MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Semi-Annual Report
December 31, 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
Printed on post-consumer recycled paper
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
A relatively benign economic environment created the backdrop for
strong US stock and bond markets in 1996. Although expectations of
an overheating economy sparked inflationary concerns at mid-year,
business activity subsequently subsided back to a more moderate
pace. As a result, equity and bond prices rebounded in the latter
half of the year. Positive investor sentiment was further reinforced
when the Federal Reserve Board kept monetary policy unchanged. The
results of the US election were well-received by investors, and
further enhanced the already positive investment outlook.
Highlighting the economic results as 1996 drew to a close were
reports of a decline in the trade deficit in October and stronger
industrial production. Underscoring the moderating growth trend were
some signs of softening in the labor market, and initial indications
suggested a respectable but unremarkable holiday selling season.
<PAGE>
On balance, US economic fundamentals appear to be the most positive
they have been for many years. However, as 1997 begins, the dilemma
facing investors is how long the economic expansion can continue at
a steady, noninflationary pace. At this late stage of the current
economic recovery, investor expectations can quickly change from
positive to negative with the release of surprising economic
results. Therefore, continued reassurance of steady, noninflationary
economic growth would be a very positive development for the stock
and bond markets in the new year.
Portfolio Matters
Security purchases during the final quarter of 1996 amounted to $284
million, while equity sales were $222 million. New assets invested
by shareholders in the Fund during the December quarter were $49
million, with total Fund assets approaching $8.6 billion at December
31, 1996. The Fund's cash position at year-end 1996 was 15.7% of net
assets, down slightly from 16.8% at the close of the September
quarter.
During the December quarter, we added to 20 existing holdings and
established one new position in AT&T Corp. AT&T is a controversial
company whose shares have lagged a strong stock market. The company
has undergone major restructuring culminating with the year-end spin-
off of NCR Corp., its failed attempt to enter the computer business.
Also, there is strong and growing competition in its core long-
distance market, and the company is spending heavily to pursue local
phone business. We believe that most of these difficulties are
already reflected in the stock price. At our entry price, the stock
provided a well above-average 3.4% yield and a well below-average
price/earnings ratio of about 12 times. We think the risk/reward
ratio is favorable.
The major additions to established positions included Federated
Department Stores, Inc., Ford Motor Co., Hercules, Inc., Ingersoll-
Rand Co., ITT Corp. and Micron Technology, Inc. Each came under some
price pressure during the volatile fourth quarter, which presented
attractive buying opportunities.
On the sell side, we eliminated four positions and reduced 14
holdings. We had been gradually scaling out of Dean Witter, Discover
& Co. and Student Loan Marketing Association in prior quarters, and
eliminated the final positions in the fourth quarter. Both had been
purchased when they were unpopular choices, and proved to be highly
successful investments. The other two eliminations were spin-offs
from Hanson PLC, Imperial Tobacco Group PLC and Millenium Chemicals,
Inc. When we originally purchased Hanson we anticipated that the
forthcoming spin-offs would lead to the sum-of-the-parts being worth
more than the whole. Thus far, that has not been the case and we
decided to sell the spin-offs which were very small positions,
rather than add to them. Our largest partial sale was in Philip
Morris Cos., Inc. The stock had an excellent price recovery from its
summer lows, and we thought some profit-taking was prudent.
<PAGE>
For the full year 1996, security purchases exceeded $1.6 billion,
with security sales amounting to $817 million. Net new assets
invested in the Fund for the year amounted to $893 million, and Fund
assets increased by 30% from $6.6 billion at the end of 1995 to
almost $8.6 billion at year-end 1996.
In Conclusion
Stock market returns in 1996 were far above historic norms and
followed an extraordinarily strong 1995. Indeed, the two-year
performance was the best in over 40 years. Most market forecasters
have underestimated the strength of the past two years, and we also
have been cautious for a considerable period of time. We expect
increased volatility in 1997 and anticipate our trading activity
could be higher than normal. As always, your Fund is priced
conservatively relative to yield, price/earnings ratios and
price/book value, an appropriate stance in the prevailing market
environment.
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. Hoffman)
Paul M. Hoffmann
Vice President and Portfolio Manager
January 9, 1997
<PAGE>
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. (There is no initial
sales charge for automatic share conversions.)
* 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.
