MERRILL LYNCH
GLOBAL SMALLCAP
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Semi-Annual Report
December 31, 1999
<PAGE>
MERRILL LYNCH GLOBAL SMALLCAP FUND, INC.
Worldwide
Investments
As of 12/31/99
Country of Percent of
Ten Largest Holdings Origin Net Assets
Haansoft Inc. ......................South Korea 4.1%
Mobilephone Telecommunications
International Limited ............Japan 3.3
M6 Metropole Television ............France 2.2
PrimaCom AG (ADR) ..................Germany 1.9
Tiscali SpA ........................Italy 1.8
The Titan Corporation ..............United States 1.5
Serome Technology Inc. .............South Korea 1.5
Justsystem Corporation .............Japan 1.4
Emmis Communications
Corporation (Class A) ............United States 1.4
KPNQwest NV ........................United States 1.4
Percent of
Ten Largest Industries Net Assets
Telecommunications ............................................ 7.2%
Computer Software & Systems ................................... 7.1
Distribution--Wholesale ....................................... 4.8
Media & Related ............................................... 4.6
Advertising ................................................... 4.0
Cellular Telephones ........................................... 3.8
Electronics ................................................... 2.8
Retail ........................................................ 2.5
Computer Services ............................................. 2.4
Broadcasting/Media ............................................ 2.2
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
DEAR SHAREHOLDER
During the three-month period ended December 31, 1999, total returns for Merrill
Lynch Global SmallCap Fund, Inc.'s Class A, Class B, Class C and Class D Shares
were +64.56%, +64.14%, +64.12% and +64.40%, respectively. (Fund results shown do
not reflect sales charges and would be lower if sales charges were included.
Complete performance information can be found on pages 4 and 5 of this report to
shareholders.) The Fund's unmanaged benchmark Morgan Stanley Capital
International (MSCI) World Small Cap Index had a price return of +10.15% during
the same period. Beneficial to the Fund's outperformance was stock selection in
the United States, Japan, the United Kingdom, the Netherlands, Germany, Italy
and Ireland. Detrimental to the Fund's performance was its overweighted position
in the Netherlands and Germany, as well as its underweighted position in the
United States.
Economic Environment
During the quarter ended December 31, 1999, the North American equity markets
produced strong returns relative to the performance of small-capitalization
issues and to large-capitalization stocks. The total return for the unmanaged
Russell 2000 Index of US small cap stocks was +18.44% for the December quarter
compared to a total return of +14.88% for the unmanaged Standard & Poor's 500
Composite (S&P 500) Index. The price return of the US small-capitalization
segment of the benchmark Index was +23.87%, outperforming both the Russell 2000
Index and the S&P 500 Index for the same three-month period. (References to
securities markets of all countries in this letter to shareholders correspond to
those countries' market weightings in the MSCI World Small Cap Index and are for
the three-month period ended December 31, 1999, unless otherwise noted.)
Major Continental European markets were positive during the December quarter.
However, small- capitalization equities underperformed relative to
large-capitalization issues. Germany posted a -~6.40% return while the Deutsche
Borse AG German Stock Index (DAX) increased 35.11%. France gained 8.58% as
compared to 29.79% for the French CAC-40 Index. The United Kingdom returned
+12.99% compared to a 12.68% increase in the Financial Times Stock Exchange
(FTSE) Index. The best-performing small cap markets were Norway and the United
Kingdom with gains of 19.29% and 12.99%, respectively, while the weakest markets
were Spain and Denmark with returns of -10.51% and -~9.80%, respectively.
For the quarter ended December 31, 1999, the Pacific Rim region major markets
produced strong gains. However, small cap markets underperformed relative to
large cap markets in the region. Japan and Hong Kong returned -~8.38% and
+20.69%, respectively, while the Japanese Nikkei 225 Index increased by 11.66%
and the Hang Seng Index rose by 33.19% for the three-month period. Australia
posted a return of -2.27% as compared to the ASX All Ordinaries stock index
return of +9.50%.
Investment Strategy
Low global inflation, a strong US economy and a recovery process in the Asian
economies continued to provide strong underpinnings for global financial
markets. Liquidity was ample and continued to flow into the "new economy"
sectors of the market. However, the interest rate outlook in the United States
currently has a rising bias. As a result, we expect the financial markets to be
particularly volatile in the early months of 2000. Globally, we will continue to
focus on investing in companies with what we view as quality management, above
average earnings growth and high barriers to entry in defendable niches. Since
the momentum and liquidity flows seem to favor the new economy, we expect to
remain overweighted in Internet and communications companies until we see a
break in momentum. We have been swapping out of more expensive positions in
favor of less-discovered companies with more favorable relative valuations. We
have also been less active in the new-issues market as larger funds have taken
to investing in the new-issue market, reducing our effective returns from new
transactions.
In Europe, we consolidated our investments in a smaller number of concentrated
holdings in the new economy as Internet fever is likely to continue to spread to
Europe. We are also guarded about the prospects for further valuation upside and
interest rate catalysts with rising interest rate biases across Europe. In the
United States, although we have been overweighted in technology stocks relative
to the benchmark, we currently intend to reduce the Fund's exposure as momentum
wanes since we believe that valuations have become extremely stretched. We
expect to continue to invest in high-quality businesses with strong management
in the United States.
We continue to be underweighted in Japan relative to the Fund's benchmark in
response to the stellar over-the-counter market performance and concerns over
upcoming quarter-on-quarter comparisons for economic activity and earnings. We
believe that while Asia may have bottomed, the prospects for growth may prove to
be more elusive as the pace of genuine corporate restructuring has been only
gradual.
We expect to maintain an underweighted stance in Asia and a neutral stance
across the United States and Europe. We have invested in technology companies
geared to the economy throughout Europe as relative valuations provide value
next to comparable US stocks.
In Conclusion
For investors with a long-term focus, we believe opportunities are abundant in
small company stocks globally. Small cap stock valuations in relation to growth
prospects continue to be very attractive as compared to those of larger
companies. Furthermore, we believe that many small cap companies will emerge as
tomorrow's industry leaders as a result of superior innovation and technology.
Once again, we would like to caution investors that it is not likely that such a
year of exceptional performance driven by technology investments in the new
economy will be repeated next year. While we believe in the secular trend in the
new economy, investors should understand that substantial volatility is possible
for the environment in which our Fund invests.
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
Senior Portfolio Manager
February 8, 2000
To reduce shareholders' expenses, Merrill Lynch Global SmallCap Fund, Inc. will
no longer be printing and mailing quarterly reports to shareholders. We will
continue to provide you with reports on a semi-annual and annual basis.
