MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Annual Report
June 30, 2000
<PAGE>
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Officers and Directors
Terry K. Glenn, President and Director
Charles C. Reilly, Director
Roscoe S. Suddarth, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Robert C. Doll, Jr., Senior Vice President
Kenneth Chiang, Senior Vice President and
Senior Portfolio Manager
Hubertus Aarts, Vice President
James E. Russell, Vice President
Donald C. Burke, Vice President and Treasurer
Susan B. Baker, 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
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
DEAR SHAREHOLDER
Fiscal Year in Review
The performance of Merrill Lynch Global SmallCap Fund, Inc. was excellent during
the fiscal year ended June 30, 2000. For the 12 months ended June 30, 2000,
total returns for Merrill Lynch Global SmallCap Fund, Inc.'s Class A, Class B,
Class C and Class D Shares were +89.67%, +87.78%, +87.77% and +89.27%,
respectively. (One-year performance results were due to special market
conditions and should not be expected to be repeated in the future. 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 - 6 of this
report to shareholders.) This compares to the +18.12% price return (in US
dollars) provided by the unmanaged Morgan Stanley Capital International (MSCI)
Developed World SmallCap Index during the same period.
The fiscal year ended June 30, 2000 marks an unprecedented period of outstanding
returns among a very narrow segment of global small companies in aggressive
technology, media, telecommunications and biotechnology sectors. Fortunately,
the Fund was significantly overinvested in these sectors during the year. In
addition, we reduced the Fund's exposure to these sectors at the end of March
2000, thus preserving a major portion of the Fund's gains.
The Fund outperformed through stock selection in several main markets including
the United States, Japan, Italy, Germany, the United Kingdom, Switzerland, the
Netherlands, France and Finland. However, the Fund's performance was hindered
because it missed out on hedging the decline in the euro, and by stock selection
in Canada, Hong Kong and Luxembourg.
In North America, the Fund's performance was aided by stock selection in the
capital equipment and service sectors and by outperformance in technology and
biotechnology companies. Poor stock selection in the multi-industry sector in
Canada hindered the Fund's performance relative to its benchmark.
In Europe, stock selection in the services sector in France, Finland,
Switzerland and the United Kingdom, as well as stock selection in the
multi-industry sector in Ireland and the Netherlands, strengthened the Fund's
performance relative to its benchmark. Stock selection in the capital equipment
sector and in technology industries in Germany and Italy added to the Fund's
strong outperformance.
In Asia, stock selection in the capital equipment and finance sectors in Japan
fueled a positive contribution to the Fund's overall return relative to the
benchmark. While stock selection in the services sector in Hong Kong weakened
performance, investment in the emerging markets of Indonesia and South Korea
strengthened performance.
Portfolio Matters
While the average small cap technology, media and telecommunications (TMT)
stocks have corrected between 50% and 70% and the stock market has bounced off
its lows, we still remain cautious about the intermediate-term outlook for TMT
stocks. In addition, we are cautious toward a variety of cyclically sensitive
sectors that may experience slowing growth as a result of the more stringent
interest rate environment.
We are optimistic about long-term growth opportunities in many of the niche
stocks that comprise the portfolio. For example, we are still excited about the
long-term prospects of Ryanair Holdings PLC, which is a discount no-frills
airline based out of Ireland. This company is much of the same mold as US-based
Southwest Airlines, except earlier in the growth curve by a decade. Ryanair
Holdings often captures a majority of the market in which it begins to compete
within six months as a result of its low cost structure and inexpensive
airfares.
We are looking to continue rebalancing the Fund toward traditional cash flow and
earnings growth positions at more reasonable prices within the traditional
economy. In the beginning of April, we sold down the 25% of the portfolio that
was invested in the hyper growth stocks that powered the strong returns,
especially during the fourth quarter of 1999 and the first quarter of 2000. We
have since added to our position in early cycle interest rate-sensitive stocks
in the financial sector and real estate investment trusts, which we believe
represent compelling value with reasonable growth. We still are maintaining a
modest cash position in anticipation of better opportunities in what we believe
will be a more difficult environment for equities amidst slowing growth and
higher interest rates globally.
We are optimistic about the benefits of technology to main line businesses in
the old economy, particularly in supply and distribution chain management.
However, we think the major beneficiaries will be the existing old economy
companies that have established relationships rather than new entrants from the
technology world. In addition, the valuations among main line companies are
showing compelling value against growth opportunities.
In Conclusion
For investors with a long-term focus, we believe opportunities are abundant in
small company stocks globally. In US dollar terms, small cap stocks globally
have begun outperforming large cap stocks in several cornerstone markets such as
the United States, the United Kingdom and Japan. In addition, small cap stock
valuations in relation to growth prospects continue to be very attractive
relative to those of larger companies. Finally, we believe that we have built a
diversified portfolio of small cap companies that may emerge as tomorrow's
industry leaders and Fortune 500 companies in response to superior innovation
and technology.
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 next report
to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Kenneth Chiang
Kenneth Chiang
Senior Vice President and
Portfolio Manager
August 10, 2000
2 & 3
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
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.
Total Return Based on a $10,000 Investment--Class A Shares and Class C Shares
A line graph depicting the growth of an investment in the Fund's Class A Shares
and Class C Shares compared to growth of an investment in the MSCI Small Cap
World Index. Beginning and ending values are:
10/21/94** 6/00
Merrill Lynch Global SmallCap Fund, Inc.+--
Class A Shares* $9,475 $22,876
Merrill Lynch Global SmallCap Fund, Inc.+--
Class C Shares* $10,000 $22,737
MSCI Small Cap World Index++ $10,000 $14,096
Total Return Based on a $10,000 Investment--Class B Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's Class B Shares
and Class D Shares compared to growth of an investment in the MSCI Small Cap
World Index. Beginning and ending values are:
8/05/94** 6/00
Merrill Lynch Global SmallCap Fund, Inc.+--
Class B Shares* $10,000 $22,300
Merrill Lynch Global SmallCap Fund, Inc.+--
Class D Shares* $9,475 $22,138
MSCI Small Cap World Index++ $10,000 $13,997
* Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
** Commencement of operations.
+ Merrill Lynch Global SmallCap Fund, Inc. invests in a diversified
portfolio of equity securities of issuers with relatively small market
capitalizations located in various foreign countries and the United
States.
++ This unmanaged broad-based Index is comprised of small cap companies from
23 developed markets.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
===================================================================
Class A Shares*
===================================================================
Year Ended 6/30/00 +89.67% +79.72%
-------------------------------------------------------------------
Five Years Ended 6/30/00 +21.58 +20.28
-------------------------------------------------------------------
Inception (10/21/94) through 6/30/00 +16.75 +15.65
-------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
===================================================================
Class B Shares*
===================================================================
Year Ended 6/30/00 +87.78% +83.78%
-------------------------------------------------------------------
Five Years Ended 6/30/00 +20.32 +20.32
-------------------------------------------------------------------
Inception (8/05/94) through 6/30/00 +14.55 +14.55
-------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
** Assuming payment of applicable contingent deferred sales
charge.