PERFORMANCE DATA (continued)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1996 28.31 31.00 1.392 0.805 +17.81
------- -------
Total $13.812 Total $13.554
Cumulative total return as of 12/31/96: +1,677.71%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1996 28.02 30.63 1.392 0.510 +16.58
------ ------
Total $4.891 Total $4.991
<PAGE>
Cumulative total return as of 12/31/96: +155.42%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1996 27.84 30.38 1.392 0.540 +16.56
------ ------
Total $2.002 Total $1.508
Cumulative total return as of 12/31/96: +50.60%**
<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**
<S> <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
1996 28.29 30.96 1.392 0.736 +17.50
------ ------
Total $2.002 Total $1.859
<PAGE>
Cumulative total return as of 12/31/96: +53.21%**
<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>
Recent Performance Results
<CAPTION>
12 Month 3 Month
12/31/96 9/30/96 12/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares* $31.00 $29.52 $28.31 +14.76%(1) + 6.40%(2)
ML Basic Value Fund Class B Shares* 30.63 29.12 28.02 +14.63(1) + 6.59(2)
ML Basic Value Fund Class C Shares* 30.38 28.89 27.84 +14.47(1) + 6.58(2)
ML Basic Value Fund Class D Shares* 30.96 29.48 28.29 +14.70(1) + 6.41(2)
Dow Jones Industrial Average** 6,448.27 5,882.17 5,117.12 +26.01 + 9.62
Standard & Poor's 500 Index** 740.74 687.31 615.93 +20.26 + 7.77
ML Basic Value Fund Class A Shares--Total Return* +17.81(3) + 7.81(4)
ML Basic Value Fund Class B Shares--Total Return* +16.58(5) + 7.50(6)
ML Basic Value Fund Class C Shares--Total Return* +16.56(7) + 7.51(8)
ML Basic Value Fund Class D Shares--Total Return* +17.50(9) + 7.70(10)
Dow Jones Industrial Average--Total Return** +29.49 +10.72
Standard & Poor's 500 Index--Total Return** +22.98 + 8.34
<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 $1.392 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.409 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.805 per share ordinary
income dividends and $1.392 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.415 per share ordinary
income dividends and $0.409 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.510 per share ordinary
income dividends and $1.392 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.262 per share ordinary
income dividends and $0.409 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.540 per share ordinary
income dividends and $1.392 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.270 per share ordinary
income dividends and $0.409 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.736 per share ordinary
income dividends and $1.392 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.379 per share
ordinary income dividends and $0.409 per share capital gains
distributions.
</TABLE>
<PAGE>
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 $16,843.80 on
December 31, 1996.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +17.81% +11.63%
Five Years Ended 12/31/96 +16.57 +15.32
Ten Years Ended 12/31/96 +13.61 +13.00
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
<PAGE>
Year Ended 12/31/96 +16.58% +12.58%
Five Years Ended 12/31/96 +15.38 +15.38
Inception (10/21/88) through 12/31/96 +12.12 +12.12
[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 12/31/96 +16.56% +15.56%
Inception (10/21/94)
through 12/31/96 +20.51 +20.51
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 12/31/96 +17.50% +11.33%
Inception (10/21/94)
through 12/31/96 +21.46 +18.51
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<PAGE>
Low Price to Book Value
<S> <C> <S> <C> <C> <C>
Metals/Non-Ferrous 1,600,000 ASARCO Inc. $ 40,877,630 $ 39,800,000 0.5%
Savings & Loans 1,800,000 Ahmanson (H.F.) & Co. 34,142,422 58,500,000 0.7
Insurance 2,500,000 American General Corp. 54,530,936 102,187,500 1.2
Insurance 260,000 American National
Insurance Co. 9,749,442 19,175,000 0.2
Steel 4,400,000 ++Bethlehem Steel Corp. 62,035,783 39,600,000 0.5
Restaurants 3,900,000 Darden Restaurants, Inc. 36,505,674 34,125,000 0.4
Information Processing 1,570,000 ++Data General Corp. 21,268,247 22,765,000 0.3
Information Processing 3,400,000 ++Digital Equipment Corp. 134,953,667 123,675,000 1.4
Utilities--Electric 2,500,000 Entergy Corp. 56,597,249 69,375,000 0.8
Retail 3,000,000 ++Federated Deptartment
Stores, Inc. 84,116,174 102,375,000 1.2
Conglomerates 5,200,000 Hanson PLC (ADR)* 45,470,434 35,100,000 0.4
Entertainment 2,400,000 ++ITT Corp. 80,838,004 104,100,000 1.2
Insurance 1,250,000 ITT Hartford Group Inc. 31,155,644 84,375,000 1.0
Chemicals 400,000 Imperial Chemical
Industries PLC (ADR)* 25,771,805 20,800,000 0.2
Paper & Forest Products 3,000,000 International Paper Co. 97,036,675 121,125,000 1.4
Insurance 1,400,000 PartnerRe Holdings Ltd. 29,498,936 47,600,000 0.6
Trucking 1,000,000 Scania AB (Class A) (ADR)* 28,093,817 24,125,000 0.3
Trucking 500,000 Scania AB (Class B) (ADR)* 13,565,869 12,062,500 0.1
Beverages 2,200,000 The Seagram Company Ltd. 73,951,621 85,250,000 1.0
Information Processing 3,400,000 ++Tandem Computers Inc. 42,086,495 46,750,000 0.5
Telecommunications 1,250,000 Telefonica de Espana S.A.
