MERRILL
LYNCH
SPECIAL
VALUE
FUND, INC.
FUND LOGO
Annual Report March 31, 1994
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.
Merrill Lynch
Special Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH SPECIAL VALUE FUND, INC.
DEAR SHAREHOLDER
Inflationary expectations changed sharply during the March quarter.
Following better-than-expected economic results, Federal Reserve
Board Chairman Alan Greenspan indicated in Congressional testimony
in January that continued strong expansion of the economy would lead
the central bank to tighten monetary policy in an effort to control
inflation. On February 4, 1994, the central bank broke with
tradition and publicly announced a modest 25 basis point (0.25%)
increase in short-term interest rates. At the March 22 meeting of
the Federal Open Market Committee, the Federal Reserve Board again
raised the Federal Funds rate by 25 basis points, and also announced
the increase.
<PAGE>
Rather than view the Federal Reserve Board's first tightening move
as a preemptive strike against inflation, fixed-income investors
focused on Chairman Greenspan's implicit promise of further
tightening should the rate of inflation accelerate, and bond prices
declined sharply. The setback in the bond market was also reflected
in greater stock market volatility. While the second increase in the
Federal Funds rate was less of a surprise, investors remained
concerned that interest rates would trend upward sharply. As a
result, stock and bond prices continued to decline through the end
of March. The volatility in the US capital markets was mirrored in
international markets. Political and economic developments, along
with concerns of heightened global inflationary pressures, led to a
sell-off in most capital markets, especially the emerging markets
that had appreciated strongly in 1993.
In the weeks ahead, investors will continue to gauge the pace of the
economic expansion and watch for signs of an overheating economy. At
this time, there is little evidence that the rate of inflation will
increase rapidly. Therefore, although the secular long-term trend
toward lower interest rates may be over, it is not yet certain
whether the pace of economic activity will accelerate to the point
where significant Federal Reserve Board tightening will be necessary
to contain inflation.
Portfolio Matters
In the March quarter, Merrill Lynch Special Value Fund, Inc.
outperformed the unmanaged Russell 2000 Index. The Fund's Class A
and Class B Shares returned +1.40% and +1.18%, respectively, while
the Russell 2000 Index total return was -2.65%. (Complete
performance information, including average annual total returns, can
be found on pages 4, 5, and 6 of this report to shareholders.)
During the three-month period ended March 31, 1994, the Fund's
performance benefited from its positions in the retail and
technology industries. Notable in order of their positive
contributions to the portfolio's total return were Input/Output,
Inc. (up 61%), Grossman's, Inc. (up 41%) and Western Digital Corp.
(up 31%).
We added Input/Output, Inc., a maker of sophisticated seismic data
acquisition equipment, to the Fund's top ten holdings in December of
last year, as we discussed in our last report to shareholders. The
stock benefited from strong earnings gains and a widening
recognition of its strong competitive position in the growing "3-D"
seismic marketplace. Since the stock more than doubled over the
course of about three months, the Fund eliminated its holding and,
following a 20% price decline, re-established a modest position in
the company.
<PAGE>
Grossman's, Inc., also discussed in our most recent shareholder
letter, benefited from an improved financial situation and a
turnaround in comparable-store sales. The stock became one of the
Fund's ten largest holdings (2.3% of net assets) during the quarter
and is attractive both for its asset value and earnings turnaround
potential, in our opinion.
Western Digital Corp., a maker of computer disk drives, is
enjoying a dramatic improvement in its earnings and financial
condition. Supported by a restructured balance sheet and strong
demand for its products, the company recently reported surprisingly
strong earnings and heavy order rates for future production.
The Fund's performance was hindered by its holdings in the
healthcare sector. Continued concerns over potential government-
imposed changes in healthcare and mounting evidence of pricing
pressures on pharmaceuticals hurt many stocks in the industry.
We continue to believe that periodic declines in healthcare stocks
offer opportunities to acquire growth companies at attractive prices.
During the March quarter, the Fund bought shares in 24 new holdings
and added to positions in 26 existing investments. Purchases spanned
a wide variety of industries. Sectors receiving emphasis included
financial services and healthcare. The Fund added to its position in
insurance stocks. Holdings in Transnational Re Corp. and its corporate
parent Phoenix Re Corp. increased substantially. If taken together,
the positions would represent one of the Fund's ten largest holdings.
The stocks are modestly priced in relation to their book values and
expected earnings. We expect continued strength in reinsurance pricing
in the wake of recent earthquake losses in California. The Fund also
added shares of Security-Connecticut Corp., a life-insurer recently
spun-off from Lincoln National Corporation. Security-Connecticut sells
far below book value per share and at slightly over seven times our
estimate of this year's earnings per share. We expect the company's
profits to grow moderately and believe the stock could achieve a higher
price/earnings multiple.
During the March quarter, Charter One Financial, Inc. became the
Fund's largest holding by virtue of substantial additions to the
existing position. The Ohio-based savings and loan has highly
experienced and successful management with a reputation for growing
earnings and making successful acquisitions in its home market. The
company operates efficiently, is well capitalized, and its asset
quality is high. Despite the company's strong record, the stock is
among the most inexpensive bank and savings and loan stocks that we
measure in terms of price/book value and price/earnings ratios.
