MERRILL LYNCH
SPECIAL VALUE
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
June 30, 1999
<PAGE>
MERRILL LYNCH SPECIAL VALUE FUND, INC.
DEAR SHAREHOLDER
There were some conflicting signals regarding the future direction of the US
economy during the quarter ended June 30, 1999. However, on balance the economic
outlook continued to be positive. The US economic expansion is ongoing,
especially in the consumer sector. Economic growth is not occurring at
inflationary rates, although the Organization of Petroleum Exporting Countries
(OPEC) successfully engineered a near-term increase in the price of crude oil.
Against this backdrop, the US Federal Reserve Board raised the Federal Funds
rate 0.25% at its June 30, 1999 meeting. Outside of the United States, signs of
growth are less apparent in other major industrial economies. European equity
markets have entered a period of consolidation, and investors are looking for
evidence of an economic pickup. In Japan, there are not yet clear signs that
Japan's economy is improving. There were growing signs of improvement in some
emerging economies (most notably South Korea and Mexico), although concerns
remain for others (such as Brazil and Argentina).
In the US capital markets, long-term interest rates rose during the June
quarter. While the spread between yields on Treasury securities and corporate
issues of similar maturities has narrowed somewhat, it remains wide by historic
standards. Although the US stock market exhibited greater price volatility, its
advances broadened beyond relatively few growth stocks to the previously
languishing cyclical sectors.
Portfolio Matters
Since late last year, the environment for small-capitalization stocks has
improved with the pace of US economic activity. Recent economic indicators,
including employment data and the Producer Price Index (PPI), seem to confirm a
strengthening in the US economy. Accordingly, the yield on the 30-year US
Government bond has increased by about 100 basis points (1.00%), causing a
steepening of the yield curve. A strengthening economy is generally favorable
for small cap stocks, particularly small cap value stocks. The steepening yield
curve is a positive indicator for the value style of investing because the slope
of the curve is an implied inflation forecast. To the extent that the Federal
Reserve Board is able to sustain the economic expansion with modest interest
rate increases, we anticipate further gains for small cap stocks.
During the quarter ended June 30, 1999, Merrill Lynch Special Value Fund, Inc.
substantially outperformed the unmanaged Russell 2000 Index. Total returns for
the Fund's Class A, Class B, Class C and Class D Shares were +27.66%, +27.33%,
+27.28% and +27.61%, respectively, compared to the total return of +15.55% for
the unmanaged Russell 2000 Index. (Fund results do not reflect sales charges;
results would be lower if sales charges were included. Complete performance
information can be found on pages 3 and 4 of this report to shareholders.)
For the quarter ended June 30, 1999, the total return of the unmanaged Russell
2000 Index was more than double the +7.05% total return provided by the
unmanaged Standard & Poor's 500 Index. All 12 of the Russell 2000 economic
sectors posted positive returns during the June quarter. The energy,
transportation and producer durables sectors marked the sharpest gains, while
the consumer staples and healthcare sectors advanced to a lesser extent. The
Fund's investment performance benefited from overweighted investments in
cyclical stocks, and from underweighted investments in interest rate-sensitive
stocks. Sector positioning modestly benefited performance in the June quarter;
however, performance in excess of the Russell 2000 Index resulted primarily from
specific stock selection, as individual stocks sharply outperformed their
respective sectors in the benchmark index.
1
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
Individual stocks that most benefited the Fund's investment results included two
companies that provide integrated circuits for the telecommunications industry,
DSP Communications, Inc. and TriQuint Semiconductor, Inc. Shares of DSP
Communications, a designer of chip sets used in wireless devices, soared as
Asian market demand rebounded and the company announced several important new
customer accounts. Sharp share price appreciation and the large size of the
position combined to make DSP Communications a leading contributor to Fund
performance during the June quarter. Shares of TriQuint Semiconductor, a
manufacturer of high-performance integrated circuits, rallied sharply as
reported earnings surpassed the range of analysts' estimates and demand for the
company's specialized manufacturing capacity increased. Shares of Forward Air
Corporation, a provider of transportation services to freight forwarders, also
were strong as trading dislocations were resolved and exports rebounded from the
depressed levels of 1998. A few investment positions failed to meet our
performance expectations, but disappointments in the June quarter were limited.
