MERRILL
LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Annual Report June 30, 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
Basic Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
The expectation of increasing inflationary pressures and higher
interest rates initially heightened investor concerns and
increased financial market volatility during the June quarter.
However, by the quarter's close, it was the weakness of the US
dollar in foreign exchange markets that dominated the financial
news and prolonged stock and bond market declines.
<PAGE>
The US dollar's weakness relative to other major currencies
reflects the deteriorating US trade deficit and widening net
long-term capital outflows. In 1993, an expanding US economy and
recession in other industrial countries led to a higher level of
imports and weaker export growth, widening the US trade deficit
further. In addition, global investors favored non-US dollar
denominated assets throughout 1993, which has further depressed
the dollar's value. This trend is not improving significantly
thus far in 1994 since foreign inflows into US capital markets
continue to decline, although US investors are investing outside
of the United States to a lesser degree.
Over the longer term, if the economies of the United States'
major trading partners expand (improving the prospects for US
export growth), the outlook for the US dollar is likely to
improve. In the near term, central banks have attempted to
reverse the dollar's decline through currency market
intervention. These efforts have met with limited success thus
far, giving rise to the concern that the Federal Reserve Board
will be forced to continue to raise short-term interest rates to
attract investment capital back to the United States and bolster
the dollar's value. However, further interest rate increases may
jeopardize the US economic expansion. In the weeks ahead,
investors will continue to assess economic data and inflationary
trends as they focus on the US dollar in order to gauge whether
further increases in short-term interest rates are imminent.
Portfolio Matters
For the fiscal year ended June 30, 1994, Merrill Lynch Basic
Value Fund, Inc.'s Class A Shares and Class B Shares provided
total returns of +5.68% and +4.61%, respectively, compared with a
total return of +1.33% for the unmanaged Standard & Poor's
500 Index (S&P 500).
The following table details quarterly performance for the Fund's
Class A Shares and Class B Shares relative to the S&P 500.
% Total Return
Class A Class B
Quarter Ended Shares Shares S&P 500
September 1993 +5.52% +5.24% +2.61%
December 1993 +1.02 +0.79 +2.35
March 1994 (1.88) (2.11) (3.81)
June 1994 +1.05 +0.75 +0.34
Fiscal Year +5.68 +4.61 +1.33
For the full fiscal year, security purchases exceeded $1 billion
while security sales amounted to approximately $657 million. The
following table outlines the quarterly activity in millions.
<PAGE>
Quarter Ended Purchases Sales
September 1993 $ 129,814 $149,565
December 1993 257,817 198,132
March 1994 291,063 183,409
June 1994 334,023 125,879
Total $1,012,717 $656,985
========== ========
Trading activity was heavily biased toward purchases during the
fiscal year and exceeded security sales by about $356 million.
Most of the Fund's full fiscal year appreciation was achieved
during the September 1993 quarter, marking the only three-month
period where sales were larger than purchases. This activity is
in keeping with our long-term strategy of buying stocks during
periods of weakness and selling securities into periods of
strength. The $657 million in sales for the fiscal year provided
capital gains of over $163 million, a 33% gain.
As the table outlining quarterly activity indicates, security
purchases increased in each quarter of the fiscal year,
culminating in $334 million in security purchases in the June
quarter, $208 million above security sales for the same period.
Most of the June quarter purchases were dedicated to increases in
established positions with an emphasis on stocks that had
experienced recent price weakness, including Deere & Co., Inc.,
General Motors Corp., Digital Equipment Corp., Telefonica de
Espana, S.A. and Unisys Corp. We believed that the weakness in
these issues created worthwhile buying opportunities, especially
in view of our strong cash position.
Two major new additions during the June quarter were Atlantic
Richfield Co., a domestic-based integrated oil and gas company,
and GTE Corp., a major telephone company. Both stocks had come
under selling pressure and at our average cost provided yields in
excess of 5.6%. In the prevailing uncertain market environment,
we believe these attractive yields (twice the market average) are
a decided plus. In addition, we believe both have favorable
appreciation possibilities. Atlantic Richfield Co. is leveraged
to the price of oil, which has increased dramatically in recent
months. GTE Corp. is an interest rate-sensitive issue that
dropped some 20% in price recently as interest rates rose.