(ADR)* 38,741,080 86,562,500 1.0
Steel 3,000,000 USX-US Steel Group 90,174,669 94,125,000 1.1
Savings & Loans 750,000 Washington Mutual Savings
Bank 14,847,596 32,437,500 0.4
Banking 200,000 Wells Fargo & Company 17,660,298 53,950,000 0.6
-------------- -------------- ------
1,163,670,167 1,459,940,000 17.0
Below-Average Price/Earnings Ratio
Insurance 3,100,000 The Allstate Corp. 67,424,755 179,412,500 2.1
Banking 2,500,000 Citicorp 73,009,932 257,500,000 3.0
Farm & Construction
Equipment 4,500,000 Deere & Co. 95,458,667 182,812,500 2.1
Chemicals 1,275,000 du Pont (E.I.) de Nemours
& Co. 96,720,608 120,328,125 1.4
Automotive 5,100,000 Ford Motor Co. 137,047,905 162,562,500 1.9
Automotive 2,900,000 General Motors Corp. 133,442,048 161,675,000 1.9
Chemicals 2,000,000 Hercules Inc. 42,469,747 86,500,000 1.0
Machinery 2,400,000 Ingersoll-Rand Co. 82,689,726 106,800,000 1.2
Machinery 3,000,000 ITT Industries Inc. 56,239,282 73,500,000 0.9
Information Processing 1,900,000 International Business
Machines Corp. 139,035,644 286,900,000 3.3
Semiconductors 2,650,000 Micron Technology, Inc. 81,124,140 77,181,250 0.9
Banking 1,200,000 NationsBank Corp. 46,863,800 117,300,000 1.4
Banking 3,100,000 Norwest Corp. 60,238,432 134,850,000 1.6
Tobacco 1,250,000 Philip Morris Cos. Inc. 83,695,440 140,781,250 1.6
Electrical Equipment 3,500,000 Philips Electronics N.V.