As small-capitalization stocks surged, we realized gains in stocks that had
reached our internal price objectives, and reinvested the proceeds in stocks
where we believed the risk-adjusted returns would be greater. In general, we
further increased the level of Fund diversification, realizing gains in
overweighted technology and economically sensitive industries, and investing
some of the proceeds in underweighted financial services stocks and other
interest rate-sensitive areas.
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,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Daniel V. Szemis
Daniel V. Szemis
Senior Vice President and Portfolio Manager
July 30, 1999
2
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o Class A Shares incur a maximum initial sales charge (front-end load) of
5.25% and bear no ongoing distribution or account maintenance fees. Class
A Shares are available only to eligible investors.
o Class B Shares are subject to a maximum contingent deferred sales charge
of 4% if redeemed during the first year, decreasing 1% each year
thereafter to 0% after the fourth year. In addition, Class B Shares are
subject to a distribution fee of 0.75% and an account maintenance fee of
0.25%. These shares automatically convert to Class D Shares after
approximately 8 years. (There is no initial sales charge for automatic
share conversions.)
o Class C Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. In addition, Class C Shares are subject to a 1%
contingent deferred sales charge if redeemed within one year of purchase.
o Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation of
future performance. Figures shown in the "Recent Performance Results" and
"Average Annual Total Return" tables assume reinvestment of all dividends
and capital gains distributions at net asset value on the ex-dividend
date. Investment return and principal value of shares will fluctuate so
that shares, when redeemed, may be worth more or less than their original
cost. Dividends paid to each class of shares will vary because of the
different levels of account maintenance, distribution and transfer agency
fees applicable to each class, which are deducted from the income
available to be paid to shareholders.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 6/30/99 + 2.42% - 2.96%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 +17.09 +15.84
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/99 +12.08 +11.48
- --------------------------------------------------------------------------------
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 6/30/99 + 1.42% - 2.44%
- --------------------------------------------------------------------------------
Five Years Ended 6/30/99 +15.91 +15.91
- --------------------------------------------------------------------------------
Ten Years Ended 6/30/99 +10.94 +10.94
- --------------------------------------------------------------------------------
*Maximum contingent deferred sales charge is 4% and is reduced to 0% after 4
years.
**Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 6/30/99 + 1.34% + 0.37%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +16.00 +16.00
- --------------------------------------------------------------------------------
*Maximum contingent deferred sales charge is 1% and is reduced to 0% after 1
year.
**Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class D Shares*
================================================================================
Year Ended 6/30/99 + 2.18% - 3.19%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 6/30/99 +16.92 +15.58
- --------------------------------------------------------------------------------
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
3
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
PERFORMANCE DATA (concluded)
Results of a $1,000 Investment Since Inception -- Class A Shares
(5.25% sales charge -- $947.50 net amount invested; assuming reinvestment of all
dividends and capital gains distributions)
[GRAPHIC OMITTED]
A mountain chart depicting the growth of an investment in the Fund's Class A
Shares from $947.50 on May 5, 1978 to $7,561.62 on June 30, 1999.
Recent Performance Results
<TABLE>
<CAPTION>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
====================================================================================================================================
<S> <C> <C> <C>
ML Special Value Fund, Inc. Class A Shares* +2.42% +27.66% +212.79%
- ------------------------------------------------------------------------------------------------------------------------------------
ML Special Value Fund, Inc. Class B Shares* +1.42 +27.33 +182.35
- ------------------------------------------------------------------------------------------------------------------------------------
ML Special Value Fund, Inc. Class C Shares* +1.34 +27.28 +100.60
- ------------------------------------------------------------------------------------------------------------------------------------
ML Special Value Fund, Inc. Class D Shares* +2.18 +27.61 +108.18
- ------------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index** +1.50 +15.55 +221.60/+93.83
====================================================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results shown would
be lower if a sales charge was included. Total investment returns are
based on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's ten-year/since inception periods
are for the ten years for Class A & Class B Shares and from 10/21/94 for
Class C & Class D Shares, respectively.