Although we have no special insights on interest rate trends, we
believe that at our entry price, the risk/reward ratio of GTE is
decidedly in our favor as overall company fundamentals are
favorable.
<PAGE>
On the sell side, in the June quarter we eliminated two small
West Coast savings and loan stocks, Coast Savings Financial, Inc.
and SFFed Corp.; two other thrifts that were subject to
takeovers, Cragin Financial Corp. and NBB Bancorp, Inc.; and two
electric utilities, FPL Group, Inc. and SCEcorp. Both utilities
cut their dividend, and we felt the funds invested in those
issues could be better utilized elsewhere. Also, the largest
partial sale was a major reduction in Texas Utilities Co., a
company whose dividend has been questioned. While the dividend
may be maintained, there appears little chance of worthwhile
appreciation and dividend increases nearby. Despite the sale of
these utilities, the average yield on the Fund's equity holdings
remains above average at 3.50%, compared to 2.70% for the S&P 500.
Overall, Fund assets increased about 18% during the fiscal year
to $4.0 billion from $3.4 billion a year earlier. The Fund
enjoyed a positive cash flow during the fiscal year with net
subscriptions amounting to $458 million.
The cash position of the Fund was 18% of net assets at the
beginning of the fiscal year and increased to about 22% at the
end of March 1994. The heavy purchase activity during the June
quarter reduced the cash position to about 20% at quarter-end.
Fiscal Year in Review
Although there have been only small overall changes in the widely
followed stock market averages over the past 12 months, these
averages have masked extreme volatility. For example, within our
portfolio, we have 11 stocks that have increased over 20% in the
past year, with price gains ranging from 20% to 82%. At the same
time, ten of our holdings have declined anywhere from 23% to 54%.
We believe these extreme movements are fairly representative of
the market as a whole. This volatility is likely to continue.
The Fund's fiscal year performance was largely determined by the
generally strong performance of the ten largest holdings, which
account for about 25% of the portfolio. Eight of the ten advanced
in price, registering an average gain of about 18%. The portfolio
as a whole had 36 advances, 41 declines and one unchanged holding.
Also, our largest industry commitments, oils and banks, generally
performed well.
<PAGE>
In Conclusion
We stated in our concluding remarks last year that "value" had
outperformed "growth" for the past 18 months and that this was
likely to continue. The distinction has narrowed, and many "value"
investors apparently have been attracted to fallen "growth" issues.
Our own foray into this area--drugs, food and tobacco, about 6% of
net assets--has thus far been undistinguished. However, this 6% of
assets provides about 9% of our dividend flow. Overall, we believe
the Fund is reasonably well structured for an uncertain market
environment.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paul M. Hoffmann)
Paul M. Hoffmann
Vice President and Portfolio Manager
July 11, 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 on page 4
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 MATERIAL, ITEM 1.
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 + 5.68% - 1.19%
Five Years Ended 6/30/94 + 9.20 + 7.74
Ten Years Ended 6/30/94 +14.63 +13.87
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/94 +4.61% +0.64%
Five Years Ended 6/30/94 +8.08 +8.08
Inception (10/21/88)
through 6/30/94 +8.92 +8.92
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
Results of a $1,000 Investment Since Inception--Class A Shares
GRAPHIC MATERIAL APPEARS HERE. SEE APPENDIX:
GRAPHIC AND IMAGE MATERIAL, ITEM 2.
