MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Annual Report
June 30, 1996
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.
<PAGE>
Merrill Lynch
Basic Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
The US economy demonstrated surprising strength during the first
half of 1996. As a result, investors are focusing on prospects for
an overheating economy, increasing inflationary pressures, and the
potential for monetary policy tightening by the Federal Reserve
Board. With more robust economic growth, a sharp rise in prices for
crude oil and agricultural commodities, and expectations of
escalating wage pressures, long-term interest rates (as measured by
the yield on the 30-year US Treasury bond) are in excess of 7%.
Inflationary concerns were heightened further shortly after the
close of the June quarter with the release of a stronger-than-
expected employment report for June. Unemployment fell to a six-year
low, and hourly wages rose sharply. This mounting evidence of a
tighter labor market and rising labor costs suggested to many
investors that the US central bank would be forced to raise short-
term interest rates in the coming months. In the weeks ahead,
investors will continue to monitor economic data releases to
determine the potential for monetary policy tightening by the
Federal Reserve Board. A significant development in this area may be
the slowdown in the technology sector, and its potential impact on
other areas of the economy. Evidence of more moderate, but
sustained, economic activity would be a beneficial development for
the US stock and bond markets.
Portfolio Matters
Security purchases during the second quarter of 1996 amounted to
$395 million, while equity sales totaled $256 million, a difference
of $139 million. New assets invested in the Fund during the quarter
ended June 30, 1996 approximated $220 million. Accordingly, our cash
position increased moderately to 18.7% of net assets from 17.6% at
the end of the March quarter.
<PAGE>
During the June quarter, we added to 22 existing holdings and
established five new positions, two of which we sold during the
quarter. The largest new commitment was in Micron Technology, Inc.
We initiated a position in Texas Instruments, Inc. in the first
quarter and decided to expand our holdings in the decidedly out-of-
favor semiconductor segment of the technology industry with Micron
Technology, Inc. The stock was under extended pressure since
September 1995 when this issue peaked at $94.75 a share. This is
probably the most precipitous price decline of any of the battered
semiconductor stocks. Earnings estimates have come down dramatically
because of a very poor pricing environment and a slowdown in orders.
The immediate outlook is uninspiring, but there is an enormous
amount of leverage here and prospects could change quickly. We
regard this as a classic contrary-opinion, out-of-favor situation.
Precise timing on turnarounds is all but impossible, but we believe
long-term recovery prospects are favorable.
Tektronix, Inc. is a "growth" stock that was available at a "value"
price early in the June quarter. This major producer of electronic
testing equipment and color printing and imaging products
experienced a modest quarterly earnings decline, and the stock price
was decimated. This was probably due as much to overall investor
anxiety relative to technology stocks as to the slight earnings
shortfall. Earnings seem to be back on track, and at our entry price
we believe appreciation possibilities are impressive.
Major additions to established Fund positions included Union
Carbide Corp. and International Business Machines Corp. Also, about
10% of quarterly purchases were dedicated to increasing our energy
holdings. Energy remains our largest industry commitment at about
15% of net assets.
On the sell side, we eliminated Aetna Life & Casualty Co. and United
Technologies Corp. at substantial profits, and sold The Limited,
Inc. at a modest loss. Overall quarterly security sales produced
gains of 93%.
Schedule of Investments
We initially began listing our schedule of invest-ments some 15
years ago by category: Discount from Book Value, Below-Average
Price/Earnings Ratio, Above-Average Yield and Special Situations. At
that time the stock market, as measured by popular averages such as
the Dow Jones Industrials or the Standard & Poor's 500, was selling
at book value and the majority of our holdings were priced at or
below stated book value.
<PAGE>
In the intervening years, dramatic changes have taken place relative
to corporate book values because of mandated and voluntary
accounting changes and massive restructurings. Accordingly, the
stock market is now selling in the area of four times book value.
Accordingly, we are changing the "Discount from Book Value" category
to "Low Price to Book Value," which we define as under two times
book value and/or half of the market averages. In our March 1996
quarterly report, there were only four stocks that qualified under
the old "Discount from Book Value" category. Under the new format 22
of our holdings qualify and, we believe, better reflect the security
selection process. There are no changes to the Below-Average
Price/Earnings Ratio and Above-Average Yield categories as these are
relative measurements as opposed to the Discount from Book Value
which was an absolute measurement.
Fiscal Year in Review
Total returns for Merrill Lynch Basic Value Fund, Inc.for the 12
months ended June 30, 1996 were below those of the unmanaged
Standard & Poor's 500. Total returns for Class A, Class B, Class C
and Class D Shares were +19.92%, +18.71%, +18.69% and +19.61%,
respectively, compared to the +25.92% total return for the Standard
& Poor's 500 Composite Index. (Complete performance information,
including average annual total returns, can be found on pages 3-6 of
this report to shareholders.) Performance of the Fund was
competitive with the stock market for eight months, but lagged for
the past four months.
The recent increases in interest rates had an adverse effect on our
interest rate-sensitive holdings, such as electric utilities and
telephone stocks. In our constant quest to provide shareholders with
an above-average yield--currently a 2.9% gross yield on our equity
investments compared to 2.1% for the S&P 500--it is necessary to
maintain positions in higher-yielding sectors such as electric
utilities and telephone issues, in our view. These two groups
accounted for 10.5% of net assets, but provided 20% of our income.
