MERRILL LYNCH BASIC VALUE FUND, INC.
FUND LOGO
Semi-Annual Report December 31, 1993
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
Basic Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
As 1993 drew to a close, the US economy began to show some signs
of improvement with little evidence of an appreciable increase in
the rate of inflation. Interest rate-sensitive sectors of the US
economy are expanding, such as capital goods, consumer durables
and residential construction. However, excluding the interest
rate-sensitive sectors, the US economy grew only marginally
during 1993. Growth was hampered by declining government
spending, a deteriorating trade balance, and sluggishness in
other sectors of the economy. Despite the areas of economic
weakness that persist, concerns arose late in 1993 that the rate
of business activity might increase inflationary pressures which
were reflected in an upturn of long-term interest rates.
<PAGE>
Other developments late in the year had significant long-term
implications for the US financial markets. The outline for
proposed healthcare reform is very important for the US economy.
As the various healthcare reform proposals are debated, investors
will focus on their potential effects on the Federal budget, the
US economy and the quality of healthcare delivery in the United
States. In addition, the ratification of the North American Free
Trade Agreement by the US Congress was important not only for the
prospect of expanding trade with Canada and Mexico, but also as a
positive influence on the recently concluded round of negotiations
on the General Agreement on Tariffs and Trade. Further economic
integration and growth through trade liberalization would be positive
for the capital markets in the United States and around the world.
Portfolio Matters
Security purchases during the final quarter of 1993 amounted to
$258 million and were comprised of additions to 14 existing positions
and 5 new commitments to the portfolio. The Fund's security sales
totaled $198 million, with reductions in 21 holdings and the
elimination of 4 positions. At year-end 1993, the Fund's cash
position was approximately 20% of net assets, the same as at the
end of September, but up from about 8% at the beginning of 1993.
Fund assets increased in 1993 to nearly $3.8 billion from $2.8
billion at the end of 1992.
Despite the addition of five new holdings to the portfolio in the
last quarter of 1993, fully 75% of the money spent was dedicated
to increasing established positions with a heavy emphasis on
Bristol-Myers Squibb Co., Merck & Co., Inc., Philip Morris Cos.
Inc. and Sears, Roebuck & Co. The first three were new positions
in the September quarter, and we have added to them consistently
since initial purchase. We had hoped these depressed growth
stocks would come under year-end tax selling pressure in view of
their overall dismal 1993 market performance, but this generally
was not the case. Nonetheless, our overall entry prices were, we
believe, quite reasonable.
In the case of Sears, the stock had already been one of our
largest holdings, fourth at the end of September, and had been an
excellent market performer throughout 1993, benefiting from major
restructuring and a dramatic turnaround in its merchandising
operations. As we had originally purchased the stock when it was
decidedly out of favor, it might be expected that we would take
advantage of the stock's strength to be taking profits. Instead,
we added to our position by 25%, and Sears is now our largest
holding. Our thinking is predicated on the belief that the
company is in the early stages of a prolonged turnaround in its
merchandising operations. In a difficult retailing environment,
its sales growth has been impressive and should continue, which
would be translated into sustained earnings gains.
<PAGE>
Our new additions to the portfolio included initial public
offerings (IPOs) in three real estate investment trusts, Avalon
Properties, Inc., Irvine Apartment Communities, Inc. and Simon
Property Group, Inc. Thus far these are small positions that
provide well-above average yields and the prospect for moderate
long-term growth. We also purchased shares in a reinsurance
company, PartnerRe Holdings Ltd., and Unisys Corp., a recovering
technology company.
On the sell side we modestly reduced our exposure to international
oils with partial sales in Royal Dutch Petroleum Co., Mobil Corp.,
British Petroleum Co. PLC and Chevron Corp. This industry remains
our largest commitment, but we thought some profit-taking was prudent.
We also continued to reduce positions in International Paper Co. and
United Technologies Corp. Our completed sales, Armco Inc., British
Steel PLC, Dime Savings Bank of New York and Tredegar Industries, Inc.,
were all minor holdings.
