MERRILL LYNCH
GLOBAL VALUE
FUND, INC.
FUND LOGO
Quarterly Report
September 30, 1998
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 Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH GLOBAL VALUE FUND, INC.
Worldwide
Investments
As of 9/30/98
Percent of
Ten Largest Industries Net Assets
Utilities--Electric & Gas 22.0%
Food & Household Products 11.4
Beverages 8.6
Insurance 8.3
Telecommunications 8.0
Financial Services 6.3
Banking 5.6
Electronic Components/Instruments 3.7
Energy Equipment & Services 3.4
Health & Personal Care 2.7
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Cadbury Schweppes PLC United Kingdom 5.2%
General Re Corporation United States 5.0
Nestle S.A. (Registered) Switzerland 4.8
Federal National Mortgage
Association United States 4.6
MCI WorldCom, Inc. United States 4.6
AES Corporation United States 4.4
Sara Lee Corporation United States 4.1
Diageo PLC United Kingdom 3.4
Berliner Kraft-und Licht
(Bewag) AG Germany 3.4
Schlumberger Ltd. United States 3.4
Merrill Lynch Global Value Fund, Inc., September 30, 1998
DEAR SHAREHOLDER
Merrill Lynch Global Value Fund, Inc.'s Class A, Class B, Class C
and Class D Shares had total returns of -6.42%, -6.69%, -6.69% and
- -6.50%, respectively, for the quarter ended September 30, 1998,
compared to a -11.99% total return for the unmanaged Morgan Stanley
Capital International (MSCI) World Index. For the first nine months
of 1998, the Fund outperformed the MSCI World Index, with Class A,
Class B, Class C and Class D Shares providing total returns of
+12.02%, +11.07%, +11.08% and +11.74%, respectively, compared to a
+2.66% total return for the Index. Please refer to "Perspective on
Relative Performance" beginning on page 3 of this report to
shareholders for an important discussion of the Fund's performance
results compared to the MSCI World Index. (Fund results 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.)
Investor Sentiment Shifts Abruptly
In past reports to shareholders, we have cautioned that the stock
market returns experienced over the past few years had been leading
investors to develop inflated expectations for future returns.
Unfortunately, this view was given credence during the September
quarter. Almost overnight, the investment outlook has gone from a
widespread, unabated bull market to a near-universal bear market,
such as the one experienced in Japan during much of the past nine
years and, more recently, in all of the emerging markets. Our view
of this phenomenon is that the investment outlook was not as
positive as had been reflected in stock prices, nor is it as
uniformly bleak as recent share price declines suggested. Indeed,
after the September quarter's close, stock markets rallied in
response to the US Federal Reserve Board's surprise easing in
monetary policy. In addition, the Japanese yen experienced an
unprecedented large gain relative to the US dollar.
It was surprising to us that most of the major stock markets had
been ignoring the economic turmoil that has occurred in much of the
world for over a year. However, just as we had been of the opinion
that economic conditions were not strong enough to support a bull
market indefinitely, we do not believe now that we are entering into
a devastating and long-lasting economic depression and bear market.
World stock markets are adjusting to diminished world growth
prospects, and are taking account of the significant problems in
emerging economies, Japan, and, more recently, hedge funds and the
firms that financed them.
In past reports to shareholders, we articulated our view of the
risks associated with the stock market conditions that had prevailed
throughout most of 1998. First, stock valuations had reached levels
that were very high by historical standards, especially in the
United States and Europe. Second, the economic crises experienced in
the world's emerging economies, coupled with the economic malaise in
Japan, do not create an environment that is conducive for US and
European companies to achieve levels of profitability and earnings
growth that had been reflected in their stocks' high valuations.
Third, many stock markets were achieving unprecedented high returns,
and these returns far exceeded the increase in economic value that
corporations were achieving. We believed that this situation could
not--and probably should not--have continued indefinitely. With
the recent decline in stock prices, we are now more confident that
we can find stocks that are worth more than their current prices.
Investment Strategy Unchanged
Typically, we strive to keep the Fund as fully invested as possible
in common stocks. One of our operating principles is that we believe
it is a good idea to limit the number of investment decisions (and
corresponding actions) that we must make. We have found that
excessive investment activity is not a sensible approach for us. For
example, we would not sell part of a position simply because we
believed that the stock had "gotten ahead of itself." We believe
that there is nothing wrong with owning shares in a well-run company
that is in a good business (and is in the process of becoming a
better company), as long as its stock valuation does not become
extremely high. Put simply, if we believe that a company represents
a reasonable investment, we will maintain our position, even if we
think that its shares are fairly valued. In our view, there is
nothing wrong with owning shares in appropriately valued companies.