2 & 3
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors, as detailed in the
Fund's prospectus. If you were a Class A shareholder prior to October 21,
1994, your Class A Shares were redesignated to Class D Shares on October
21, 1994. However, in the case of certain eligible investors, the shares
were simultaneously exchanged for Class A Shares.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 12/31/99 +107.03% +96.16%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 + 18.03 +16.76
- --------------------------------------------------------------------------------
Inception (10/21/94) through 12/31/99 + 16.26 +15.06
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 12/31/99 +104.84% +100.84%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 + 16.78 + 16.78
- --------------------------------------------------------------------------------
Inception (8/05/94) through 12/31/99 + 13.99 + 13.99
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 12/31/99 +105.01% +104.01%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 + 16.77 + 16.77
- --------------------------------------------------------------------------------
Inception (10/21/94) through 12/31/99 + 15.04 + 15.04
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 1% and is reduced to 0% after
1 year.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 12/31/99 +106.69% +95.84%
- --------------------------------------------------------------------------------
Five Years Ended 12/31/99 + 17.71 +16.45
- --------------------------------------------------------------------------------
Inception (8/05/94) through 12/31/99 + 14.90 +13.76
- --------------------------------------------------------------------------------
* 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.
Recent Performance Results*
<TABLE>
<CAPTION>
3 Month 12 Month Since Inception
As of December 31, 1999 Total Return Total Return Total Return
============================================================================================
<S> <C> <C> <C>
ML Global SmallCap Fund, Inc. Class A Shares +64.56% +107.03% +118.69%
- --------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class B Shares +64.14 +104.84 +102.99
- --------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class C Shares +64.12 +105.01 +107.03
- --------------------------------------------------------------------------------------------
ML Global SmallCap Fund, Inc. Class D Shares +64.40 +106.69 +111.90
============================================================================================
</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>
Shares Percent of
EUROPE Industries Held Investments Value Net Assets
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Belgium Cellular Telephones 7,600 +Mobistar SA $ 435,084 0.5%
-------------------------------------------------------------------------------------------------------------------
Total Investments in Belgium 435,084 0.5
====================================================================================================================================
Finland Application Development Software 18,000 +TJ Group Oyj 634,410 0.6
-------------------------------------------------------------------------------------------------------------------
Computer Software & Systems 10,000 +Comptel Oyj 703,289 0.8
-------------------------------------------------------------------------------------------------------------------
Electronic Components 17,200 +Perlos Oyj 606,214 0.7
-------------------------------------------------------------------------------------------------------------------
Telecommunications 3,000 Elocoteq Network Corporation 'A' 45,919 0.0
30,000 +Teleste Oyj 489,402 0.6
----------- ------
535,321 0.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in Finland 2,479,234 2.7
====================================================================================================================================
France Advertising 2,850 Havas Advertising SA 1,213,989 1.3
-------------------------------------------------------------------------------------------------------------------
Beverages 10,900 +Laurent-Perrier SA 442,345 0.5
-------------------------------------------------------------------------------------------------------------------
Broadcasting & Publishing 1,300 Societe Television Francaise SA 680,732 0.8
-------------------------------------------------------------------------------------------------------------------
Broadcasting/Media 4,100 M6 Metropole Television 2,031,320 2.2
-------------------------------------------------------------------------------------------------------------------
Film Processing 18,700 GrandVision SA 559,089 0.6
-------------------------------------------------------------------------------------------------------------------
Multimedia 3,000 +Infosources 222,044 0.2
-------------------------------------------------------------------------------------------------------------------
Total Investments in France 5,149,519 5.6
====================================================================================================================================
</TABLE>
$ & 5
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
EUROPE Shares Percent of
(concluded) Industries Held Investments Value Net Assets
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Germany Computer Software & Systems 5,500 +Trintech Group PLC (ADR)* $ 269,500 0.3%
-------------------------------------------------------------------------------------------------------------------
Finance 6,000 +Consors Discount Broker AG 499,069 0.6
-------------------------------------------------------------------------------------------------------------------
Healthcare & Medical 1,958 Fresenius AG (Preferred) 362,794 0.4
-------------------------------------------------------------------------------------------------------------------
Internet Software 2,000 +Fantastic Corporation 378,632 0.4
-------------------------------------------------------------------------------------------------------------------
Media & Related 54,900 +PrimaCom AG (ADR)* 1,756,800 1.9
-------------------------------------------------------------------------------------------------------------------
Steel 4,746 Kloeckner-Werke AG 434,909 0.5
-------------------------------------------------------------------------------------------------------------------
Telecommunications 7,000 +Telegate AG 406,022 0.4
-------------------------------------------------------------------------------------------------------------------
Toys 11,200 +Zapf Creation AG 372,187 0.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in Germany 4,479,913 4.9
====================================================================================================================================
Greece Telecommunications 14,000 +STET Hellas Telecommunications SA (ADR)* 423,500 0.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in Greece 423,500 0.4
====================================================================================================================================
Ireland Airlines 14,600 +Ryanair Holdings PLC (ADR)* 792,050 0.8
-------------------------------------------------------------------------------------------------------------------
Crystal Giftware 250,000 Waterford Wedgwood PLC 254,268 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Ireland 1,046,318 1.1
====================================================================================================================================
Italy Telecommunications 4,000 +Tiscali SpA 1,623,284 1.8
-------------------------------------------------------------------------------------------------------------------
Total Investments in Italy 1,623,284 1.8
====================================================================================================================================