(ADR)* 84,649,762 140,000,000 1.6
Retail 3,400,000 Sears, Roebuck & Co. 77,459,405 156,825,000 1.8
Electronics 1,500,000 Tektronix, Inc. 58,632,719 76,875,000 0.9
Insurance 3,200,000 Travelers Inc. 59,158,024 145,200,000 1.7
Chemicals 2,400,000 Union Carbide Corp. 75,165,781 98,100,000 1.2
Retail Apparel 4,250,000 ++Woolworth Corp. 59,770,846 92,968,750 1.1
-------------- -------------- ------
1,610,296,663 2,798,071,875 32.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
Above-Average Yield
<S> <C> <S> <C> <C> <C>
Telecommunications 2,800,000 AT&T Corp. $ 105,960,062 $ 121,800,000 1.4%
Oil--Domestic 960,000 Atlantic Richfield Co. 100,625,359 127,200,000 1.5
Real Estate Investment
Trust 700,000 Avalon Properties, Inc. 14,323,869 20,125,000 0.2
Telecommunications 1,525,000 Bell Atlantic Corp. 74,012,340 98,743,750 1.2
Oil--International 950,731 The British Petroleum
Co. PLC (ADR)* 57,955,700 134,409,595 1.6
Utilities--Electric 1,400,000 CINergy Corp. 36,103,137 46,725,000 0.5
Oil--International 2,275,000 Chevron Corp. 89,811,207 147,875,000 1.7
Utilities--Electric 1,650,000 Consolidated Edison Co. of
New York, Inc. 39,941,210 48,262,500 0.6
Utilities--Electric 637,500 DPL Inc. 6,204,369 15,618,750 0.2
Oil--International 2,100,000 Exxon Corp. 134,198,915 205,800,000 2.4
Telecommunications 3,300,000 GTE Corp. 107,131,875 150,150,000 1.7
Foods/Food Processing 1,450,000 General Mills, Inc. 67,972,787 91,893,750 1.1
Real Estate Investment
Trust 440,000 Irvine Apartment Communities,
Inc. 7,299,447 11,000,000 0.1
Real Estate Investment
Trust 820,000 Liberty Property Trust 16,038,839 21,115,000 0.2
Real Estate Investment
Trust 500,000 The Mills Corp. 11,119,875 11,937,500 0.1
Oil--International 1,900,000 Mobil Corp. 120,904,758 232,275,000 2.7
Utilities--Electric 1,200,000 NIPSCO Industries, Inc. 27,387,777 47,550,000 0.6
Oil--Domestic 4,100,000 Occidental Petroleum Corp. 89,048,665 95,837,500 1.1
Utilities--Electric 1,900,000 PECO Energy Co. 47,700,965 47,975,000 0.6
Utilities--Electric 1,800,000 Public Service Enterprise
Group Inc. 48,476,636 49,050,000 0.6
Oil--International 1,275,000 Royal Dutch Petroleum Co.
(ADR)* 102,034,053 217,706,250 2.5
Real Estate Investment
Trust 1,600,000 Simon DeBartolo Group,
Inc. (a) 35,365,609 49,600,000 0.6
Real Estate Investment
Trust 500,000 Summit Properties Inc. 9,407,600 11,062,500 0.1
Oil--International 1,600,000 Texaco Inc. 106,280,936 157,000,000 1.8
Utilities--Electric 1,500,000 Texas Utilities Co. 51,841,315 61,125,000 0.7
Telecommunications 3,000,000 US West Communications
Group 77,072,443 96,750,000 1.1
-------------- -------------- ------
1,584,219,748 2,318,587,095 26.9
<PAGE>
Special Situations
Pharmaceuticals 1,150,000 Bristol-Myers Squibb Co. 65,372,906 125,062,500 1.5
Oil Services & Equipment 2,450,000 Dresser Industries, Inc. 50,686,268 75,950,000 0.9
Capital Goods 1,400,000 Eaton Corp. 72,067,416 97,650,000 1.1
Pharmaceuticals 1,800,000 Merck & Co., Inc. 57,303,898 142,650,000 1.7
Semiconductors 2,000,000 Texas Instruments, Inc. 99,369,049 127,500,000 1.5
Telecommunications 2,000,000 ++US West Media Group 29,542,902 37,000,000 0.4
Information Processing 5,600,000 ++Unisys Corp. 60,913,547 37,800,000 0.4
Pharmaceuticals 440,000 Zeneca Group PLC (ADR)* 12,980,000 36,960,000 0.4
-------------- -------------- ------
448,235,986 680,572,500 7.9
Total Stocks 4,806,422,564 7,257,171,470 84.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Value Percent
Amount Issue Cost (Note 1a) Net Assets
<PAGE>
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper** $35,000,000 CIT Group Holdings, Inc.