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
6/30/94 3/31/94 6/30/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares $23.17 $22.93 $23.31 +2.57%(1) +1.05%
ML Basic Value Fund Class B Shares 22.87 22.70 23.04 +2.46(1) +0.75
Dow Jones Industrial Average** 3,624.96 3,635.96 3,516.08 +3.10 -0.30
Standard & Poor's 500 Index** 444.27 445.77 450.53 -1.39 -0.34
ML Basic Value Fund Class A Shares--Total Return +5.68(2) +1.05
ML Basic Value Fund Class B Shares--Total Return +4.61(3) +0.75
Dow Jones Industrial Average--Total Return** +5.94 +0.37
Standard & Poor's 500 Index--Total Return** +1.33 +0.34
<FN>
(1)Percent change includes reinvestment of $0.726 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.702 per share ordinary income dividends and
$0.726 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.484 per share ordinary income dividends and
$0.726 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>
PERFORMANCE DATA (concluded)
<PAGE>
<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>
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
1/1/94--6/30/94 23.37 23.17 -- -- - 0.86
------- -------
Total $11.125 Total $11.237
Cumulative total return as of 6/30/94: +1,003.99%**
<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 A 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
1/1/94--6/30/94 23.19 22.87 -- -- - 1.38
------ ------
Total $2.204 Total $3.446
Cumulative total return as of 6/30/94: +62.66%**
<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>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Discount from Book Value
Metals/Non-Ferrous 1,400,000 ASARCO Inc. $ 35,255,430 $ 39,375,000 1.0%
Insurance 800,000 Aetna Life & Casualty Co. 35,195,218 44,700,000 1.1
Savings & Loans 1,850,000 Ahmanson(H.F.) & Co. 32,200,305 34,918,750 0.9
Insurance 260,000 American National Insurance Co. 9,749,442 12,220,000 0.3
Insurance 600,000 CIGNA Corp. 31,341,428 43,875,000 1.1
Insurance 1,000,000 Continental Corp. 31,627,263 15,500,000 0.4
Information Processing 1,700,000 ++Data General Corp. 23,653,243 13,175,000 0.3
Information Processing 2,600,000 ++Digital Equipment Corp. 110,424,691 50,375,000 1.3
Utilities 1,000,000 Entergy Corp. 19,799,508 24,750,000 0.6
Retail 1,600,000 K mart Corp. 30,422,460 24,800,000 0.6
Retail 550,000 K mart Corp.(Pfd. P) 24,266,763 17,256,250 0.4
-------------- -------------- ------
383,935,751 320,945,000 8.0
<PAGE>
Below-Average Price/Earnings Ratio
Insurance 600,000 Allstate Corp. 16,316,532 14,250,000 0.4
Insurance 2,000,000 American General Corp. 34,620,231 55,250,000 1.4
Steel 1,400,000 ++Bethlehem Steel Corp. 19,927,935 26,075,000 0.6
Banking 1,570,000 Chase Manhattan Corp. 35,345,175 60,052,500 1.5
Banking 2,200,000 Citicorp, Inc. 53,771,262 87,725,000 2.2
Financial Services 800,000 Dean Witter Discover & Co. 20,456,508 30,000,000 0.8
Farm & Construction
Equipment 1,330,000 Deere & Co., Inc. 67,229,295 89,941,250 2.2
Retail 700,000 ++Federated Department Stores, Inc. 8,331,220 14,000,000 0.3
Banking 1,150,000 First Interstate Bancorp 53,035,168 88,550,000 2.2
Automotive 1,000,000 Ford Motor Co. 39,797,208 59,000,000 1.5