<PAGE>
The Fund eliminated holdings in 15 securities. By far the majority
of sales was motivated by stocks appreciating to the Fund's price
objectives. Concerns about companies' operating results motivated a
small number of sales. The Fund reduced its holdings in 21
companies. Almost all of these sales were motivated by the stocks
appreciating to less-attractive valuation levels. In addition to
Input/Output, Inc., the most significant reductions were in Beverly
Enterprises, Inc., Community Psychiatric Centers and BE Aerospace,
Inc.
Cash reserves fluctuated during the March quarter as a result of
shareholders' net inflows and the Fund's purchases and sales of
securities. During most of the quarter, the Fund increased its cash
reserves through receipt of subscriptions and sales of securities.
In the period of stock market weakness experienced late in the March
quarter, the Fund increased its purchase activity and decreased its
sales of securities so that cash reserves declined despite continued
net subscription inflows. Cash reserves were 26.0% of the portfolio
at the end of the March quarter, compared to 16.9% at December
quarter-end. Including cash reserves, we estimated that the Fund had
approximately 98% of the volatility of the Russell 2000 Index at the
end of the March quarter.
Fiscal Year in Review
For the twelve months ended March 31, 1994, the Fund modestly
outperformed the unmanaged Russell 2000 Index. The Fund's Class A
and Class B Shares returned +13.14% and +12.03%, respectively, while
the total return of the Russell 2000 Index was +11.01%. The Fund
benefited from its holdings in the technology, financial services
and consumer durables sectors. Results were hindered by investments
in the retail and energy areas. Cash reserves detracted from results
for most of the year, but served to reduce the impact of the weak
stock market in February and March. The Fund's cash position also
provided buying power to take advantage of price weakness in
individual securities.
The March quarter experienced the most volatile and weakest stock
market environment since 1990. The trend toward lower interest rates
that had supported a high level of stock valuations reversed,
causing investors to adjust their portfolios and reconsider the
prices they were willing to pay for stocks. Concerns about the
valuation levels in the overall equity market have led us to
maintain cash reserves in the Fund for a number of quarters. Also in
recent quarters, we have emphasized our value-oriented approach to
stock selection to a greater degree than our growth approach. We
believe that these strategies have served to buffer somewhat the
impact that the weak market has had on the Fund.
<PAGE>
The duration of any period of stock market weakness is difficult to
predict. However, as is typically the case, this sell-off has
produced buying opportunities in many individual securities. This
has been especially true among small stocks, whose lack of liquidity
can produce exaggerated short-term price movements. We are pleased
to have found opportunities to add to a number of portfolio holdings
at attractive prices and to initiate positions in a number of new
investments.
In Conclusion
We thank you for your continued investment in Merrill Lynch Special
Value Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Dennis Stattman)
Dennis Stattman
Vice President and Portfolio Manager
April 26, 1994
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Dennis W. Stattman, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
<PAGE>
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. The
"Results of a $1,000 Investment Since Inception" chart on page 6
measures performance since inception and may not reflect results of
investments made at any other time.
Total Return Based on a $10,000 Investment
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX GRAPHIC AND IMAGE MATERIALS
ITEM 1.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/94 +13.14% +5.79%
Five Years Ended 3/31/94 + 8.19 +6.75
Ten Years Ended 3/31/94 + 7.20 +6.48
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/94 +12.03% +8.03%
Five Years Ended 3/31/94 + 7.09 +7.09
Inception (10/21/88)through 3/31/94 + 6.92 +6.92
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
5/5/78--12/31/78 $ 9.60 $ 8.70 -- $0.190 - 7.63%
1979 8.70 10.16 $0.370 0.320 +25.67
1980 10.16 12.54 0.500 0.195 +33.62
1981 12.54 10.58 0.890 0.390 - 6.27
1982 10.58 10.67 0.650 0.380 +12.70
1983 10.67 12.45 0.610 0.070 +22.40
1984 12.45 11.10 0.290 0.120 - 7.60
1985 11.10 14.29 0.340 0.090 +33.14
1986 14.29 13.97 0.620 0.050 + 1.88
1987 13.97 10.32 1.086 0.143 -18.52
1988 10.32 11.83 0.017 0.233 +17.06
1989 11.83 11.65 -- 0.237 + 0.42
1990 11.65 8.32 -- 0.148 -27.52
1991 8.32 12.80 -- 0.080 +54.87
1992 12.80 14.96 -- 0.019 +17.04
1993 14.96 15.66 0.594 0.811 +14.26
1/1/94--3/31/94 15.66 15.88 -- -- + 1.40
------ ------
Total $5.967 Total $3.476
Cumulative total return as of 3/31/94: +266.49%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date, and do not include sales charge; results would be lower if
sales charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $12.01 $11.82 $0.017 $0.095 - 0.04%
1989 11.82 11.61 -- 0.140 - 0.64
1990 11.61 8.29 -- 0.050 -28.26
1991 8.29 12.69 -- 0.019 +53.32
1992 12.69 14.70 -- -- +15.84
1993 14.70 15.31 0.594 0.692 +13.07
1/1/94--3/31/94 15.31 15.49 -- -- + 1.18
------ ------
Total $0.611 Total $0.996
Cumulative total return as of 3/31/94: +43.91%**
<PAGE>
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
PERFORMANCE DATA (concluded)
Results of a $1,000 Investment Since Inception--Class A Shares
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX GRAPHIC AND IMAGE MATERIALS
ITEM 2.