===================================================================
% Return % Return
Without CDSC With CDSC**
===================================================================
Class C Shares*
===================================================================
Year Ended 6/30/00 +87.77% +86.77%
-------------------------------------------------------------------
Five Years Ended 6/30/00 +20.30 +20.30
-------------------------------------------------------------------
Inception (10/21/94) through 6/30/00 +15.52 +15.52
-------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
** Assuming payment of applicable contingent deferred sales
charge.
===================================================================
% Return Without % Return With
Sales Charge Sales Charge**
===================================================================
Class D Shares*
===================================================================
Year Ended 6/30/00 +89.27% +79.34%
-------------------------------------------------------------------
Five Years Ended 6/30/00 +21.25 +19.95
-------------------------------------------------------------------
Inception (8/05/94) through 6/30/00 +15.46 +14.41
-------------------------------------------------------------------
* Maximum sales charge is 5.25%. (Prior to October 21, 1994,
Class D Shares (formerly Class A Shares) were offered at a
higher sales charge. Thus, actual returns would have been
lower than shown for the inception period.)
** Assuming maximum sales charge.
4 & 5
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
PERFORMANCE DATA (concluded)
Recent Performance Results*
<TABLE>
<CAPTION>
6 Month 12 Month Since Inception
As of June 30, 2000 Total Return Total Return Total Return
======================================================================================================
<S> <C> <C> <C>
ML Global SmallCap Fund, Inc. Class A Shares +10.41% +89.67% +141.45%
------------------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class B Shares + 9.85 +87.78 +123.00
------------------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class C Shares + 9.82 +87.77 +127.37
------------------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class D Shares +10.27 +89.27 +133.66
======================================================================================================
</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 from
10/21/94 for Class A & Class C Shares and from 8/05/94 for Class B & Class
D Shares.
SCHEDULE OF INVESTMENTS (in US dollars)
<TABLE>
<CAPTION>
Percent
Shares of Net
EUROPE Industries Held Investments Cost Value Assets
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
Denmark Wireless Communications 10,100 +RTX Telecom A/S $ 238,694 $ 324,450 0.2%
----------------------------------------------------------------------------------------------------------------------
Total Investments in Denmark 238,694 324,450 0.2
====================================================================================================================================
Finland Electronic Components 26,200 Perlos Oyj 477,379 831,317 0.5
----------------------------------------------------------------------------------------------------------------------
Telecommunications 34,000 Elocoteq Network Corporation 'A' 595,280 747,996 0.4
30,000 Teleste Oyj 260,969 733,329 0.4
------------ ------------ ------
856,249 1,481,325 0.8
----------------------------------------------------------------------------------------------------------------------
Telecommunications & 114,100 +Tecnomen Oyj 920,938 984,387 0.5
Equipment
----------------------------------------------------------------------------------------------------------------------
Total Investments in Finland 2,254,566 3,297,029 1.8
====================================================================================================================================
France Advertising 70,000 Havas Advertising SA 1,206,865 1,607,093 0.9
----------------------------------------------------------------------------------------------------------------------
Biotechnology 60,000 +Genset SPA (ADR)* 1,615,051 1,365,000 0.7
----------------------------------------------------------------------------------------------------------------------
Broadcasting & Publishing 13,000 Societe Television Francaise SA 513,555 909,711 0.5
----------------------------------------------------------------------------------------------------------------------
Broadcasting/Media 30,000 M6 Metropole Television 1,285,498 1,829,009 1.0
----------------------------------------------------------------------------------------------------------------------
Medical 13,500 Nicox SA 572,325 757,054 0.4
----------------------------------------------------------------------------------------------------------------------
Oil Field & Equipment 31,300 Coflexip SA (ADR)* 1,370,144 1,885,825 1.0
----------------------------------------------------------------------------------------------------------------------
Optical Networking 7,300 +Highwave Optical Technologies SA 555,781 528,332 0.3
----------------------------------------------------------------------------------------------------------------------
Total Investments in France 7,119,219 8,882,024 4.8
====================================================================================================================================
Germany Application Development 500 +Openshop Holding AG 26,225 16,776 0.0
Software 17,400 +Thiel Logistik AG 607,295 1,642,945 0.9
-------- ---------- ----
633,520 1,659,721 0.9
----------------------------------------------------------------------------------------------------------------------
Drugs/Pharmaceuticals 12,300 +Evotec Biosystems AG 1,165,758 1,108,333 0.6
----------------------------------------------------------------------------------------------------------------------
Electrical Instruments 79,085 +Techem AG 1,508,325 1,880,110 1.0
----------------------------------------------------------------------------------------------------------------------
Finance 10,400 +Consors Discount Broker AG 825,808 932,143 0.5
----------------------------------------------------------------------------------------------------------------------
Financial Services 14,600 +Comdirect bank AG 427,481 452,756 0.3
----------------------------------------------------------------------------------------------------------------------
Healthcare & Medical 1,709 Fresenius AG (Preferred) 335,371 391,541 0.2
----------------------------------------------------------------------------------------------------------------------
Human Resources 431 Jobs & Adverts AG 9,622 7,230 0.0
----------------------------------------------------------------------------------------------------------------------
Media & Related 61,400 +PrimaCom AG (ADR)* 1,661,507 1,366,150 0.7
----------------------------------------------------------------------------------------------------------------------
Networking Products 3,595 +Pandatel AG 371,945 465,233 0.3
----------------------------------------------------------------------------------------------------------------------
Optical Networking 650 +Adva AG Optical Networking 378,817 372,608 0.2
----------------------------------------------------------------------------------------------------------------------
Telecommunications 7,000 +Telegate AG 342,458 728,057 0.4
----------------------------------------------------------------------------------------------------------------------
Toys 24,700 Zapf Creation AG 984,665 1,550,871 0.9
----------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 8,645,277 10,914,753 6.0
====================================================================================================================================
Ireland Airlines 33,500 +Ryanair Holdings PLC (ADR)* 843,793 1,218,563 0.7
----------------------------------------------------------------------------------------------------------------------
Total Investments in Ireland 843,793 1,218,563 0.7
====================================================================================================================================
Italy Boat Manufacturing 525,000 +Ferretti SpA 1,278,124 1,378,946 0.8
----------------------------------------------------------------------------------------------------------------------
Telecommunications 150 +e.Biscom SPA 23,294 23,150 0.0
----------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 1,301,418 1,402,096 0.8
====================================================================================================================================
Netherlands Computer Software & Systems 24,762 ICT Automatisering NV 239,889 924,550 0.5
----------------------------------------------------------------------------------------------------------------------
Containers 20,300 +IFCO Systems NV 302,473 541,949 0.3
----------------------------------------------------------------------------------------------------------------------
Distribution--Wholesale 61,700 Buhrmann NV 1,403,567 1,771,411 1.0
----------------------------------------------------------------------------------------------------------------------
Internet Software 22,000 +Tele Atlas BV 309,049 322,665 0.1