The worst of the increase in interest rates has probably been seen,
and we believe the high yields and defensive characteristics of
groups such as electric and telephone utilities make them
appropriate holdings in an uncertain market environment.
For the fiscal year ended June 30, 1996, we purchased $1.3 billion
in equities and sold $757 million, a difference of $543 million. New
money invested in the Fund totaled $856 million; thus our cash
position increased to 18.7% at June 30, 1996 from 17.3% at June 30,
1995.
<PAGE>
In Conclusion
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
July 12, 1996
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years.
<PAGE>
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. Dividends paid to each class
of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
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
1994 23.37 22.35 0.784 0.692 + 1.97
1995 22.35 28.31 0.511 0.820 +32.90
1/1/96--6/30/96 28.31 30.22 -- -- + 6.75
------- -------
Total $12.420 Total $12.749
Cumulative total return as of 6/30/96: +1,510.72%**
<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>
PERFORMANCE DATA (continued)
<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 $18.78 $17.89 $0.352 $0.361 - 0.91%
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
1994 23.19 22.15 0.784 0.464 + 0.88
1995 22.15 28.02 0.511 0.571 +31.60
1/1/96--6/30/96 28.02 29.76 -- -- + 6.21
------ ------
Total $3.499 Total $4.481
Cumulative total return as of 6/30/96: +132.70%**
<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>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $22.92 $22.07 $0.099 $0.329 - 1.81%
1995 22.07 27.84 0.511 0.639 +31.59
1/1/96--6/30/96 27.84 29.56 -- -- + 6.18
------ ------
Total $0.610 Total $0.968
Cumulative total return as of 6/30/96: +37.19%**
<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>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/94-12/31/94 $23.19 $22.35 $0.099 $0.353 - 1.64%
1995 22.35 28.29 0.511 0.770 +32.57
1/1/96--6/30/96 28.29 30.16 -- -- + 6.61
------ ------
Total $0.610 Total $1.123
Cumulative total return as of 6/30/96: +39.01%**
<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>
<PAGE>
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's Class A
and Class B Shares compared to the growth of an investment in the S&P
500 Total Return Index. Beginning and ending values are:
6/86 6/96
ML Basic Value Fund, Inc.++--
Class A Shares* $ 9,600 $31,125
S&P 500 Index++++ $10,000 $36,478
10/21/88** 6/96
ML Basic Value Fund, Inc.++--
Class B Shares $10,000 $23,270
S&P 500 Index++++ $10,000 $29,754
10/21/94** 6/96
ML Basic Value Fund, Inc.++--
Class C Shares* $10,000 $13,719
ML Basic Value Fund, Inc.++--
Class D Shares* $ 9,600 $13,172
S&P 500 Index++++ $10,000 $15,021
[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.
Past performance is not predictive of future performance.
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/96 +19.92% +13.62%
Five Years Ended 6/30/96 +16.13 +14.88
Ten Years Ended 6/30/96 +12.63 +12.02
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/96 +18.71% +14.71%
Five Years Ended 6/30/96 +14.95 +14.95
Inception (10/21/88) through 6/30/96 +11.60 +11.60
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/96 +18.69% +17.69%
Inception (10/21/94)
through 6/30/96 +20.53 +20.53
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced
to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/96 +19.61% +13.33%
Inception (10/21/94)
through 6/30/96 +21.48 +17.67
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% current sales charge--$947.50 and 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 $947.50 on July 1, 1977 to $15,261.57
on June 30, 1996.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
6/30/96 3/31/96 6/30/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares* $30.22 $30.13 $26.44 +16.44%(1) +0.30%
ML Basic Value Fund Class B Shares* 29.76 29.74 26.08 +16.27(1) +0.07
ML Basic Value Fund Class C Shares* 29.56 29.55 25.98 +15.95(1) +0.03
ML Basic Value Fund Class D Shares* 30.16 30.09 26.41 +16.34(1) +0.23
Dow Jones Industrial Average** 5,654.63 5,587.14 4,556.10 +24.11 +1.21
Standard & Poor's 500 Index** 670.63 645.50 544.75 +23.11 +3.89
ML Basic Value Fund Class A Shares--Total Return* +19.92(2) +0.30
ML Basic Value Fund Class B Shares--Total Return* +18.71(3) +0.07
ML Basic Value Fund Class C Shares--Total Return* +18.69(4) +0.03
ML Basic Value Fund Class D Shares--Total Return* +19.61(5) +0.23
Dow Jones Industrial Average--Total Return** +27.05 +1.76
Standard & Poor's 500 Index--Total Return** +25.92 +4.43
<PAGE>
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $0.511 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.820 per share ordinary
income dividends and $0.511 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.571 per share ordinary
income dividends and $0.511 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.639 per share ordinary
income dividends and $0.511 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.770 per share ordinary
income dividends and $0.511 per share capital gains distributions.