** An unmanaged broad-based Index comprised of small-capitalization common
stocks. Ten years/since inception total returns are for the ten years and
from 10/21/94, respectively.
4
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Percent of
Sector* Held Stocks Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Auto & Transportation
- ------------------------------------------------------------------------------------------------------------------------
489,600 Air Express International Corporation $ 8,689,896 $ 12,423,600 1.4%
537,200 Circle International Group, Inc. 13,348,433 11,751,250 1.3
271,000 Forward Air Corporation 924,883 7,604,938 0.8
21,000 Gentex Corporation 260,610 588,000 0.1
24,300 Keystone Automotive Industries Inc. 387,929 422,213 0.0
428,500 Landair Corporation 1,270,155 1,714,000 0.2
136,500 Meritor Automotive, Inc. 2,908,272 3,480,750 0.4
2,041,700 Miller Industries, Inc. 14,853,769 8,039,194 0.9
------------ ------------ ------
42,643,947 46,023,945 5.1
- ------------------------------------------------------------------------------------------------------------------------
Consumer Discretionary
- ------------------------------------------------------------------------------------------------------------------------
2,035,900 APAC TeleServices, Inc. 15,777,645 6,616,675 0.7
1,317 Adrien Arpel, Inc. (Preferred) 0 24,259 0.0
1,304,200 Boise Cascade Office Products Corp. 19,308,602 15,324,350 1.7
556,900 Boron, LePore & Associates, Inc. 7,575,025 4,664,037 0.5
453,700 Buffets, Inc. 4,667,813 5,217,550 0.6
569,600 Caribiner International, Inc. 5,715,911 3,524,400 0.4
235,600 The Cheesecake Factory Incorporated 5,231,665 7,185,800 0.8
1,822,700 Danka Business Systems PLC (ADR) (a) 12,925,295 10,252,687 1.1
1,208,350 HA-LO Industries, Inc. 12,880,304 11,932,456 1.3
1,390,000 Heilig-Meyers Company 18,598,857 9,469,375 1.1
227,700 ITI Technologies, Inc. 3,435,408 5,151,713 0.6
665,500 McNaughton Apparel Group Inc. 9,404,076 5,573,562 0.6
261,900 Micro Warehouse, Inc. 3,658,557 4,681,462 0.5
1,421,540 Midway Games, Inc. 20,405,264 18,391,174 2.0
1,121,700 Panera Bread Company (Class A) 7,525,064 7,150,837 0.8
1,254,800 Paxson Communications Corporation 13,503,438 16,939,800 1.9
411,300 Pier 1 Imports, Inc. 3,268,879 4,627,125 0.5
598,500 SITEL Corporation 4,878,878 1,758,094 0.2
304,200 Sodak Gaming, Inc. 3,378,954 2,851,875 0.3
330,400 Stein Mart, Inc. 3,089,064 3,097,500 0.3
120,900 Suiza Foods Corporation 4,578,222 5,062,687 0.6
281,000 Veterinary Centers of America, Inc. 3,810,412 3,811,062 0.4
934,500 WMS Industries, Inc. 4,457,766 15,886,500 1.8
------------ ------------ ------
188,075,099 169,194,980 18.7
- ------------------------------------------------------------------------------------------------------------------------
Energy
- ------------------------------------------------------------------------------------------------------------------------
188,400 Barrett Resources Corporation 5,114,797 7,229,850 0.8
445,000 Basin Exploration, Inc. 7,149,236 8,927,813 1.0
75,300 Evergreen Resources, Inc. 1,679,300 1,896,619 0.2
248,922 Louis Dreyfus Natural Gas Corp. 3,586,765 5,367,381 0.6
157,000 Newpark Resources, Inc. 896,822 1,393,375 0.2
467,191 Plains Resources Inc. 3,633,726 8,857,509 0.9
126,100 Stone Energy Corporation 3,714,453 5,343,487 0.6
290,750 Tom Brown, Inc. 2,716,267 4,524,797 0.5
------------ ------------ ------
28,491,366 43,540,831 4.8
========================================================================================================================
