MERRILL LYNCH
GLOBAL VALUE
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 1999
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 3/31/99
Percent of
Ten Largest Industries Net Assets
Utilities--Electric & Gas 12.0%
Insurance 10.1
Health & Personal Care 9.9
Telecommunications 9.1
Banking 8.7
Food & Household Products 8.6
Electronic Components & Instruments 5.4
Chemicals 4.7
Data Processing &Reproduction 4.4
Leisure & Tourism 4.4
Country of Percent of
Ten Largest Equity Holdings Origin Net Assets
Berkshire Hathaway Inc.
(Class A) United States 5.1%
McKesson HBOC, Inc. United States 5.1
Cadbury Schweppes PLC United Kingdom 4.9
Monsanto Company United States 4.7
Federal National Mortgage
Association United States 4.2
The AES Corporation United States 3.7
Nestle SA (Registered
Shares) Switzerland 3.7
Becton, Dickinson and
Company United States 3.6
Frontier Corporation United States 3.4
Washington Mutual, Inc. United States 3.4
Merrill Lynch Global Value Fund, Inc., March 31, 1999
DEAR SHAREHOLDER
Merrill Lynch Global Value Fund, Inc.'s Class A, Class B, Class C
and Class D Shares had total returns of -2.63%, -2.87%, -2.87% and
- -2.64%, respectively, for the three months ended March 31, 1999,
underperforming the +3.57% total return for the unmanaged Morgan
Stanley Capital International (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.)
The Fund had very poor absolute and relative returns for the first
quarter of 1999. This is attributable to two factors. First, our
stock selection was poor. Each of the analysts working on the Fund
contributes investment ideas from the industries that they cover.
During the past quarter, all of us recommended stocks that have
performed poorly. Typically, if the selections of one or two members
of the portfolio management team are doing poorly, other members of
the team will select stocks that are outperforming by a sufficient
margin to create good overall performance. We expect that the
unlikely event of the entire team's selections performing poorly at
the same time is an anomaly, and will not be repeated over the
longer term.
The other factor affecting the Fund's performance during the March
quarter is the nature of the stocks in which we typically invest. As
we have discussed in past reports to shareholders, we do not invest
in growth companies. On the other hand, we do not invest in deep
cyclical stocks, either. Although such stocks meet the investment
criteria of many value-oriented funds, they do not fit our
definition of value within the context of ML Global Value Fund.
Therefore, during the March quarter, we missed out on whatever
further appreciation was offered by growth stocks as well as the
bounce back experienced by many deep cyclical issues.
However, in our view, the Fund's underperformance over such a short
period of time has little significance. While it would be nice to
outperform our benchmark index each and every quarter, we are
certain that we will not be able to do so. Just as we stressed in
past reports to shareholders that we were not as good as some of our
past performance results implied, we also believe that our
investment acumen is not as poor as our recent results suggest. In
some ways, reviewing quarterly performance results for any fund can
have an unintended impact. It is our belief that quarterly
investment results--positive or negative--tell an investor little
about a portfolio manager's expertise (or lack thereof).
Furthermore, in our view, even a year is not a sufficiently long
time period to gauge investment skill. As a result, we believe that
mutual fund investors need to take a long-term view of investment
performance before evaluating the skill of its management team.
Accordingly, we strive to outperform the MSCI World Index over very
long time periods. For example, over a three-year--five-year period,
we will strive to out-perform the Index, on average, by a 2%
compound annual rate each year.
Significant New Positions
Despite the Fund's disappointing, albeit modest, price declines
during the March quarter, we are very pleased with the changes we
were able to make within the portfolio. We believe that these
changes enhance the Fund's longer-term appreciation potential. More
important, we believe that our new investments have continued to
improve the portfolio's overall quality.
Longer-term shareholders may recall that the Fund's portfolio
turnover has been higher than we anticipated it would be. This is
because we invested in companies that we believed were of reasonable
quality, but their shares were valued like those of below-average
companies. As their share valuations became stretched (their share
prices appreciated and their values increased at a much slower
rate), we were not comfortable maintaining our investments. However,
we view most of our current top 15 positions--which comprise over
55% of the portfolio--as the types of investments that we can hold
for longer time periods, even if their valuations are somewhat
stretched.
For example, if our new key holdings were to appreciate by 20% over
the next year (a rate much higher than the stock market in general
usually appreciates), we would probably not be inclined to sell
them. Many of these companies are currently reasonably valued and we
believe are likely to increase their economic value at 13%-15% per
year for a number of years into the future. If their stock prices
only appreciate by this rate or less, we could be in the envious
position of not having to contemplate selling them at all.