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Low Price to Book Value
Metals/Non-Ferrous 1,600,000 ASARCO Inc. $ 40,877,630 $ 44,200,000 0.6%
Savings & Loans 1,900,000 Ahmanson (H.F.) & Co. 35,849,422 51,300,000 0.7
Insurance 3,100,000 The Allstate Corp. 67,424,755 141,437,500 1.9
Insurance 2,600,000 American General Corp. 56,042,709 94,575,000 1.3
Insurance 260,000 American National Insurance Co. 9,749,442 16,770,000 0.2
Steel 4,000,000 ++Bethlehem Steel Corp. 58,791,345 47,500,000 0.6
Restaurants 2,000,000 Darden Restaurants, Inc. 20,441,741 21,500,000 0.3
Information Processing 1,570,000 ++Data General Corp. 21,268,247 20,410,000 0.3
Utilities--Electric 2,300,000 Entergy Corp. 51,247,248 65,262,500 0.9
Retail 2,200,000 ++Federated Deptartment Stores,
Inc. 57,329,146 75,075,000 1.0
Conglomerates 4,500,000 Hanson PLC Sponsored (ADR)* 65,930,510 64,125,000 0.8
Insurance 1,250,000 ITT Hartford Group Inc.(a) 31,155,644 66,562,500 0.9
Chemicals 400,000 Imperial Chemical Industries
PLC (ADR)* 25,771,805 19,650,000 0.3
Paper & Forest Products 2,900,000 International Paper Co. 93,252,865 106,937,500 1.4
Insurance 1,400,000 PartnerRe Holdings Ltd. 29,498,937 41,825,000 0.6
Trucking 1,000,000 Scania AB (Class A)(ADR)* 28,093,817 27,750,000 0.4
Trucking 500,000 Scania AB (Class B)(ADR)* 13,565,869 13,812,500 0.2
Information Processing 3,400,000 ++Tandem Computers Inc. 42,086,495 42,075,000 0.6
Electronics 1,278,500 Tektronix, Inc. 50,051,965 57,212,875 0.8
Insurance 2,550,000 Travelers Inc. 65,201,903 116,343,750 1.5
Steel 2,400,000 USX--US Steel Group 73,819,785 68,100,000 0.9
Savings & Loans 1,200,000 Washington Mutual Savings Bank 21,615,463 35,850,000 0.5
-------------- -------------- ------
959,066,743 1,238,274,125 16.7
<PAGE>
Below-Average Price/Earnings Ratio
Banking 2,500,000 Citicorp 73,009,932 206,562,500 2.7
Financial Services 400,000 Dean Witter, Discover & Co. 10,659,960 22,900,000 0.3
Farm & Construction
Equipment 5,000,000 Deere & Co. 104,072,898 200,000,000 2.7
Capital Goods 1,300,000 Eaton Corp. 66,591,554 76,212,500 1.0
Automotive 3,800,000 Ford Motor Co. 95,253,535 123,025,000 1.6
Automotive 2,600,000 General Motors Corp. 114,470,463 136,175,000 1.8
Machinery 1,650,000 ITT Industries Inc.(a) 25,098,330 41,456,250 0.5
Information Processing 2,050,000 International Business Machines
Corp. 151,753,994 202,950,000 2.7
Banking 1,600,000 NationsBank Corp. 66,516,217 132,200,000 1.8
Banking 2,800,000 Norwest Corp. 50,295,872 97,650,000 1.3
Tobacco 1,200,000 Philip Morris Cos. Inc. 68,248,115 124,800,000 1.7
Electrical Equipment 3,500,000 Philips Electronics N.V. (ADR)* 84,649,762 114,187,500 1.5
Financial Services 360,000 Student Loan Marketing
Association 13,274,390 26,640,000 0.3
Telecommunications 1,250,000 Telefonica de Espana S.A. (ADR)* 38,741,080 68,906,250 0.9
Chemicals 2,700,000 Union Carbide Corp. 76,107,766 107,325,000 1.4
Information Processing 5,600,000 ++Unisys Corp. 60,913,547 39,900,000 0.5
Banking 320,000 Wells Fargo & Company (b) 23,708,277 76,440,000 1.0
-------------- -------------- ------
1,123,365,692 1,797,330,000 23.7
</TABLE>
<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 859,000 Atlantic Richfield Co. $ 88,316,091 $ 101,791,500 1.4%
Real Estate Investment
Trust 700,000 Avalon Properties, Inc. 14,323,870 15,225,000 0.2
Telecommunications 1,400,000 Bell Atlantic Corp. 66,463,875 89,250,000 1.2
Pharmaceuticals 1,150,000 Bristol-Myers Squibb Co. 65,372,906 103,500,000 1.4
Oil--International 885,028 The British Petroleum Co.