Accordingly, the Fund's portfolio is not dominated by undervalued
stocks.
The attraction of volatile market conditions is that it creates
investment opportunities. Over the course of the past few months, we
made two purchases that as of September 30, 1998 were among top ten
holdings: Sara Lee Corporation and AES Corporation. More recently,
we have identified several potential investments that could
eventually become large positions. However, we have more investment
ideas than cash reserves available to make new investments at this
time. Since we remain positive on our current investments--and
since we are not inclined to implement too many ideas in the near
term--we are taking our time studying these investment candidates.
There is another reason why we do not want to move too quickly in
establishing new positions. Currently, it appears that there are
more risks to the financial system than we have seen before. We
should note that this view is not based on any special knowledge of
fixed-income hedge fund investing and how these funds are financed.
Our concerns focus on the likelihood that other financial entities
that are much larger and more important to world financial stability
than hedge funds own positions similar to hedge funds. These
positions cannot be liquidated in the current environment. These
potential stresses to the financial system - coupled with the poor
economic state of affairs in many emerging countries and Japan (with
its recession, along with banking and pension funding problems) -
lead us to be more cautious than usual.
However, despite the near-term weaknesses in the financial system,
we are optimistic that the current difficulties will be overcome.
Stock market investing is for those who are optimistic about the
future. Although we are concerned about the present and are still
not entirely comfortable with the stock market's overall valuations,
we remain confident that the stocks in the Fund's portfolio will, in
the long run, be worth more than they are today. We expect the
companies in the Fund's portfolio to increase their worth in the
years ahead, and we believe that their shares are not overvalued
now.
Perspective on Relative
Performance
Given our style of portfolio management, we expect that the Fund
would tend to outperform stocks in general during periods of
declining markets while almost keeping pace during periods of
buoyant stock prices. During the recent period of stock market
declines, the Fund's net asset values declined less, but
dramatically outperformed relevant unmanaged indexes and
competitors. To our surprise, the Fund has outperformed even when
share prices were generally rising. Although we are pleased with
this strong relative performance, we want to caution our
shareholders that they should not expect us to consistently repeat
these results. In our view, good relative performance would be
outperforming the unmanaged MSCI World Index by about two percentage
points a year.
Merrill Lynch Global Value Fund, Inc., September 30, 1998
For the nine months ended September 30, 1998, the Fund's Class A
Shares were 9.36 percentage points ahead of the MSCI World Index, on
top of an 8.25 percentage point outperformance for 1997. As much as
we would like to repeat these results in the future, this level of
outperformance is not sustainable. We cannot stress strongly enough
to shareholders that you should not expect the level of
outperformance that we achieved in 1997 and 1998 to continue in the
future. Nonetheless, we believe that our investment strategy will
provide consistent positive investment returns over the long term,
since we believe that stocks will provide positive real returns and
that our approach to stock market investing is sufficiently sound so
that we can continue to do well.
In Conclusion
We thank you for your continued investment in Merrill Lynch Global
Value Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our upcoming annual report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and
Portfolio Manager
November 11, 1998
PERFORMANCE DATA
About Fund
Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* 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.
* 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.)
* 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.
* 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.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Global Value Fund, Inc. Class A Shares +13.68% -6.42% +41.45%