Focus on Two New Positions
We will discuss two of our new large positions in this letter to
shareholders: Becton, Dickinson and Company and The Walt Disney
Company. AT&T Corp. is also a new large holding with very positive
prospects, which we will discuss in our next report to shareholders.
In addition, while not new to the portfolio during the March
quarter, we place our investments in The AES Corporation and
Monsanto Company in the same category. These stocks are relatively
new positions that we believe also offer attractive long-term
appreciation potential. We still view our other major investment
positions favorably, but do not expect them to have as strong growth
prospects as some of our newer holdings.
Becton, Dickinson and Company manufactures a broad line of hospital,
surgical and diagnostic supplies, which it primarily sells to
hospitals. Becton, Dickinson has grown cash flow per share at a 12%
annual rate over the past decade, and the stock outperformed the
Standard & Poor's 500 Index during this period. However, the
company's shares declined by 15% in the early part of 1999 (while
the S&P 500 appreciated approximately 9%), because its December 31
period-end earnings and sales were disappointing. We believe that
this setback is a temporary one. Becton, Dickinson stock is slightly
lower than the average valuations of S&P 500 stocks, and we expect
that the company may be able to grow earnings over the next five
years at a rate that is slightly faster than the pace set over the
past ten years. Becton, Dickinson is the prototypical ML Global
Value Fund stock. However, it has the additional characteristic of
growing earnings at a faster rate than most of our stocks, and this
may allow us to own it for a long time.
We do not expect shares of The Walt Disney Company to perform well
in the short term. The company is suffering from poor earnings,
which do not appear to be likely to rebound meaningfully in the near
term. However, Disney has been a company that has generally
responded well to tough times, which leads us to believe that it has
a solid management team as well as a basically sound business model.
In addition--and probably most important--we remain believers in
the value of a brand name. This view may be held as old-fashioned,
but we believe that the Disney brand will continue to have a large
and growing economic value. Disney is aggressively working on an
Internet strategy. The company is also addressing problems in its
creative content division (where all of its problems lie) while it
continues to develop the value of the Disney brand name.
Important Development in a
Large Holding
In this letter to shareholders, we also intended to highlight our
investment in McKesson HBOC, Inc. We are discussing McKesson, but
for reasons that are very different from what we had anticipated.
The company is a newly combined entity of McKesson, which had been a
highly successful drug distribution business, and HBOC, the leader
in information systems for the healthcare sector. Drug distribution
is a low-margin business (that is, each dollar of sales generates
only a small profit), with reasonable growth prospects. In contrast,
healthcare information systems has been a high-margin, high-growth
industry. Both companies were generally very well regarded before
their January 1999 merger. During the March quarter, McKesson HBOC
had seen its stock price decline dramatically following very poor
Merrill Lynch Global Value Fund, Inc., March 31, 1999
earnings reports by some of HBOC's competitors. We established a
position in McKesson at a valuation that was less than 22 times the
most cautious earnings estimate for next year. We thought that we
were getting the best of both worlds: a company that would increase
its economic value at an above-average rate, but valued as though it
was a below-average company. Unfortunately, on April 28, 1999, the
company announced that an audit had uncovered that HBOC's revenues
had been overstated. This announcement was particularly surprising,
since the company's chief executive officer had recently assured
investors that all businesses were on track and that he was
confident that the company would earn $3.00 per share in fiscal year
2000. With the decline in McKesson HBOC's stock price, by April
month-end it was no longer one of our largest holdings.
In Conclusion
We thank you for your investment in Merrill Lynch Global Value Fund,
Inc., and we look forward to reviewing our outlook and strategy
again with you in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Stephen I. Silverman)
Stephen I. Silverman
Senior Vice President and
Portfolio Manager
May 14, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Global Value Fund,
Inc.'s Board of Directors. We are pleased to announce that Terry K.