----------------------------------------------------------------------------------------------------------------------
Oil Refineries 150,000 Petroplus International NV 1,617,714 1,768,617 1.0
----------------------------------------------------------------------------------------------------------------------
Telephone Communications 15,600 +Versatel Telecom International NV 163,176 657,983 0.4
----------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 4,035,868 5,987,175 3.3
====================================================================================================================================
Russia Telephone Service 2,800 +Mobile Telesystems (ADR)* 60,200 62,650 0.0
----------------------------------------------------------------------------------------------------------------------
Total Investments in Russia 60,200 62,650 0.0
====================================================================================================================================
Sweden Application Development 124,500 +AU-System AB 712,711 709,725 0.4
Software
----------------------------------------------------------------------------------------------------------------------
Computer Services 75,000 +Adcore AB 570,364 581,462 0.3
----------------------------------------------------------------------------------------------------------------------
Medical 145,800 +PyroSequencing AB 1,653,830 1,695,542 0.9
----------------------------------------------------------------------------------------------------------------------
Medical Supplies 39,910 Nobel Biocare AB 997,573 887,293 0.5
----------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 3,934,478 3,874,022 2.1
====================================================================================================================================
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Percent
EUROPE Shares of Net
(concluded) Industries Held Investments Cost Value Assets
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
Switzerland Industrial--Automation 2,220 Swisslog Holding AG $ 1,058,434 $ 1,092,184 0.6%
----------------------------------------------------------------------------------------------------------------------
Systems
Manufacturing 3,356 Gerberit International AG (Registered) 893,252 1,124,789 0.6
----------------------------------------------------------------------------------------------------------------------
Medical Diagnostics 2,000 Tecan AG 1,725,825 1,919,931 1.0
----------------------------------------------------------------------------------------------------------------------
Retail 1,505 The Selecta Group (Registered) 298,852 468,317 0.3
----------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 3,976,363 4,605,221 2.5
====================================================================================================================================
United Aerospace Technology 600,000 Rolls-Royce PLC 2,129,954 2,130,057 1.2
Kingdom ----------------------------------------------------------------------------------------------------------------------
E-Commerce 50,705 +QXL.com PLC 54,467 76,762 0.0
----------------------------------------------------------------------------------------------------------------------
Internet Software 118,300 +Orchestream Holdings PLC 328,086 569,520 0.3
----------------------------------------------------------------------------------------------------------------------
Telecommunications 30,000 Kingston Communication (Hull) PLC 104,949 295,211 0.2
----------------------------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 2,617,456 3,071,550 1.7
====================================================================================================================================
Total Investments in Europe 35,027,332 43,639,533 23.9
====================================================================================================================================
MIDDLE EAST
====================================================================================================================================
Israel Application Development 91,000 +e-SIM Limited 2,076,257 884,406 0.5
Software
----------------------------------------------------------------------------------------------------------------------
Total Investments in the Middle East 2,076,257 884,406 0.5
====================================================================================================================================
NORTH
AMERICA
====================================================================================================================================
Canada Entertainment 50,000 +Rogers Communications, Inc. 'B' 1,162,390 1,415,604 0.8
----------------------------------------------------------------------------------------------------------------------
Hotels 21,400 Four Seasons Hotels Inc. 1,111,810 1,330,812 0.7
----------------------------------------------------------------------------------------------------------------------
Total Investments in Canada 2,274,200 2,746,416 1.5
====================================================================================================================================
United Advertising 136,300 +Interep National Radio Sales, Inc. 'A' 1,531,937 715,575 0.4
States 120,000 +Princeton Video Image, Inc. 1,188,225 690,000 0.4
------------ ------------ ------
2,720,162 1,405,575 0.8
----------------------------------------------------------------------------------------------------------------------
Aerospace--Defense & 21,600 PerkinElmer, Inc. 1,280,675 1,428,300 0.8
Equipment 36,000 +The Titan Corporation 611,612 1,611,000 0.9
------------ ------------ ------
1,892,287 3,039,300 1.7
----------------------------------------------------------------------------------------------------------------------
Airlines 86,400 +Frontier Airlines, Inc. 1,255,648 1,231,200 0.7
----------------------------------------------------------------------------------------------------------------------
Application Development 34,000 +Caminus Corporation 544,000 833,000 0.4
Software 11,250 +HNC Software Inc. 554,500 694,687 0.4
61,000 +Optimal Robotics Corp. 2,315,525 2,333,250 1.3
29,200 +Precise Software Solutions Ltd. 467,200 700,800 0.4
------------ ------------ ------
3,881,225 4,561,737 2.5
----------------------------------------------------------------------------------------------------------------------
Banking & Finance 120,000 Banknorth Group, Inc. 1,819,481 1,830,000 1.0
93,000 +Golden State Bancorp Inc. 1,632,231 1,674,000 0.9
48,000 Virginia Capital Bancshares, Inc. 648,500 744,000 0.4
------------ ------------ ------
4,100,212 4,248,000 2.3
----------------------------------------------------------------------------------------------------------------------
Circuit Boards 35,300 +DDi Corp. 463,891 1,003,844 0.6
38,200 +Manufacturers' Services Limited 656,740 785,488 0.4
------------ ------------ ------
1,120,631 1,789,332 1.0
----------------------------------------------------------------------------------------------------------------------
Commercial Services 68,400 +Gaiam, Inc. 444,982 1,179,900 0.6
70,000 Gartner Group, Inc. (Class A) 987,100 840,000 0.5
32,000 +Iron Mountain Incorporated 1,017,139 1,088,000 0.6
------------ ------------ ------
2,449,221 3,107,900 1.7
----------------------------------------------------------------------------------------------------------------------
Computer Equipment 63,000 +Cadence Design Systems, Inc. 1,061,583 1,283,625 0.7
----------------------------------------------------------------------------------------------------------------------
Computer Services 75,000 +MarchFirst, Inc. 1,405,217 1,368,750 0.7
3,900 +StorageNetworks, Inc. 105,300 351,975 0.2
------------ ------------ ------
1,510,517 1,720,725 0.9
----------------------------------------------------------------------------------------------------------------------
Computer Systems 22,500 +Mercury Computer Systems, Inc. 719,676 727,031 0.4
15,000 +NetIQ Corporation 521,250 894,375 0.5
------------ ------------ ------
1,240,926 1,621,406 0.9
----------------------------------------------------------------------------------------------------------------------
Consulting Services 24,700 +The Corporate Executive Board Company 1,040,590 1,478,912 0.8
86,800 +Nextera Enterprises, Inc. (Class A) 608,724 415,013 0.2
------------ ------------ ------
1,649,314 1,893,925 1.0
----------------------------------------------------------------------------------------------------------------------
Containers 100,000 +Packaging Corp. of America 1,143,686 1,012,500 0.5
135,000 +Pactiv Corporation 1,227,868 1,063,125 0.6
------------ ------------ ------
2,371,554 2,075,625 1.1
----------------------------------------------------------------------------------------------------------------------
Data Processing 31,000 +Hyperion Solutions Corporation 1,301,446 1,007,500 0.6
----------------------------------------------------------------------------------------------------------------------
Drug Distribution 65,000 +Anesta Corp. 1,121,945 1,612,812 0.9
----------------------------------------------------------------------------------------------------------------------
Electric & Gas 21,600 +Calpine Corporation 996,628 1,420,200 0.8