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
3/31/94 12/31/93 3/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Special Value Fund, Inc. Class A Shares $ 15.88 $ 15.66 $ 15.32 + 7.67%(1) +1.40%
ML Special Value Fund, Inc. Class B Shares 15.49 15.31 15.01 + 7.28(1) +1.18
Russell 2000 Index 251.06 258.59 229.21 + 9.53 -2.91
ML Special Value Fund, Inc. Class A Shares--Total Return +13.14(2) +1.40
ML Special Value Fund, Inc. Class B Shares--Total Return +12.03(3) +1.18
Russell 2000 Index**--Total Return +11.01 -2.65
<FN>
*Investment results shown for the 3-month and 12-month periods are before
the deduction of any sales charges.
**An unmanaged broad-based index comprised of common stocks. Total investment
returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $0.594 per share
capital gains distributions.
(2)Percent change includes reinvestment of $0.811 per share ordinary income
dividends and $0.594 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.692 per share ordinary income
dividends and $0.594 per share capital gains distributions.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Aerospace 85,000 ++Banner Aerospace, Inc. $ 585,575 $ 499,375 0.3%
115,000 ++BE Aerospace, Inc. 1,048,229 1,092,500 0.6
------------ ------------ ------
1,633,804 1,591,875 0.9
Agriculture & 25,000 ++Calgene, Inc. 268,438 290,625 0.2
Agricultural 35,000 Delta & Pine Land Co. 452,501 481,250 0.3
Pharmaceuticals ------------ ------------ ------
720,939 771,875 0.5
Apparel 30,000 Kellwood Co. 515,975 723,750 0.4
15,000 St. John Knits, Inc. 255,000 363,750 0.2
80,000 ++The Warnaco Group, Inc. (Class A) 2,364,255 2,430,000 1.3
------------ ------------ ------
3,135,230 3,517,500 1.9
Banks & Finance 70,000 American Federal Bank, FSB 612,500 805,000 0.4
222,500 Bankers Corp. 2,164,922 3,838,125 2.0
40,000 Banknorth Group, Inc. 632,500 725,000 0.4
385,000 Charter One Financial, Inc. 7,133,237 7,266,875 3.8
170,000 Civic Bancorp, Inc. 926,250 850,000 0.4
125,000 Coast Savings Financial, Inc. 1,836,424 1,734,375 0.9
182,000 ++The Co-Operative Bank of Concord 2,184,876 3,276,000 1.7
60,000 NFS Financial Corp. 641,875 1,020,000 0.5
80,000 ONBANCorp, Inc. 2,648,784 2,440,000 1.3
52,500 Resource Bancshares Mortgage
Group, Inc. 418,750 551,250 0.3
140,000 Roosevelt Financial Group, Inc. 4,044,900 6,195,000 3.2
28,000 Simmons First National Corp. 616,000 630,000 0.3
55,000 Sterling BancShares, Inc. 1,088,750 2,076,250 1.1
------------ ------------ ------
24,949,768 31,407,875 16.3
Biotechnology 50,000 ++Alteon, Inc. 633,550 412,500 0.2
212,643 ++Applied Immune Sciences, Inc. 3,478,381 1,860,626 1.0
42,900 ++AutoImmune, Inc. 284,213 311,025 0.2
27,200 ++COR Therapeutics, Inc. 324,088 323,000 0.2
90,000 ++Cyto Therapeutics, Inc. 918,050 933,750 0.5
28,500 ++Genetic Therapy, Inc. 350,328 356,250 0.2
25,000 ++Gilead Sciences, Inc. 253,125 268,750 0.1
164,000 ++The Immune Response Corp. 2,157,484 1,722,000 0.9
37,500 ++The Liposome Company, Inc. 229,688 239,063 0.1
76,100 National Patent Development Corp. 208,155 309,156 0.2
135,000 ++NeoRx Corp. 917,758 877,500 0.5
50,000 ++Sepracor, Inc. 386,875 350,000 0.2
10,000 ++Somatogen, Inc. 190,000 77,500 0.0
------------ ------------ ------
10,331,695 8,041,120 4.3
<PAGE>
Business Services 249,700 ++Applied Bioscience
International, Inc. 1,425,381 1,560,625 0.8
Computer Equipment 5,000 Cadence Design Systems, Inc. 67,175 70,000 0.0
226,000 ++Micronics Computers, Inc. 1,198,238 1,214,750 0.6
------------ ------------ ------
1,265,413 1,284,750 0.6
Computer Products 20,000 Sigma Designs, Inc. 62,500 175,000 0.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Stocks & Convertible Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Computer Services 725,000 Anacomp, Inc. $ 2,691,367 $ 2,809,375 1.5%