In Conclusion
In each of the quarterly shareholder reports throughout 1993, we
espoused a cautious approach which, as it turned out, was
generally premature. Much has been written about the lack of
volatility in the stock market during 1993. And while this is
true for the market averages, there were dramatic price changes
in various sectors and industries. We remain concerned with
historically high valuations and believe overall market
volatility will be much more pronounced in 1994 than it was in
1993. Accordingly, we believe our 20% cash position is
appropriate in prevailing market conditions.
Thank you for your investment in Merrill Lynch Basic Value Fund,
Inc., and we look forward to reviewing our outlook and strategy
again in our upcoming quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paul M. Hoffmann)
Paul M. Hoffmann
Vice President and Portfolio Manager
January 10, 1994
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. "Results of a $1,000
Investment Since Inception" chart measures performance since inception
and may not reflect results of investments made at any other time.
<PAGE>
Results of a $1,000 Investment Since Inception--Class A Shares
(6.5% current sales charge--$935 net amount invested; assuming
reinvestment of all dividends and capital gains distributions.)
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX: ITEM 1.
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
12/31/93 9/30/93 12/31/92 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares $23.37 $23.71 $20.34 +18.56%(1) -0.34%(2)
ML Basic Value Fund Class B Shares 23.19 23.47 20.21 +18.44(1) -0.09(2)
Dow Jones Industrial Average** 3,754.09 3,555.12 3,301.11 +13.72 +5.60
Standard & Poor's 500 Index** 466.45 458.93 435.71 + 7.06 +1.64
ML Basic Value Fund Class A Shares--Total Return +22.16(3) +1.02(4)
ML Basic Value Fund Class B Shares--Total Return +20.93(5) +0.79(6)
Dow Jones Industrial Average--Total Return** +16.96 +6.32
Standard & Poor's 500 Index--Total Return** +10.09 +2.35
<FN>
(1)Percent change includes reinvestment of $0.726 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.257 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.702 per share ordinary income dividends
and $0.726 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.318 per share ordinary income dividends
and $0.257 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.484 per share ordinary income dividends
and $0.726 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.204 per share ordinary income dividends
and $0.257 per share capital gains distributions.
*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.
</TABLE>
<PAGE>
<TABLE>
PERFORMANCE DATA (concluded)
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>
7/1/77-12/31/77 $ 9.60 $ 9.91 -- -- + 3.23%
1978 9.91 9.61 $ 0.270 $ 0.490 + 4.65
1979 9.61 11.46 0.460 0.550 +31.24
1980 11.46 12.46 0.940 0.600 +23.92
1981 12.46 10.62 1.370 0.690 + 1.12
1982 10.62 12.28 0.310 0.680 +28.25
1983 12.28 14.31 0.920 0.610 +30.52
1984 14.31 13.38 1.130 0.680 + 7.08
1985 13.38 15.79 1.020 0.640 +32.17
1986 15.79 17.06 0.860 0.580 +17.86
1987 17.06 15.75 1.338 0.973 + 4.36
1988 15.75 17.90 0.655 0.749 +22.73
1989 17.90 19.94 0.226 0.872 +17.54