Netherlands Computer Software & Systems 24,762 ICT Automatisering NV 972,478 1.1
-------------------------------------------------------------------------------------------------------------------
Distribution--Wholesale 16,700 Buhrmann NV 251,413 0.3
-------------------------------------------------------------------------------------------------------------------
Telecommunications 9,600 +United Pan-Europe Communications
NV (UPC) (ADR)* 1,219,200 1.3
-------------------------------------------------------------------------------------------------------------------
Telephone Communications 20,600 +Versatel Telecom International NV 726,047 0.8
-------------------------------------------------------------------------------------------------------------------
Total Investments in the Netherlands 3,169,138 3.5
====================================================================================================================================
Sweden Computer Services 6,000 +Information Highway AB 995,997 1.1
-------------------------------------------------------------------------------------------------------------------
Telecommunications 7,000 +Net Insight AB 338,710 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Sweden 1,334,707 1.4
====================================================================================================================================
Switzerland Advertising 1,020 Edipresse SA (Bearer) 563,925 0.6
700 PubliGroupe SA 692,656 0.8
----------- ------
1,256,581 1.4
-------------------------------------------------------------------------------------------------------------------
Banking & Finance 1,715 Banque Cantonale de Geneve (BCG) 316,236 0.3
-------------------------------------------------------------------------------------------------------------------
Chemicals 1,100 Clariant AG (Registered) 524,534 0.6
-------------------------------------------------------------------------------------------------------------------
Electronics & 98 +Kudelski SA (Bearer) 584,909 0.6
Electrical Equipment
-------------------------------------------------------------------------------------------------------------------
Manufacturing 1,656 +Gerberit International AG (Registered) 567,016 0.6
-------------------------------------------------------------------------------------------------------------------
Medical Equipment 4,600 Gretag Imaging Group (Registered) 666,866 0.7
-------------------------------------------------------------------------------------------------------------------
Retail 2,100 +Distefora Holding AG 510,586 0.6
1,505 The Selecta Group (Registered) 472,765 0.5
----------- ------
983,351 1.1
-------------------------------------------------------------------------------------------------------------------
Total Investments in Switzerland 4,899,493 5.3
====================================================================================================================================
United Kingdom Broadcasting/Cable 16,200 +NDS Group PLC (ADR)* 492,075 0.5
-------------------------------------------------------------------------------------------------------------------
Media & Related 90,000 Saatchi and Saatchi PLC 538,981 0.6
-------------------------------------------------------------------------------------------------------------------
Retail 25,000 +QXL Limited 581,112 0.7
140,000 Safeway PLC 479,095 0.5
----------- ------
1,060,207 1.2
-------------------------------------------------------------------------------------------------------------------
Technology 5,000 +Scoot.com PLC (ADR)* 235,625 0.3
-------------------------------------------------------------------------------------------------------------------
Telecommunications 89,600 +Kingston Communication PLC 1,041,353 1.1
67,000 +Thus PLC 422,872 0.5
----------- ------
1,464,225 1.6
-------------------------------------------------------------------------------------------------------------------
Total Investments in the United Kingdom 3,791,113 4.2
====================================================================================================================================
Total Investments in Europe
(Cost--$17,578,807) 28,831,303 31.4
====================================================================================================================================
NORTH
AMERICA
Canada Drugs 17,000 +Forbes Medi-Tech Inc. 127,908 0.1
====================================================================================================================================
Entertainment 30,000 +Rogers Communications, Inc. 'B' 731,000 0.8
-------------------------------------------------------------------------------------------------------------------
Hotels 13,384 Four Seasons Hotels Inc. 709,527 0.8
-------------------------------------------------------------------------------------------------------------------
Telecommunications 13,500 +Clearnet Communications Inc. (Class A) 464,062 0.5
-------------------------------------------------------------------------------------------------------------------
Total Investments in Canada 2,032,497 2.2
====================================================================================================================================
United States Advertising 89,400 +Interep National Radio Sales, Inc. 'A' 1,167,787 1.3
-------------------------------------------------------------------------------------------------------------------
Aerospace--Defense & 10,500 HEICO Corporation (Class A) 221,812 0.2
Equipment 30,000 +The Titan Corporation 1,413,750 1.5
----------- ------
1,635,562 1.7
-------------------------------------------------------------------------------------------------------------------
Banking & Finance 15,000 AMCORE Financial, Inc. 359,062 0.4
20,000 Peoples Heritage Financial Group, Inc. 300,000 0.3
32,000 +Virginia Capital Bancshares, Inc. 516,000 0.6
----------- ------
1,175,062 1.3
-------------------------------------------------------------------------------------------------------------------
Biotechnology 27,000 +Guilford Pharmaceuticals Inc. 445,500 0.5
-------------------------------------------------------------------------------------------------------------------
Cable Television Services 14,600 +Insight Communications Company, Inc. 432,525 0.5
-------------------------------------------------------------------------------------------------------------------
Chemicals 25,000 CK Witco Corporation 334,375 0.4
-------------------------------------------------------------------------------------------------------------------
Commercial Services 61,700 +Gaiam, Inc. 971,775 1.1
18,000 Gartner Group, Inc. (Class A) 274,500 0.3
14,000 +Luminant Worldwide Corporation 635,250 0.7
----------- ------
1,881,525 2.1
-------------------------------------------------------------------------------------------------------------------
Computer Equipment 20,000 +Cadence Design Systems, Inc. 480,000 0.5
43,000 +Navigant Consulting, Inc. 467,625 0.5
----------- ------
947,625 1.0
-------------------------------------------------------------------------------------------------------------------
</TABLE>
6 & 7
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
SCHEDULE OF INVESTMENTS (continued) (in US dollars)
<TABLE>
<CAPTION>
NORTH AMERICA Shares Percent of
(concluded) Industries Held Investments Value Net Assets
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
United States Computer-Related Products 1,000 +Foundry Networks, Inc. $ 301,500 0.3%
(concluded) -------------------------------------------------------------------------------------------------------------------
Computer Software & 16,000 +Iron Mountain Incorporated 629,000 0.7
Systems 7,500 +OpenTV Corp. 601,875 0.7
13,963 +Sterling Commerce, Inc. 475,615 0.5
8,000 +Symantec Corporation 469,000 0.5
6,000 +Transaction Systems Architects, Inc.