ML Global Value Fund, Inc. Class B Shares +12.51 -6.69 +38.66
ML Global Value Fund, Inc. Class C Shares +12.52 -6.69 +38.67
ML Global Value Fund, Inc. Class D Shares +13.39 -6.50 +40.70
<FN>
*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 commenced operations on 11/01/96.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/98 +13.68% + 7.71%
Inception (11/01/96) through 9/30/98 +19.88 +16.55
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/98 +12.51% + 8.51%
Inception (11/01/96) through 9/30/98 +18.64 +17.29
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/98 +12.52% +11.52%
Inception (11/01/96) through 9/30/98 +18.64 +18.64
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 9/30/98 +13.39% + 7.44%
Inception (11/01/96) through 9/30/98 +19.55 +16.22
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Global Value Fund, Inc., September 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
NORTH Percent of
AMERICA Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Transportation-- 1,521,600 Canadian National Railway Company $ 74,424,143 $ 67,901,400 2.7%
Road & Rail
Total Investments in Canada 74,424,143 67,901,400 2.7
United Electronic 2,070,700 Lattice Semiconductor Corporation 104,996,064 51,249,825 2.0
States Components/
Instruments
Energy Equipment 1,716,000 Schlumberger Ltd. 130,814,706 86,336,250 3.4
& Services
Financial Services 1,827,400 Federal National Mortgage Association 79,099,130 117,410,450 4.6
Food & Household 1,905,000 Sara Lee Corporation 102,969,085 102,870,000 4.1
Products
Health & 1,144,000 Baxter International, Inc. 61,537,393 68,068,000 2.7
Personal Care
Insurance 617,300 General Re Corporation 133,157,732 125,311,900 5.0
1,380,000 Horace Mann Educators Corp. 25,535,782 41,400,000 1.6
-------------- -------------- ------
158,693,514 166,711,900 6.6
Merchandising 1,656,100 American Stores Company 41,461,019 53,305,719 2.1
Recreation/Other 923,800 Mattel, Inc. 26,450,091 25,866,400 1.0
Consumer Goods
Telecommunications 775,200 ADC Telecommunications, Inc. 20,548,965 16,327,650 0.6
2,550,000 Frontier Corporation 81,196,512 69,806,250 2.8
2,361,514 MCI WorldCom, Inc. 85,053,372 115,418,997 4.6
-------------- -------------- ------
186,798,849 201,552,897 8.0
Utilities-- 3,007,400 AES Corporation 97,611,738 111,461,762 4.4
Electric & Gas 1,225,950 Columbia Energy Group 63,217,999 71,871,319 2.8
2,002,100 Houston Industries Inc. 45,203,722 62,315,362 2.5
1,397,000 K N Energy, Inc. 78,302,281 71,596,250 2.8
1,830,000 Unicom Corporation 57,049,442 68,396,250 2.7
-------------- -------------- ------
341,385,182 385,640,943 15.2
Total Investments in the
United States 1,234,205,033 1,259,012,384 49.7
Total Investments in North America 1,308,629,176 1,326,913,784 52.4
PACIFIC
BASIN
Australia Leisure & Tourism 360,000 Village Roadshow Limited
(Convertible Preferred) 18,000,000 14,220,000 0.6
11,800,652 Village Roadshow Limited
(Preferred)(Class A) 30,727,549 15,713,158 0.6
-------------- -------------- ------
48,727,549 29,933,158 1.2
Real Estate 1,729,808 Lend Lease Corporation Ltd. 32,485,526 36,853,213 1.4
Total Investments in Australia 81,213,075 66,786,371 2.6
Japan Appliances 953,000 Matsushita Electric Industrial
& Household Co., Ltd. 17,443,427 12,988,135 0.5
Durables 400,000 Sony Corporation 36,894,499 27,889,207 1.1
-------------- -------------- ------
54,337,926 40,877,342 1.6
Construction 1,073,400 Chudenko Corporation 25,974,605 20,819,749 0.8
& Housing 788,000 Kinden Corporation 9,663,415 8,794,152 0.4
-------------- -------------- ------
35,638,020 29,613,901 1.2
Data Processing & 2,166,000 Canon Inc. 51,626,097 44,080,670 1.7
Reproduction
Electronic 1,276,000 Murata Manufacturing Company, Ltd. 39,076,429 43,217,692 1.7
Components/
Instruments
Insurance 3,376,000 Dai-Tokyo Fire & Marine Insurance
Co., Ltd. 13,600,046 9,623,745 0.4
784,000 Nichido Fire & Marine Insurance
Co., Ltd. 4,117,378 3,461,788 0.1
4,411,000 Sumitomo Marine & Fire Insurance
Co., Ltd. 30,544,736 21,226,986 0.9
850,000 Tokio Marine & Fire Insurance
Co., Ltd. 10,618,405 7,618,838 0.3
-------------- -------------- ------
58,880,565 41,931,357 1.7
Miscellaneous-- 10,000 Toyo Seikan Kaisha, Ltd. 106,000 130,409 0.0
Materials
& Commodities
Total Investments in Japan 239,665,037 199,851,371 7.9
Total Investments in the
Pacific Basin 320,878,112 266,637,742 10.5
WESTERN
EUROPE
Denmark Banking 622,200 Den Danske Bank Group 83,576,491 70,520,897 2.8
Total Investments in Denmark 83,576,491 70,520,897 2.8