1990 19.94 16.09 0.303 0.969 -13.07
1991 16.09 19.36 0.272 0.772 +27.23
1992 19.36 20.34 0.325 0.680 +10.36
1993 20.34 23.37 0.726 0.702 +22.16
------- -------
Total $11.125 Total $11.237
Cumulative total return as of 12/31/93: +1,013.52%**
<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 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 $18.79 $17.89 $0.352 $0.361 - 0.96%
1989 17.89 19.83 0.226 0.756 +16.33
1990 19.83 16.01 0.303 0.781 -13.92
1991 16.01 19.25 0.272 0.583 +25.91
1992 19.25 20.21 0.325 0.481 + 9.24
1993 20.21 23.19 0.726 0.484 +20.93
------ ------
Total $2.204 Total $3.446
Cumulative total return as of 12/31/93: +64.94%**
<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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/93 +22.16% +14.22%
Five Years Ended 12/31/93 +11.87 +10.38
Ten Years Ended 12/31/93 +14.11 +13.35
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/93 +20.93% +16.93%
Five Years Ended 12/31/93 +10.74 +10.74
Inception (10/21/88)
through 12/31/93 +10.11 +10.11
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
Discount from Book Value
<S> <C> <S> <C> <C> <C>
Metals/Non-Ferrous 1,400,000 ASARCO Inc. $ 35,255,430 $ 32,025,000 0.8%
Insurance 800,000 Aetna Life & Casualty Co. 35,143,623 48,300,000 1.3
Savings & Loans 1,700,000 Ahmanson (H.F.) & Co. 29,795,907 33,362,500 0.9
Insurance 260,000 American National Insurance Co. 9,749,442 13,325,000 0.4
Insurance 650,000 CIGNA Corp. 34,208,142 40,787,500 1.1
Savings & Loans 400,000 ++Coast Savings Financial, Inc. 6,687,030 5,700,000 0.1
Insurance 850,000 Continental Corp. 29,293,263 23,481,250 0.6
Information Processing 1,700,000 Data General Corp. 23,653,243 15,937,500 0.4
Information Processing 2,000,000 ++Digital Equipment Corp. 97,582,338 68,500,000 1.8
Savings & Loans 330,000 SFFed Corp. 5,711,230 5,857,500 0.2
Communications 900,000 Telefonica de Espana, S.A. (ADR)* 22,118,230 35,100,000 0.9
Insurance 1,400,000 Travelers Corp. 45,943,251 43,575,000 1.2
-------------- -------------- -----
375,141,129 365,951,250 9.7
<PAGE>
<CAPTION>
Below-Average Price/Earnings Ratio
<S> <C> <S> <C> <C> <C>
Insurance 600,000 Allstate Corp. 16,316,532 17,700,000 0.5
Financial Services 1,050,000 American Express Co. 24,145,988 32,418,750 0.9
Insurance 2,000,000 American General Corp. 34,620,231 57,250,000 1.5
Steel 1,750,000 ++Bethlehem Steel Corp. 27,564,885 35,656,250 0.9
Banking 1,550,000 Chase Manhattan Corp. 34,131,600 52,506,250 1.4
Banking 1,650,000 ++Citicorp, Inc. 32,573,546 60,637,500 1.6
Savings & Loans 400,000 ++Cragin Financial Corp. 4,320,769 14,850,000 0.4
Financial Services 800,000 Dean Witter Discover & Co. 20,456,508 27,700,000 0.7
Retail 700,000 ++Federated Department Stores, Inc. 8,331,220 14,525,000 0.4
Banking 1,100,000 First Interstate Bancorp 46,781,158 70,537,500 1.9
Automotive 1,000,000 Ford Motor Co. 35,593,428 64,500,000 1.7
Automotive 1,250,000 General Motors Corp. 46,816,513 68,593,750 1.8
Conglomerates 1,400,000 ITT Corp. 71,697,690 127,750,000 3.4
Retail 1,600,000 K mart Corp. 31,300,627 34,000,000 0.9
Aerospace & Defense 450,000 Lockheed Corp. 16,415,936 30,712,500 0.8
Aerospace & Defense 100,000 McDonnell Douglas Corp. 3,902,972 10,700,000 0.3