(The), 5.29% due 1/14/1997 $ 34,927,997 $ 34,927,997 0.4%
CXC Inc.:
50,000,000 5.32% due 1/15/1997 49,889,167 49,889,167 0.6
25,000,000 5.32% due 1/17/1997 24,937,195 24,937,195 0.3
25,000,000 Ciesco L.P., 5.27% due
1/07/1997 24,974,382 24,974,382 0.3
52,327,000 Clipper Receivables Corp.,
5.354% due 1/07/1997 52,272,565 52,272,565 0.6
Corporate Receivables
Corp.:
30,000,000 5.30% due 1/03/1997 29,986,750 29,986,750 0.3
21,000,000 5.30% due 1/10/1997 20,969,083 20,969,083 0.2
50,000,000 5.32% due 1/16/1997 49,881,778 49,881,778 0.6
58,980,000 Delaware Funding Corp.,
5.50% due 1/10/1997 58,889,892 58,889,892 0.7
du Pont (E.I.) de Nemours
& Co.:
25,000,000 5.27% due 1/03/1997 24,989,021 24,989,021 0.3
50,000,000 5.26% due 1/07/1997 49,948,861 49,948,861 0.6
25,000,000 Eureka Securitization PLC,
5.33% due 1/17/1997 24,937,077 24,937,077 0.3
52,975,000 Falcon Asset Securitization
Corp., 5.30% due 1/16/1997 52,850,215 52,850,215 0.6
21,224,000 Fleet Funding Corp., 5.40%
due 1/13/1997 21,182,613 21,182,613 0.2
50,506,000 General Electric Capital
Corp., 7.10% due 1/02/1997 50,486,078 50,486,078 0.6
Goldman Sachs Group, L.P.:
44,000,000 5.42% due 1/06/1997 43,960,253 43,960,253 0.5
50,000,000 5.43% due 1/16/1997 49,879,333 49,879,333 0.6
50,000,000 IBM Credit Corp., 5.31% due
1/07/1997 49,948,375 49,948,375 0.6
85,000,000 International Securitization
Corp., 5.34% due 1/17/1997 84,785,658 84,785,658 1.0
50,000,000 Lehman Brothers Holdings,
Inc., 5.43% due 2/03/1997 49,743,583 49,743,583 0.6
25,000,000 Morgan Stanley Group, Inc.,
5.32% due 1/14/1997 24,948,278 24,948,278 0.3
17,000,000 National Fleet Funding
Corp., 5.40% due 1/24/1997 16,938,800 16,938,800 0.2
Preferred Receivables
Funding Corp.:
56,000,000 5.45% due 1/02/1997 55,983,044 55,983,044 0.6
62,100,000 5.45% due 1/03/1997 62,071,796 62,071,796 0.7
15,000,000 Procter & Gamble Company
(The), 5.26% due 1/07/1997 14,984,658 14,984,658 0.2
Riverwood Funding Corp.:
50,000,000 5.40% due 1/06/1997 49,955,000 49,955,000 0.6
50,000,000 5.31% due 1/14/1997 49,896,750 49,896,750 0.6
60,000,000 5.31% due 1/17/1997 59,849,550 59,849,550 0.7
40,000,000 Three Rivers Funding Corp.,
5.48% due 1/10/1997 39,939,111 39,939,111 0.5
35,000,000 Xerox Corporation, 5.28%
due 1/07/1997 34,964,067 34,964,067 0.4
Xerox Credit Corporation:
35,000,000 5.30% due 1/03/1997 34,984,542 34,984,542 0.4
14,000,000 5.28% due 1/10/1997 13,979,467 13,979,467 0.1
-------------- -------------- ------
1,307,934,939 1,307,934,939 15.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent
Amount Issue Cost (Note 1a) Net Assets
Short-Term Securities (concluded)
<S> <C> <S> <C> <C> <C>
US Government & $39,900,000 Federal Home Loan Bank,
Agency Obligations** 5.21% due 1/02/1997 $ 39,888,451 $ 39,888,451 0.5%
71,000 Federal Home Loan Mortgage
Corp., 5.40% due 1/02/1997 70,979 70,979 0.0
-------------- -------------- ------
39,959,430 39,959,430 0.5
Total Short-Term Securities 1,347,894,369 1,347,894,369 15.7
Total Investments $6,154,316,933 8,605,065,839 100.1
==============
Liabilities in Excess of Other Assets (9,998,710) (0.1)
-------------- ------
Net Assets $8,595,067,129 100.0%
============== ======
<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 August 12, 1996, Simon Property Group, Inc. merged with
DeBartolo Realty Corp.
++Non-income producing security.
See Notes to Financial Statements.
</TABLE>
PORTFOLIO INFORMATION
Percent of
Ten Largest Stock Holdings Net Assets
<PAGE>
International Business Machines Corp. 3.3%
Citicorp 3.0
Mobil Corp. 2.7
Royal Dutch Petroleum Co. (ADR) 2.5
Exxon Corp. 2.4
Deere & Co. 2.1
The Allstate Corp. 2.1
Ford Motor Co. 1.9
General Motors Corp. 1.9
Texaco Inc. 1.8
Portfolio Changes for the Quarter Ended
December 31, 1996
Addition
AT&T Corp.