(Class A) 168,000 0.2
2,600 +VA Linux Systems, Inc. 537,225 0.6
----------- ------
2,880,715 3.2
-------------------------------------------------------------------------------------------------------------------
Consulting Services 8,000 +The Corporate Executive Board Company 443,000 0.5
79,900 +Nextera Enterprises, Inc. (Class A) 1,028,713 1.1
----------- ------
1,471,713 1.6
-------------------------------------------------------------------------------------------------------------------
Consumer Discretionary 15,000 +APAC Customer Services Inc. 209,062 0.2
-------------------------------------------------------------------------------------------------------------------
Data Processing 20,000 +Deltek Systems, Inc. 270,000 0.3
-------------------------------------------------------------------------------------------------------------------
Electronics 25,000 +Gentex Corporation 693,750 0.8
10,000 Helix Technology Corporation 448,125 0.5
----------- ------
1,141,875 1.3
-------------------------------------------------------------------------------------------------------------------
Entertainment & 32,000 Dover Downs Entertainment, Inc. 600,000 0.7
Recreation 40,000 +The Topps Company, Inc. 412,500 0.4
----------- ------
1,012,500 1.1
-------------------------------------------------------------------------------------------------------------------
Financial Services 10,000 City National Corporation 329,375 0.4
-------------------------------------------------------------------------------------------------------------------
Gold 30,000 Homestake Mining Company 234,375 0.3
-------------------------------------------------------------------------------------------------------------------
Healthcare--Products & 15,000 +SangStat Medical Corporation 445,313 0.5
Services 2,000 +Superior Consultant Holdings Corporation 28,250 0.0
----------- ------
473,563 0.5
-------------------------------------------------------------------------------------------------------------------
Healthcare Services 7,500 +Healtheon Corporation 281,250 0.3
-------------------------------------------------------------------------------------------------------------------
Hospitals 16,500 +Province Healthcare Company 313,500 0.3
-------------------------------------------------------------------------------------------------------------------
Human Resources 2,000 +Robert Half International Inc. 57,125 0.1
-------------------------------------------------------------------------------------------------------------------
Internet 19,500 +KPNQwest NV 1,243,125 1.4
8,000 +Liquid Audio, Inc. 209,500 0.2
----------- ------
1,452,625 1.6
-------------------------------------------------------------------------------------------------------------------
Internet Content 23,300 +Navidec, Inc. 276,688 0.3
20,000 +Smartserv Online, Inc. 393,750 0.4
----------- ------
670,438 0.7
-------------------------------------------------------------------------------------------------------------------
Internet Software 8,400 +Covad Communications Group, Inc. 467,250 0.5
10,400 +Mediaplex, Inc. 647,400 0.7
12,000 +MedicaLogic, Inc. 252,750 0.3
----------- ------
1,367,400 1.5
-------------------------------------------------------------------------------------------------------------------
Internetworking 12,000 +StarMedia Network, Inc. 479,250 0.5
-------------------------------------------------------------------------------------------------------------------
Leisure 15,500 +UnitedGlobalCom Inc. (Class A) 1,088,875 1.2
-------------------------------------------------------------------------------------------------------------------
Machine Tools & Machinery 7,000 +SPX Corporation 565,688 0.6
-------------------------------------------------------------------------------------------------------------------
Media & Related 10,000 +Emmis Communications Corporation (Class A) 1,246,250 1.4
-------------------------------------------------------------------------------------------------------------------
Medical 115,000 +Laboratory Corporation of America Holdings 424,063 0.4
-------------------------------------------------------------------------------------------------------------------
Metals 16,500 Newmont Mining Corporation 404,250 0.4
19,500 +Stillwater Mining Company 621,563 0.7
----------- ------
1,025,813 1.1
-------------------------------------------------------------------------------------------------------------------
Oil Field Services 15,000 +UTI Energy Corp. 345,938 0.4
-------------------------------------------------------------------------------------------------------------------
Optical Supplies 27,000 +Ocular Sciences, Inc. 506,250 0.5
-------------------------------------------------------------------------------------------------------------------
Packaging 16,500 +Smurfit-Stone Container Corporation 403,219 0.4
-------------------------------------------------------------------------------------------------------------------
Petroleum Equipment & Services 46,000 +Santa Fe Snyder Corporation 368,000 0.4
-------------------------------------------------------------------------------------------------------------------
Radio 3,000 +Hispanic Broadcasting Corporation 276,000 0.3
18,900 +Salem Communications Corporation (Class A) 435,881 0.5
----------- ------
711,881 0.8
-------------------------------------------------------------------------------------------------------------------
Real Estate 15,000 Arden Realty, Inc. 300,937 0.3
7,000 Boston Properties, Inc. 217,875 0.2
----------- ------
518,812 0.5
-------------------------------------------------------------------------------------------------------------------
Restaurants 20,000 +Outback Steakhouse, Inc. 518,750 0.6
-------------------------------------------------------------------------------------------------------------------
Retail 5,000 +Ticketmaster Online-CitySearch, Inc.
(Class B) 192,188 0.2
-------------------------------------------------------------------------------------------------------------------
Savings & Loan Associations 30,000 +American Financial Holdings, Inc. 376,875 0.4
-------------------------------------------------------------------------------------------------------------------
Technology 15,000 +Aspen Technology, Inc. 396,562 0.4
20,000 +IMRglobal Corp. 247,500 0.3
4,000 +Novellus Systems, Inc. 490,000 0.5
----------- ------
1,134,062 1.2
-------------------------------------------------------------------------------------------------------------------
Telecommunications 1,600 +Infonet Services Corporation (Class B) 42,000 0.0
-------------------------------------------------------------------------------------------------------------------
Textiles 20,000 +Donna Karan International Inc. 131,250 0.2
-------------------------------------------------------------------------------------------------------------------
Transportation--Airlines 30,000 +Atlantic Coast Airlines Holdings, Inc. 701,250 0.8
-------------------------------------------------------------------------------------------------------------------
Wireless Communications 18,000 +Metro One Telecommunications, Inc. 234,000 0.2
1,600 +TeleCorp PCS, Inc. 61,000 0.1
----------- ------
295,000 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in the United States 31,562,391 34.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in North America
(Cost--$24,236,479) 33,594,888 36.6
====================================================================================================================================
PACIFIC
BASIN
====================================================================================================================================
Australia Media & Related 200,000 John Fairfax Holdings Limited 601,404 0.7
-------------------------------------------------------------------------------------------------------------------
Mining 320,000 +Lihir Gold Limited 232,194 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Australia 833,598 1.0
====================================================================================================================================
</TABLE>
8 & 9
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<TABLE>
<CAPTION>
PACIFIC BASIN Shares Percent of
(concluded) Industries Held Investments Value Net Assets
====================================================================================================================================
<C> <S> <C> <C> <C> <C>
Hong Kong Computer Services 534,000 +Timeless Software Limited $ 307,430 0.3%
-------------------------------------------------------------------------------------------------------------------
Distribution--Wholesale 488,000 China Hong Kong Photo Products Holdings, Ltd. 62,154 0.1