Savings & Loans 350,000 NBB Bancorp, Inc. 6,371,616 12,993,750 0.3
Hospital Management 1,600,000 ++National Medical Enterprises, Inc. 16,947,603 22,400,000 0.6
Semiconductors 1,750,000 National Semiconductor Corp. 14,850,011 28,218,750 0.8
Banking 1,400,000 NationsBank Corp. 56,031,815 68,600,000 1.8
Banking 1,200,000 Norwest Corp. 6,512,508 29,250,000 0.8
Insurance 800,000 ++PartnerRe Holdings Ltd. 17,259,560 17,000,000 0.5
Electrical Equipment 2,800,000 ++Philips N.V. Corp. 50,735,011 57,750,000 1.5
Retail 2,500,000 Sears, Roebuck & Co. 84,975,172 131,875,000 3.5
Information Processing 2,200,000 ++Tandem Computers Inc. 26,902,529 23,925,000 0.6
Information Processing 1,000,000 ++Unisys Corp. 12,205,991 12,625,000 0.3
Savings & Loans 450,000 Washington Mutual Savings Bank 4,466,265 10,743,750 0.3
-------------- -------------- -----
752,227,684 1,135,418,750 30.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
Above-Average Yield
<S> <C> <S> <C> <C> <C>
Real Estate Investment
Trust 600,000 Avalon Properties, Inc. $ 12,413,018 $ 12,300,000 0.3%
Communications 650,000 Bell Atlantic Corp. 24,933,951 38,350,000 1.0
Pharmaceutical 850,000 Bristol-Myers Squibb Co. 49,065,476 49,406,250 1.3
Oil--International 500,000 Chevron Corp. 25,615,084 43,562,500 1.2
Banking 700,000 Citicorp, Inc. (Pfd. P) 10,325,000 13,912,500 0.4
Utilities 850,000 Consolidated Edison Co. of New York 17,134,666 27,306,250 0.7
Utilities 637,500 DPL Inc. 6,204,369 13,148,438 0.4
Utilities 650,000 Entergy Corp. 8,294,486 23,400,000 0.6
Oil--International 530,000 Exxon Corp. 19,216,740 33,390,000 0.9
Utilities 500,000 FPL Group, Inc. 16,500,010 19,562,500 0.5
Chemicals 330,000 Imperial Chemical Industries PLC (ADR)* 23,014,655 15,592,500 0.4
Real Estate Investment
Trust 377,600 ++Irvine Apartment Communities, Inc. 6,608,000 6,749,600 0.2
Retail 550,000 K mart Corp. (Pfd. P) 24,266,762 24,406,250 0.7
Oil--International 1,300,000 Mobil Corp. 63,000,327 102,700,000 2.7
Utilities 650,000 NIPSCO Industries, Inc. 9,770,400 21,368,750 0.6
Oil--Domestic 2,400,000 Occidental Petroleum Corp. 51,424,946 41,100,000 1.1
Communications 350,000 Pacific Telesis Group 6,615,296 18,900,000 0.5
Utilities 700,000 Philadelphia Electric Co. 15,280,225 21,175,000 0.6
Tobacco 1,000,000 Philip Morris Cos. Inc. 51,576,884 55,750,000 1.5
Utilities 850,000 Public Service Enterprise Group 22,490,010 27,200,000 0.7
Oil--International 1,100,000 Royal Dutch Petroleum Co. 65,619,858 114,812,500 3.0
Utilities 1,400,000 SCEcorp 24,211,866 28,000,000 0.7
Real Estate Investment
Trust 900,000 ++Simon Property Group, Inc. 20,025,000 20,362,500 0.5
Oil--International 1,000,000 Texaco Inc. 53,689,121 64,625,000 1.7
Utilities 800,000 Texas Utilities Corp. 25,913,086 34,600,000 0.9
Communications 600,000 U.S. West Inc. 14,129,797 27,525,000 0.7
-------------- -------------- -----
667,339,033 899,205,538 23.8
<PAGE>
<CAPTION>
Special Situations
<S> <C> <S> <C> <C> <C>
Aluminum 200,000 Aluminum Co. of America 7,763,259 13,875,000 0.4
Oil--International 700,000 British Petroleum Co. PLC (ADR)* 32,946,715 44,800,000 1.2
Information Processing 1,000,000 ++Ceridian Corp. 16,072,735 19,000,000 0.5