181,000 ++Boole & Babbage, Inc. 3,454,168 4,253,500 2.2
35,950 Computer Task Group, Inc. 449,573 283,106 0.1
25,000 Primark Corp. 282,750 337,500 0.2
------------ ------------ ------
6,877,858 7,683,481 4.0
Computer Software 271,500 ++Cognos, Inc. 1,712,435 3,156,188 1.6
Computers 130,000 Alpha Industries, Inc. 629,856 406,250 0.2
40,000 Amdahl Corp. 181,600 260,000 0.1
50,000 ++DH Technology, Inc. 688,750 862,500 0.5
135,000 SHL Systemhouse, Inc. 843,750 928,125 0.5
130,000 ++Western Digital Corp. 1,676,801 2,193,750 1.1
------------ ------------ ------
4,020,757 4,650,625 2.4
Electrical 60,000 Catalina Lighting, Inc. 471,291 660,000 0.3
Equipment 135,000 Comptek Research, Inc. 2,159,300 2,615,625 1.4
75,000 ++Comptronix Enterprises, Inc. 388,780 365,625 0.2
10,000 Core Industries, Inc. 149,550 116,250 0.1
26,300 ++WPI Group, Inc. 164,375 78,900 0.0
------------ ------------ ------
3,333,296 3,836,400 2.0
Electronics 100,000 Alden Electronics, Inc. 422,500 300,000 0.2
324,200 Automated Security Holdings PLC 1,238,076 1,094,175 0.6
27,562 ++Maxwell Laboratories, Inc. 316,726 234,277 0.1
50,000 ++VLSI Technology, Inc. 503,915 706,250 0.4
------------ ------------ ------
2,481,217 2,334,702 1.3
<PAGE>
Energy $ 900,000 Swift Energy Corp., Convertible
Bonds, 6.50% due 6/30/2003 924,000 918,000 0.5
Environmental & 385,250 NSC Corp. 2,047,537 1,637,313 0.9
Environmental 170,000 Rollins Environmental
Control Services, Inc. 879,087 786,250 0.4
------------ ------------ ------
2,926,624 2,423,563 1.3
Health Care-- 55,300 ++Analogic Corp. 915,631 843,325 0.4
Products & Services 100,000 Beverly Enterprises, Inc. 953,736 1,312,500 0.7
45,000 Community Psychiatric Centers 489,481 720,000 0 4
80,000 Healthcare Services Group, Inc. 783,450 820,000 0.4
130,000 ++The Hillhaven Corp. 1,861,092 2,518,750 1.3
105,000 ++Medical Care America, Inc. 2,376,577 2,231,250 1.2
75,500 ++Ramsay Health Care, Inc. 588,423 566,250 0.3
275,000 ++Unilab Corp. 1,528,125 1,409,375 0.7
------------ ------------ ------
9,496,515 10,421,450 5.4
Home Builders 30,000 Washington Homes, Inc. 270,000 232,500 0.1
Home Furnishings 30,000 Crown Crafts, Inc. 524,300 562,500 0.3
Housing 110,000 ++Redman Industries, Inc. 1,757,956 1,952,500 1.0
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Convertible Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Insurance 100,000 Phoenix Re Corp. $ 2,360,714 $ 2,075,000 1.1%
162,500 Security-Connecticut Corp. 3,181,400 3,128,125 1.6
142,000 ++Transnational Re Corp. (Class A) 2,899,912 2,502,750 1.3
------------ ------------ ------
8,442,026 7,705,875 4.0
Leasing 167,100 LDI Corp. 1,682,660 856,388 0.4
100,000 ++Sea Containers, Ltd. 2,146,996 1,525,000 0.8
------------ ------------ ------
3,829,656 2,381,388 1.2
Leisure 24,400 Outboard Marine Corp. 469,488 469,700 0.2
Machinery & 34,245 ++Varity Corp. 1,138,324 1,434,009 0.7
Machine Tools
<PAGE>
Medical 32,600 ++Everest & Jennings International
(Class A) 456,544 34,638 0.0
15,000 ++Fischer Imaging Corp. 288,440 97,500 0.1
36,000 ++Thermo Cardiosystems, Inc. 308,225 715,500 0.4
------------ ------------ ------
1,053,209 847,638 0.5
Metals--Non-Ferrous 76,800 Handy & Harman 1,205,929 1,132,800 0.6
Natural Resources 145,000 ++Abraxas Petroleum Corp. 1,642,500 1,558,750 0.8
35,000 ++Addington Resources, Inc. 227,290 498,750 0.3
110,000 ++American Oilfield Divers, Inc. 1,008,750 935,000 0.5
90,900 ++Atwood Oceanics, Inc. 763,563 1,170,337 0.6
95,000 ++Tom Brown, Inc. 410,463 1,080,625 0.6
38,300 ++Cliffs Drilling Co. 494,563 450,025 0.2
29,000 Cliffs Drilling Co.,
Convertible Preferred 774,875 746,750 0.4