France Food & Household 209,300 Groupe Danone S.A. 30,175,687 55,004,264 2.1
Products 179,300 Groupe Danone S.A. (ADR)* 5,558,300 9,379,631 0.4
Total Investments in France 35,733,987 64,383,895 2.5
Germany Transportation 3,120,200 Lufthansa AG 54,760,129 61,675,331 2.5
--Airlines
Utilities-- 1,810,650 Berliner Kraft-und Licht (Bewag) AG 79,992,542 86,954,569 3.4
Electric & Gas
Total Investments in Germany 134,752,671 148,629,900 5.9
Ireland Banking 4,800,000 Allied Irish Banks PLC 41,920,503 71,197,583 2.8
9,500 Allied Irish Banks PLC (ADR)* 482,133 835,406 0.0
Total Investments in Ireland 42,402,636 72,032,989 2.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN EUROPE Percent of
(concluded) Industries Shares Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Netherlands Financial 961,700 ING Groep N.V. $ 40,767,624 $ 43,321,659 1.7%
Services
Total Investments in the
Netherlands 40,767,624 43,321,659 1.7
Switzerland Food & 60,800 Nestle S.A. (Registered) 67,899,128 120,993,713 4.8
Household
Products
Total Investments in Switzerland 67,899,128 120,993,713 4.8
United Beverages 10,100,000 Cadbury Schweppes PLC 91,146,039 130,666,084 5.2
Kingdom 9,174,278 Diageo PLC 82,325,988 87,226,099 3.4
-------------- -------------- ------
173,472,027 217,892,183 8.6
Utilities-- 9,449,573 National Power PLC 89,490,280 85,993,080 3.4
Electric & Gas
Total Investments in the
United Kingdom 262,962,307 303,885,263 12.0
Total Investments in Western
Europe 668,094,844 823,768,316 32.5
SHORT-TERM Face
SECURITIES Amount Issue
Commercial $114,229,000 General Electric Capital Corp.,
Paper** 5.85% due 10/01/1998 114,229,000 114,229,000 4.5
Total Investment in Short-Term
Securities 114,229,000 114,229,000 4.5
OPTIONS Nominal Value Premiums
PURCHASED Covered by Options Paid
Currency 83,360,000 Japanese Yen, expiring December 1998
Put Options at YEN 130 2,463,288 4,268,032 0.2
Purchased 176,640,000 Japanese Yen, expiring August 1999 at
YEN 150 7,604,352 2,941,056 0.1
Total Options Purchased 10,067,640 7,209,088 0.3
Total Investments 2,421,898,772 2,538,757,930 100.2
OPTIONS Premiums
WRITTEN Received
Call Options 185,000 Federal National Mortgage
Written Association, expiring March 1999
at $79.20 (402,930) (321,900) (0.0)
Total Options Written (402,930) (321,900) (0.0)
Total Investments, Net of Options Written $2,421,495,842 2,538,436,030 100.2
==============
Unrealized Depreciation on Forward Foreign Exchange Contracts++ (1,015,501) (0.1)
Liabilities in Excess of Other Assets (3,345,646) (0.1)
-------------- ------
Net Assets $2,534,074,883 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $167,188,247
and 12,882,710 shares outstanding $ 12.98
==============
Class B--Based on net assets of $1,691,070,598
and 131,668,679 shares outstanding $ 12.84
==============
Class C--Based on net assets of $316,631,263
and 24,656,303 shares outstanding $ 12.84
==============
Class D--Based on net assets of $359,184,775
and 27,747,367 shares outstanding $ 12.94
==============
<FN>
*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.
++Forward foreign exchange contracts as of September 30, 1998 were
as follows:
Unrealized
Foreign Expiration Appreciation
Currency Purchased Date (Depreciation)
Chf 71,861,467 December 1998 $ 4,242,697
Frf 337,119,697 December 1998 3,216,100
Pound Sterling 933,760 December 1998 45,073
Lit 97,882,627,500 October 1998 4,368,751
Nlg 234,470,221 December 1998 6,465,023
YEN 5,282,983,031 December 1998 944,285
Total (US$ Commitment--$318,369,554) 19,281,929
------------
Foreign Currency Sold
Chf 115,955,352 December 1998 (3,684,073)
Dkr 482,520,640 December 1998 (4,621,137)
Frf 337,119,697 December 1998 (4,274,856)
Pound Sterling 119,925,515 December 1998 (7,547,082)
Lit 97,882,627,500 October 1998 (2,541,662)
Nlg 234,470,221 December 1998 (7,299,920)
YEN 16,307,848,382 December 1998 9,671,300
Total (US$ Commitment--$708,636,403) (20,297,430)
------------
Total Unrealized Depreciation on Forward Foreign
Exchange Contracts--Net $ (1,015,501)
============
</TABLE>
Merrill Lynch Global Value Fund, Inc., September 30, 1998
PORTFOLIO CHANGES
For the Quarter Ended September 30, 1998
Additions
AES Corporation
Den Danske Bank Group
Mattel, Inc.
Sara Lee Corporation
Deletions
Morgan (J.P.) & Co., Inc.
Novartis AG (Registered)
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Executive Vice President
Stephen I. Silverman, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Barbara G. Fraser, 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