</TABLE>
5
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Sector* Held Stocks Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Financial Services
- ------------------------------------------------------------------------------------------------------------------------
85,050 American National Insurance Company $ 6,785,507 $ 6,059,813 0.7%
110,000 BARRA Inc. 2,718,076 2,777,500 0.3
566,600 Billing Concepts Corp. 5,437,881 6,338,838 0.7
286,300 Brandywine Realty Trust 5,158,021 5,672,319 0.6
196,500 Camden Property Trust 5,100,934 5,452,875 0.6
529,400 Capitol Federal Financial 5,259,897 5,525,613 0.6
559,473 Charter One Financial, Inc. 8,982,730 15,560,343 1.7
110,300 Commerce Bancorp, Inc. 4,460,694 4,715,325 0.5
179,600 FelCor Lodging Trust Inc. 3,888,363 3,726,700 0.4
218,800 Frontier Insurance Group, Inc. 3,220,795 3,364,050 0.4
123,000 HCC Insurance Holdings, Inc. 2,035,275 2,790,563 0.3
64,900 Investment Technology Group, Inc. 1,865,985 2,101,138 0.2
34,900 Jefferies Group, Inc. 590,427 1,047,000 0.1
106,200 Kimco Realty Corporation 3,935,760 4,155,075 0.5
145,000 Meditrust Companies 2,179,231 1,894,062 0.2
44,800 National Data Corporation 1,589,004 1,915,200 0.2
380,000 PXRE Corporation 7,897,968 6,887,500 0.8
394,700 Peoples Heritage Financial Group, Inc. 7,749,225 7,425,294 0.8
423,600 Primark Corporation 10,330,966 11,887,275 1.3
637,200 Scottish Annuity & Life Holdings, Ltd. 9,135,650 6,849,900 0.8
------------ ------------ ------
98,322,389 106,146,383 11.7
- ------------------------------------------------------------------------------------------------------------------------
Healthcare
- ------------------------------------------------------------------------------------------------------------------------
267,100 COR Therapeutics, Inc. 2,579,398 3,939,725 0.4
234,800 Covance Inc. 4,934,003 5,620,525 0.6
67,400 DVI, Inc. 1,194,029 1,154,225 0.1
26,000 Datascope Corp. 726,750 835,250 0.1
475,400 EndoSonics Corporation 3,209,799 3,327,800 0.4
59,400 Gilead Sciences, Inc. 1,417,229 3,103,650 0.4
819,500 HCIA, Inc. 9,510,805 7,324,281 0.8
2,192,500 MedPartners, Inc. 16,412,861 16,580,781 1.8
427,800 Mentor Corporation 6,659,215 7,967,775 0.9
548,000 Nabi 3,737,565 1,541,250 0.2
91,000 NeoRx Corporation 537,444 139,344 0.0
153,700 Neurogen Corporation 2,038,368 2,247,862 0.3
599,600 Orthodontic Centers of America, Inc. 7,248,034 8,469,350 0.9
186,600 Pharmacopeia, Inc. 2,951,278 2,099,250 0.2
300,850 Scios Inc. 1,387,073 977,762 0.1
28,400 Sepracor Inc. 2,080,605 2,307,500 0.3
139,500 Sierra Health Services, Inc. 2,866,479 2,014,031 0.2
81,600 VISX, Incorporated (b) 383,882 6,461,700 0.7
------------ ------------ ------
69,874,817 76,112,061 8.4
========================================================================================================================
</TABLE>
6
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Sector* Held Stocks Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Materials & Processing
- ------------------------------------------------------------------------------------------------------------------------
432,100 A.M. Castle & Company $ 7,628,056 $ 7,345,700 0.8%
525,000 Apogee Enterprises, Inc. 6,204,771 7,054,688 0.8
638,277 BHA Group Holdings, Inc. 7,083,102 5,265,785 0.6
79,500 Carpenter Technology Corporation 2,434,576 2,270,719 0.2
214,500 Citation Corporation 2,666,840 3,445,406 0.4
438,900 Commonwealth Industries, Inc. 6,993,121 5,486,250 0.6