282,253 ++Coho Resources, Inc. 1,990,477 1,199,575 0.6
25,000 ++Energy Ventures, Inc. 468,750 334,375 0.2
275,000 ++Gerrity Oil & Gas Corp. 3,571,250 2,578,125 1.3
65,000 ++Grant Tensor Geophysical Corp.,
Convertible Preferred 1,103,750 812,500 0.4
20,600 ++Input/Output, Inc. 800,502 795,675 0.4
359,000 ++International Petroleum Corp. 990,247 359,000 0.2
40,000 ++Noble Drilling Corp. 265,000 270,000 0.1
100,000 ++Nuevo Energy Co. 2,008,475 1,925,000 1.0
266,200 ++Plains Resources, Inc. 2,174,772 1,497,375 0.8
42,500 ++Tetra Technologies, Inc. 311,135 308,125 0.2
20,000 The Wiser Oil Co. 360,000 320,000 0.2
------------ ------------ ------
19,366,362 16,839,987 8.8
Personal Care 50,000 ++Marietta Corp. 441,875 393,750 0.2
Products
Pharmaceuticals 10,000 ++Amylin Pharmaceuticals, Inc. 108,750 107,500 0.1
Photo-Optical 80,000 Instron Corp. 1,010,849 820,000 0.4
Instruments
Plastics 19,800 Tredegar Industries, Inc. 297,088 287,100 0.2
Pollution Control 60,000 Attwoods PLC (ADR) (a) 567,376 525,000 0.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Stocks & Convertible Bonds Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Real Estate $1,000,000 Alexander Haagen Properties,
Inc., 7.25% due 12/27/2003 $ 1,000,000 $ 980,000 0.5%
Real Estate 67,100 Carr Realty Corp. 1,476,200 1,576,850 0.8
Investment Trusts 45,000 Crown American Realty Trust 643,950 618,750 0.3
41,200 Health Equity Properties, Inc. 347,110 381,100 0.2
------------ ------------ ------
2,467,260 2,576,700 1.3
Restaurants 240,000 ++TPI Enterprises, Inc. 2,126,394 1,650,000 0.9
Retail Stores 320,000 J. Baker, Inc. 5,299,544 6,400,000 3.3
51,500 Bradlees, Inc. 876,378 772,500 0.4
110,000 ++Catherines Stores Corp. 1,496,475 1,787,500 0.9
40,000 ++Gantos, Inc. 497,276 160,000 0.1
1,053,000 ++Grossman's, Inc. 3,230,162 4,475,250 2.3
147,000 ++Just Toys, Inc. 957,267 918,750 0.5
106,951 Pier 1 Imports, Inc. 1,153,213 895,715 0.5
60,000 ++S & K Famous Brands, Inc. 766,650 795,000 0 4
312,500 Service Merchandise Co., Inc. 2,418,330 2,460,937 1.3
80,000 The Stride Rite Corp. 1,261,496 1,180,000 0.6
110,000 The United States Shoe Corp. 1,131,371 1,870,000 1.0
30,000 Venture Stores, Inc. 784,580 648,750 0.3
485,000 ++The Wet Seal, Inc. (Class A) 1,876,035 2,061,250 1.1
------------ ------------ ------
21,748,777 24,425,652 12.7
Services 60,000 Pinkertons Security &
Investigation Services 1,219,030 1,207,500 0.6
Utilities 105,000 American Water Works Co., Inc. 1,394,798 2,940,000 1.5
Total Stocks & Convertible Bonds 145,736,879 153,247,128 80.0
<PAGE>
<CAPTION>
Face Amount Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper* $4,000,000 Abbott Laboratories,
3.47% due 4/12/1994 3,995,759 3,995,759 2.1
7,000,000 AT&T Capital Corp.,
3.50% due 4/04/1994 6,997,958 6,997,958 3.7
7,000,000 Corporate Bond Trust,
3.58% due 4/29/1994 6,980,509 6,980,509 3.6
5,000,000 Delaware Funding Corp.,
3.54% due 4/15/1994 4,993,117 4,993,117 2.6
General Electric Capital Corp.:
549,000 3.50% due 4/01/1994 549,000 549,000 0.3
6,371,000 3.53% due 4/04/1994 6,369,126 6,369,126 3.3
8,000,000 PepsiCo Inc., 3.55% due 4/22/1994 7,983,433 7,983,433 4.2
7,000,000 PHH Corp., 3.55% due 4/18/1994 6,988,265 6,988,265 3.6
5,000,000 Sheffield Receivables Corp.,
3.475% due 4/04/1994 4,998,552 4,998,552 2.6
Total Short-Term Securities 49,855,719 49,855,719 26.0
Total Investments $195,592,598 203,102,847 106.0
============
Liabilities in Excess of Other Assets (11,530,933) (6.0)
------------ ------
Net Assets $191,571,914 100.0%
============ ======
<FN>
*Commercial Paper is traded on a discount basis; the interest rates shown are the discount
rates paid at the time of purchase by the Fund.
(a)American Depositary Receipt (ADR).