Farm & Construction
Equipment 1,000,000 Deere & Co., Inc. 43,861,789 74,000,000 2.0
Oil Services & Equipment 2,000,000 Dresser Industries, Inc. 38,346,273 41,500,000 1.1
Food Merchandising 770,800 ++Foodmaker Inc. 9,587,860 7,515,300 0.2
Chemicals 500,000 Hercules, Inc. 19,235,727 56,500,000 1.5
Machinery 675,000 Ingersoll-Rand Co. 13,619,766 25,818,750 0.7
Computers 1,275,000 International Business Machines Corp. 86,680,600 72,037,500 1.9
Forest & Paper Products 1,000,000 International Paper Co. 55,866,813 67,750,000 1.8
Pharmaceutical 1,400,000 Merck & Co., Inc. 45,341,085 48,125,000 1.3
Aluminum 550,000 Reynolds Metals Co. 22,792,529 24,956,250 0.7
Steel 800,000 USX--US Steel Group, Inc. 21,961,346 34,700,000 0.9
Chemicals 1,600,000 Union Carbide Corp. 23,852,950 35,800,000 0.9
Aerospace & Defense 600,000 United Technologies Corp. 29,864,349 37,200,000 1.0
Chemicals 440,000 Zeneca Group PLC (ADR)* 12,980,000 16,390,000 0.4
-------------- -------------- -----
480,773,796 619,967,800 16.5
Total Stocks 2,275,481,642 3,020,543,338 80.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper** $50,000,000 American Telephone & Telegraph Co., 3.30%
due 1/07/1994 $ 49,967,917 $ 49,967,917 1.3%
50,000,000 Bank One Diversified, 3.28% due 1/13/1994 49,940,778 49,940,778 1.3
Ciesco L.P.:
50,000,000 3.24% due 1/25/1994 49,887,500 49,887,500 1.3
50,000,000 3.18% due 2/09/1994 49,823,333 49,823,333 1.3
30,000,000 Daimler Benz A.G., 3.35% due 1/14/1994 29,960,917 29,960,917 0.8
23,751,000 General Electric Capital Corp., 3.22% due 1/03/1994 23,744,627 23,744,627 0.6
52,000,000 Matterhorn Capital Corp., 3.30% due 1/05/1994 51,976,028 51,976,028 1.4
33,495,000 Met Life Funding Corp., 3.29% due 1/13/1994 33,455,206 33,455,206 0.9
National Australia Funding:
54,000,000 3.40% due 1/10/1994 53,949,000 53,949,000 1.4
50,000,000 3.27% due 1/11/1994 49,950,041 49,950,041 1.4
50,000,000 PHH Corp., 3.35% due 1/10/1994 49,953,472 49,953,472 1.4
Penney (J.C.) & Co.:
50,000,000 3.20% due 1/27/1994 49,880,000 49,880,000 1.3
<PAGE> 50,000,000 3.15% due 2/01/1994 49,860,000 49,860,000 1.3
50,000,000 PepsiCo, Inc., 3.30% due 1/06/1994 49,972,500 49,972,500 1.4
40,000,000 Sara Lee Corp., 3.32% due 1/12/1994 39,955,733 39,955,733 1.1
50,000,000 Sheffield Receivables Corp., 3.18% due 2/07/1994 49,832,167 49,832,167 1.3
35,000,000 Siemens Corp., 3.30% due 1/24/1994 34,923,000 34,923,000 0.9
Total Short-Term Securities 767,032,219 767,032,219 20.4
Total Investments $3,042,513,861 3,787,575,557 100.5
==============
Liabilities in Excess of Other Assets (17,029,545) (0.5)
-------------- -----
Net Assets $3,770,546,012 100.0%
============== =====
<FN>
*American Depositary Receipt (ADR).
**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.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO INFORMATION
Ten Largest Percent of
Stock Holdings Net Assets
Sears, Roebuck & Co. 3.5%
ITT Corp. 3.4
Royal Dutch Petroleum Co. 3.0
Mobil Corp. 2.7
Deere & Co., Inc. 2.0
International Business Machines Corp. 1.9
First Interstate Bancorp 1.9
NationsBank Corp. 1.8
General Motors Corp. 1.8
Digital Equipment Corp. 1.8
Portfolio Changes for the Quarter
Ended December 31, 1993
Additions
Avalon Properties, Inc.