Automotive 1,200,000 General Motors Corp. 50,650,675 60,300,000 1.5
Conglomerates 1,500,000 ITT Corp. 73,820,738 122,437,500 3.0
Computers 1,350,000 International Business Machines Corp. 85,976,347 79,312,500 2.0
Aerospace & Defense 450,000 Lockheed Corp. 16,415,936 29,418,750 0.7
Pharmaceutical 1,800,000 Merck & Co., Inc. 57,548,710 53,550,000 1.3
Hospital Management 1,500,000 National Medical Enterprises, Inc. 15,860,263 23,437,500 0.6
Semiconductors 1,000,000 ++National Semiconductor Corp. 8,902,861 17,250,000 0.4
Banking 1,500,000 NationsBank Corp. 60,787,427 77,062,500 1.9
Banking 1,800,000 Norwest Corp. 20,939,972 47,025,000 1.2
Insurance 1,400,000 PartnerRe Holdings Ltd. 29,498,937 28,350,000 0.7
Electrical Equipment 2,800,000 Philips N.V. Corp. 50,735,011 80,500,000 2.0
Retail 3,100,000 Sears, Roebuck & Co. 114,099,842 148,800,000 3.7
Information Processing 2,200,000 Tandem Computers Inc. 26,902,529 24,750,000 0.6
Communications 1,280,000 Telefonica de Espana, S.A. (ADR)* 37,922,666 51,520,000 1.3
Insurance 1,400,000 Travelers Corp. 55,658,554 45,150,000 1.1
Steel 800,000 USX--US Steel Group, Inc. 21,961,346 27,100,000 0.7
Information Processing 3,300,000 ++Unisys Corp. 39,601,470 30,525,000 0.8
Aerospace & Defense 450,000 United Technologies Corp. 22,695,049 28,912,500 0.7
Savings & Loans 800,000 Washington Mutual Savings Bank 11,813,145 16,500,000 0.4
Chemicals 440,000 Zeneca Group PLC (ADR)* 12,980,000 14,685,000 0.4
-------------- -------------- ------
1,163,602,012 1,531,430,000 38.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Above-Average Yield
Oil/Domestic 450,000 Atlantic Richfield Co. $ 44,540,126 $ 45,956,250 1.1%
Real Estate Investment
Trust 600,000 Avalon Properties, Inc. 12,413,018 12,750,000 0.3
Communications 800,000 Bell Atlantic Corp. 33,212,901 44,800,000 1.1
Pharmaceutical 1,100,000 Bristol-Myers Squibb Co. 62,776,156 58,987,500 1.5
Oil--International 1,100,000 Chevron Corp. 29,812,184 46,062,500 1.1
Banking 700,000 Citicorp, Inc.(Pfd. P) 10,325,000 13,737,500 0.3
Utilities 1,000,000 Consolidated Edison Co. of New York 21,723,966 26,500,000 0.7
Utilities 637,500 DPL Inc. 6,204,369 12,590,625 0.3
Oil--International 700,000 Exxon Corp. 32,536,013 39,637,500 1.0
Telecommunications 1,500,000 GTE Corp. 47,329,575 47,250,000 1.2
Chemicals 430,000 Imperial Chemical Industries PLC(ADR)* 27,795,155 20,425,000 0.5
Real Estate Investment
Trust 400,000 Irvine Apartment Communities, Inc. 7,075,747 8,000,000 0.2
Insurance 700,000 ++Liberty Property Trust 14,155,230 14,000,000 0.4
Real Estate 500,000 Mills Corp. 11,734,125 11,250,000 0.3
Oil--International 1,500,000 Mobil Corp. 78,457,147 122,437,500 3.0
Utilities 850,000 NIPSCO Industries, Inc. 15,883,276 25,075,000 0.6
Oil-Domestic 2,250,000 Occidental Petroleum Corp. 47,641,346 42,468,750 1.1
Utilities 1,100,000 PECO Energy Co.(a) 26,348,540 29,012,500 0.7
Tobacco 1,500,000 Philip Morris Cos. Inc. 80,845,984 77,250,000 1.9
Utilities 850,000 Public Service Enterprise Group 22,490,010 22,100,000 0.6
Aluminum 250,000 Reynolds Metals Co.(Pfd. P) 11,937,200 12,468,750 0.3