-------------------------------------------------------------------------------------------------------------------
Telecommunications & 146,000 City Telecom (HK) Ltd. 141,811 0.2
Equipment
-------------------------------------------------------------------------------------------------------------------
Total Investments in Hong Kong 511,395 0.6
====================================================================================================================================
India Computer Software & Systems 7,200 +BFL Software Limited 183,932 0.1
-------------------------------------------------------------------------------------------------------------------
Total Investments in India 183,932 0.1
====================================================================================================================================
Indonesia Tobacco 80,000 +PT Hanjaya Mandala Sampoerna 203,871 0.2
-------------------------------------------------------------------------------------------------------------------
Total Investments in Indonesia 203,871 0.2
====================================================================================================================================
Japan Automobiles 1,000 Jac Co., Ltd. 238,575 0.3
-------------------------------------------------------------------------------------------------------------------
Beverages 9,400 Coca-Cola West Japan Company Limited 395,538 0.4
-------------------------------------------------------------------------------------------------------------------
Cellular Telephones 30 Mobilephone Telecommunications
International Limited 2,994,422 3.3
-------------------------------------------------------------------------------------------------------------------
Computer Software & 4,000 AM Japan Co., Ltd. 193,757 0.2
Systems 22,000 +Justsystem Corporation 1,291,712 1.4
----------- ------
1,485,469 1.6
-------------------------------------------------------------------------------------------------------------------
Containers 3,600 Fuji Seal, Inc. 225,462 0.2
-------------------------------------------------------------------------------------------------------------------
Entertainment & Recreation 14,000 Roland Corporation 304,824 0.3
-------------------------------------------------------------------------------------------------------------------
Financial Services 100,000 Ichiyoshi Securities Co., Ltd. 528,427 0.6
-------------------------------------------------------------------------------------------------------------------
Machinery 7,500 UNION TOOL CO. 1,210,980 1.3
-------------------------------------------------------------------------------------------------------------------
Manufacturing 42,000 Fujitec Co., Ltd. 421,274 0.5
12,000 Nichicon Corporation 371,073 0.4
----------- ------
792,347 0.9
-------------------------------------------------------------------------------------------------------------------
Music 2,000 Avex Inc. 499,070 0.5
-------------------------------------------------------------------------------------------------------------------
Publishing 7,500 Shobunsha Publications, Inc. 469,713 0.5
-------------------------------------------------------------------------------------------------------------------
Retail--Stores 25,000 Sangetsu Co., Ltd. 525,981 0.6
-------------------------------------------------------------------------------------------------------------------
Steel 80,000 Yodogawa Steel Works, Ltd. 241,119 0.3
-------------------------------------------------------------------------------------------------------------------
Telecommunications 1 BIG GROUP Co., Ltd. 225,071 0.2
-------------------------------------------------------------------------------------------------------------------
Total Investments in Japan 10,136,998 11.0
====================================================================================================================================
Malaysia Computer Systems 200,000 +Mesiniaga Berhad 423,684 0.5
-------------------------------------------------------------------------------------------------------------------
Total Investments in Malaysia 423,684 0.5
====================================================================================================================================
New Zealand Entertainment & Recreation 75,000 Sky City Limited 289,655 0.3
-------------------------------------------------------------------------------------------------------------------
Paper & Forest Products 75,000 Carter Holt Harvey Limited 97,856 0.1
-------------------------------------------------------------------------------------------------------------------
Restaurants 250,000 Restaurant Brands New Zealand Limited 215,284 0.2
-------------------------------------------------------------------------------------------------------------------
Total Investments in New Zealand 602,795 0.6
====================================================================================================================================
Singapore Electronic Components 3,900 +Chartered Semiconductor Manufacturing
Limited (ADR)* 280,800 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Singapore 280,800 0.3
====================================================================================================================================
South Korea Apparel 95,000 The Will-Bes & Company 950,000 1.0
-------------------------------------------------------------------------------------------------------------------
Computer Services 26,509 +Daou Technology Inc. 922,560 1.0
-------------------------------------------------------------------------------------------------------------------
Distribution--Wholesale 80,000 Haansoft Inc. 3,707,489 4.1
60,000 +Kolon International Corporation 296,035 0.3
----------- ------
4,003,524 4.4
-------------------------------------------------------------------------------------------------------------------
Electronics 6,357 Serome Technology Inc. 1,355,413 1.5
-------------------------------------------------------------------------------------------------------------------
Product Distribution 55,000 Comtec System Company Limited 746,256 0.8
-------------------------------------------------------------------------------------------------------------------
Telecommunications 1,300 +Korea Thrunet Co., Ltd. (Class A) 88,075 0.1
-------------------------------------------------------------------------------------------------------------------
Venture Capital 35,000 +Korea Technology Banking Company 339,207 0.4
-------------------------------------------------------------------------------------------------------------------
Total Investments in South Korea 8,405,035 9.2
====================================================================================================================================
Taiwan Computers 180,000 +Eten Information System Co., Ltd. 797,323 0.9
60,000 +Systex Corporation 409,178 0.4
----------- ------
1,206,501 1.3
-------------------------------------------------------------------------------------------------------------------
Distribution 40,000 +Hitron Technology Inc. 234,544 0.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Taiwan 1,441,045 1.6
====================================================================================================================================
Total Investments in the Pacific Basin
(Cost--$13,416,292) 23,023,153 25.1
<CAPTION>
====================================================================================================================================
SHORT-TERM Face
SECURITIES Amount Issue
====================================================================================================================================
<S> <C> <C> <C> <C>
Commercial Paper** $3,003,000 General Motors Acceptance Corp.,
5% due 1/03/2000 3,002,166 3.3
-------------------------------------------------------------------------------------------------------------------
Total Investments in Short-Term Securities
(Cost--$3,002,166) 3,002,166 3.3
====================================================================================================================================
Total Investments (Cost--$58,233,744) 88,451,510 96.4
Other Assets Less Liabilities 3,278,227 3.6
----------- ------
Net Assets $91,729,737 100.0%
=========== ======
====================================================================================================================================
</TABLE>
+ Non-income producing security.
* American Depositary Receipts (ADR).
** Commercial Paper is traded on a discount basis; the interest
rate shown reflects the discount rate paid at the time of
purchase by the Fund.
See Notes to Financial Statements.