PLC (ADR)* 49,872,121 94,587,368 1.3
Utilities--Electric 1,230,000 CINergy Corp. 30,925,895 39,360,000 0.5
Oil--International 2,050,000 Chevron Corp. 76,068,224 120,950,000 1.6
Utilities--Electric 1,550,000 Consolidated Edison Co. of
New York, Inc. 37,135,210 45,337,500 0.6
Utilities--Electric 637,500 DPL Inc. 6,204,369 15,539,062 0.2
Oil--International 1,850,000 Exxon Corp. 113,555,755 160,718,750 2.1
Telecommunications 3,000,000 GTE Corp. 95,026,435 134,250,000 1.8
Foods/Food Processing 1,350,000 General Mills, Inc. 62,379,617 73,575,000 1.0
Real Estate Investment
Trust 440,000 Irvine Apartment Communities,
<PAGE> Inc. 7,299,447 8,855,000 0.1
Real Estate Investment
Trust 820,000 Liberty Property Trust 16,038,839 16,297,500 0.2
Real Estate Investment
Trust 500,000 The Mills Corp. 11,119,875 8,750,000 0.1
Oil--International 1,800,000 Mobil Corp. 109,741,282 201,825,000 2.7
Utilities--Electric 1,200,000 NIPSCO Industries, Inc. 27,387,777 48,300,000 0.6
Oil--Domestic 3,400,000 Occidental Petroleum Corp. 72,508,904 84,150,000 1.1
Utilities--Electric 1,900,000 PECO Energy Co. 47,700,965 49,400,000 0.7
Utilities--Electric 1,800,000 Public Service Enterprise
Group Inc. 48,476,636 49,275,000 0.7
Oil--International 1,150,000 Royal Dutch Petroleum Co. (ADR)* 82,945,123 176,812,500 2.3
Real Estate Investment
Trust 1,600,000 Simon Property Group, Inc. 35,365,609 39,200,000 0.5
Real Estate Investment
Trust 500,000 Summit Properties Inc. 9,407,600 9,812,500 0.1
Oil--International 1,600,000 Texaco Inc. 99,704,520 134,200,000 1.8
Utilities--Electric 1,500,000 Texas Utilities Co. 51,841,315 64,125,000 0.8
Telecommunications 2,600,000 US West Communications Group (c) 64,638,416 82,875,000 1.1
-------------- -------------- ------
1,389,820,676 1,967,961,680 26.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Special Situations
Information Processing 750,000 ++Ceridian Corp. $ 10,996,412 $ 37,875,000 0.5%
Information Processing 2,900,000 ++Digital Equipment Corp. 115,168,287 130,500,000 1.7
Oil Services &
Equipment 2,350,000 Dresser Industries, Inc. 47,775,442 69,325,000 0.9
Chemicals 1,500,000 Hercules Inc. 19,235,727 82,875,000 1.1
Entertainment 1,250,000 ++ITT Corp. (a) 31,402,179 82,812,500 1.1
Machinery 1,750,000 Ingersoll-Rand Co. 54,798,460 76,562,500 1.0
Pharmaceutical 1,800,000 Merck & Co., Inc. 57,303,897 116,325,000 1.6
Semiconductors 2,300,000 Micron Technology, Inc. 75,483,875 59,512,500 0.8
Beverages 2,000,000 The Seagram Company Ltd. 67,248,996 67,250,000 0.9
Retail 3,100,000 Sears, Roebuck & Co. 61,630,328 150,737,500 2.0
Semiconductors 1,700,000 Texas Instruments, Inc. 86,093,780 84,787,500 1.1
Telecommunications 1,700,000 ++US West Media Group (c) 24,221,802 31,025,000 0.4
Retail Apparel 4,250,000 ++Woolworth Corp. 59,770,846 95,625,000 1.3
Pharmaceuticals 440,000 Zeneca Group PLC (ADR)* 12,980,000 29,590,000 0.4
-------------- -------------- ------
724,110,031 1,114,802,500 14.8
Total Stocks 4,196,363,142 6,118,368,305 81.3
<PAGE>
Face
Amount Issue
Short-Term Securities
Commercial Paper** American Brands, Inc.:
$ 20,000,000 5.36% due 8/07/1996 19,880,889 19,880,889 0.3
20,000,000 5.36% due 8/15/1996 19,857,067 19,857,067 0.3
50,000,000 Asset Securitization
Cooperative Corp.,5.30% due
7/02/1996 49,970,556 49,970,556 0.7
Ciesco, L.P.:
20,000,000 5.37% due 8/15/1996 19,856,800 19,856,800 0.3
40,000,000 5.37% due 8/16/1996 39,707,633 39,707,633 0.5
50,000,000 Corporate Receivables Corp.,
5.35% due 7/08/1996 49,925,694 49,925,694 0.7
Eureka Securitization Corp.:
50,000,000 5.38% due 8/01/1996 49,745,944 49,745,944 0.6
50,000,000 5.39% due 8/12/1996 49,663,125 49,663,125 0.6
106,382,000 Gannett Co., Inc., 5.33% due
7/18/1996 106,066,991 106,066,991 1.4
81,037,000 General Electric Capital Corp.,
5.56% due 7/01/1996 80,999,453 80,999,453 1.1
Goldman Sachs Group, L.P.:
100,000,000 5.33% due 7/08/1996 99,851,944 99,851,944 1.3
50,000,000 5.32% due 7/09/1996 49,918,722 49,918,722 0.7
50,000,000 5.34% due 8/09/1996 49,688,500 49,688,500 0.6
International Securitization
Corporation:
50,185,000 5.32% due 7/02/1996 50,155,335 50,155,335 0.7
50,000,000 5.38% due 7/24/1996 49,805,722 49,805,722 0.6
29,800,000 Knight-Ridder, Inc., 5.35%
due 8/09/1996 29,613,998 29,613,998 0.4
25,000,000 Lucent Technologies, Inc.,
5.34% due 7/29/1996 24,885,042 24,885,042 0.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Industry Amount Issue Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Short-Term Securities (concluded)
Commercial Paper** McKenna Triangle National Corp.:
(concluded) $ 50,000,000 5.36% due 7/24/1996 $ 49,806,444 $ 49,806,444 0.7%
50,000,000 5.35% due 8/09/1996 49,687,917 49,687,917 0.6
40,000,000 MetLife Funding Corp., 5.37%
due 7/30/1996 39,809,067 39,809,067 0.5
50,000,000 National Australia Funding
(Delaware), Inc., 5.28% due
7/02/1996 49,970,667 49,970,667 0.7
50,000,000 National Fleet Funding Corp.,
5.30% due 7/01/1996 49,977,917 49,977,917 0.7
30,000,000 PHH Corporation, 5.36% due
7/24/1996 29,883,867 29,883,867 0.4
Preferred Receivables Funding
Corp.:
48,000,000 5.37% due 7/16/1996 47,871,120 47,871,120 0.6
