MERRILL LYNCH
BASIC VALUE
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Quarterly Report
September 30, 1997
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless accompanied
or preceded by the Fund's current prospectus. Past performance results
shown in this report should not be considered a representation of
future performance. Investment return and principal value of shares
will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Statements and other information herein
are as dated and are subject to change.
Merrill Lynch
Basic Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011 #10247 -- 9/97
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
During the quarter ended September 30, 1997, investor perceptions
regarding the prospects for the US economy shifted dramatically. As
the period began, increasing evidence of noninflationary economic
growth boosted investor confidence when, as widely expected, the
Federal Reserve Board chose to leave monetary policy unchanged at its
July and August meetings. This increased confidence was reinforced
further in late July by the passage of tax-cut and five-year balanced
budget bills.
By late August, the consensus outlook had changed, with forecasts of
overheating growth and inflationary expectations. These concerns were
reinforced by a large upward revision in second-quarter real gross
domestic product growth from an original estimate of 2.2% to 3.6%.
However, in September, this rate of growth was revised downward to
3.3%. This report set the stage for renewed investor confidence, which
was bolstered further by the continued absence of inflationary
pressures.
Although it was widely anticipated that the Federal Reserve Board
would not tighten monetary policy at its September meeting, investors
were pleasantly surprised by the release of September employment data
shortly after the quarter's close, since the US economy added jobs at
a slower-than-expected pace during the month. Over the balance of
1997, the determining factor in the investment outlook is likely to be
whether or not the US economy continues to follow a pattern of
moderate, noninflationary growth.
Outside of the United States, the most dramatic developments took
place in Southeast Asia. The investment boom in many developing Asian
economies came to an abrupt halt as the devaluation of the Thai baht
sparked a series of currency devaluations and financial market
volatility throughout the region. Countries have been forced to raise
interest rates to support their currencies, and this trend may
continue for some time. With higher debt-service costs, corporate
profitability is likely to erode, and lower economic growth is
expected.
Portfolio Matters
Security purchases during the third quarter of 1997 amounted to $418
million, while equity sales totaled $478 million. On the buy side, we
initiated positions in three new holdings and added to 11 existing
positions. On the sell side, we eliminated three holdings and reduced
positions in 15 commitments. Our cash position declined slightly to
12.7% of assets on September 30, 1997 from 13.4% on June 30, 1997.
The three new positions were Eastman Kodak Company, Fluor Corporation
and Potash Corp. of Saskatchewan Inc.
Kodak's stock price came under severe price pressure in mid-September
when the company announced that earnings for the September quarter
would be below forecasts. This was the third consecutive quarter of a
profits shortfall, and the news triggered massive selling in Kodak's
stock. Two of the company's most important product lines, consumer
film and color negative paper, have experienced pricing problems which
may not be quickly resolved. Also, there are some difficulties with
new products and, it appears, a bloated corporate cost structure.
These problems should be addressed shortly, and with the price of the
stock down from the mid-$90s earlier this year to under $60 per share,
we felt the stock was discounting the well-publicized adversities.
Although not as extreme as Kodak, both Fluor Corp. and Potash Corp.
have also come under selling pressure that we believe is temporary.
Fluor is one of the largest engineering and construction companies in
the world. Growth opportunities in the early 1990s were exceptional,
and the company's pursuit of expansion was aggressive. Along the way,
serious mistakes were made on contract bidding and management
controls. Earnings are suffering and 1997 results will be severely
depressed. Management has taken severe corrective actions and this,
along with a favorable business environment, should lead to a
worthwhile profits recovery in the years ahead.
Potash Corp. is one of the largest integrated fertilizer companies in
the world. Recent acquisitions have solidified their position in the
industry and diversified their product line. Some product price
weakness, and a hoped for acquisition in Germany that was disallowed,
led to stock price weakness that we regarded as a buying opportunity.
The stock is reasonably priced at about 11 times estimated 1998
earnings per share.
The three eliminations from the portfolio during the September quarter
were Micron Technology, Inc., Texas Instruments, Inc. and Tandem
Computers Inc. Tandem was the subject of a takeover, and the
semiconductor stocks, which were purchased when they were out-of-favor
and unpopular, were sold when their renewed popularity seemed to us
somewhat excessive.