10 & 11
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
As of December 31, 1999
================================================================================================================
<C> <S> <C> <C>
Assets: Investments, at value (identified cost--$58,233,744) ................ $ 88,451,510
Foreign cash ........................................................ 4,426,803
Cash ................................................................ 136,709
Receivables:
Capital shares sold ............................................... $1,160,200
Securities sold ................................................... 325,801
Dividends ......................................................... 37,444 1,523,445
----------
Deferred organization expenses ...................................... 3,055
Prepaid registration fees and other assets .......................... 30,110
------------
Total assets ........................................................ 94,571,632
------------
================================================================================================================
Liabilities: Payables:
Securities purchased .............................................. 1,975,627
Capital shares redeemed ........................................... 523,416
Investment adviser ................................................ 62,819
Distributor ....................................................... 50,218 2,612,080
----------
Accrued expenses and other liabilities .............................. 229,815
------------
Total liabilities ................................................... 2,841,895
------------
================================================================================================================
Net Assets: Net assets .......................................................... $ 91,729,737
============
================================================================================================================
Net Assets Class A Common Stock, $.10 par value, 100,000,000 shares authorized . $ 70,896
Consist of: Class B Common Stock, $.10 par value, 100,000,000 shares authorized . 333,198
Class C Common Stock, $.10 par value, 100,000,000 shares authorized . 31,734
Class D Common Stock, $.10 par value, 100,000,000 shares authorized . 79,442
Paid-in capital in excess of par .................................... 63,831,528
Accumulated investment loss--net .................................... (546,756)
Accumulated realized capital losses on investments and foreign
currency transactions--net .......................................... (2,271,904)
Accumulated distributions in excess of realized capital gains on
investments and foreign currency transactions--net .................. (31,856)
Unrealized appreciation on investments and foreign currency
transactions--net ................................................... 30,233,455
------------
Net assets .......................................................... $ 91,729,737
============
================================================================================================================
Net Asset Class A--Based on net assets of $12,737,261 and 708,958 shares
Value: outstanding ......................................................... $ 17.97
============
Class B--Based on net assets of $59,172,268 and 3,331,981 shares
outstanding ......................................................... $ 17.76
============
Class C--Based on net assets of $5,587,042 and 317,338 shares
outstanding ......................................................... $ 17.61
============
Class D--Based on net assets of $14,233,166 and 794,416 shares
outstanding ......................................................... $ 17.92
============
================================================================================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended December 31, 1999
====================================================================================================================
<C> <S> <C> <C>
Investment Dividends ........................................................... $ 173,080
Income: Interest and discount earned ........................................ 41,560
------------
Total income ........................................................ 214,640
------------
====================================================================================================================
Expenses: Investment advisory fees ............................................ $ 243,701
Account maintenance and distribution fees--Class B .................. 194,942
Custodian fees ...................................................... 64,419
Printing and shareholder reports .................................... 49,153
Accounting services ................................................. 38,310
Professional fees ................................................... 37,050
Registration fees ................................................... 31,490
Transfer agent fees--Class B ........................................ 30,424
Directors' fees and expenses ........................................ 22,598
Account maintenance and distribution fees--Class C .................. 16,642
Account maintenance fees--Class D ................................... 10,812
Transfer agent fees--Class D ........................................ 5,182
Pricing fees ........................................................ 4,969
Transfer agent fees--Class A ........................................ 3,762
Transfer agent fees--Class C ........................................ 2,675
Amortization of organization expenses ............................... 1,590
Other ............................................................... 3,677
-----------
Total expenses ...................................................... 761,396
------------
Investment loss--net ................................................ (546,756)
------------
====================================================================================================================
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net .................................................. 13,863,723
(Loss) on Foreign currency transactions--net ................................ (496,323) 13,367,400
Investments & -----------
Foreign
Currency Change in unrealized appreciation/depreciation on:
Transactions-- Investments--net .................................................. 22,835,257
Net: Foreign currency transactions--net ................................ 54,141 22,889,398
----------- ------------
Net realized and unrealized gain on investments and foreign currency
transactions ........................................................ 36,256,798
------------
Net Increase in Net Assets Resulting from Operations ................ $ 35,710,042
============
====================================================================================================================
</TABLE>
See Notes to Financial Statements.
12 & 13
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 1999 1999
=============================================================================================================================
<C> <S> <C> <C>
Operations: Investment loss--net ........................................................ $ (546,756) $ (823,328)
Realized gain on investments and foreign currency transactions--net ......... 13,367,400 1,888,309
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net .......................................... 22,889,398 1,266,645
------------ ------------
Net increase in net assets resulting from operations ........................ 35,710,042 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 7,635,817 (30,845,451)
Transactions: ------------ ------------
=============================================================================================================================
Net Assets: Total increase (decrease) in net assets ..................................... 43,345,859 (28,753,894)
Beginning of period ......................................................... 48,383,878 77,137,772
------------ ------------
End of period ............................................................... $ 91,729,737 $ 48,383,878
============ ============
=============================================================================================================================
</TABLE>
See Notes to Financial Statements.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Class A
------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information Months
provided in the financial statements. Ended For the Year Ended June 30,
Dec. 31, ----------------------------------------
Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996
====================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.46 $ 9.45 $10.69 $10.86 $ 8.92
Operating ------- ------- ------ ------ ------
Performance: Investment income (loss)--net .......... (.07) (.06) (.01) .01 .13
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... 7.58 1.26 (.81) .72 1.97
------- ------- ------ ------ ------
Total from investment operations ....... 7.51 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 period ......... $ 17.97 $ 10.46 $ 9.45 $10.69 $10.86
======= ======= ====== ====== ======
====================================================================================================================
Total Investment Based on net asset value per share ..... 71.80%++ 13.24% (7.15%) 7.53% 23.87%
Return:** ======= ======= ====== ====== ======
====================================================================================================================
Ratios to Expenses ............................... 1.83%* 2.10% 1.63% 1.53% 1.55%
Average ======= ======= ====== ====== ======
Net Assets: Investment income (loss)--net .......... (1.12%)* (.68%) (.15%) .13% .46%
======= ======= ====== ====== ======
====================================================================================================================
Supplemental Net assets, end of period (in thousands) $12,737 $ 4,239 $4,376 $5,508 $3,083
Data: ======= ======= ====== ====== ======
Portfolio turnover ..................... 125.95% 228.19% 52.73% 63.17% 60.33%
======= ======= ====== ====== ======
====================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Based on average shares outstanding.
++ Aggregate total investment return.
See Notes to Financial Statements.