83,800 Dan River, Inc. (Class A) 1,257,000 618,025 0.1
224,000 Giant Cement Holding, Inc. 2,793,187 5,124,000 0.6
180,600 Gibraltar Steel Corporation 3,896,316 4,469,850 0.5
223,300 Insituform Technologies, Inc. (Class A) 1,711,288 4,828,863 0.5
559,200 Intermet Corporation 8,772,555 8,457,900 0.9
251,500 Novamerican Steel, Inc. 2,912,596 2,892,250 0.3
592,000 Paxar Corporation 8,093,980 5,328,000 0.6
189,600 Quanex Corporation 4,435,033 5,403,600 0.6
1,177,581 Ryerson Tull Inc. 19,902,399 26,569,171 2.9
674,500 Shiloh Industries, Inc. 9,473,940 9,780,250 1.1
381,100 Wolverine Tube, Inc. 10,082,263 9,575,137 1.1
863,610 Zemex Canada Corporation 7,282,851 5,451,538 0.6
------------ ------------ ------
113,623,874 119,367,132 13.2
- ------------------------------------------------------------------------------------------------------------------------
Miscellaneous
- ------------------------------------------------------------------------------------------------------------------------
1,609,700 Mercer International, Inc. 21,053,577 9,658,200 1.1
1,110,850 Metromedia International Group, Inc. 12,529,473 8,331,375 0.9
------------ ------------ ------
33,583,050 17,989,575 2.0
- ------------------------------------------------------------------------------------------------------------------------
Producer Durables
- ------------------------------------------------------------------------------------------------------------------------
194,300 AGCO Corporation 4,473,631 2,198,019 0.2
87,100 ANTEC Corporation 2,506,783 2,792,644 0.3
250,000 Allen Telecom Inc. 3,924,618 2,687,500 0.3
636,000 Applied Industrial Technologies, Inc. 11,914,143 12,084,000 1.3
606,200 B.I., Incorporated 5,500,558 5,152,700 0.6
846,900 Brown & Sharpe Manufacturing Company
(Class A) 10,624,240 4,605,019 0.5
808,800 Comdial Corporation 4,965,675 5,712,150 0.6
192,800 DONCASTERS PLC (ADR) (a) 3,281,548 3,374,000 0.4
517,800 ESCO Electronics Corporation 9,048,312 6,634,313 0.7
436,600 Kent Electronics Corporation 5,745,066 8,650,138 1.0
210,800 Nu Horizons Electronics Corp. 1,621,264 1,488,775 0.2
598,500 Oakwood Homes Corporation 11,219,065 7,855,312 0.9
145,200 The Ryland Group, Inc. 1,988,647 4,310,625 0.5
518,750 TALX Corporation 4,385,624 3,760,937 0.4
164,630 Toll Brothers, Inc. 3,204,764 3,529,256 0.4
121,600 Triumph Group, Inc. 2,913,004 3,100,800 0.3
------------ ------------ ------
87,316,942 77,936,188 8.6
========================================================================================================================
</TABLE>
7
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Percent of
Sector* Held Stocks Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Technology
- ------------------------------------------------------------------------------------------------------------------------
435,000 Anixter International, Inc. $ 5,272,172 $ 7,938,750 0.9%
769,500 Aspen Technology, Inc. 9,561,567 9,041,625 1.0
545,300 Bell Industries, Inc. 4,905,410 2,419,769 0.3
346,600 Black Box Corporation 9,823,716 17,373,325 1.9
89,071 Brite Voice Systems, Inc. 722,651 1,235,860 0.1
806,150 C.P. Clare Corporation 7,312,386 4,786,516 0.5
285,000 Cognos, Inc. 6,900,270 6,198,750 0.7
263,200 The DII Group, Inc. 3,063,360 9,820,650 1.1
1,120,100 DSP Communications, Inc. 10,182,078 32,342,888 3.6
591,192 Harbinger Corporation 3,322,584 7,389,900 0.8
1,648,800 Mentor Graphics Corporation 18,050,546 21,125,250 2.3
240,000 NetManage, Inc. 621,375 517,500 0.1