We also took some profits in seven of our ten largest holdings. We
mentioned in our June 30, 1997 annual report that our ten largest
positions had outperformed the market with an average gain of 51% for
the 12 months ended June 30, 1997. Above-average strength generally
continued into July and it seemed appropriate to secure some gains. We
cut back 10% of the International Business Machines Corp. holding as
the position approached 4% of the total portfolio. The second largest
holding, Citicorp, was also reduced as were the three largest oil
positions -- Exxon Corp., Mobil Corp. and Royal Dutch Petroleum Co.
(ADR). (For a complete listing of the Fund's ten largest holdings, see
page 10 of this report to shareholders.) Overall sales in the third
quarter resulted in gains of over 130%.
In Conclusion
We thank you for your investment in Merrill Lynch Basic Value Fund,
Inc., and we look forward to reviewing our outlook and strategy in our
upcoming semi-annual report to shareholders.
Sincerely,
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/PAUL M. HOFFMANN
Paul M. Hoffmann
Vice President and Portfolio Manager
October 27, 1997
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
Thomas D. Jones, III, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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.
[bullet] 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.)
[bullet] 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.
[bullet] Class D Shares incur a maximum initial sales charge of 5.25%
and an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of all
dividends and capital gains distributions at net asset value on the
ex-dividend date. Investment return and principal value of shares will
fluctuate so that shares, when redeemed, may be worth more or less
than their original cost. Dividends paid to each class of shares will
vary because of the different levels of account maintenance,
distribution and transfer agency fees applicable to each class, which
are deducted from the income available to be paid to shareholders.
<TABLE>
<CAPTION>
Recent Performance Results
12 Month 3 Month
9/30/97 6/30/97 9/30/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares* $38.02 $36.50 $29.52 +34.82%(1) +7.62%(2)
ML Basic Value Fund Class B Shares* 37.43 35.89 29.12 +34.64(1) +7.80(2)
ML Basic Value Fund Class C Shares* 37.09 35.59 28.89 +34.53(1) +7.75(2)
ML Basic Value Fund Class D Shares* 37.93 36.42 29.48 +34.70(1) +7.60(2)
Dow Jones Industrial Average** 7,945.26 7,672.79 5,882.17 +35.07 +3.55
Standard & Poor's 500 Index** 947.28 885.14 687.31 +37.82 +7.02
ML Basic Value Fund Class A Shares -- Total Return* +38.09(3) +8.79(4)
ML Basic Value Fund Class B Shares -- Total Return* +36.66(5) +8.50(6)
ML Basic Value Fund Class C Shares -- Total Return* +36.66(7) +8.50(8)
ML Basic Value Fund Class D Shares -- Total Return* +37.70(9) +8.68(10)
Dow Jones Industrial Average -- Total Return** +37.67 +3.99
Standard & Poor's 500 Index -- Total Return** +40.41 +7.50
* 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 $1.632 per share capital gains distributions.
(2) Percent change includes reinvestment of $1.223 per share capital gains distributions.
(3) Percent change includes reinvestment of $0.829 per share ordinary income dividends and $1.632 per share capital gains
distributions.
(4) Percent change includes reinvestment of $0.414 per share ordinary income dividends and $1.223 per share capital gains
distributions.
(5) Percent change includes reinvestment of $0.507 per share ordinary income dividends and $1.632 per share capital gains
distributions.
(6) Percent change includes reinvestment of $0.245 per share ordinary income dividends and $1.223 per share capital gains
distributions.
(7) Percent change includes reinvestment of $0.530 per share ordinary income dividends and $1.632 per share capital gains
distributions.
(8) Percent change includes reinvestment of $0.260 per share ordinary income dividends and $1.223 per share capital gains
distributions.
(9) Percent change includes reinvestment of $0.761 per share ordinary income dividends and $1.632 per share capital gains
distributions.
(10) Percent change includes reinvestment of $0.382 per share ordinary income dividends and $1.223 per share capital gains
distributions.
</TABLE>
[GRAPHIC MOUNTAIN CHART OMITTED: RESULTS OF A $1,000 INVESTMENT SINCE
INCEPTION -- CLASS A SHARES]
MERRILL LYNCH BASIC VALUE FUND, INC.