19,050,000 5.35% due 7/22/1996 18,982,055 18,982,055 0.2
22,000,000 Transamerica Corporation,
5.33% due 7/11/1996 21,957,656 21,957,656 0.3
Xerox Credit Corp.:
50,000,000 5.30% due 7/08/1996 49,926,389 49,926,389 0.7
50,000,000 5.27% due 7/10/1996 49,912,167 49,912,167 0.7
44,000,000 5.34% due 8/09/1996 43,725,880 43,725,880 0.6
48,000,000 5.35% due 8/09/1996 47,700,400 47,700,400 0.6
-------------- -------------- ------
1,388,804,961 1,388,804,961 18.4
US Government & Agency 19,000,000 Federal Home Loan Mortgage
Obligations** Corp., 5.29% due 7/18/1996 18,944,161 18,944,161 0.3
Total Short-Term Securities 1,407,749,122 1,407,749,122 18.7
Total Investments $5,604,112,264 7,526,117,427 100.0
==============
Liabilities in Excess of Other Assets (3,413,830) (0.0)
-------------- ------
Net Assets $7,522,703,597 100.0%
============== ======
<PAGE>
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a)On December 20, 1995, ITT Corp. split into three separate
entities: ITT Corp., ITT Industries, Inc. and ITT Hartford Group, Inc.
(b)On April 1, 1996, First Interstate Bancorp merged with Wells
Fargo & Company.
(c)On November 1, 1995, US West Inc. spun off US West Media Group,
and changed its name to US West Communications Group.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$5,604,112,264) (Note 1a) $7,526,117,427
Cash 182,816
Receivables:
Capital shares sold $ 16,493,798
Dividends 10,829,062 27,322,860
--------------
Prepaid registration fees and other assets (Note 1d) 116,604
--------------
Total assets 7,553,739,707
--------------
Liabilities: Payables:
Securities purchased 15,669,255
Capital shares redeemed 8,630,065
Distributor (Note 2) 2,752,562
Investment adviser (Note 2) 2,321,146 29,373,028
--------------
Accrued expenses and other liabilities 1,663,082
--------------
Total liabilities 31,036,110
--------------
Net Assets: Net assets $7,522,703,597
==============
<PAGE>
Net Assets Class A Shares of Common Stock, $0.10 par value, 300,000,000 shares
Consist of: authorized $ 11,871,232
Class B Shares of Common Stock, $0.10 par value, 300,000,000 shares
authorized 11,052,222
Class C Shares of Common Stock, $0.10 par value, 200,000,000 shares
authorized 716,474
Class D Shares of Common Stock, $0.10 par value, 200,000,000 shares
authorized 1,440,238
Paid-in capital in excess of par 5,248,520,660
Undistributed investment income--net 82,449,679
Undistributed realized capital gains on investments--net 244,647,929
Unrealized appreciation on investments--net 1,922,005,163
--------------
Net assets $7,522,703,597
==============
Net Asset Value: Class A--Based on net assets of $3,587,557,556 and 118,712,320 shares
outstanding $ 30.22
==============
Class B--Based on net assets of $3,288,963,029 and 110,522,222 shares
outstanding $ 29.76
==============
Class C--Based on net assets of $211,786,930 and 7,164,737 shares
outstanding $ 29.56
==============
Class D--Based on net assets of $434,396,082 and 14,402,376 shares
outstanding $ 30.16
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended June 30, 1996
<S> <S> <C> <C>
Investment Dividends (net of $2,831,877 foreign withholding tax) $ 162,522,456
Income Interest and discount earned 64,932,173
(Notes 1b & 1c): Other 96,759
--------------
Total income 227,551,388
--------------
<PAGE>
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 28,997,218
Investment advisory fees (Note 2) 26,704,376
Transfer agent fees--Class B (Note 2) 4,358,779
Transfer agent fees--Class A (Note 2) 4,146,337
Account maintenance and distribution fees--Class C (Note 2) 1,396,921
Account maintenance fees--Class D (Note 2) 813,530
Registration fees (Note 1d) 554,438
Printing and shareholder reports 443,251
Transfer agent fees--Class D (Note 2) 421,688
Accounting services (Note 2) 394,536
Custodian fees 246,022
Transfer agent fees--Class C (Note 2) 227,909
Professional fees 105,727
Directors' fees and expenses 41,250
Pricing fees 233
Other 71,129
--------------
Total expenses 68,923,344
--------------
Investment income--net 158,628,044
--------------
Realized & Realized gain on investments--net 327,014,797
Unrealized Gain on Change in unrealized appreciation on investments--net 639,253,232
Investments--Net --------------
(Notes 1c, 1e & 3): Net Increase in Net Assets Resulting from Operations $1,124,896,073
==============
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: 1996 1995
<S> <S> <C> <C>
Operations: Investment income--net $ 158,628,044 $ 123,636,446
Realized gain on investments--net 327,014,797 66,820,215
Change in unrealized appreciation on investments--net 639,253,232 718,977,808
-------------- --------------
Net increase in net assets resulting from operations 1,124,896,073 909,434,469
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (83,171,240) (68,596,425)
Shareholders Class B (50,150,559) (36,272,122)
(Note 1g): Class C (2,265,975) (125,803)
Class D (6,929,391) (1,039,403)
Realized gain on investments--net:
Class A (63,214,864) (77,560,878)
Class B (56,947,014) (61,276,834)
Class C (2,332,735) (37,759)