++Non-income producing securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of March 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$195,592,598)
(Note 1a) $203,102,847
Receivables:
Capital shares sold $ 2,314,560
Securities sold 480,752
Dividends 53,795
Interest 33,556 2,882,663
------------
Prepaid registration fees and other assets (Note 1d) 38,036
------------
Total assets 206,023,546
------------
Liabilities: Payables:
Securities purchased 12,403,343
Capital shares redeemed 1,317,262
Investment adviser (Note 2) 119,148
Distributor (Note 2) 91,767 13,931,520
------------
Accrued expenses and other liabilities 520,112
------------
Total liabilities 14,451,632
------------
Net Assets: Net assets $191,571,914
============
Net Assets Class A Common Stock, $0.10 par value,
Consist of: 100,000,000 shares authorized $ 496,195
Class B Common Stock, $0.10 par value,
100,000,000 shares authorized 727,889
Paid-in capital in excess of par 170,972,690
Undistributed investment income--net 99,234
Undistributed realized capital gains--net 11,765,657
Unrealized appreciation on investments--net 7,510,249
------------
Net assets $191,571,914
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $78,804,119
and 4,961,948 shares outstanding $ 15.88
============
Class B--Based on net assets of $112,767,795
and 7,278,885 shares outstanding $ 15.49
============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statement of Operations for the Year Ended March 31, 1994
<S> <S> <C>
Investment Dividends (net of $1,039 foreign withholding tax) $ 1,578,992
Income Interest and discount earned 1,220,566
(Note 1b & 1c): ------------
Total income 2,799,558
------------
Expenses: Investment advisory fees (Note 2) 1,179,244
Distribution fees--Class B (Note 2) 846,077
Transfer agent fees--Class B (Note 2) 168,543
Transfer agent fees--Class A (Note 2) 127,174
Printing and shareholder reports 98,277
Professional fees 94,471
Accounting services (Note 2) 48,221
Registration fees (Note 1d) 47,106
Directors' fees and expenses 43,898
Custodian fees 37,487
Amortization of organization expenses (Note 1d) 2,927
Other 6,899
------------
Total expenses 2,700,324
------------
Investment income--net 99,234
------------
Realized & Realized gain on investments--net 23,450,584
Unrealized Gain Change in unrealized appreciation on investments--net (6,187,920)
(Loss) on ------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 17,361,898
(Notes 1c & 3): ============
See Notes to Financial Statements.
</TABLE>
For the Year Ended March 31,
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended March 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ 99,234 $ (41,297)
Realized gain on investments--net 23,450,584 2,626,562
Change in unrealized appreciation on investments--net (6,187,920) 7,794,016
------------ ------------
Net increase in net assets resulting from operations 17,361,898 10,379,281
------------ ------------
Dividends & Investment income--net:
Distributions to Class A -- (77,614)
Shareholders Class B -- --
(Note 1e): Realized gain on investments--net:
Class A (6,037,362) --
Class B (6,735,508) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (12,772,870) (77,614)
------------ ------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 39,880,101 50,210,840
(Note 4): ------------ ------------
Net Assets: Total increase in net assets 44,469,129 60,512,507
Beginning of year 147,102,785 86,590,278
------------ ------------
End of year* $191,571,914 $147,102,785
============ ============
<FN>
* Undistributed investment income--net $ 99,234 $ 0
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived from Class A
information provided in the financial statements. For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1994** 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.32 $ 13.86 $ 10.84 $ 11.36 $ 12.20
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .10 .05 .10 .12 .22
Realized and unrealized gain (loss) on
investments--net 1.87 1.43 3.00 (.49) (.82)
-------- -------- -------- -------- --------
Total from investment operations 1.97 1.48 3.10 (.37) (.60)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.02) (.08) (.15) (.24)
Realized gain on investments--net (1.41) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.41) (.02) (.08) (.15) (.24)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.88 $ 15.32 $ 13.86 $ 10.84 $ 11.36
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.14% 10.69% 28.71% (3.15%) (5.05%)
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses 1.17% 1.28% 1.55% 1.88% 1.45%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .62% .37% .83% 1.13% 1.62%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $ 78,804 $ 70,920 $ 57,056 $ 44,818 $ 57,799
Data: ======== ======== ======== ======== ========
Portfolio turnover 68.70% 42.25% 98.76% 73.06% 44.66%
======== ======== ======== ======== ========
<FN>
* Total investment returns exclude the effects
of sales loads.
** Based on an average number of shares outstanding
during the period.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived from Class B
information provided in the financial statements. For the Year Ended March 31,
Increase (Decrease) in Net Asset Value: 1994** 1993** 1992** 1991** 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 15.01 $ 13.70 $ 10.77 $ 11.29 $ 12.15
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.06) (.09) (.03) -- .07
Realized and unrealized gain (loss) on
investments--net 1.83 1.40 2.98 (.47) (.79)
-------- -------- -------- -------- --------
Total from investment operations 1.77 1.31 2.95 (.47) (.72)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.02) (.05) (.14)
Realized gain on investments--net (1.29) -- -- -- --
-------- -------- -------- -------- --------
Total dividends and distributions (1.29) -- (.02) (.05) (.14)
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.49 $ 15.01 $ 13.70 $ 10.77 $ 11.29
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 12.03% 9.56% 27.41% (4.16%) (6.00%)
Return:* ======== ======== ======== ======== ========
Ratios to Average Total expenses, excluding
Net Assets: distribution fees 1.19% 1.28% 1.51% 1.95% 1.49%
======== ======== ======== ======== ========
Expenses 2.19% 2.28% 2.51% 2.95% 2.49%
======== ======== ======== ======== ========
Investment income (loss)--net (.41%) (.65%) (.27%) (.04%) .59%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $112,768 $ 76,182 $ 29,534 $ 3,783 $ 1,456
Data: ======== ======== ======== ======== ========
Portfolio turnover 68.70% 42.25% 98.76% 73.06% 44.66%
======== ======== ======== ======== ========
<FN>
* Total investment returns exclude
the effects of sales loads.