Irvine Apartment Communities, Inc.
PartnerRe Holdings Ltd.
Simon Property Group, Inc.
Unisys Corp.
<PAGE>
Deletions
Armco Inc.
British Steel PLC (ADR)
Dime Savings Bank of New York
Tredegar Industries, Inc.
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of December 31, 1993
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$3,042,513,861) (Note 1a) $3,787,575,557
Receivables:
Capital shares sold $14,043,501
Securities sold 12,197,588
Dividends 6,010,780 32,251,869
-----------
Deferred organization expenses (Note 1d) 7,903
Prepaid registration fees and other assets (Note 1d) 81,950
--------------
Total assets 3,819,917,279
--------------
Liabilities: Payables:
Capital shares redeemed 20,133,862
Securities purchased 19,994,605
Distributor (Note 2) 1,336,208
Investment adviser (Note 2) 1,299,469 42,764,144
-----------
Accrued expenses and other liabilities 6,607,123
--------------
Total liabilities 49,371,267
--------------
Net Assets: Net assets $3,770,546,012
==============
Net Assets Class A Common Stock, $0.10 par value, 200,000,000 shares authorized $ 9,329,384
Consist of: Class B Common Stock, $0.10 par value, 200,000,000 shares authorized 6,855,851
Paid-in capital in excess of par 2,977,193,670
Undistributed investment income--net 161,210
Undistributed realized capital gains--net 31,944,201
Unrealized appreciation on investments--net 745,061,696
--------------
Net assets $3,770,546,012
==============
<PAGE>
Net Asset Value: Class A--Based on net assets of $2,180,637,120 and 93,293,841 shares
outstanding $ 23.37
==============
Class B--Based on net assets of $1,589,908,892 and 68,558,506 shares
outstanding $ 23.19
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Six Months Ended December 31, 1993
<S> <S> <C>
Investment Dividends (net of $671,561 foreign withholding tax) $ 45,689,700
Income Interest and discount earned 11,133,452
(Notes 1b & 1c): Other 209,382
--------------
Total income 57,032,534
--------------
Expenses: Distribution fees--Class B (Note 2) 7,515,707
Investment advisory fees (Note 2) 7,447,316
Transfer agent fees--Class A (Note 2) 970,658
Transfer agent fees--Class B (Note 2) 816,137
Printing and shareholder reports 125,548
Accounting services (Note 2) 86,016
Registration fees (Note 1d) 78,650
Custodian fees 68,353
Professional fees 34,093
Directors' fees and expenses 19,564
Pricing fees 5,424
Amortization of organization expenses (Note 1d) 3,622
Other 18,141
--------------
Total expenses 17,189,229
--------------
Investment income--net 39,843,305
--------------
Realized & Realized gain on investments--net 77,069,939
Unrealized Gain on Change in unrealized appreciation on investments--net 104,343,054
Investments--Net --------------
(Notes 1c & 3): Net Increase in Net Assets Resulting from Operations $ 221,256,298
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: December 31, 1993 June 30, 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 39,843,305 $ 90,239,186
Realized gain on investments--net 77,069,939 81,147,456
Change in unrealized appreciation on investments--net 104,343,054 340,508,739
-------------- --------------
Net increase in net assets resulting from operations 221,256,298 511,895,381
-------------- --------------
Dividends & Investment income--net:
Distributions to Class A (60,909,747) (52,495,436)
Shareholders Class B (29,397,371) (23,460,921)
(Note 1e): Realized gain on investments--net:
Class A (66,312,510) (29,779,683)
Class B (47,028,899) (19,244,373)
-------------- --------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (203,648,527) (124,980,413)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 345,925,550 285,314,244
Transactions -------------- --------------
(Note 4):
Net Assets: Total increase in net assets 363,533,321 672,229,212
Beginning of period 3,407,012,691 2,734,783,479
-------------- --------------
End of period* $3,770,546,012 $3,407,012,691
============== ==============
<FN>
*Undistributed investment income--net $ 161,210 $ 50,625,023
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights
Class A
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Six For the Year Ended June 30,
Months Ended --------------------------------------------------
Increase (Decrease) in Net Asset Value: Dec. 31, 1993 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 23.31 $ 20.57 $ 18.90 $ 19.32 $ 20.03
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .32 .71 .70 .87 .95