14 & 15
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
FINANCIAL HIGHLIGHTS (concluded)
<TABLE>
<CAPTION>
Class B
-----------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information Months
provided in the financial statements. Ended For the Year Ended June 30,
Dec. 31, ---------------------------------------------
Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996
=========================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.39 $ 9.28 $ 10.54 $ 10.71 $ 8.84
Operating ------- ------- ------- -------- --------
Performance: Investment loss--net ................... (.13) (.15) (.12) (.10) (.06)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... 7.50 1.26 (.78) .72 2.04
------- ------- ------- -------- --------
Total from investment operations ....... 7.37 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 period ......... $ 17.76 $ 10.39 $ 9.28 $ 10.54 $ 10.71
======= ======= ======= ======== ========
=========================================================================================================================
Total Investment Based on net asset value per share ..... 70.93%++ 12.01% (8.15%) 6.47% 22.57%
Return:** ======= ======= ======= ======== ========
=========================================================================================================================
Ratios to Expenses ............................... 2.88%* 3.16% 2.67% 2.58% 2.61%
Average ======= ======= ======= ======== ========
Net Assets: Investment loss--net ................... (2.13%)* (1.74%) (1.25%) (1.00%) (.66%)
======= ======= ======= ======== ========
=========================================================================================================================
Supplemental Net assets, end of period (in thousands) $59,173 $34,320 $57,424 $111,261 $131,656
Data: ======= ======= ======= ======== ========
Portfolio turnover ..................... 125.95% 228.19% 52.73% 63.17% 60.33%
======= ======= ======= ======== ========
=========================================================================================================================
<CAPTION>
Class C
------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information Months
provided in the financial statements. Ended For the Year Ended June 30,
Dec. 31, ----------------------------------------
Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996
====================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.30 $ 9.25 $10.52 $10.71 $ 8.84
Operating ------- ------- ------ ------ ------
Performance: Investment loss--net ................... (.13) (.15) (.12) (.10) (.05)
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... 7.44 1.25 (.79) .71 2.03
------- ------- ------ ------ ------
Total from investment operations ....... 7.31 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 period ......... $ 17.61 $ 10.30 $ 9.25 $10.52 $10.71
======= ======= ====== ====== ======
====================================================================================================================
Total Investment Based on net asset value per share ..... 70.97%++ 12.08% (8.19%) 6.38% 22.56%
Return:** ======= ======= ====== ====== ======
====================================================================================================================
Ratios to Expenses ............................... 2.88%* 3.17% 2.69% 2.60% 2.63%
Average ======= ======= ====== ====== ======
Net Assets: Investment loss--net ................... (2.15%)* (1.76%) (1.23%) (1.00%) (.64%)
======= ======= ====== ====== ======
====================================================================================================================
Supplemental Net assets, end of period (in thousands) $ 5,587 $ 2,623 $4,312 $5,962 $5,753
Data: ======= ======= ====== ====== ======
Portfolio turnover ..................... 125.95% 228.19% 52.73% 63.17% 60.33%
======= ======= ====== ====== ======
====================================================================================================================
<CAPTION>
Class D
---------------------------------------------------------
For the
The following per share data and ratios Six
have been derived from information Months
provided in the financial statements. Ended For the Year Ended June 30,
Dec. 31, -------------------------------------------
Increase (Decrease) in Net Asset Value: 1999+ 1999+ 1998+ 1997+ 1996
=======================================================================================================================
<C> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period ... $ 10.44 $ 9.41 $ 10.66 $ 10.83 $ 8.91
Operating ------- ------- ------- ------- -------
Performance: Investment income (loss)--net .......... (.08) (.08) (.05) (.02) .02
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net ...................... 7.56 1.25 (.79) .72 2.05
------- ------- ------- ------- -------
Total from investment operations ....... 7.48 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 period ......... $ 17.92 $ 10.44 $ 9.41 $ 10.66 $ 10.83
======= ======= ======= ======= =======
=======================================================================================================================
Total Investment Based on net asset value per share ..... 71.65%++ 12.91% (7.43%) 7.27% 23.50%
Return:** ======= ======= ======= ======= =======
=======================================================================================================================
Ratios to Expenses ............................... 2.10%* 2.36% 1.88% 1.80% 1.83%
Average ======= ======= ======= ======= =======
Net Assets: Investment income (loss)--net .......... (1.35%)* (.92%) (.46%) (.21%) .10%
======= ======= ======= ======= =======
=======================================================================================================================
Supplemental Net assets, end of period (in thousands) $14,233 $ 7,202 $11,026 $19,441 $22,593
Data: ======= ======= ======= ======= =======
Portfolio turnover ..................... 125.95% 228.19% 52.73% 63.17% 60.33%
======= ======= ======= ======= =======
=======================================================================================================================
</TABLE>
* Annualized.
** Total investment returns exclude the effects of sales
charges.
+ Based on average shares outstanding.
++ Amount is less than $.01 per share.
++ Aggregate total investment return.
See Notes to Financial Statements.
16 & 17
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Global SmallCap Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a diversified, open-end management investment
company. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles, which may require the use of
management accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature. The Fund offers four classes of shares under
the Merrill Lynch Select Pricing(SM) System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of shares have identical
voting, dividend, liquidation and other rights and the same terms and
conditions, except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and Class B and
Class C Shares also bear certain expenses related to the distribution of such
shares. Each class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The following is a
summary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities 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 counterparty 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
strategies to seek to increase its return by hedging its portfolio against
adverse movements in the equity, debt and currency markets. Losses may arise due
to changes in the value of the contract or if the counterparty does not perform
under the contract.
o Forward foreign exchange contracts--The Fund is authorized to enter into
forward foreign exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are not entered on the
Fund's records. However, the effect on operations is recorded from the date the
Fund enters into such contracts.
o Foreign currency options and futures--The Fund may also purchase or sell
listed or over-the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures as a short or long hedge against
possible variations in foreign exchange rates. Such transactions may be effected
with respect to hedges on non-US dollar-denominated securities owned by the
Fund, sold by the Fund but not yet delivered, or committed or anticipated to be
purchased by the Fund.
o Options--The Fund is authorized to purchase and write call and put options.
When the Fund writes an option, an amount equal to the premium received by the
Fund is reflected as an asset and an equivalent liability. The amount of the
liability is subsequently marked to market to reflect the current value of the
option written. When a security is purchased or sold through an exercise of an
option, the related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to) the proceeds
of the security sold. When an option expires (or the Fund enters into a closing
transaction), the Fund realizes a gain or loss on the option to the extent of
the premiums received or paid (or gain or loss to the extent the cost of the
closing transactions exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
o Financial futures contracts--The Fund may purchase or sell financial futures
contracts and options on such futures contracts for the purpose of hedging the
market risk on existing securities or the intended purchase of securities.
Futures contracts are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a contract, the
Fund deposits and maintains as collateral such initial margin as required by the
exchange on which the transaction is effected. Pursuant to the contract, the
Fund agrees to receive from or pay to the broker an amount of cash equal to the
daily fluctuation in value of the contract. Such receipts or payments are known
as variation margin and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
(d) Foreign currency transactions--Transactions denominated in foreign
currencies are recorded at the exchange rate prevailing when recognized. Assets
and liabilities denominated in foreign currencies are valued at the exchange
rate at the end of the period. Foreign currency transactions are the result of
settling (realized) or valuing (unrealized) assets or liabilities expressed in
foreign currencies into US dollars. Realized and unrealized gains or losses from
investments include the effects of foreign exchange rates on investments.