** Based on an average number of shares
outstanding during the period.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Special Value Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
investment management company. The Fund offers both Class A and
Class B Shares. Class A Shares are sold with a front-end sales
charge. Class B Shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B Shares bear certain expenses related to the
distribution of such shares and have exclusive voting rights with
respect to matters relating to such distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Portfolio securities which are
traded on stock exchanges are valued at the last sale price as of
the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked
prices. Securities traded in the over-the-counter market are valued
at the most recent bid prices as obtained from one or more dealers
that make markets in the securities. Portfolio securities which are
traded both in the over-the-counter market and on a stock exchange
are valued according to the broadest and most representative market.
Short-term securities are valued at amortized cost which approximates
market. Securities and assets for which market quotations are not
readily available are valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Directors.
(b) 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.
(c) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend date, except that if the ex-dividend date has passed,
certain dividends from foreign securities are recorded as soon as
the funds are informed of 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. Transaction gains or losses
resulting from changes in the exchange rate on foreign dividends
between ex-dividend date and payable date are reported in net
investment income.
<PAGE>
(d) Deferred organization expenses and prepaid registration fees--
Costs related to the organization of the second class of shares are
charged to expense over a five-year period. Prepaid registration
fees are charged to expense as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
(f) Reclassifications--Certain items from 1993 have been restated
to conform to the 1994 presentation.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). Effective January 1, 1994, the
investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of FAM is
Princeton Services, Inc., an indirect wholly-owned subsidiary of ML
& Co. The limited partners are ML & Co. and Merrill Lynch Investment
Management, Inc. ("MLIM"), which is also an indirect wholly-owned
subsidiary of ML & Co., and a Distribution Agreement and a
Distribution Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD"
or "Distributor"), a wholly-owned subsidiary of MLIM. FAM is
responsible for the management of the Fund's portfolio and provides
the necessary personnel, facilities, equipment and certain other
services necessary to the operations of the Fund. For such services,
the Fund pays a monthly fee of 0.75%, on an annual basis, of the
average daily value of the Fund's net assets. The Investment
Advisory Agreement obligates FAM to reimburse the Fund to the extent
the Fund's expenses (excluding interest, taxes, distribution fees,
brokerage fees and commissions, and extraordinary items) exceed 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the Fund's next $70 million of average daily net assets, and 1.5% of
the average daily net assets in excess thereof. No fee payment will
be made to the Investment Adviser during the fiscal year which will
cause such expenses to exceed the pro rata expense limitation at the
time of such payment.
Pursuant to a distribution plan (the "Distribution Plan") adopted by
the Fund in accordance with Rule 12b-1 under the Investment Company
Act of 1940, the Fund pays the Distributor an ongoing account main-
tenance fee and distribution fee, which are accrued daily and paid
monthly at the annual rates of 0.25% and 0.75%, respectively, of the
average daily net assets of the Class B Shares of the Fund. These
fees are to compensate the Distributor for services it provides and
the expenses borne by the Distributor under the Distribution Agree-
ment. As authorized by the Plan, the Distributor has entered into
an agreement with Merrill Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S")
which provides for the compensation of MLPF&S for providing distri-
bution-related services to the Fund.
<PAGE>
For the year ended March 31, 1994, MLFD earned underwriting discounts
of $5,760, and MLPF&S earned dealer concessions of $156,666 on sale
of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges of $158,825 re-
lating to transactions in Class B Shares and $15,386 in commissions
on the execution of portfolio security transactions for the Fund dur-
ing the year.
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 FAM at cost.
Certain officers and/or directors of the Fund are officers and/or dir-
ectors of FAM, MLIM, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended March 31, 1994 were $116,050,967 and $85,493,409,
respectively.
Net realized and unrealized gains as of March 31, 1994 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $23,450,584 $7,510,249
----------- ----------
Total $23,450,584 $7,510,249
=========== ==========
As of March 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $7,510,249, of which $20,764,885 related to
appreciated securities and $13,254,636 related to depreciated secur-
ities. The aggregate cost of investments at March 31, 1994 for Federal
income tax purposes was $195,592,598.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $39,880,101 and $50,210,840 for the years ended March 31, 1994
and 1993, respectively.
Transactions in capital shares for Class A Shares and Class B Shares
were as follows:
<PAGE>
Class A Shares for the Year Dollar
Ended March 31, 1994 Shares Amount
Shares sold 1,242,225 $ 19,995,495
Shares issued to shareholders
in reinvestment of dividends
and distributions 322,010 4,973,387
------------ ------------
Total issued 1,564,235 24,968,882
Shares redeemed (1,232,902) (19,830,929)
------------ ------------
Net increase 331,333 $ 5,137,953
============ ============
Class A Shares for the Year Dollar
Ended March 31, 1993 Shares Amount
Shares sold 1,376,699 $19,725,815
Shares issued to share-
holders in reinvestment
of dividends 5,053 65,682
------------ ------------
Total issued 1,381,752 19,791,497
Shares redeemed (867,861) (12,070,108)
------------ ------------
Net increase 513,891 $ 7,721,389
============ ============
Class B Shares for the Year Dollar
Ended March 31, 1994 Shares Amount
Shares sold 3,509,022 $55,127,981
Shares issued to share-
holders in reinvestment
of dividends and
distributions 387,961 5,863,597
------------ ------------
Total issued 3,896,983 60,991,578
Shares redeemed (1,692,858) (26,249,430)
------------ ------------
Net increase 2,204,125 $ 34,742,148
============ ============
<PAGE>
Class B Shares for the Year Dollar
Ended March 31,1993 Shares Amount
Shares sold 4,180,480 $ 59,842,332
Shares issued to shareholders
in reinvestment of dividends -- --
------------ ------------
Total issued 4,180,480 59,842,332
Shares redeemed (1,260,880) (17,352,881)
------------ ------------
Net increase 2,919,600 $ 42,489,451
============ ============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Special Value Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Merrill Lynch Special Value
Fund, Inc. as of March 31, 1994, the related statements of operations
for the year then ended and changes in net assets for each of the
years in the two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended. These
financial statements and the financial highlights are the respons-
ibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and the financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our procedures
included confirmation of securities owned at March 31, 1994 by correspon-
dence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch
Special Value Fund, Inc. as of March 31, 1994, the results of its operations,
the changes in its net assets, and the financial highlights for the re-
spective stated periods in conformity with generally accepted accounting
principles.