643,750 Phoenix Technologies Ltd. 8,297,752 11,507,031 1.3
593,200 Planar Systems, Inc. 6,130,407 4,597,300 0.5
101,900 Rational Software Corporation 1,500,447 3,356,331 0.4
387,900 Read-Rite Corporation 4,416,336 2,406,192 0.3
267,400 Sensormatic Electronics Corporation 2,216,624 3,726,887 0.4
277,000 Software Spectrum, Inc. 5,550,546 4,501,250 0.5
236,817 Sterling Commerce, Inc. 5,569,335 8,643,820 0.9
63,500 Storage Technology Corporation 2,076,495 1,444,625 0.2
897,400 Structural Dynamics Research Corporation 12,037,474 16,657,987 1.8
62,300 Summit Technology, Inc. 1,029,699 1,370,600 0.1
1,232,700 Sybase, Inc. 17,535,228 13,559,700 1.5
602,500 Telxon Corporation 6,344,736 4,782,344 0.5
123,900 TriQuint Semiconductor, Inc. 2,331,787 7,039,069 0.8
------------ ------------ ------
154,774,981 203,783,919 22.5
- ------------------------------------------------------------------------------------------------------------------------
Utilities
- ------------------------------------------------------------------------------------------------------------------------
569,600 Applied Digital Access, Inc. 4,238,174 2,563,200 0.3
========================================================================================================================
Total Stocks 820,944,639 862,658,214 95.3
========================================================================================================================
</TABLE>
8
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Face Percent of
Amount Issue Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <S> <C> <C> <C>
Short-Term Securities
- ------------------------------------------------------------------------------------------------------------------------
Commercial Paper** $15,000,000 CSW Credit Inc., 4.90% due 7/19/1999 $ 14,963,250 $ 14,963,250 1.6%
39,545,000 General Electric Capital Corp.,
5.75% due 7/01/1999 39,545,000 39,545,000 4.4
10,000,000 Goldman Sachs Group, L.P., 4.88%
due 7/15/1999 9,981,022 9,981,022 1.1
10,000,000 Metropolitan Life Insurance Company,
4.87% due 7/07/1999 9,991,883 9,991,883 1.1
========================================================================================================================
Total Short-Term Securities 74,481,155 74,481,155 8.2
========================================================================================================================
Total Investments $895,425,794 937,139,369 103.5
============
Liabilities in Excess of Other Assets (32,026,225) (3.5)
------------ ------
Net Assets $905,113,144 100.0%
============ ======
========================================================================================================================
Net Asset Value: Class A -- Based on net assets of $314,975,459 and
15,164,089 shares outstanding $ 20.77
============
Class B -- Based on net assets of $439,473,241 and
22,459,391 shares outstanding $ 19.57
============
Class C -- Based on net assets of $45,990,881 and
2,374,975 shares outstanding $ 19.36
============
Class D -- Based on net assets of $104,673,563 and
5,066,579 shares outstanding $ 20.66
============
========================================================================================================================
</TABLE>
* Holdings are classified into the economic sectors found in the Russell
2000 Index.
** 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.
(a) American Depositary Receipts (ADR).
(b) VISX, Incorporated declared a two-for-one stock split during the quarter.
