc. (Class A)
Fraser & Neave Limited (Ordinary)
Fujitec Co., Ltd.
Guilford Pharmaceuticals Inc.
IMRglobal Corporation
*ING Groep N.V.
*Infinity Broadcasting Corporation (Class A)
Jafco Co., Ltd.
Jardine Strategic Holdings Limited
Kamps AG
Kawasumi Laboratories, Inc.
Kissei Pharmaceutical Co., Ltd.
Lycos, Inc.
*Mayne Nickless Ltd.
Meitec Corporation
*Microstrategy Inc.
*Mony Group, Inc.
*National Westminster Bank PLC (Ordinary)
Network Associates, Inc.
Nichicon Corporation
Outback Steakhouse, Inc.
PT Hanjaya Mandala Sampoerna
PT Indosat (ADR)
*Panfon Hellenic Telecom Co.
Penauille Polyservices
QBE Insurance Group Limited
*QLogic Corporation
*Rexall Sundown Corporation
SCI Systems, Inc.
SPX Corporation
SRL, Inc.
SangStat Medical Corporation
Sanmina Corporation
Sanyo Shinpan Finance Co., Ltd.
Savile Systems PLC (ADR)
*Scottish Annuity & Life Holdings, Ltd.
*Select Comfort Corporation
Seton Scholl Healthcare Group PLC
Sky City Limited
*Societe Europeene de Communications (Class A)
*Societe Europeene de Communications (Class B)
Stillwater Mining Company
Tektronix, Inc.
*Ticket Master Online--City Search `B'
Tokyo Style Co., Ltd.
*Toll Brothers, Inc.
Tranz Rail Holdings Limited
*UBS AG
U.S. Home Corporation
uBid, Inc.
Unique International N.V.
Valora Holding AG
Vitasoy International Holdings Ltd.
*Xoom.com Inc.
Yodogawa Steel Works, Ltd.
Deletions
ADVO, Inc.
Altran Technologies S.A.
Ardent Software, Inc.
Au Bon Pain Company, Inc. (Class A)
BHA Group, Inc. (Class A)
Bank United Corporation (Class A)
*Barclays Bank PLC
Charter One Financial, Inc.
*Compagnie Financiere de Paribas
*Compania Anonima Nacional Telefonos de Venezuela SACA (CANTV) (ADR)
*Consolidated Freightways Inc.
*Credit Suisse Group (Registered)
EM.TV & Merchandising AG
*Etek Dynamics Inc
Far East Bank & Trust Company
Forcenergy Inc.
*Fortum Corporation, the IVO-Neste Group
*Fox Entertainment Group, Inc. (Class A)
Giga Information Group, Inc.
Grands Magasins Jelmoli Holding AG
GreenPoint Financial Corporation
Grupo Profesional Planeacion y Proyectos, S.A. de C.V. (Class B)
HCIA, Inc.
*ING Groep N.V.
*Infinity Broadcasting Corporation (Class A)
Information Resources, Inc.
Invacare Corporation
Magellan Health Services, Inc.
*Mayne Nickless Ltd.
Metromedia International Group, Inc.
*Microstrategy Inc.
*Mony Group, Inc.
National Data Corporation
*National Westminster Bank PLC (Ordinary)
*Panfon Hellenic Telecom Co.
Phoenix Technologies Ltd.
Plains Resources Inc.
Priority Healthcare Corporation (Class B)
*QLogic Corporation
Ramsay Health Care, Inc.
Rational Software Corporation
*Rexall Sundown Corporation
SITEL Corporation
SK Telecommunications Co., Ltd. (ADR)
Scandic Hotels AB
Schibsted ASA
*Scottish Annuity & Life Holdings, Ltd.
Select Appointments Holdings PLC
*Select Comfort Corporation
Skillsgroup PLC
*Societe Europeene de Communications (Class A)
*Societe Europeene de Communications (Class B)
*Ticket Master Online--City Search `B'
*Toll Brothers, Inc.
TransTexas Gas Corporation
Trigon Healthcare, Inc.
Triumph Group, Inc.
*UBS AG
*Xoom.com Inc.
*Added and deleted in the same quarter.
22 & 23
<PAGE>
Officers and Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Roland M. Machold, 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--12/98
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