Oil--International 1,150,000 Royal Dutch Petroleum Co. 70,562,758 120,318,750 3.0
Real Estate Investment
Trust 1,130,000 Simon Property Group, Inc. 25,891,365 30,086,250 0.8
Real Estate Investment
Trust 500,000 Summit Properties Inc. 9,602,500 10,000,000 0.3
Oil--International 1,000,000 Texaco Inc. 53,689,121 60,375,000 1.5
Utilities 400,000 Texas Utilities Corp. 13,696,291 12,550,000 0.3
Communications 800,000 U.S. West Inc. 22,413,677 33,500,000 0.8
-------------- -------------- ------
841,092,780 999,589,375 24.9
<PAGE>
Special Situations
Oil--International 700,000 British Petroleum Co. PLC (ADR)* 32,946,715 50,225,000 1.3
Information Processing 1,000,000 ++Ceridian Corp. 16,072,735 24,625,000 0.6
Oil Services & Equipment 2,500,000 Dresser Industries, Inc. 49,131,722 51,250,000 1.3
Food Merchandising 770,800 ++Foodmaker Inc. 9,587,860 4,335,750 0.1
Foods 900,000 General Mills Inc. 49,335,984 49,162,500 1.2
Chemicals 500,000 Hercules, Inc. 19,235,727 53,500,000 1.3
Machinery 675,000 Ingersoll-Rand Co. 13,619,766 23,709,375 0.6
Forest & Paper Products 1,000,000 International Paper Co. 55,866,813 66,250,000 1.7
Aluminum 350,000 Reynolds Metals Co. 13,221,321 16,800,000 0.4
Chemicals 1,850,000 Union Carbide Corp. 29,886,191 49,487,500 1.2
-------------- -------------- ------
288,904,834 389,345,125 9.7
Total Stocks 2,677,535,377 3,241,309,500 80.7
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Short-Term Securities
<PAGE>
Commercial Paper** $50,000,000 ANZ(Delaware) Inc., 4.26% due 8/10/1994 $ 49,757,417 $ 49,757,417 1.2%
40,000,000 Bank One Diversified Services Corp., 4.25%
due 7/11/1994 39,948,056 39,948,056 1.0
50,000,000 Ciesco L.P., 4.23% due 7/19/1994 49,888,375 49,888,375 1.3
40,000,000 du Pont(E.I.) de Nemours and Co., 4.22%
due 7/13/1994 39,939,044 39,939,044 1.0
48,842,000 General Electric Capital Corp., 4.30% due 7/01/1994 48,836,166 48,836,166 1.2
55,000,000 Matterhorn Capital Corp., 4.23% due 7/18/1994 54,883,675 54,883,675 1.4
30,000,000 Miles Inc., 4.23% due 7/15/1994 29,947,125 29,947,125 0.8
National Australia Funding (Delaware), Inc.:
50,000,000 4.25% due 7/25/1994 49,852,431 49,852,431 1.2
50,000,000 4.20% due 7/29/1994 49,830,833 49,830,833 1.2
PHH Corp.:
50,000,000 4.23% due 7/14/1994 49,917,750 49,917,750 1.2
50,000,000 4.25% due 7/28/1994 49,834,722 49,834,722 1.2
50,000,000 Penney(J.C.) & Co., 4.21% due 7/11/1994 49,935,681 49,935,681 1.3
50,000,000 PepsiCo., Inc., 4.25% due 7/21/1994 49,876,625 49,876,625 1.2
50,000,000 Preferred Receivables Funding Corp., 4.25%
due 7/20/1994 49,881,944 49,881,944 1.3
Siemens Corp.:
40,000,000 4.25% due 7/08/1994 39,962,222 39,962,222 1.0
50,000,000 4.26% due 8/08/1994 49,769,250 49,769,250 1.2
50,000,000 UBS Finance(Delaware), Inc., 4.23% due 7/21/1994 49,876,625 49,876,625 1.2
Total Short-Term Securities 801,937,941 801,937,941 19.9
Total Investments $3,479,473,318 4,043,247,441 100.6
==============
Liabilities in Excess of Other Assets (25,560,591) (0.6)
-------------- ------
Net Assets $4,017,686,850 100.0%
============== ======
<FN>
(a)Formerly Philadelphia Electric Co.
++Non-income producing security.