Deletions
Dean Witter, Discover & Co.
*Imperial Tobacco Group PLC
*Millenium Chemicals, Inc.
Student Loan Marketing Association
[FN]
*Received from the spin-off of Hanson PLC during the December
quarter.
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of December 31, 1996
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$6,154,316,933) (Note 1a) $8,605,065,839
Cash 1,413,968
Receivables:
Capital shares sold $ 19,001,154
Dividends 12,506,678 31,507,832
--------------
Prepaid registration fees and other assets (Note 1d) 116,766
--------------
Total assets 8,638,104,405
--------------
Liabilities: Payables:
Capital shares redeemed 22,889,449
Securities purchased 11,125,150
Distributor (Note 2) 3,566,932
Investment adviser (Note 2) 3,052,291 40,633,822
--------------
Accrued expenses and other liabilities 2,403,454
--------------
Total liabilities 43,037,276
--------------
<PAGE>
Net Assets: Net assets $8,595,067,129
==============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 400,000,000 shares authorized $ 13,389,378
Class B Shares of Common Stock, $0.10 par value,
400,000,000 shares authorized 11,861,010
Class C Shares of Common Stock, $0.10 par value,
200,000,000 shares authorized 889,881
Class D Shares of Common Stock, $0.10 par value,
200,000,000 shares authorized 1,745,945
Paid-in capital in excess of par 6,063,299,755
Accumulated investment loss on investments--net (3,991,695)
Undistributed realized capital gains on investments--net 57,123,949
Unrealized appreciation on investments 2,450,748,906
--------------
Net assets $8,595,067,129
==============
Net Asset Value: Class A--Based on net assets of $4,150,495,596 and
133,893,784 shares outstanding $ 31.00
==============
Class B--Based on net assets of $3,633,595,939 and
118,610,101 shares outstanding $ 30.63
==============
Class C--Based on net assets of $270,356,600 and
8,898,806 shares outstanding $ 30.38
==============
Class D--Based on net assets of $540,618,994 and
17,459,446 shares outstanding $ 30.96
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended December 31, 1996
<S> <S> <C> <C>
Investment Dividends (net of $1,009,439 foreign withholding tax) $ 93,514,313
Income Interest and discount earned 36,858,049
(Notes 1b & 1c): Other 91,402
--------------
Total income 130,463,764
--------------
<PAGE>
Expenses: Account maintenance and distribution fees--Class B (Note 2) $ 17,424,264
Investment advisory fees (Note 2) 16,403,217
Transfer agent fees--Class B (Note 2) 2,522,472
Transfer agent fees--Class A (Note 2) 2,420,384
Account maintenance and distribution fees--Class C (Note 2) 1,224,041
Account maintenance fees--Class D (Note 2) 606,303
Transfer agent fees--Class D (Note 2) 300,193
Registration fees (Note 1d) 291,784
Printing and shareholder reports 223,621
Transfer agent fees--Class C (Note 2) 190,691
Accounting services (Note 2) 185,753
Custodian fees 132,341
Professional fees 40,930
Directors' fees and expenses 20,206
Pricing fees 115
Other 57,834
--------------
Total expenses 42,044,149
--------------
Investment income--net 88,419,615
--------------
Realized & Realized gain on investments--net 172,631,095
Unrealized Gain on Change in unrealized appreciation on investments--net 528,743,743
Investments--Net --------------
(Notes 1c, 1e & 3): Net Increase in Net Assets Resulting from Operations $ 789,794,453
==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: December 31, 1996 June 30, 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 88,419,615 $ 158,628,044
Realized gain on investments--net 172,631,095 327,014,797
Change in unrealized appreciation on investments--net 528,743,743 639,253,232
-------------- --------------
Net increase in net assets resulting from operations 789,794,453 1,124,896,073
-------------- --------------
<PAGE>
Dividends & Investment income--net:
Distributions to Class A (100,659,426) (83,171,240)
Shareholders Class B (58,137,865) (50,150,559)
(Note 1g): Class C (4,393,794) (2,265,975)
Class D (11,669,904) (6,929,391)
Realized gain on investments--net:
Class A (170,767,565) (63,214,864)
Class B (157,008,366) (56,947,014)
Class C (10,983,674) (2,332,735)
Class D (21,395,471) (5,725,774)
-------------- --------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (535,016,065) (270,737,552)
-------------- --------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 817,585,144 1,092,277,977
(Note 4): -------------- --------------
Net Assets: Total increase in net assets 1,072,363,532 1,946,436,498
Beginning of period 7,522,703,597 5,576,267,099
-------------- --------------
End of period* $8,595,067,129 $7,522,703,597
============== ==============
<FN>
*Undistributed (accumulated) investment income (loss)--net $ (3,991,695) $ 82,449,679
============== ==============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1996++ 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 30.22 $ 26.44 $ 23.17 $ 23.31 $ 20.57
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .41 .80 .74 .62 .71