Class D (5,725,774) (291,335)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (270,737,552) (245,200,559)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 1,092,277,977 894,346,339
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 1,946,436,498 1,558,580,249
Beginning of year 5,576,267,099 4,017,686,850
-------------- --------------
End of year* $7,522,703,597 $5,576,267,099
============== ==============
<FN>
*Undistributed investment income--net (Note 1h) $ 82,449,679 $ 63,306,430
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 26.44 $ 23.17 $ 23.31 $ 20.57 $ 18.90
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .80 .74 .62 .71 .70
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.31 4.01 .67 3.03 2.02
---------- ---------- ---------- ---------- ----------
Total from investment operations 5.11 4.75 1.29 3.74 2.72
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.76) (.69) (.70) (.64) (.76)
Realized gain on investments--net (.57) (.79) (.73) (.36) (.29)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.33) (1.48) (1.43) (1.00) (1.05)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 30.22 $ 26.44 $ 23.17 $ 23.31 $ 20.57
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 19.92% 21.67% 5.68% 19.03% 15.08%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .56% .59% .53% .54% .58%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 2.88% 3.19% 2.76% 3.48% 3.52%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $3,587,558 $2,834,652 $2,272,983 $2,023,078 $1,670,430
========== ========== ========== ========== ==========
Portfolio turnover 13.94% 11.69% 21.79% 20.85% 21.24%
========== ========== ========== ========== ==========
Average commission rate paid+++ $ .0491 -- -- -- --
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
+++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
Financial Highlights (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1996 1995 1994 1993 1992
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 26.08 $ 22.87 $ 23.04 $ 20.35 $ 18.71
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment loss--net .53 .53 .42 .53 .50
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.23 3.93 .62 2.96 2.00
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.76 4.46 1.04 3.49 2.50
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.51) (.46) (.48) (.44) (.57)
Realized gain on investments--net (.57) (.79) (.73) (.36) (.29)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.08) (1.25) (1.21) (.80) (.86)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 29.76 $ 26.08 $ 22.87 $ 23.04 $ 20.35
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 18.71% 20.45% 4.61% 17.81% 13.90%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.58% 1.61% 1.55% 1.56% 1.60%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.86% 2.16% 1.75% 2.47% 2.50%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year
Data: (in thousands) $3,288,963 $2,464,248 $1,744,704 $1,383,935 $1,064,354
========== ========== ========== ========== ==========
Portfolio turnover 13.94% 11.69% 21.79% 20.85% 21.24%
========== ========== ========== ========== ==========
Average commission rate paid+++ $ .0491 -- -- -- --
========== ========== ========== ========== ==========
<PAGE>
<FN>
*Total investment returns exclude the effects of sales loads.
+++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
For the For the
For the Period For the Period
The following per share data and ratios have been derived Year Oct. 21, Year Oct. 21,
from information provided in the financial statements. Ended 1994++ to Ended 1994++ to
June 30, June 30, June 30, June 30,
Increase (Decrease) in Net Asset Value: 1996 1995 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 25.98 $ 22.92 $ 26.41 $ 23.19
Operating ---------- ---------- ---------- ----------
Performance: Investment income--net .55 .44 .76 .50
Realized and unrealized gain on investments
and foreign currency transactions--net 4.18 3.05 4.27 3.17
---------- ---------- ---------- ----------
Total from investment operations 4.73 3.49 5.03 3.67
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.58) (.33) (.71) (.35)
Realized gain on investments--net (.57) (.10) (.57) (.10)
---------- ---------- ---------- ----------
Total dividends and distributions (1.15) (.43) (1.28) (.45)
---------- ---------- ---------- ----------
Net asset value, end of period $ 29.56 $ 25.98 $ 30.16 $ 26.41
========== ========== ========== ==========
Total Investment Based on net asset value per share 18.69% 15.59%+++ 19.61% 16.23%+++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.59% 1.66%* .81% .87%*
Net Assets: ========== ========== ========== ==========
Investment income--net 1.83% 2.09%* 2.61% 2.88%*
========== ========== ========== ==========
<PAGE>
Supplemental Net assets, end of period (in thousands) $ 211,787 $ 74,334 $ 434,396 $ 203,033
Data: ========== ========== ========== ==========
Portfolio turnover 13.94% 11.69% 13.94% 11.69%
========== ========== ========== ==========
Average commission rate paid+++++ $ .0491 -- $ .0491 --
========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
+++Aggregate total investment return.