<PAGE>
Deloitte & Touche
Princeton, New Jersey
April 29, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
Of the ordinary income distributions paid to shareholders of record
on December 13, 1993 by Merrill Lynch Special Value Fund, Inc. for
the taxable year ended March 31, 1994, 11.45% qualifies for the div-
idends-received deduction for corporations. Additionally, the Fund
paid long-term capital gain distributions of $.111296 and $.482431
to shareholders of record on July 6, 1993 and December 13, 1993, re-
spectively.
Please retain this information for your records.
PORTFOLIO INFORMATION (unaudited)
Percent of
Top Ten Equity Holdings Net Assets
Charter One Financial, Inc. 3.8%
J. Baker, Inc 3.3
Roosevelt Financial Group, Inc. 3.2
Grossman's, Inc. 2.3
Boole & Babbage, Inc. 2.2
Bankers Corp. 2.0
The Co-Operative Bank of Concord 1.7
Cognos, Inc. 1.6
Security-Connecticut Corp. 1.6
American Water Works Co., Inc. l.5
Percent of
Ten Largest Industries Net Assets
Banks & Finance 16.3%
Retail Stores 12.7
Natural Resources 8.8
Health Care--Products & Services 5.4
Biotechnology 4.3
Insurance 4.0
Computer Services 4.0
Computers 2.4
Apparel 1.9
Electrical Equipment 1.8
<PAGE>
Portfolio Changes for the Quarter Ended
March 31, 1994
Additions
Analogic Corp.
*Applied Digital Access, Inc.
Automated Security Holdings PLC
Cadence Design Systems, Inc.
Comptronix Enterprises, Inc.
COR Therapeutics, Inc.
Crown American Realty Trust
Delta & Pine Land Co.
Genetic Therapy, Inc.
Gilead Sciences, Inc.
*International Post Corp.
The Liposome Company, Inc.
Medical Care America, Inc.
NeoRx Corp.
Noble Drilling Corp.
Outboard Marine Corp.
Pinkertons Security & Investigation Services
Ramsay Health Care, Inc.
Rollins Environmental Services, Inc.
S & K Famous Brands, Inc.
Security--Connecticut Corp.
SHL Systemhouse, Inc.
*Storage USA, Inc.
The Stride Rite Corp.
*Telular Corp.
Tetra Technologies, Inc.
Unilab Corp.
Western Digital Corp.
Deletions
Alfin, Inc.
Alfin, Inc., Preferred
*Applied Digital Access, Inc.
Bell Industries, Inc.
Chart House Enterprises, Inc.
Collagen Corp.
Columbia/HCA Healthcare Corp.
Cordis Corp.
Harman International Industries, Inc.
*International Post Corp.
Jones Apparel Group, Inc.
NovaCare, Inc.
The Pep Boys--Manny, Moe & Jack
PhyCor, Inc., Convertible Bonds, 6.50% due 1/15/2003
*Storage USA, Inc.
*Telular Corp.
Tokos Medical Corp.
Vivra, Inc.
Weatherford International, Inc.
<PAGE>
[FN]
*Added and deleted in the same quarter.
APPENDIX: GRAPHIC AND IMAGE MATERIAL
Item 1:
Total Return based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to the growth of an investment in the Russell
2000 Index. Beginning and ending values are:
3/84 3/94
ML Special Value Fund, Inc++--
Class A Shares* $ 9,350 $18,740
Russell 2000 Index++++ $10,000 $29,387
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the Russell
2000 Index. Beginning and ending values are:
10/21/88** 3/94
ML Special Value Fund, Inc.++--
Class B Shares* $10,000 $14,391
Russell 2000 Index++++ $10,000 $18,823
[FN]
* Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
** Commencement of Operations.
++ ML Special Value Fund, Inc. invests in a diversified
portfolio of securities, primarily common stocks, of
relatively small companies which the Fund's management
beleives have special investment value and emerging
growth companies regardless of size.
++++ This unmanaged Index is comprised of common stocks of the
bottom two-thirds of the largest 3,000 publicly traded
companies domiciled in the United States.
<PAGE>
Item 2:
Results of a $1,000 Investment Since Inception--Class A Shares
(6.5% sales charge--$935.00 net amount invested; assuming
reinvestment of all dividends and capital gains distributions.)
A mountain chart depicting the growth of an investment in the
Fund's Class A Shares from $935.00 on May 5, 1978 to $3,426.68 on
March 31, 1994.