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.56 4.31 4.01 .67 3.03
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.97 5.11 4.75 1.29 3.74
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.80) (.76) (.69) (.70) (.64)
Realized gain on investments--net (1.39) (.57) (.79) (.73) (.36)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.19) (1.33) (1.48) (1.43) (1.00)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 31.00 $ 30.22 $ 26.44 $ 23.17 $ 23.31
========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value per share 10.37%+++ 19.92% 21.67% 5.68% 19.03%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .55%* .56% .59% .53% .54%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 2.66%* 2.88% 3.19% 2.76% 3.48%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $4,150,496 $3,587,558 $2,834,652 $2,272,983 $2,023,078
========== ========== ========== ========== ==========
Portfolio turnover 5.59% 13.94% 11.69% 21.79% 20.85%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0581 $ .0491 -- -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
+++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.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1996++ 1996 1995 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 29.76 $ 26.08 $ 22.87 $ 23.04 $ 20.35
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .25 .53 .53 .42 .53
Realized and unrealized gain on
investments and foreign currency
transactions--net 2.52 4.23 3.93 .62 2.96
---------- ---------- ---------- ---------- ----------
Total from investment operations 2.77 4.76 4.46 1.04 3.49
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.51) (.51) (.46) (.48) (.44)
Realized gain on investments--net (1.39) (.57) (.79) (.73) (.36)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (1.90) (1.08) (1.25) (1.21) (.80)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 30.63 $ 29.76 $ 26.08 $ 22.87 $ 23.04
========== ========== ========== ========== ==========
<PAGE>
Total Investment Based on net asset value per share 9.76%+++ 18.71% 20.45% 4.61% 17.81%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.57%* 1.58% 1.61% 1.55% 1.56%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.64%* 1.86% 2.16% 1.75% 2.47%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period
Data: (in thousands) $3,633,596 $3,288,963 $2,464,248 $1,744,704 $1,383,935
========== ========== ========== ========== ==========
Portfolio turnover 5.59% 13.94% 11.69% 21.79% 20.85%
========== ========== ========== ========== ==========
Average commission rate paid+++++ $ .0581 $ .0491 -- -- --
========== ========== ========== ========== ==========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
+++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.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C Class D
<PAGE>
For the For the For the For the
The following per share data and ratios have Six For the Period Six For the Period
been derived from information provided in the Months Year Oct. 21, Months Year Oct. 21,
financial statements. Ended Ended 1994++++ to Ended Ended 1994++++ to
Dec. 31, June 30, June 30, Dec. 31, June 30, June 30,
Increase (Decrease) in Net Asset Value: 1996++ 1996 1995 1996++ 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning
Operating of period $ 29.56 $ 25.98 $ 22.92 $ 30.16 $ 26.41 $ 23.19
Performance: -------- -------- -------- -------- -------- --------
Investment income--net .24 .55 .44 .37 .76 .50
Realized and unrealized
gain on investments and
foreign currency
transactions--net 2.27 4.18 3.05 2.56 4.27 3.17
-------- -------- -------- -------- -------- --------
Total from investment
operations 2.51 4.73 3.49 2.93 5.03 3.67
-------- -------- -------- -------- -------- --------
Less dividends and
distributions:
Investment income--net (.30) (.58) (.33) (.74) (.71) (.35)
Realized gain on
investments--net (1.39) (.57) (.10) (1.39) (.57) (.10)
-------- -------- -------- -------- -------- --------
Total dividends and
distributions (1.69) (1.15) (.43) (2.13) (1.28) (.45)
-------- -------- -------- -------- -------- --------
Net asset value, end of
period $ 30.38 $ 29.56 $ 25.98 $ 30.96 $ 30.16 $ 26.41
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value
Return: ** per share 9.77%+++ 18.69% 15.59%+++ 10.21%+++ 19.61% 16.23%+++
======== ======== ======== ======== ======== ========
Ratios to Average Expenses 1.58%* 1.59% 1.66%* .80%* .81% .87%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income--net 1.62%* 1.83% 2.09%* 2.40%* 2.61% 2.88%*
======== ======== ======== ======== ======== ========
<PAGE>
Supplemental Net assets, end of period
Data: (in thousands) $270,356 $211,787 $ 74,334 $540,619 $434,396 $203,033
======== ======== ======== ======== ======== ========
Portfolio turnover 5.59% 13.94% 11.69% 5.59% 13.94% 11.69%
======== ======== ======== ======== ======== ========
Average commission rate
paid+++++ $ .0581 $ .0491 -- $ .0581 $ .0491 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Based on average shares outstanding during the period.