+++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities.
++Commencement of Operations.
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 Fund offers four classes of
shares under the Merrill Lynch Select Pricing SM System. Shares of
Class A and Class D are sold with a front-end sales charge. Shares
of Class B and Class C may be subject to a contingent deferred sales
charge. All classes of shares have identical voting, dividend,
liquidation and other rights and the same terms and conditions,
except that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such shares, and
Class B and Class C Shares also bear certain expenses related to the
distribution of such shares. Each class has exclusive voting rights
with respect to matters relating to its account maintenance and
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
<PAGE>
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by the Board of Directors as the primary market.
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. Options written are valued at the last sale
price in the case of exchange-traded options or, in the case of
options traded in the over-the-counter market, the last asked price.
Short-term securities are valued at amortized cost, which
approximates market value. Other investments are stated at market
value. Securities and assets for which market value quotations are
not available are valued at their fair value as determined in good
faith by or under the direction of the Fund's Board of Directors.
(b) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a
withholding tax may be 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 exdividend 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) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the equity markets. Losses
may arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
<PAGE>
* Options--The Fund is authorized to write covered call options. When
the Fund writes an option, an amount equal to the premium received
by the Fund is reflected as an asset and an equivalent liability.
The amount of the liability is subsequently marked to market to
reflect the current market value of the option written. When a
security is purchased or sold through an exercise of an option, the
related premium paid (or received) is added to (or deducted from)
the basis of the security acquired or deducted from (or added to)
the proceeds of the security sold. When an option expires (or the
Fund enters into a closing transaction) the Fund realizes a gain or
loss on the option to the extent of the premiums received or paid
(or gain or loss to the extent the cost of the closing transaction
exceeds the premium paid or received).
Written options are non-income producing investments.
(f) 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.
NOTES TO FINANCIAL STATEMENTS (continued)
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Reclassification--Generally accepted accounting principles
require that certain components of net assets be reclassified to
reflect permanent differences between financial reporting and tax
purposes. Accordingly, current year's permanent book/tax differences
of $3,032,370 have been reclassified from undistributed net realized
capital gains to undistributed net investment income. These
reclassifications have no effect on net assets or net asset values
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
<PAGE>
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 the Fund's 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 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 FAM during any fiscal year which will cause such expenses
to exceed the pro rata expense limitation at the time of such
payment.
Pursuant to the distribution plans (the "Distribution Plans")
adopted by the Fund in accordance with Rule 12b-1 under the
Investment Company Act of 1940, the Fund pays the Distributor
ongoing account maintenance and distribution fees, which are accrued
daily and paid monthly at annual rates based upon the average daily
net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended June 30, 1996, MLFD earned underwriting discounts
and direct commissions and MLPF&S earned dealer concessions on sales
of the Fund's Class A and Class D Shares as follows:
<PAGE>
MLFD MLPF&S
Class A $ 67,810 $ 880,772
Class D $155,038 $2,222,285
For the year ended June 30, 1996, MLPF&S received contingent
deferred sales charges of $2,785,815 and $84,568 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $117,800 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended June 30, 1996.
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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 FAM, PSI, MLPF&S, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1996 were $1,317,972,322 and
$761,195,681, respectively.
Net realized and unrealized gains as of June 30, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $327,014,797 $1,922,005,163
------------ --------------
Total $327,014,797 $1,922,005,163
============ ==============
As of June 30, 1996, net unrealized appreciation for Federal income
tax purposes aggregated $1,919,040,757 of which $1,986,112,499
related to appreciated securities and $67,071,742 related to
depreciated securities. At June 30, 1996, the aggregate cost of
investments for Federal income tax purposes was $5,607,076,670.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $1,092,277,977 and $894,346,339 for the years ended June 30,
1996 and June 30, 1995, respectively.