*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.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1994
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$3,479,473,318)(Note 1a) $4,043,247,441
Receivables:
Capital shares sold $ 13,609,181
Dividends 8,170,765 21,779,946
--------------
Prepaid registration fees and other assets(Note 1d) 73,525
--------------
Total assets 4,065,100,912
--------------
Liabilities: Payables:
Securities purchased 31,274,427
Capital shares redeemed 11,811,167
Distributor(Note 2) 1,452,545
Investment adviser(Note 2) 1,367,061 45,905,200
--------------
Accrued expenses and other liabilities 1,508,862
--------------
Total liabilities 47,414,062
--------------
Net Assets: Net assets $4,017,686,850
==============
Net Assets Class A Common Stock, $0.10 par value, 200,000,000 shares authorized $ 9,809,582
Consist of: Class B Common Stock, $0.10 par value, 200,000,000 shares authorized 7,627,611
Paid-in capital in excess of par 3,269,539,318
Undistributed investment income--net 45,703,737
Undistributed realized capital gains on investments and foreign currency
transactions--net 121,232,479
Unrealized appreciation on investments and foreign currency transactions--net 563,774,123
--------------
Net assets $4,017,686,850
==============
<PAGE>
Net Asset Value: Class A--Based on net assets of $2,272,982,770 and 98,095,819 shares
outstanding $ 23.17
==============
Class B--Based on net assets of $1,744,704,080 and 76,276,115 shares
outstanding $ 22.87
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended June 30, 1994
<CAPTION>
<S> <S> <C> <C>
Investment Dividends (net of $1,615,127 foreign withholding tax) $ 98,527,728
Income Interest and discount earned 25,933,615
(Notes 1b & 1c): Other 232,965
--------------
Total income 124,694,308
--------------
Expenses: Distribution and account maintenance fees--Class B(Note 2) 15,925,964
Investment advisory fees(Note 2) 15,452,148
Transfer agent fees--Class A(Note 2) 2,044,053
Transfer agent fees--Class B(Note 2) 1,771,029
Registration fees(Note 1d) 307,224
Printing and shareholder reports 282,006
Accounting services(Note 2) 185,215
Custodian fees 146,718
Professional fees 76,833
Directors' fees and expenses 41,369
Amortization of organization expenses(Note 1d) 11,525
Other 27,131
--------------
Total expenses 36,271,215
--------------
Investment income--net 88,423,093
--------------
<PAGE>
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net $ 163,325,790
(Loss) on Foreign currency transactions--net (4,833) 163,320,957
Investments & --------------
Foreign Currency Change in unrealized appreciation on investments--net (76,944,519)
Transactions--Net --------------
(Note 1c, 1e & 3): Net realized and unrealized gain on investments and foreign currency
transactions 86,376,438
--------------
Net Increase in Net Assets Resulting from Operations $ 174,799,531
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended June 30,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 88,423,093 $ 90,239,186
Realized gain on investments and foreign currency transactions--net 163,320,957 81,147,456
Change in unrealized appreciation/depreciation on investments--net (76,944,519) 340,508,739
-------------- --------------
Net increase in net assets resulting from operations 174,799,531 511,895,381
-------------- --------------
Dividends & Investment income--net:
Distributions Class A (62,663,619) (52,495,436)
To Shareholders Class B (30,680,760) (23,460,921)
(Note 1f): Realized gain on investments--net:
Class A (64,558,638) (29,779,683)
Class B (45,745,511) (19,244,373)
-------------- --------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (203,648,528) (124,980,413)
-------------- --------------
Capital Share Net increase in net assets derived from capital share transactions 639,523,156 285,314,244
Transactions -------------- --------------
(Note 4):
<PAGE>
Net Assets: Total increase in net assets 610,674,159 672,229,212
Beginning of year 3,407,012,691 2,734,783,479
-------------- --------------
End of year* $4,017,686,850 $3,407,012,691
============== ==============
<FN>
*Undistributed investment income--net $ 45,703,737 $ 50,625,023
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended June 30,
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 $ 23.31 $ 20.57 $ 18.90 $ 19.32 $ 20.03
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .62 .71 .70 .87 .95
Realized and unrealized gain(loss) on
investments--net .67 3.03 2.02 (.02) (.56)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.29 3.74 2.72 .85 .39
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.70) (.64) (.76) (.97) (.87)
Realized gain on investments--net (.73) (.36) (.29) (.30) (.23)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.43) (1.00) (1.05) (1.27) (1.10)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 23.17 $ 23.31 $ 20.57 $ 18.90 $ 19.32
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.68% 19.03% 15.08% 5.39% 1.77%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses .53% .54% .58% .59% .57%
Average Net ========== ========== ========== ========== ==========
Assets: Investment income--net 2.76% 3.48% 3.52% 4.76% 5.05%
========== ========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of year (in thousands) $2,272,983 $2,023,078 $1,670,430 $1,490,657 $1,556,257
Data: ========== ========== ========== ========== ==========