----------------------------------------------------------------------------------------------------------------------
Electronic Components 19,500 +ATMI, Inc. 705,379 905,531 0.5
25,000 +Parthus Technologies PLC (ADR)* 315,000 712,500 0.4
50,000 +Photronics, Inc. 1,381,444 1,418,750 0.8
------------ ------------ ------
2,401,823 3,036,781 1.7
----------------------------------------------------------------------------------------------------------------------
Electronics 6,000 +Gentex Corporation 78,000 150,000 0.1
23,000 Helix Technology Corporation 866,686 895,562 0.5
53,000 +Robotic Vision Systems, Inc. 781,750 970,563 0.5
------------ ------------ ------
1,726,436 2,016,125 1.1
----------------------------------------------------------------------------------------------------------------------
Energy 118,300 +Key Energy Services, Inc. 1,160,124 1,138,637 0.6
44,000 +Louis Dreyfus Natural Gas Corp. 1,296,449 1,377,750 0.8
------------ ------------ ------
2,456,573 2,516,387 1.4
----------------------------------------------------------------------------------------------------------------------
Energy Equipment & Service 46,700 +Syntroleum Corporation 817,250 799,738 0.4
----------------------------------------------------------------------------------------------------------------------
Entertainment & Recreation 64,000 Dover Downs Entertainment, Inc. 903,159 896,000 0.5
----------------------------------------------------------------------------------------------------------------------
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
Percent
NORTH AMERICA Shares of Net
(concluded) Industries Held Investments Cost Value Assets
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
United Fiber Optics 1,800 +Exfo Electro-Optical Engineering Inc. $ 46,800 $ 78,975 0.1%
States 7,500 +New Focus, Inc. 250,574 615,938 0.3
(concluded) ------------ ------------ ------
297,374 694,913 0.4
----------------------------------------------------------------------------------------------------------------------
Financial Services 30,000 City National Corporation 859,575 1,042,500 0.6
93,000 Dime Bancorp, Inc. 1,686,170 1,464,750 0.8
------------ ------------ ------
2,545,745 2,507,250 1.4
----------------------------------------------------------------------------------------------------------------------
Food 15,000 Dreyer's Grand Ice Cream, Inc. 314,812 313,125 0.2
----------------------------------------------------------------------------------------------------------------------
Food Processing 41,000 Dean Foods Company 1,095,166 1,299,187 0.7
----------------------------------------------------------------------------------------------------------------------
Healthcare--Products & Services 45,000 +SangStat Medical Corporation 1,315,294 1,293,750 0.7
----------------------------------------------------------------------------------------------------------------------
Hospitals 40,000 +Province Healthcare Company 877,894 1,442,500 0.8
----------------------------------------------------------------------------------------------------------------------
Internet Software 17,000 +Centillium Communications, Inc. 453,694 1,165,562 0.6
39,000 +RADVision Ltd. 1,146,750 1,077,375 0.6
29,200 +Sequoia Software Corporation 365,000 470,850 0.3
12,200 +Virage, Inc. 156,492 220,363 0.1
------------ ------------ ------
2,121,936 2,934,150 1.6
----------------------------------------------------------------------------------------------------------------------
Machine Tools & Machinery 25,000 +SPX Corporation 1,929,723 3,023,438 1.7
----------------------------------------------------------------------------------------------------------------------
Medical 32,500 +Laboratory Corporation of America Holdings 1,193,062 2,506,562 1.4
12,000 +Sequenom Inc. 505,876 544,500 0.3
------------ ------------ ------
1,698,938 3,051,062 1.7
----------------------------------------------------------------------------------------------------------------------
Medical Services 84,600 +Charles River Laboratories
International, Inc. 1,353,600 1,877,062 1.0
----------------------------------------------------------------------------------------------------------------------
Medical Technology 12,000 +Invitrogen Corporation 853,500 902,250 0.5
----------------------------------------------------------------------------------------------------------------------
Metals 42,600 +Stillwater Mining Company 1,268,359 1,187,475 0.7
----------------------------------------------------------------------------------------------------------------------
Networking Products 7,800 +Stratos Lightwave, Inc. 217,880 216,938 0.1
----------------------------------------------------------------------------------------------------------------------
Oil & Gas Producers 55,000 EOG Resources, Inc. 883,831 1,842,500 1.0
----------------------------------------------------------------------------------------------------------------------
Oil Field & Equipment 18,000 +Universal Compression Holdings, Inc. 396,000 603,000 0.3
----------------------------------------------------------------------------------------------------------------------
Oil Field Services 88,300 +OSCA, Inc. 1,456,400 1,473,506 0.8
205,000 +Parker Drilling Company 1,152,255 1,268,438 0.7
23,500 +UTI Energy Corp. 338,272 942,938 0.5
------------ ------------ ------
2,946,927 3,684,882 2.0
----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 14,500 +COR Therapeutics, Inc. 1,189,469 1,236,125 0.6
12,000 +IDEC Pharmaceuticals Corporation 1,124,250 1,407,000 0.8
------------ ------------ ------
2,313,719 2,643,125 1.4
----------------------------------------------------------------------------------------------------------------------
Property & Casualty Insurance 35,000 Everest Re Group, Ltd. 1,209,600 1,150,625 0.6
----------------------------------------------------------------------------------------------------------------------
Real Estate 35,000 Arden Realty, Inc. 735,825 822,500 0.4
33,000 Boston Properties, Inc. 1,064,084 1,274,625 0.7
------------ ------------ ------
1,799,909 2,097,125 1.1
----------------------------------------------------------------------------------------------------------------------
Real Estate Investment Trusts 30,000 Avalonbay Communities, Inc. 1,033,050 1,252,500 0.6
60,000 Liberty Property Trust 1,409,046 1,556,250 0.9
------------ ------------ ------
2,442,096 2,808,750 1.5
----------------------------------------------------------------------------------------------------------------------
Retail--Stores 21,000 +Barnes & Noble, Inc. 447,510 467,250 0.3
----------------------------------------------------------------------------------------------------------------------
Semiconductor Equipment 19,500 +Novellus Systems, Inc. 611,527 1,102,969 0.6
----------------------------------------------------------------------------------------------------------------------
Telecommunications & 400 +Accelerated Networks, Inc. 6,000 16,850 0.0
Equipment 28,000 Harris Corporation 795,505 917,000 0.5
8,800 +Plantronics, Inc. 796,400 1,016,400 0.6
------------ ------------ ------
1,597,905 1,950,250 1.1
----------------------------------------------------------------------------------------------------------------------
Waste Disposal 100,000 +Allied Waste Industries, Inc. 874,219 1,000,000 0.5
----------------------------------------------------------------------------------------------------------------------
Wireless Communications 34,500 +Netro Corporation 1,482,177 1,975,125 1.1
15,800 +Pinnacle Holdings Inc. 647,800 853,200 0.5
------------ ------------ ------
2,129,977 2,828,325 1.6
----------------------------------------------------------------------------------------------------------------------
Total Investments in the United States 70,521,981 84,205,794 46.2
====================================================================================================================================
Total Investments in North America 72,796,181 86,952,210 47.7
====================================================================================================================================
PACIFIC BASIN
====================================================================================================================================
Australia Advertising 583,300 Infomedia Ltd. 349,922 350,213 0.2
Computer Software & Systems 157,332 +Formida Holdings Limited 344,681 335,341 0.2
Media & Related 200,000 John Fairfax Holdings Limited 351,182 564,616 0.3
------------ ------------ ------
Total Investments in Australia 1,045,785 1,250,170 0.7
====================================================================================================================================
China Automobiles 12,000,000 Qingling Motor Company 'H' 1,433,078 1,370,056 0.8
Internet Content 30,000 +Netease.com Inc. (ADR)* 465,000 363,750 0.2
------------ ------------ ------
Total Investments in China 1,898,078 1,733,806 1.0
====================================================================================================================================
Hong Kong Consumer Products 5,000,000 Group Sense International Ltd. 618,304 538,786 0.3
----------------------------------------------------------------------------------------------------------------------
Total Investments in Hong Kong 618,304 538,786 0.3