(e) Income taxes--It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders.
Therefore, no Federal income tax provision is required. Under the applicable
foreign tax law, a withholding tax may be imposed on interest, dividends, and
capital gains at various rates.
(f) Security transactions and investment income--Security transactions are
recorded on the dates the transactions are entered into (the trade dates).
Dividend income is recorded on the ex-dividend dates. Dividends from foreign
securities where the ex-dividend date may have passed are subsequently recorded
when the Fund has determined the ex- dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified cost basis.
(g) Deferred organization expenses and prepaid registration fees--Deferred
organization expenses are charged to expense on a straight-line basis over a
period not exceeding five years. Prepaid registration fees are charged to
expense as the related shares are issued.
(h) Dividends and distributions--Dividends and distributions paid by the Fund
are recorded on the ex-dividend dates. Distributions in excess of realized
capital gains are due primarily to differing tax treatments for foreign currency
transactions.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Merrill Lynch
Asset Management, L.P. ("MLAM" or the "Investment Adviser"). The general partner
of MLAM is Princeton Services, Inc. ("PSI"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML & Co."), which is the limited partner. The
Fund has also entered into a Distribution Agreement and Distribution Plans with
Merrill Lynch Funds Distributor ("MLFD" or the "Distributor"), a division of
Princeton Funds Distributor, Inc. ("PFD"), which is a wholly-owned subsidiary of
Merrill Lynch Group, Inc.
MLAM is responsible for the management of the Fund's portfolio and provides the
necessary personnel, facilities, equipment and certain other services necessary
to the operations of the Fund. For such services, the Fund pays a monthly fee of
18 & 19
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
.85%, on an annual basis, of the average daily net assets of the Fund. MLAM has
entered into a Sub-Advisory Agreement with Merrill Lynch Asset Management U.K.,
Ltd. ("MLAM U.K."), an affiliate of MLAM, pursuant to which MLAM pays MLAM U.K.
a fee in an amount to be determined from time to time by MLAM and MLAM U.K. but
in no event in excess of the amount that MLAM actually receives. For the six
months ended December 31, 1999, MLAM paid MLAM U.K. a fee of $29,262 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 FeeFee
- --------------------------------------------------------------------------------
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 six months ended December 31, 1999, MLFD earned underwriting discounts
and MLPF&S earned dealer concessions on sales of the Fund's Class A and Class D
Shares as follows:
- --------------------------------------------------------------------------------
MLFD MLPF&S
- --------------------------------------------------------------------------------
Class A .............................. $ -- $ 1
Class D .............................. $ 1,498 $23,858
- --------------------------------------------------------------------------------
For the six months ended December 31, 1999, MLPF&S received contingent deferred
sales charges of $19,606 and $255 relating to transactions in Class B and Class
C Shares, respectively.
In addition, MLPF&S received $28,664 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended December
31, 1999.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of ML & Co., is
the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost. Certain officers
and/or directors of the Fund are officers and/or directors of MLAM, PSI, MLAM
U.K., PFD, FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for the six
months ended December 31, 1999 were $72,976,013 and $71,049,664, respectively.
Net realized gains (losses) for the six months ended December 31, 1999 and net
unrealized gains as of December 31, 1999 were as follows:
- --------------------------------------------------------------------------------
Realized Unrealized
Gains (Losses) Gains
- --------------------------------------------------------------------------------
Investments:
Long-term ............................. $ 14,095,221 $ 30,217,766
Financial futures contracts ........... (231,498) --
------------ ------------
Total investments ....................... 13,863,723 30,217,766
------------ ------------
Currency transactions:
Foreign currency transactions ......... (14,718) 15,689
Forward foreign exchange
contracts ............................. (481,605) --
------------ ------------
Total currency transactions ............. (496,323) 15,689
------------ ------------
Total ................................... $ 13,367,400 $ 30,233,455
============ ============
- --------------------------------------------------------------------------------
As of December 31, 1999, net unrealized appreciation for Federal income tax
purposes aggregated $30,217,766, of which $32,155,852 related to appreciated
securities and $1,938,086 related to depreciated securities. The aggregate cost
of investments at December 31, 1999 for Federal income tax purposes was
$58,233,744.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share transactions
was $7,635,817 and ($30,845,451) for the six months ended December 31, 1999 and
the year ended June 30, 1999, respectively.
Transactions in capital shares for each class were as follows:
- --------------------------------------------------------------------------------
Class A Shares for the Six Months Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 416,289 $ 5,576,483
Shares redeemed .................... (112,771) (1,401,473)
----------- -----------
Net increase ....................... 303,518 $ 4,175,010
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Six Months Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold .............................. 545,768 $ 7,126,014
Automatic conversion of shares ........... (23,272) (275,451)
Shares redeemed .......................... (494,216) (5,776,987)
----------- -----------
Net increase ............................. 28,280 $ 1,073,576
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Six Months Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 181,746 $ 2,491,854
Shares redeemed .................... (119,097) (1,660,204)
----------- -----------
Net increase ....................... 62,649 $ 831,650
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Six Months Dollar
Ended December 31, 1999 Shares Amount
- --------------------------------------------------------------------------------
Shares sold ........................ 172,690 $ 2,485,405
Automatic conversion of shares ..... 23,130 275,451
----------- -----------
Total issued ....................... 195,820 2,760,856
Shares redeemed .................... (91,301) (1,205,275)
----------- -----------
Net increase ....................... 104,519 $ 1,555,581
=========== ===========
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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)
=========== ===========
- --------------------------------------------------------------------------------
5. Commitments:
At December 31, 1999, the Fund had entered into foreign exchange contracts under
which it had agreed to purchase foreign currency with an approximate value of
$644,000.
6. Capital Loss Carryforward:
At June 30, 1999, the Fund had a net capital loss carryforward of approximately
$14,993,000, of which $1,631,000 expires in 2006 and $13,362,000 expires in
2007. This amount will be available to offset like amounts of any future taxable
gains.
20 & 21
<PAGE>
Merrill Lynch Global SmallCap Fund, Inc., December 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Robert C. Doll, 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
Donald Cecil and Edward H. Meyer, Directors of Merrill Lynch Global SmallCap
Fund, Inc. have recently retired. The Fund's Board of Directors wishes Mr. Cecil
and Mr. Meyer well in their retirements.
<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--12/99
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