Portfolio turnover 21.79% 20.85% 21.24% 20.11% 4.88%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended June 30,
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 $ 23.04 $ 20.35 $ 18.71 $ 19.12 $ 19.92
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .42 .53 .50 .66 .78
Realized and unrealized gain(loss) on
investments--net .62 2.96 2.00 .01 (.59)
---------- ---------- ---------- ---------- ----------
Total from investment operations 1.04 3.49 2.50 .67 .19
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.48) (.44) (.57) (.78) (.76)
Realized gain on investments--net (.73) (.36) (.29) (.30) (.23)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.21) (.80) (.86) (1.08) (.99)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 22.87 $ 23.04 $ 20.35 $ 18.71 $ 19.12
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 4.61% 17.81% 13.90% 4.33% 0.73%
Return:* ========== ========== ========== ========== ==========
Ratios to Expenses, excluding distribution fees .55% .56% .60% .61% .60%
Average Net ========== ========== ========== ========== ==========
Assets: Expenses 1.55% 1.56% 1.60% 1.61% 1.60%
========== ========== ========== ========== ==========
Investment income--net 1.75% 2.47% 2.50% 3.73% 4.03%
========== ========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of year(in thousands) $1,744,704 $1,383,935 $1,064,354 $ 874,318 $ 922,126
Data: ========== ========== ========== ========== ==========
Portfolio turnover 21.79% 20.85% 21.24% 20.11% 4.88%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
See Notes to Financial Statements.
</TABLE>
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 management investment company. The shares of the Fund are
divided into Class A Shares 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 according to the broadest and most representative
market. Short-term securities with remaining maturities of sixty
days or less are valued at amortized cost, which approximates market
value. 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.
<PAGE>
(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 withheld 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 Fund is 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.
(d) Prepaid registration fees--Prepaid registration fees are
charged to expense as the related shares are issued.
(e) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the
period. Foreign currency transactions are the result of settling
(realized) or valuing (unrealized) assets or liabilities
expressed in foreign currencies into US dollars. Realized and
unrealized gains or losses from investments include the effects
of foreign exchange rates on investments.
The Fund is authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions or
portfolio positions. Such contracts are not entered on the Fund's
records. However, the effect on operations is recorded from the
date the Fund enters into such contracts. Premium or discount is
amortized over the life of the contracts.
(f) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
<PAGE>
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 and 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 Fund Asset
Management, Inc. ("FAMI"), which is also an indirect wholly-
owned subsidiary of ML & Co. The Fund has also entered into a
Distribution Agreement and a Distribution Plan with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a wholly-
owned subsidiary of Merrill Lynch Investment Management, Inc.
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 based upon the
average daily value of the Fund's daily 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
exceeding $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 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 any fiscal year which will cause such
expenses to exceed the pro rata expense limitation at the time of
such payment.
The Fund has adopted a Plan of Distribution (the "Plan") in
accordance with Rule 12b-1 under the Investment Company Act of
1940 pursuant to which the Fund pays the Distributor an ongoing
account maintenance 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. This fee is to compensate the Distributor for
services it provides and the expense 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 year ended June 30, 1994, MLFD earned underwriting
discounts of $216,022, and MLPF&S earned dealer concessions of
$3,539,580 on sales of the Fund's Class A Shares. MLPF&S also
received contingent deferred sales charges of $1,189,344 relating
to transactions in Class B Shares and $109,200 in commissions on
the execution of portfolio security transactions for the Fund
during 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
directors of FAMI, FAM, MLPF&S, FDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the year ended June 30, 1994 were $1,012,717,840
and $656,985,312, respectively.
Net realized and unrealized gains (losses) as of
June 30, 1994 were as follows:
Realized
Gain Unrealized
(Losses) Gains
Long-term investments $163,325,790 $563,774,123
Foreign currency
transactions (4,833) --
------------ ------------
Total $163,320,957 $563,774,123
============ ============
As of June 30, 1994, net unrealized appreciation for
Federal income tax purposes aggregated $561,183,340,
of which $723,695,304 related to appreciated securities
and $162,511,964 related to depreciated securities.
At June 30, 1994, the aggregate cost of investments
for Federal income tax purposes was $3,482,064,101.