====================================================================================================================================
India Information Systems 25,180 +Silverline Technologies Limited (ADR)* 629,500 544,518 0.3
----------------------------------------------------------------------------------------------------------------------
Total Investments in India 629,500 544,518 0.3
====================================================================================================================================
Indonesia Tobacco 600,000 PT Gudang Garam Tbk 965,325 970,009 0.5
1,500,500 PT Hanjaya Mandala Sampoerna Tbk 2,275,604 2,177,247 1.2
----------------------------------------------------------------------------------------------------------------------
Total Investments in Indonesia 3,240,929 3,147,256 1.7
====================================================================================================================================
</TABLE>
10 & 11
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
Percent
PACIFIC BASIN Shares of Net
(concluded) Industries Held Investments Cost Value Assets
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
Japan Advertising 1,500 Dentsu Tec Inc. $ 128,886 $ 164,453 0.1%
----------------------------------------------------------------------------------------------------------------------
Beverages 9,400 Coca-Cola West Japan Company Limited 216,100 297,623 0.2
----------------------------------------------------------------------------------------------------------------------
Chemicals 144,000 Mitsui Chemicals Inc. 1,127,306 1,008,497 0.6
----------------------------------------------------------------------------------------------------------------------
Commerce 8 +Rakuten, Inc. 445,247 483,909 0.3
----------------------------------------------------------------------------------------------------------------------
Computer Equipment 32,000 AM Japan Co., Ltd. 734,532 305,468 0.2
----------------------------------------------------------------------------------------------------------------------
Computer Software & Systems 33,000 +Justsystem Corporation 1,503,235 1,450,310 0.8
----------------------------------------------------------------------------------------------------------------------
Containers 24,000 Fuji Seal, Inc. 1,430,901 1,315,628 0.7
----------------------------------------------------------------------------------------------------------------------
Entertainment 6,000 Avex Inc. 919,523 623,789 0.3
----------------------------------------------------------------------------------------------------------------------
Food 140,000 Meiji Seika Kaisha, Ltd. 987,078 928,879 0.5
----------------------------------------------------------------------------------------------------------------------
Human Resources 28,000 Pasona Softbank, Inc. 786,559 754,218 0.4
----------------------------------------------------------------------------------------------------------------------
Instruments--Scientific 12,000 Moritex Corporation 1,042,385 1,078,588 0.6
----------------------------------------------------------------------------------------------------------------------
Machinery 7,500 Union Tool Co. 285,033 815,179 0.4
----------------------------------------------------------------------------------------------------------------------
Manufacturing 30,000 Nichicon Corporation 708,195 737,205 0.4
----------------------------------------------------------------------------------------------------------------------
Medical 99,000 Chugai Pharmaceutical Co., Ltd. 1,399,639 1,876,046 1.0
----------------------------------------------------------------------------------------------------------------------
Metal Processing 86,000 +Shimura Kako Company, Ltd. 651,032 682,765 0.4
----------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 23,000 Santen Pharmaceutical Co., Ltd. 474,486 556,495 0.3
----------------------------------------------------------------------------------------------------------------------
Restaurants 10,500 Doutor Coffee Co., Ltd. 813,290 813,761 0.4
----------------------------------------------------------------------------------------------------------------------
Retail--Stores 120,000 Deodeo Corporation 1,174,383 1,071,783 0.6
50,000 Sangetsu Co., Ltd. 912,065 826,993 0.5
18,000 Sugi Pharmacy Co., Ltd. 1,769,616 1,684,230 0.9
11,000 Toys 'R' Us--Japan, Ltd. 1,632,845 1,871,367 1.0
------------ ------------ ------
5,488,909 5,454,373 3.0
----------------------------------------------------------------------------------------------------------------------
Steel 160,000 Yodogawa Steel Works, Ltd. 550,987 458,201 0.3
----------------------------------------------------------------------------------------------------------------------
Textiles & Apparel 350,000 Gunze Limited 1,252,456 1,362,885 0.7
----------------------------------------------------------------------------------------------------------------------
Transport Services 12,000 Yamada Denki 1,245,822 1,077,454 0.6
----------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 22,191,601 22,245,726 12.2
====================================================================================================================================
Malaysia Financial Services 85,000 Commerce Asset-Holding Berhad 298,529 246,053 0.1
----------------------------------------------------------------------------------------------------------------------
Total Investments in Malaysia 298,529 246,053 0.1
====================================================================================================================================
Singapore Electronic Components 1,200,000 PCI Limited 1,153,760 763,447 0.4
----------------------------------------------------------------------------------------------------------------------
Total Investments in Singapore 1,153,760 763,447 0.4
====================================================================================================================================
South Korea Apparel 4,750 The Will-Bes & Company 47,602 59,853 0.0
----------------------------------------------------------------------------------------------------------------------
Application Development 74,000 +Haansoft Inc. 958,925 1,197,910 0.7
Software
----------------------------------------------------------------------------------------------------------------------
Banking & Finance 91,060 Shinhan Bank 661,877 857,496 0.5
----------------------------------------------------------------------------------------------------------------------
Communications Equipment 13,006 Serome Technology Inc. 237,779 526,060 0.3
----------------------------------------------------------------------------------------------------------------------
Computer Services 32,071 Daou Technology Inc. 823,189 310,636 0.1
----------------------------------------------------------------------------------------------------------------------
Networking Product 55,000 Comtec System Company Limited 448,395 283,626 0.2
----------------------------------------------------------------------------------------------------------------------
Telecommunications & 69,000 +Communication Network Interface Inc. 905,534 380,574 0.2
Equipment
----------------------------------------------------------------------------------------------------------------------
Total Investments in South Korea 4,083,301 3,616,155 2.0
====================================================================================================================================
Taiwan Computers 216,000 +Eten Information System Co., Ltd. 560,665 564,545 0.3
----------------------------------------------------------------------------------------------------------------------
Total Investments in Taiwan 560,665 564,545 0.3
====================================================================================================================================
Total Investments in the Pacific Basin 35,720,452 34,650,462 19.0
====================================================================================================================================
<CAPTION>
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Commercial Paper** $8,058,000 General Motors Acceptance Corp.,
7.13% due 7/03/2000 8,054,808 8,054,808 4.4
----------------------------------------------------------------------------------------------------------------------
US Government Agency 2,000,000 Federal Home Loan Banks, 6.41% due
Obligations** 7/21/2000 1,992,878 1,992,878 1.1
4,000,000 Federal Home Loan Mortgage Corporation,
6.37% due 7/05/2000 3,997,169 3,997,169 2.2
1,500,000 Federal National Mortgage Association,
6.37% due 7/11/2000 1,497,346 1,497,346 0.8
------------ ------------ ------
7,487,393 7,487,393 4.1
----------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities 15,542,201 15,542,201 8.5
====================================================================================================================================
Total Investments $161,162,423 181,668,812 99.6
============
Other Assets Less Liabilities 761,937 0.4
------------ ------
Net Assets $182,430,749 100.0%
============ ======
====================================================================================================================================
</TABLE>
+ Non-income producing security.