Glenn has been elected President and Director of the Fund. Mr. Glenn
has held the position of Executive Vice President of MLAM since
1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
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 +4.23% -2.63% +56.27%
ML Global Value Fund, Inc. Class B Shares +3.19 -2.87 +52.49
ML Global Value Fund, Inc. Class C Shares +3.17 -2.87 +52.47
ML Global Value Fund, Inc. Class D Shares +4.05 -2.64 +55.35
<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 3/31/99 + 4.23% - 1.25%
Inception (11/01/96) through 3/31/99 +20.34 +17.68
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/99 + 3.19% - 0.54%
Inception (11/01/96) through 3/31/99 +19.12 +18.47
[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 3/31/99 + 3.17% + 2.24%
Inception (11/01/96) through 3/31/99 +19.12 +19.12
[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 3/31/99 + 4.05% - 1.42%
Inception (11/01/96) through 3/31/99 +20.05 +17.39
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Global Value Fund, Inc., March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
NORTH Shares Percent of
AMERICA Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Canada Transportation-- 1,521,600 Canadian National Railway
Road & Rail Company $ 74,424,143 $ 84,639,000 2.8%
Total Investments in Canada 74,424,143 84,639,000 2.8
United Banking 2,460,400 Washington Mutual, Inc. 94,374,063 100,568,850 3.4
States
Chemicals 3,095,400 Monsanto Company 127,705,641 142,194,937 4.7
Data Processing & 1,160,000 Hewlett-Packard Company 94,509,260 78,662,500 2.6
Reproduction
Electronic 2,070,700 Lattice Semiconductor
Components & Corporation 104,996,064 94,216,850 3.1
Instruments
Financial Services 1,827,400 Federal National Mortgage
Association 79,099,130 126,547,450 4.2
Health & Personal Care 2,860,300 Becton, Dickinson and Company 102,202,839 109,585,244 3.6
575,700 Guidant Corporation 30,494,089 34,829,850 1.2
2,310,600 McKesson HBOC, Inc. 151,253,322 152,499,600 5.1
-------------- -------------- ------
283,950,250 296,914,694 9.9
Insurance 2,160 Berkshire Hathaway Inc.
(Class A) 133,124,596 154,224,000 5.1
Leisure & Tourism 3,155,200 The Walt Disney Company 99,888,740 98,205,600 3.3
Telecommunications 1,206,400 AT&T Corp. 103,383,775 96,285,800 3.2
1,991,000 Frontier Corporation 62,391,523 103,283,125 3.4
-------------- -------------- ------
165,775,298 199,568,925 6.6
Utilities-- 3,007,400 The AES Corporation 97,611,738 112,025,650 3.7
Electric & Gas 1,225,950 Columbia Energy Group 63,217,999 64,055,887 2.2
2,095,500 K N Energy, Inc. 78,302,281 41,779,031 1.4
1,830,000 Unicom Corporation 57,049,442 66,909,375 2.2
-------------- -------------- ------
296,181,460 284,769,943 9.5
Total Investments in the
United States 1,479,604,502 1,575,873,749 52.4
Total Investments in
North America 1,554,028,645 1,660,512,749 55.2
PACIFIC
BASIN
Australia Leisure & Tourism 11,800,652 Village Roadshow Limited 'A'
(Preferred) 30,727,549 19,390,831 0.7
360,000 Village Roadshow Limited
(Convertible Preferred) 18,000,000 12,240,000 0.4
-------------- -------------- ------
48,727,549 31,630,831 1.1
Real Estate 3,506,367 Lend Lease Corporation
Limited 33,093,970 44,522,137 1.5
Total Investments in Australia 81,821,519 76,152,968 2.6
Japan Appliances & Household 953,000 Matsushita Electric Industrial
Durables Company, Ltd. 17,443,427 18,615,170 0.6
400,000 Sony Corporation 36,894,499 37,037,037 1.2
-------------- -------------- ------
54,337,926 55,652,207 1.8
Construction & Housing 1,105,602 Chudenko Corporation 25,974,605 22,063,426 0.7
788,000 Kinden Corporation 9,663,415 11,247,624 0.4
-------------- -------------- ------
35,638,020 33,311,050 1.1
Data Processing & 2,166,000 Canon, Inc. 51,626,097 53,664,637 1.8
Reproduction
Electronic 1,276,000 Murata Manufacturing
Components & Co., Ltd. 39,076,429 67,975,647 2.3
Instruments
Insurance 3,438,000 The Dai-Tokyo Fire and
Marine Insurance Co., Ltd. 13,781,868 12,297,260 0.4
784,000 The Nichido Fire & Marine
Insurance Co., Ltd. 4,117,378 4,600,846 0.2
4,411,000 The Sumitomo Marine & Fire
Insurance Co., Ltd. 30,544,736 28,272,772 0.9
850,000 The Tokio Marine & Fire
Insurance Co., Ltd. 10,618,405 9,710,384 0.3
-------------- -------------- ------
59,062,387 54,881,262 1.8
Miscellaneous Materials & 10,000 Toyo Seikan Kaisha, Ltd. 106,000 216,049 0.0
Commodities
Total Investments in Japan 239,846,859 265,700,852 8.8
Total Investments in the
Pacific Basin 321,668,378 341,853,820 11.4
WESTERN
EUROPE
Denmark Banking 716,200 Den Danske Bank Group 95,868,098 75,322,490 2.5