9
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
PORTFOLIO INFORMATION
As of June 30, 1999
Percent of
Top Ten Equity Holdings Net Assets
DSP Communications, Inc. ................ 3.6%
Ryerson Tull Inc. ....................... 2.9
Mentor Graphics Corporation ............. 2.3
Midway Games, Inc. ...................... 2.0
Black Box Corporation ................... 1.9
Paxson Communications Corporation ....... 1.9
Structural Dynamics Research Corporation 1.8
MedPartners, Inc. ....................... 1.8
WMS Industries, Inc. .................... 1.8
Charter One Financial, Inc. ............. 1.7
Sectors Represented Percent of
in the Portfolio Net Assets
Technology .............................. 22.5%
Consumer Discretionary .................. 18.7
Materials & Processing .................. 13.2
Financial Services ...................... 11.7
Producer Durables ....................... 8.6
Healthcare .............................. 8.4
Auto & Transportation ................... 5.1
Energy .................................. 4.8
Miscellaneous ........................... 2.0
Utilities ............................... 0.3
Stock Portfolio Changes for the Quarter
Ended June 30, 1999
Additions
ANTEC Corporation
*AppliedTheory Corp.
BARRA Inc.
*Backweb Technologies Ltd.
*Boole & Babbage, Inc.
*Brocade Communications Systems
Capitol Federal Financial
Commerce Bancorp, Inc.
Covance Inc.
*DLJDirect
Datascope Corp.
Evergreen Resources Inc.
*Extreme Networks
Frontier Insurance Group, Inc.
*Informatica Corp.
Investment Technology Group
*Juniper Networks Inc.
*Juno Online Services Inc.
Keystone Automotive Industries Inc.
*Latitude Communications Inc.
*Marimba
Orthodontic Centers of America, Inc.
Panera Bread Company (Class A)
*Pantry Inc.
*Phone.com Inc.
*Portal Software Inc.
*Radio One Inc.
*Razorfish Inc.
*Redback Networks
Sepracor Inc.
*Software.com Inc.
*Starmedia Network Inc.
Suiza Foods Corporation
Summit Technology, Inc.
*Tenfold Corporation
*US Internetworking Inc.
Veterinary Centers of America, Inc.
*Viant Corporation
Deletions
ACX Technologies, Inc.
Alpha Industries, Inc.
*AppliedTheory Corp.
Au Bon Pain Co., Inc. (Class A)
BMC Software, Inc.
*Backweb Technologies Ltd.
Benton Oil and Gas Company
*Boole & Babbage, Inc.
*Brocade Communications Systems
CHS Electronics, Inc.
*DLJDirect
*Extreme Networks
Harmonic Lightwaves, Inc.
*Informatica Corp.
*Juniper Networks Inc.
*Juno Online Services Inc.
Kennametal, Inc.
*Latitude Communications Inc.
Magellan Health Services, Inc.
*Marimba
PLATINUM Technology International, Inc.
*Pantry Inc.
*Phone.com Inc.
*Portal Software Inc.
*Radio One Inc.
*Razorfish Inc.
*Redback Networks
Santa Fe International Corporation
Shared Medical Systems Corporation
*Software.com Inc.
*Starmedia Network Inc.
Stewart & Stevenson Services, Inc.
*Tenfold Corporation
*US Internetworking Inc.
*Viant Corporation
Walbro Corporation
*Added and deleted in the same quarter.
10
<PAGE>
Merrill Lynch Special Value Fund, Inc. June 30, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Fred G. Weiss, Director
Arthur Zeikel, Director
Daniel V. Szemis, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Thomas D. Jones, III, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
11
<PAGE>
This report is not authorized for use as an offer of sale or a solicitation of
an offer to buy shares of the Fund unless accompanied or preceded by the Fund's
current prospectus. Past performance results shown in this report should not be
considered a representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Statements and other information
herein are as dated and are subject to change.
Merrill Lynch
Special Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #10253 -- 6/99
[RECYCLE LOGO] Printed on post-consumer recycled paper