* American Depositary Receipts (ADR).
** 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.
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of June 30, 2000
====================================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$161,162,423) ................................... $181,668,812
Foreign cash ............................................................................ 4,835,851
Cash .................................................................................... 386,027
Receivables:
Securities sold ....................................................................... $ 1,921,899
Capital shares sold ................................................................... 976,325
Dividends ............................................................................. 203,215 3,101,439
------------
Prepaid registration fees and other assets .............................................. 31,030
------------
Total assets ............................................................................ 190,023,159
------------
====================================================================================================================================
Liabilities: Payables:
Securities purchased .................................................................. 6,937,119
Capital shares redeemed ............................................................... 276,262
Investment adviser .................................................................... 113,828
Distributor ........................................................................... 97,754 7,424,963
------------
Accrued expenses and other liabilities .................................................. 167,447
------------
Total liabilities ....................................................................... 7,592,410
------------
====================================================================================================================================
Net Assets: Net assets .............................................................................. $182,430,749
============
====================================================================================================================================
Net Assets Class A Common Stock, $.10 par value, 100,000,000 shares authorized ..................... $ 191,755
Consist of: Class B Common Stock, $.10 par value, 100,000,000 shares authorized ..................... 502,236
Class C Common Stock, $.10 par value, 100,000,000 shares authorized ..................... 100,876
Class D Common Stock, $.10 par value, 100,000,000 shares authorized ..................... 136,195
Paid-in capital in excess of par ........................................................ 153,240,597
Undistributed realized capital gains on investments and foreign currency
transactions--net ....................................................................... 7,768,745
Unrealized appreciation on investments and foreign currency transactions--net ........... 20,490,345
------------
Net assets .............................................................................. $182,430,749
============
====================================================================================================================================
Net Asset Class A--Based on net assets of $38,038,815 and 1,917,548 shares outstanding ............ $ 19.84
Value: ============
Class B--Based on net assets of $97,974,652 and 5,022,356 shares outstanding ............ $ 19.51
============
Class C--Based on net assets of $19,510,678 and 1,008,755 shares outstanding ............ $ 19.34
============
Class D--Based on net assets of $26,906,604 and 1,361,948 shares outstanding ............ $ 19.76
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Year Ended June 30, 2000
====================================================================================================================================
<C> <S> <C> <C>
Investment Dividends (net of $50,698 foreign withholding tax) ...................... $ 844,635
Income: Interest and discount earned ............................................ 572,167
------------
Total income ............................................................ 1,416,802
------------
====================================================================================================================================
Expenses: Investment advisory fees ................................................ $ 905,840
Account maintenance and distribution fees--Class B ...................... 639,571
Custodian fees .......................................................... 172,570
Account maintenance and distribution fees--Class C ...................... 89,270
Accounting services ..................................................... 88,820
Professional fees ....................................................... 83,109
Transfer agent fees--Class B ............................................ 76,530
Printing and shareholder reports ........................................ 50,295
Directors' fees and expenses ............................................ 43,022
Registration fees ....................................................... 41,233
Account maintenance fees--Class D ....................................... 39,080
Transfer agent fees--Class A ............................................ 14,266
Transfer agent fees--Class D ............................................ 14,223
Transfer agent fees--Class C ............................................ 9,754
------------
Total expenses .......................................................... 2,267,583
------------
Investment loss--net .................................................... (850,781)
------------
====================================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net ...................................................... 25,420,064
(Loss) on Foreign currency transactions--net .................................... (480,669) 24,939,395
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net: Investments--net ...................................................... 13,123,880
Foreign currency transactions--net .................................... 22,408 13,146,288
------------ ------------
Net Increase in Net Assets Resulting from Operations .................... $ 37,234,902
============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Year Ended
June 30,
------------------------------
Increase (Decrease) in Net Assets: 2000 1999
====================================================================================================================================
<C> <S> <C> <C>
Operations: Investment loss--net ............................................................... $ (850,781) $ (823,328)
Realized gain on investments and foreign currency transactions--net ................ 24,939,395 1,888,309
Change in unrealized appreciation/depreciation on investments and foreign currency
transactions--net .................................................................. 13,146,288 1,266,645
------------ ------------
Net increase in net assets resulting from operations ............................... 37,234,902 2,331,626
------------ ------------
====================================================================================================================================
Dividends to Investment income--net:
Shareholders: Class A .......................................................................... -- (79,308)
Class B .......................................................................... -- (17,136)
Class C .......................................................................... -- (20,214)
Class D .......................................................................... -- (123,411)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders ................ -- (240,069)
------------ ------------
====================================================================================================================================
Capital Share Net increase (decrease) in net assets derived from capital share transactions ...... 96,811,969 (30,845,451)
Transactions: ------------ ------------
====================================================================================================================================
Net Assets: Total increase (decrease) in net assets ............................................ 134,046,871 (28,753,894)
Beginning of year .................................................................. 48,383,878 77,137,772
------------ ------------
End of year ........................................................................ $182,430,749 $ 48,383,878
============ ============
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
The following per share data and ratios have been derived --------------------------------------------------------
from information provided in the financial statements. For the Year Ended June 30,
--------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 10.46 $ 9.45 $ 10.69 $ 10.86 $ 8.92
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net ........................... .02 (.06) (.01) .01 .13
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net ...................... 9.36 1.26 (.81) .72 1.97
-------- -------- -------- -------- --------
Total from investment operations ........................ 9.38 1.20 (.82) .73 2.10
-------- -------- -------- -------- --------
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) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ....................... -- (.19) (.42) (.90) (.16)
-------- -------- -------- -------- --------
Net asset value, end of year ............................ $ 19.84 $ 10.46 $ 9.45 $ 10.69 $ 10.86
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ...................... 89.67% 13.24% (7.15%) 7.53% 23.87%