Realized and unrealized gain (loss) on
investments--net 1.17 3.03 2.02 (.02) (.56)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.49 3.74 2.72 .85 .39
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.68) (.64) (.76) (.97) (.87)
Realized gain on investments--net (.75) (.36) (.29) (.30) (.23)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.43) (1.00) (1.05) (1.27) (1.10)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.37 $ 23.31 $ 20.57 $ 18.90 $ 19.32
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.59%++ 19.03% 15.08% 5.39% 1.77%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses .52%* .54% .58% .59% .57%
Average Net ========== ========== ========== ========== ==========
Assets: Investment income--net 2.61%* 3.48% 3.52% 4.76% 5.05%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $2,180,637 $2,023,078 $1,670,430 $1,490,657 $1,556,257
Data: ========== ========== ========== ========== ==========
Portfolio turnover 11.94% 20.85% 21.24% 20.11% 4.88%
========== ========== ========== ========== ==========
<PAGE>
<CAPTION>
Class B
The following per share data and ratios have been derived ----------------------------------------------------------------------
from information provided in the financial statements. For the Six For the Year Ended June 30,
Months Ended ------------------------------------------------------
Increase (Decrease) in Net Asset Value: Dec. 31, 1993 1993 1992 1991 1990
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 23.04 $ 20.35 $ 18.71 $ 19.12 $ 19.92
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .19 .53 .50 .66 .78
Realized and unrealized gain (loss) on
investments--net 1.17 2.96 2.00 .01 (.59)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.36 3.49 2.50 .67 .19
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.46) (.44) (.57) (.78) (.76)
Realized gain on investments--net (.75) (.36) (.29) (.30) (.23)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.21) (.80) (.86) (1.08) (.99)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 23.19 $ 23.04 $ 20.35 $ 18.71 $ 19.12
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.07%++ 17.81% 13.90% 4.33% 0.73%
Return:** ========== ========== ========== ========== ==========
Ratios to Expenses, excluding distribution fees .54%* .56% .60% .61% .60%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses 1.54%* 1.56% 1.60% 1.61% 1.60%
========== ========== ========== ========== ==========
Investment income--net 1.58%* 2.47% 2.50% 3.73% 4.03%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $1,589,909 $1,383,935 $1,064,354 $ 874,318 $ 922,126
Data: ========== ========== ========== ========== ==========
Portfolio turnover 11.94% 20.85% 21.24% 20.11% 4.88%
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Basic 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 last quoted
bid prices at the close of trading on each day by brokers 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
based upon the prices or quotes obtained from the broadest and most
representative market. Short-term securities with less than sixty days
to maturity are valued at amortized cost, which approximates market.
Options written by the Fund are valued at the last sale price or,
lacking any sales, the last offering price. 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. Written and purchased options are non-income
producing investments.
(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 held on interest, dividends, and capital gains at various rates.
(c) Security transactions and investment income--Security transactions
are recorded on the dates the transactions are entered into (the trade
dates). Dividend income is recorded on the ex-dividend 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 assets.
<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. Undistributed investment income
- --net and undistributed realized capital gains--net reflect approximately
$1,200,000 of prior year capital gain distributions which were reclassified
to ordinary income dividends as a result of current tax regulations.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund Asset
Management, Inc. ("FAMI"), a wholly-owned subsidiary of Merrill Lynch
Investment Management, Inc. ("MLIM"), an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc., and a Distribution Agreement with Merrill
Lynch Funds Distributor, Inc. ("MLFD"), a wholly-owned subsidiary of MLIM.