<PAGE>
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 23,070,207 $665,661,352
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,785,871 131,186,394
------------ ------------
Total issued 27,856,078 796,847,746
Shares redeemed (16,341,658) (469,020,925)
------------ ------------
Net increase 11,514,420 $327,826,821
============ ============
Class A Shares for the Year Dollar
Ended June 30, 1995 Shares Amount
Shares sold 19,425,436 $466,205,455
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,782,037 130,723,601
------------ ------------
Total issued 25,207,473 596,929,056
Shares redeemed (16,105,392) (384,011,079)
------------ ------------
Net increase 9,102,081 $212,917,977
============ ============
Class B Shares for the
Year Ended Dollar
June 30, 1996 Shares Amount
Shares sold 34,258,281 $968,992,372
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,511,955 95,303,902
------------ ------------
Total issued 37,770,236 1,064,296,274
Automatic conversion of
shares (1,370,936) (38,128,704)
Shares redeemed (20,359,611) (573,975,897)
------------ ------------
Net increase 16,039,689 $452,191,673
============ ============
<PAGE>
Class B Shares for the
Year Ended Dollar
June 30, 1995 Shares Amount
Shares sold 34,461,582 $815,962,756
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,848,516 86,346,162
------------ ------------
Total issued 38,310,098 902,308,918
Automatic conversion of
shares (4,721,916) (109,837,782)
Shares redeemed (15,381,764) (361,976,739)
------------ ------------
Net increase 18,206,418 $430,494,397
============ ============
Class C Shares for the
Year Ended Dollar
June 30, 1996 Shares Amount
Shares sold 6,142,278 $173,460,878
Shares issued to shareholders
in reinvestment of dividends
and distributions 153,247 4,142,044
------------ ------------
Total issued 6,295,525 177,602,922
Shares redeemed (1,991,553) (56,032,695)
------------ ------------
Net increase 4,303,972 $121,570,227
============ ============
Class C Shares for the Period
October 21, 1994++ to Dollar
June 30, 1995 Shares Amount
Shares sold 3,236,903 $ 77,339,209
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,576 142,631
------------ ------------
Total issued 3,243,479 77,481,840
Shares redeemed (382,714) (9,161,923)
------------ ------------
Net increase 2,860,765 $ 68,319,917
============ ============
[FN]
++Commencement of Operations.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Class D Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
Shares sold 7,412,646 $212,175,625
Automatic conversion of
shares 1,355,250 38,128,704
Shares issued to shareholders
in reinvestment of dividends
and distributions 412,739 11,332,508
------------ ------------
Total issued 9,180,635 261,636,837
Shares redeemed (2,466,089) (70,947,581)
------------ ------------
Net increase 6,714,546 $190,689,256
============ ============
Class D Shares for the Period
October 21 1994++ to Dollar
June 30, 1995 Shares Amount
Shares sold 3,673,107 $ 88,800,325
Automatic conversion of
shares 4,666,859 109,837,782
Shares issued to shareholders
in reinvestment of dividends
and distributions 55,369 1,215,335
------------ ------------
Total issued 8,395,335 199,853,442
Shares redeemed (707,505) (17,239,394)
------------ ------------
Net increase 7,687,830 $182,614,048
============ ============
[FN]
++Commencement of Operations.
<PAGE>
<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, 1996, 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,
1996 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.
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, 1996, 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 LLP
Princeton, New Jersey
July 31, 1996
</AUDIT-REPORT>
<PAGE>
<TABLE>
IMPORTANT TAX INFORMATION (unaudited)
<CAPTION>
The following information summarizes all per share distributions
paid by Merrill Lynch Basic Value Fund, Inc. during its taxable year
ended June 30, 1996:
Qualifying Non-Qualifying Total Long-Term
Record Payable Ordinary Ordinary Ordinary Capital
Date Date Income Income Income Gains
<S> <C> <C> <C> <C> <C> <C>
Class A Shares: 8/08/95 8/16/95 $.336598 $.033362 $.369960 $.213134
12/11/95 12/19/95 $.372381 $.077904 $.450285 $.298247
Class B Shares: 8/08/95 8/16/95 $.234242 $.023217 $.257459 $.213134
12/11/95 12/19/95 $.258943 $.054172 $.313115 $.298247
Class C Shares: 8/08/95 8/16/95 $.282105 $.027961 $.310066 $.213134
12/11/95 12/19/95 $.271804 $.056863 $.328667 $.298247
Class D Shares: 8/08/95 8/16/95 $.319274 $.031645 $.350919 $.213134
12/11/95 12/19/95 $.346480 $.072485 $.418965 $.298247
The domestic qualifying ordinary income qualifies for the dividends-
received deduction for corporations.
Please retain this information for your records.
</TABLE>
PORTFOLIO INFORMATION (unaudited)
Percent of
Ten Largest Stock Holdings Net Assets
Citicorp 2.7%
International Business Machines Corp. 2.7
Mobil Corp. 2.7
Deere & Co. 2.7
Royal Dutch Petroleum Co. (ADR) 2.3
Exxon Corp. 2.1
Sears, Roebuck & Co. 2.0
The Allstate Corp. 1.9
General Motors Corp. 1.8
GTE Corp. 1.8
<PAGE>
Portfolio Changes for the Quarter Ended
June 30, 1996
Additions
*Associates First Capital Corp.
*Lucent Technologies, Inc.
Micron Technology, Inc.
Scania AB (Class A) (ADR)
Scania AB (Class B) (ADR)
Tektronix, Inc.
Deletions
Aetna Life & Casualty Co.
*Associates First Capital Corp.
The Limited, Inc.
*Lucent Technologies, Inc.
United Technologies Corp.
[FN]
*Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Paul M. Hoffmann, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