Total Investments in Denmark 95,868,098 75,322,490 2.5
Germany Insurance 129,700 Hannover Rueckversicherungs-AG 14,461,879 10,934,021 0.3
Transportation-- 3,120,200 Deutsche Lufthansa AG
Airlines (Registered Shares) 54,760,129 68,289,321 2.3
Utilities-- 3,621,300 Bewag AG 79,992,542 74,364,120 2.5
Electric & Gas
Total Investments in Germany 149,214,550 153,587,462 5.1
Ireland Banking 4,800,000 Allied Irish Banks PLC 41,920,503 82,740,096 2.8
9,500 Allied Irish Banks PLC (ADR)* 482,133 983,250 0.0
Total Investments in Ireland 42,402,636 83,723,346 2.8
</TABLE>
Merrill Lynch Global Value Fund, Inc., March 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
WESTERN EUROPE Shares Percent of
(concluded) Industries Held Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Italy Telecommunications 3,628,500 Telecom Italia SpA $ 25,819,445 $ 21,569,255 0.7%
4,970,000 Telecom Italia SpA 47,106,581 52,856,308 1.8
Total Investments in Italy 72,926,026 74,425,563 2.5
Switzerland Food & Household 60,800 Nestle SA (Registered Shares) 67,899,128 110,736,386 3.7
Products
Total Investments in
Switzerland 67,899,128 110,736,386 3.7
United Beverages 3,094,078 Diageo PLC 27,671,805 34,757,140 1.1
Kingdom
Food & Household 10,100,000 Cadbury Schweppes PLC 91,146,039 146,549,586 4.9
Products
Insurance 6,527,900 Allied Zurich PLC 97,252,574 87,975,856 2.9
Total Investments in the
United Kingdom 216,070,418 269,282,582 8.9
Total Investments in
Western Europe 644,380,856 767,077,829 25.5
SHORT-TERM Face
SECURITIES Amount Issue
Commercial Paper** $110,000,000 General Electric Capital Corp.,
5.08% due 4/01/1999 110,000,000 110,000,000 3.6
92,090,000 General Motors Acceptance Corp.,
5.13% due 4/01/1999 92,090,000 92,090,000 3.1
Total Investment in
Short-Term Securities 202,090,000 202,090,000 6.7
OPTIONS Nominal Value Premiums
PURCHASED Covered by Options Paid
Currency Put 176,640,000 Japanese Yen, expiring
Options Purchased August 1999 at YEN 150 7,604,352 317,952 0.0
Total Options Purchased 7,604,352 317,952 0.0
Total Investments 2,729,772,231 2,971,852,350 98.8
OPTIONS Premiums
WRITTEN Received
Call Options 1,118,988 Federal National Mortgage
Written Association, expiring
April 1999 at US$79.20 (2,450,584) (44,760) 0.0
Total Options Written (2,450,584) (44,760) 0.0
Total Investments, Net of Options Written $ 2,727,321,647 2,971,807,590 98.8
===============
Unrealized Appreciation on Forward Foreign Exchange Contracts--Net*** 15,297,167 0.5
Other Assets Less Liabilities 21,581,692 0.7
-------------- ------
Net Assets $3,008,686,449 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $216,907,052
and 16,292,547 shares outstanding $ 13.31
==============
Class B--Based on net assets of $2,011,068,926
and 152,103,679 shares outstanding $ 13.22
==============
Class C--Based on net assets of $353,717,873
and 26,751,916 shares outstanding $ 13.22
==============
Class D--Based on net assets of $426,992,598
and 32,126,553 shares outstanding $ 13.29
==============
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rates
shown reflect the discount rates paid at the time of purchase by the
Fund.
***Forward foreign exchange contracts as of March 31, 1999 were as
follows:
Foreign Expiration Unrealized
Currency Sold Date Appreciation
Chf 43,726,686 September 1999 $ 3,237,912
Dkr 482,520,640 September 1999 6,052,508
POUND STERLING 99,850,823 September 1999 3,943,109
YEN 11,024,865,351 September 1999 2,063,638
------------
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$372,804,865) $ 15,297,167
============
</TABLE>
Merrill Lynch Global Value Fund, Inc., March 31, 1999
PORTFOLIO CHANGES
For the Quarter Ended March 31, 1999
Additions
AT&T Corp.
Becton, Dickinson and Company
Guidant Corporation
Hannover Rueckversicherungs-AG
Hewlett-Packard Company
McKesson HBOC, Inc.
Telecom Italia SpA
The Walt Disney Company
Deletions
ADC Telecommunications, Inc.
Alleanza Assicurazioni
Baxter International Inc.
Berkshire Hathaway Inc. (Class B)
Groupe Danone SA
Groupe Danone SA (ADR)
Horace Mann Educators Corporation
MCI WorldCom Inc.
Mattel, Inc.
National Power PLC
Sara Lee Corporation
Schlumberger Limited
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland M. Machold, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Stephen I. Silverman, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, Secretary
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Global Value Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Directors in wishing Mr. Richard and Mr.
Harvey well in their retirements.
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