Return:* ======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Expenses ................................................ 1.32% 2.10% 1.63% 1.53% 1.55%
Average ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net ........................... .12% (.68%) (.15%) .13% .46%
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, end of year (in thousands) .................. $ 38,039 $ 4,239 $ 4,376 $ 5,508 $ 3,083
Data: ======== ======== ======== ======== ========
Portfolio turnover ...................................... 215.09% 228.19% 52.73% 63.17% 60.33%
======== ======== ======== ======== ========
====================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
See Notes to Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class B
The following per share data and ratios have been derived --------------------------------------------------------
from information provided in the financial statements. For the Year Ended June 30,
--------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 10.39 $ 9.28 $ 10.54 $ 10.71 $ 8.84
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net .................................... (.19) (.15) (.12) (.10) (.06)
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net ...................... 9.31 1.26 (.78) .72 2.04
-------- -------- -------- -------- --------
Total from investment operations ........................ 9.12 1.11 (.90) .62 1.98
-------- -------- -------- -------- --------
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) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ....................... -- -- (.36) (.79) (.11)
-------- -------- -------- -------- --------
Net asset value, end of year ............................ $ 19.51 $ 10.39 $ 9.28 $ 10.54 $ 10.71
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ...................... 87.78% 12.01% (8.15%) 6.47% 22.57%
Return:* ======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Expenses ................................................ 2.43% 3.16% 2.67% 2.58% 2.61%
Average ======== ======== ======== ======== ========
Net Assets: Investment loss--net .................................... (1.16%) (1.74%) (1.25%) (1.00%) (.66%)
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, end of year (in thousands) .................. $ 97,975 $ 34,320 $ 57,424 $111,261 $131,656
Data: ======== ======== ======== ======== ========
Portfolio turnover ...................................... 215.09% 228.19% 52.73% 63.17% 60.33%
======== ======== ======== ======== ========
====================================================================================================================================
<CAPTION>
Class C
The following per share data and ratios have been derived --------------------------------------------------------
from information provided in the financial statements. For the Year Ended June 30,
--------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 10.30 $ 9.25 $ 10.52 $ 10.71 $ 8.84
Operating -------- -------- -------- -------- --------
Performance: Investment loss--net .................................... (.15) (.15) (.12) (.10) (.05)
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net ...................... 9.19 1.25 (.79) .71 2.03
-------- -------- -------- -------- --------
Total from investment operations ........................ 9.04 1.10 (.91) .61 1.98
-------- -------- -------- -------- --------
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) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ....................... -- (.05) (.36) (.80) (.11)
-------- -------- -------- -------- --------
Net asset value, end of year ............................ $ 19.34 $ 10.30 $ 9.25 $ 10.52 $ 10.71
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ...................... 87.77% 12.08% (8.19%) 6.38% 22.56%
Return:* ======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Expenses ................................................ 2.35% 3.17% 2.69% 2.60% 2.63%
Average ======== ======== ======== ======== ========
Net Assets: Investment loss--net .................................... (.89%) (1.76%) (1.23%) (1.00%) (.64%)
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, end of year (in thousands) .................. $ 19,511 $ 2,623 $ 4,312 $ 5,962 $ 5,753
Data: ======== ======== ======== ======== ========
Portfolio turnover ...................................... 215.09% 228.19% 52.73% 63.17% 60.33%
======== ======== ======== ======== ========
====================================================================================================================================
<CAPTION>
Class D
The following per share data and ratios have been derived --------------------------------------------------------
from information provided in the financial statements. For the Year Ended June 30,
--------------------------------------------------------
Increase (Decrease) in Net Asset Value: 2000+ 1999+ 1998+ 1997+ 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year ...................... $ 10.44 $ 9.41 $ 10.66 $ 10.83 $ 8.91
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net ........................... (.05) (.08) (.05) (.02) .02
Realized and unrealized gain (loss) on investments and
foreign currency transactions--net ...................... 9.37 1.25 (.79) .72 2.05
-------- -------- -------- -------- --------
Total from investment operations ........................ 9.32 1.17 (.84) .70 2.07
-------- -------- -------- -------- --------
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) -- --
-------- -------- -------- -------- --------
Total dividends and distributions ....................... -- (.14) (.41) (.87) (.15)
-------- -------- -------- -------- --------
Net asset value, end of year ............................ $ 19.76 $ 10.44 $ 9.41 $ 10.66 $ 10.83
======== ======== ======== ======== ========
====================================================================================================================================
Total Investment Based on net asset value per share ...................... 89.27% 12.91% (7.43%) 7.27% 23.50%
Return:* ======== ======== ======== ======== ========
====================================================================================================================================
Ratios to Expenses ................................................ 1.64% 2.36% 1.88% 1.80% 1.83%
Average ======== ======== ======== ======== ========
Net Assets: Investment income (loss)--net ........................... (.32%) (.92%) (.46%) (.21%) .10%
======== ======== ======== ======== ========
====================================================================================================================================
Supplemental Net assets, end of year (in thousands) .................. $ 26,906 $ 7,202 $ 11,026 $ 19,441 $ 22,593
Data: ======== ======== ======== ======== ========
Portfolio turnover ...................................... 215.09% 228.19% 52.73% 63.17% 60.33%
======== ======== ======== ======== ========
====================================================================================================================================
</TABLE>
* Total investment returns exclude the effects of sales charges.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
See Notes to Financial Statements.
18 & 19
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
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
accounting principles generally accepted in the United States of America, which
may require the use of management accruals and estimates. 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 that 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
that 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. If the seller defaults and the fair value of
the collateral declines, liquidation of the collateral by the Fund may be
delayed or limited.
(c) Derivative financial instruments--The Fund may engage in various portfolio
investment strategies to increase or decrease the level of risk to which the
Fund is exposed more quickly and efficiently than transactions in other types of
instruments. 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) Prepaid registration fees--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.
(i) Reclassification--Generally accepted accounting principles require that
certain components of net assets be adjusted to reflect permanent differences
between financial and tax reporting. Accordingly, current year's permanent
book/tax differences of $1,499,490 have been reclassified between accumulated
net investment loss and undistributed net realized capital gains and $648,709
has been reclassified between paid-in capital in excess of par and accumulated
net investment loss. These reclassifications have no effect on net assets or net
asset values per share.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Investment Managers, L.P. ("MLIM" or the "Investment Adviser"). The general
partner of MLIM 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 FAM Distributors, Inc. ("FAMD" or the "Distributor"),
which is a wholly-owned subsidiary of Merrill Lynch Group, Inc.
MLIM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities,
20 & 21
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
equipment and certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee of .85%, on an annual basis, of
the average daily net assets of the Fund. MLIM has entered into a Sub-Advisory
Agreement with Merrill Lynch Investment Managers U.K., Ltd. ("MLIM U.K."), an
affiliate of MLIM, pursuant to which MLIM pays MLIM U.K. a fee in an amount to
be determined from time to time by MLIM and MLIM U.K. but in no event in excess
of the amount that MLIM actually receives. For the year ended June 30, 2000,
MLIM paid MLIM U.K. a fee of $106,733 pursuant to such Agreement.