++++Commencement of Operations.
+++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.
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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
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 dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined 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) 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.
* 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).
<PAGE>
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.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
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.
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.
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:
<PAGE>
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 six months ended December 31, 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:
MLFD MLPF&S
Class A $20,231 $270,333
Class D $59,589 $862,828
For the six months ended December 31, 1996, MLPF&S received
contingent deferred sales charges of $1,755,544 and $53,208 relating
to transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $48,100 in commissions on the execution
of portfolio security transactions for the Fund for the six months
ended December 31, 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.
NOTES TO FINANCIAL STATEMENTS (concluded)
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 six months ended December 31, 1996 were $808,590,036 and
$371,161,497, respectively.
<PAGE>
Net realized and unrealized gains as of December 31, 1996 were as
follows:
Realized Unrealized
Gains Gains
Long-term investments $172,631,095 $2,450,748,906
------------ --------------
Total $172,631,095 $2,450,748,906
============ ==============
As of December 31, 1996, net unrealized appreciation for Federal
income tax purposes aggregated $2,450,748,906, of which
$2,535,792,521 related to appreciated securities and $85,043,615
related to depreciated securities. At December 31, 1996, the
aggregate cost of investments for Federal income tax purposes was
$6,154,316,933.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $817,585,144 and $1,092,277,977 for the six months ended
December 31, 1996 and for the year ended June 30, 1996,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 17,936,923 $530,377,841
Shares issued to shareholders
in reinvestment of dividends
and distributions 8,257,275 243,407,144
------------ ------------
Total issued 26,194,198 773,784,985
Shares redeemed (11,012,734) (331,719,481)
------------ ------------
Net increase 15,181,464 $442,065,504
============ ============
Class A Shares for the Year Dollar
Ended June 30, 1996 Shares Amount
<PAGE>
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 B Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 12,633,251 $373,048,947
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,603,697 191,804,853
------------ ------------
Total issued 19,236,948 564,853,800
Automatic conversion of
shares (578,804) (17,701,273)
Shares redeemed (10,570,265) (313,535,389)
------------ ------------
Net increase 8,087,879 $233,617,138
============ ============
Class B Shares for the Dollar
Year Ended 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
============ ============
Class C Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
<PAGE>
Shares sold 2,249,789 $ 65,864,866
Shares issued to shareholders
in reinvestment of dividends
and distributions 485,970 14,024,176
------------ ------------
Total issued 2,735,759 79,889,042
Shares redeemed (1,001,690) (29,524,728)
------------ ------------
Net increase 1,734,069 $ 50,364,314
============ ============
Class C Shares for the Dollar
Year Ended 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 D Shares for the Six Months Dollar
Ended December 31, 1996 Shares Amount
Shares sold 3,050,260 $ 91,545,603
Automatic conversion of
shares 571,138 17,701,273
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,008,878 29,701,013
------------ ------------
Total issued 4,630,276 138,947,889
Shares redeemed (1,573,206) (47,409,701)
------------ ------------
Net increase 3,057,070 $ 91,538,188
============ ============
Class D Shares for the Dollar
Year 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
============ ============
<PAGE>
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, 12th Floor
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