FAMI 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 based upon the average daily value of the Fund's net assets at
the following annual rates: 0.60% of the Fund's average daily net assets not
exceeding $100 million; 0.50% of average daily net assets in excess of $100
million but not exceeding $200 million; and 0.40% of average daily net assets
in excess of $200 million. The Investment Advisory Agreement obligates FAMI
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 any fiscal year which will cause
such expenses to exceed the pro rata expense limitation at the time of
such payment.
Effective January 1, 1994, the investment advisory business of FAMI
reorganized from a corporation to a limited partnership. The general partner
of FAMI is Princeton Services, Inc., an indirect wholly-owned subsidiary
of Merrill Lynch & Co.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940 pursuant to which MLFD
receives a fee from the Fund which are accrued daily and paid monthly of
0.25% and 0.75%, respectively, of the average daily net assets of the
Class B Shares of the Fund. This fee is to compensate the Distributor for
services it provides and the expenses borne by the Distributor under the
Distribution Agreement. 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
distribution-related services to the Fund.
<PAGE>
During the six months ended December 31, 1993, MLFD earned underwriting
discounts of $107,036, and MLPF&S earned dealer concessions of $1,698,706
on sales of the Fund's Class A Shares. MLPF&S also received contingent
deferred sales charges of $504,435 relating to transactions in Class B
Shares and $34,500 in commissions on the execution of portfolio security
transactions for the Fund during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
Merrill Lynch & Co., Inc., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAMI at cost.
Certain officers and/or directors of the Fund are officers and/or directors
of MLIM, FAMI, MLPF&S, FDS, MLFD, and/or Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term securities, for
the six months ended December 31, 1993 were $400,611,619 and $347,696,974,
respectively.
Net realized and unrealized gains as of December 31, 1993 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $77,069,939 $745,061,696
----------- ------------
Total $77,069,939 $745,061,696
=========== ============
As of December 31, 1993, net unrealized appreciation for Federal income
tax purposes aggregated $745,061,696, of which $832,070,369 related to
appreciated securities and $87,008,673 related to depreciated securities.
The aggregate cost of investments at December 31, 1993 for Federal income
tax purposes was $3,042,513,861.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions was
$345,925,550 and $285,314,244 for the six months ended December 31, 1993 and
the year ended June 30, 1993, respectively.
<PAGE>
Transactions in capital shares for Class A and Class B Shares were
as follows:
Class A Shares for the Six Months
Ended December 31, 1993 Shares Dollar Amount
Shares sold 9,574,215 $224,982,210
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,979,090 114,208,364
----------- ------------
Total issued 14,553,305 339,190,574
Shares redeemed (8,063,520) (189,512,095)
----------- ------------
Net increase 6,489,785 $149,678,479
=========== ============
Class A Shares for the
Year Ended June 30, 1993 Shares Dollar Amount
Shares sold 15,789,908 $338,060,653
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,634,557 73,353,178
----------- ------------
Total issued 19,424,465 411,413,831
Shares redeemed (13,832,732) (293,122,519)
----------- ------------
Net increase 5,591,733 $118,291,312
=========== ============
Class B Shares for the Six Months
Ended December 31, 1993 Shares Dollar Amount
Shares sold 10,931,281 $254,487,851
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,969,021 67,552,341
----------- ------------
Total issued 13,900,302 322,040,192
Shares redeemed (5,412,109) (125,793,121)
----------- ------------
Net increase 8,488,193 $196,247,071
=========== ============
<PAGE>
Class B Shares for the
Year Ended June 30, 1993 Shares Dollar Amount
Shares sold 17,381,247 $368,588,150
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,878,067 37,667,375
----------- ------------
Total issued 19,259,314 406,255,525
Shares redeemed (11,495,277) (239,232,593)
----------- ------------
Net increase 7,764,037 $167,022,932
=========== ============
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, Executive Vice President
Donald C. Burke, Vice President
Paul M. Hoffmann, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
National Westminster Bank NJ
10 Exchange Place
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
APPENDIX. Item 1.
Results of a $1,000 Investment Since Inception--Class A Shares
(6.5% sales charge--$935 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 on July 1, 1977 to $10,411.41 on
December 31, 1993.