Pursuant to the Distribution Plans adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees. The fees are accrued daily
and paid monthly at annual rates based upon the average daily net assets of the
shares as follows:
--------------------------------------------------------------------------------
Account Distribution
Maintenance Fee Fee
--------------------------------------------------------------------------------
Class B ....................................... .25% .75%
Class C ....................................... .25% .75%
Class D ....................................... .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 year ended June 30, 2000, FAMD earned underwriting discounts and direct
commissions and MLPF&S earned dealer concessions on sales of the Fund's Class A
and Class D Shares as follows:
--------------------------------------------------------------------------------
FAMD MLPF&S
--------------------------------------------------------------------------------
Class A ................................................. $ 11 $ 91
Class D ................................................. $9,262 $136,853
--------------------------------------------------------------------------------
For the year ended June 30, 2000, MLPF&S received contingent deferred sales
charges of $44,181 and $4,725 relating to transactions in Class B and Class C
Shares, respectively. Furthermore, MLPF&S received contingent deferred sales
charges of $1,028 relating to transactions subject to front-end sales charge
waivers in Class A Shares.
In addition, MLPF&S received $88,547 in commissions on the execution of
portfolio security transactions for the Fund for the year ended June 30, 2000.
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 MLIM at cost.
Certain officers and/or directors of the Fund are officers and/or directors of
MLIM, PSI, MLIM U.K., FAMD, FDS and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the
year ended June 30, 2000 were $290,989,601 and $209,773,500, respectively.
Net realized gains (losses) for the year ended June 30, 2000 and net unrealized
gains (losses) as of June 30, 2000 were as follows:
--------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains (Losses)
--------------------------------------------------------------------------------
Investments:
Long-term .............................. $ 25,285,617 $ 20,506,389
Short-term ............................. 1,014 --
Financial futures contracts ............ 133,433 --
------------ ------------
Total investments ........................ 25,420,064 20,506,389
------------ ------------
Currency transactions:
Forward foreign exchange
contracts .............................. (481,605) --
Foreign currency transactions .......... 936 (16,044)
Total currency transactions .............. (480,669) (16,044)
------------ ------------
Total .................................... $ 24,939,395 $ 20,490,345
============ ============
--------------------------------------------------------------------------------
As of June 30, 2000, net unrealized appreciation for Federal income tax purposes
aggregated $20,401,436, of which $30,393,319 related to appreciated securities
and $9,991,883 related to depreciated securities. The aggregate cost of
investments at June 30, 2000 for Federal income tax purposes was $161,267,376.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $96,811,969 and $(30,845,451) for the years ended June 30, 2000 and June 30,
1999, respectively.
Transactions in capital shares for each class were as follows:
--------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 2,199,464 $ 43,551,837
Shares redeemed ........................ (687,356) (13,143,010)
---------- ------------
Net increase ........................... 1,512,108 $ 30,408,827
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class A Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 211,490 $ 1,930,637
Shares issued to shareholders
in reinvestment of dividends ........... 8,957 72,467
---------- ------------
Total issued ........................... 220,447 2,003,104
Shares redeemed ........................ (278,152) (2,412,017)
---------- ------------
Net decrease ........................... (57,705) $ (408,913)
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 2,994,696 $ 58,921,185
Automatic conversion of shares ......... (104,929) (1,959,636)
Shares redeemed ........................ (1,171,112) (19,488,404)
---------- ------------
Net increase ........................... 1,718,655 $ 37,473,145
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 234,132 $ 2,087,549
Shares issued to shareholders
in reinvestment of dividends ........... 1,311 10,610
---------- ------------
Total issued ........................... 235,443 2,098,159
Automatic conversion of shares ......... (57,666) (521,618)
Shares redeemed ........................ (3,063,306) (26,023,769)
---------- ------------
Net decrease ........................... (2,885,529) $(24,447,228)
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 1,246,820 $ 24,356,767
Shares redeemed ........................ (492,754) (9,286,348)
---------- ------------
Net increase ........................... 754,066 $ 15,070,419
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 83,999 $ 712,386
Shares issued to shareholders
in reinvestment of dividends ........... 2,118 16,983
---------- ------------
Total issued ........................... 86,117 729,369
Shares redeemed ........................ (297,346) (2,489,968)
---------- ------------
Net decrease ........................... (211,229) $ (1,760,599)
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 877,788 $ 17,504,369
Automatic conversion of shares ......... 103,905 1,959,636
---------- ------------
Total issued ........................... 981,693 19,464,005
Shares redeemed ........................ (309,642) (5,604,427)
---------- ------------
Net increase ........................... 672,051 $ 13,859,578
========== ============
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class D Shares for the Year Dollar
Ended June 30, 1999 Shares Amount
--------------------------------------------------------------------------------
Shares sold ............................ 72,797 $ 609,995
Automatic conversion of shares ......... 55,825 521,618
Shares issued to shareholders
in reinvestment of dividends ........... 9,020 72,971
---------- ------------
Total issued ........................... 137,642 1,204,584
Shares redeemed ........................ (619,616) (5,433,295)
---------- ------------
Net decrease ........................... (481,974) $ (4,228,711)
========== ============
--------------------------------------------------------------------------------
22 & 23
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
5. Commitments:
At June 30, 2000, the Fund had entered into foreign exchange contracts under
which it had agreed to purchase and sell various foreign currencies with
approximate values of $1,285,000 and $78,000, respectively.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Global SmallCap Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Global SmallCap Fund, Inc. as of
June 30, 2000, the related statements of operations for the year then ended and
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for each of the years in the five-year period then
ended. These financial statements and the financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at June 30, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Global
SmallCap Fund, Inc. as of June 30, 2000, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods in accordance with accounting principles generally accepted in
the United States of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 15, 2000
24 & 25
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., June 30, 2000
PORTFOLIO INFORMATION (unaudited)
Worldwide Investments As of 6/30/00
Country of Percent of
Ten Largest Holdings Origin Net Assets
SPX Corporation .............................. United States 1.7%
Laboratory Corporation of America
Holdings ..................................... United States 1.4
Optimal Robotics Corp. ....................... United States 1.3
PT Hanjaya Mandala Sampoerna Tbk ............. Indonesia 1.2
Rolls-Royce PLC .............................. United Kingdom 1.2
Netro Corporation ............................ United States 1.1
Tecan AG ..................................... Switzerland 1.0
Coflexip SA (ADR) ............................ France 1.0
Techem AG .................................... Germany 1.0
Charles River Laboratories
International, Inc. .......................... United States 1.0
Percent of
Ten Largest Industries Net Assets
Application Development Software ................................. 5.0%
Medical .......................................................... 4.0
Retail--Stores ................................................... 3.6
Banking & Finance ................................................ 2.8
Electronic Components ............................................ 2.6
Computer Software & Systems ...................................... 2.4
Containers ....................................................... 2.1
Internet Software ................................................ 2.0
Oil Field Services ............................................... 2.0
Advertising ...................................................... 2.0
26
<PAGE>
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--6/00
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