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions was $639,523,156 and $285,314,244 for the years
ended June 30, 1994 and June 30, 1993, respectively.
Transactions in capital shares for Class A and Class B Shares
were as follows:
<PAGE>
Class A Shares for the Year
Ended June 30, 1994 Shares Dollar Amount
Shares sold 22,051,928 $518,481,972
Shares issued to shareholders
in reinvestment of dividends
and distributions to
shareholders 4,979,090 114,208,364
------------ ------------
Total issued 27,031,018 632,690,336
Shares redeemed (15,739,255) (370,180,112)
------------ ------------
Net increase 11,291,763 $262,510,224
============ ============
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 to
shareholders. 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 Year
Ended June 30, 1994 Shares Dollar Amount
Shares sold 25,498,592 $594,651,037
Shares issued to shareholders
in reinvestment of dividends
and distributions to
shareholders 2,969,021 67,552,341
------------ ------------
Total issued 28,467,613 662,203,378
Shares redeemed (12,261,811) (285,190,446)
------------ ------------
Net increase 16,205,802 $377,012,932
============ ============
<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 to
shareholders. 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
============ ============
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Basic Value Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill
Lynch Basic Value Fund, Inc. as of June 30, 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 responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the 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 June 30, 1994 by correspondence with the
custodian and brokers. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
<PAGE>
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Basic Value Fund, Inc. as of June 30, 1994, the results
of its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche
Princeton, New Jersey
July 29, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION
The following information summarizes all per share distributions
paid by Merrill Lynch Basic Value Fund, Inc. during the fiscal
year ended June 30, 1994:
<TABLE>
<CAPTION>
Domestic Domestic
Record Payable Qualifying Non-Qualifying Total Long-Term
Date Date Ordinary Income Ordinary Income Ordinary Income Capital Gains
Class A Shares
<C> <C> <C> <C> <C> <C>
8/03/93 8/11/93 $0.367109 $0.016533 $0.383642 $0.469086
12/13/93 12/21/93 $0.308572 $0.009806 $0.318378 $0.257249
Class B Shares
<C> <C> <C> <C> <C> <C>
8/03/93 8/11/93 $0.267978 $0.012068 $0.280046 $0.469086
12/13/93 12/21/93 $0.197720 $0.006283 $0.204003 $0.257249
The domestic qualifying ordinary income qualifies for the dividends-received deduction for corporations.
Please retain this information for your records.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
Ten Largest Percent of
Stock Holdings Net Assets
Sears, Roebuck & Co. 3.7%
ITT Corp. 3.0
Mobil Corp. 3.0
Royal Dutch Petroleum Co. 3.0
Deere & Co., Inc. 2.2
First Interstate Bancorp 2.2
Citicorp, Inc. 2.2
Philips N.V. Corp 2.0
International Business Machines Corp. 2.0
Philip Morris Cos. Inc. 1.9
Portfolio Changes for the Quarter
Ended June 30, 1994
Additions
Atlantic Richfield Co.
GTE Corp.
Liberty Property Trust
Mills Corp.
Deletions
Coast Savings Financial, Inc.
Cragin Financial Corp.
FPL Group, Inc.
NBB Bancorp, Inc.
SCEcorp
SFFed Corp.
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 and Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
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: 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 growth of an investment in the S&P 500
Index. Beginning and ending values are:
6/84 6/94
ML Basic Value Fund, Inc.++--
Class A Shares $ 9,350 $36,638
S&P 500 Index++++ $10,000 $40,960
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
10/21/88** 6/94
ML Basic Value Fund, Inc.++--
Class B Shares $10,000 $16,266
S&P 500 Index++++ $10,000 $18,750
[FN]
*Assuming maximum sales charge, transaction costs and other operating
expenses, including advisory fees.
**Commencement of Operations.
++ML Basic Value Fund, Inc. invests in securities, primarily equities,
that management of the Fund believes are undervalued and therefore
represent basic investment value.
++++This unmanaged broad-based Index is comprised of common stocks.
<PAGE>
Item 2:
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.)
A mountain chart depicting the growth of an investment in the
Fund's Class A Shares from $935.00 on July 1, 1977 to $10,322.29
on June 30, 1994.