Results of a $1,000 Investment Since Inception -- Class A Shares
(5.25% current sales charge -- $947.50 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 $21,574.67 on September
30, 1997.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/97 +38.09% +30.84%
Five Years Ended 9/30/97 +21.16 +19.86
Ten Years Ended 9/30/97 +13.66 +13.05
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/97 +36.66% +32.66%
Five Years Ended 9/30/97 +19.93 +19.93
Inception (10/21/88)
through 9/30/97 +14.08 +14.08
* 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 9/30/97 +36.66% +35.66%
Inception (10/21/94)
through 9/30/97 +24.69 +24.69
* 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 9/30/97 +37.70% +30.47%
Inception (10/21/94)
through 9/30/97 +25.67 +23.39
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1/1/97 -- 9/30/97 31.00 38.02 1.223 0.414 +28.09
Total $15.035 Total $13.968
Cumulative total return as of 9/30/97: +2,177.01%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class B Shares
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
1/1/97 -- 9/30/97 30.63 37.43 1.223 0.245 +27.13
Total $6.114 Total $5.236
Cumulative total return as of 9/30/97: +224.72%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
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
1/1/97 -- 9/30/97 30.38 37.09 1.223 0.260 +27.11
Total $3.225 Total $1.768
Cumulative total return as of 9/30/97: +91.43%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
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
1/1/97 -- 9/30/97 30.96 37.93 1.223 0.382 +27.85
Total $3.225 Total $2.241
Cumulative total return as of 9/30/97: +95.88%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Basic Value Fund, Inc. September 30, 1997
SCHEDULE OF INVESTMENTS
Shares Percent of
Industry Held Stocks Cost Value Net Assets
<S> <C> <C> <C> <C> <C>
Metals/Non-Ferrous 1,400,000 ASARCO Inc. $36,667,971 $44,800,000 0.4%
Savings & Loan 1,900,000 Ahmanson (H.F.) & Co. 41,425,084 107,943,750 1.0
Insurance 2,500,000 American General Corp. 54,530,936 129,687,500 1.2
Insurance 260,000 American National Insurance Co. 9,749,442 25,805,000 0.2
Steel 4,900,000 Bethlehem Steel Corp. 66,610,783 50,531,250 0.4
Restaurants 3,900,000 Darden Restaurants, Inc. 36,505,673 45,093,750 0.4
Information Processing 4,000,000 Digital Equipment Corp. 147,586,967 173,250,000 1.6
Utilities -- Electric 2,700,000 Entergy Corp. 62,093,373 70,368,750 0.6
Retail 3,150,000 Federated Department Stores, Inc. 88,433,294 135,843,750 1.2
Entertainment 1,250,000 The Hartford Financial Services Group Inc. 31,155,644 107,578,125 1.0
Chemicals 800,000 Imperial Chemical Industries PLC (ADR)* 45,969,824 52,900,000 0.5
Paper & Forest Products 3,100,000 International Paper Co. 108,471,162 170,693,750 1.5
Retail 5,000,000 Kmart Corporation 60,134,879 70,000,000 0.6
Insurance 1,400,000 PartnerRe Ltd. 29,498,937 60,287,500 0.5
Trucking 1,000,000 Scania AB (Class A) (ADR)* 28,093,817 30,250,000 0.3
Trucking 500,000 Scania AB (Class B) (ADR)* 13,565,869 15,125,000 0.1
Beverages 2,400,000 The Seagram Company Ltd. 81,139,661 84,600,000 0.8
Telecommunications 1,600,000 Telefonica de Espana S.A. (ADR)* 63,336,735 150,600,000 1.4
Telecommunications 2,000,000 U S West Media Group, Inc. 29,542,902 44,625,000 0.4
Steel 3,150,000 USX -- US Steel Group, Inc. 94,976,906 109,462,500 1.0
Banking 475,000 Wells Fargo & Company 89,258,392 130,625,000 1.2
------------- ------------- ------
1,218,748,251 1,810,070,625 16.3
============= ============= ======
Below-Average Price/Earnings Ratio
Insurance 2,700,000 The Allstate Corp. 61,274,819 217,012,500 2.0
Banking 2,300,000 Citicorp 91,970,264 308,056,250 2.8
Farm & Construction
Equipment 4,500,000 Deere & Company 103,532,247 241,875,000 2.2
Photography 1,250,000 Eastman Kodak Company 71,122,327 81,171,875 0.7
Capital Goods 1,400,000 Eaton Corp. 72,067,416 129,325,000 1.2
Machinery & Equipment 2,000,000 Fluor Corporation 115,459,776 107,250,000 1.0
Automotive 5,600,000 Ford Motor Co. 162,471,869 253,400,000 2.3
Automotive 2,900,000 General Motors Corp. 133,442,048 194,118,750 1.8
Conglomerates 650,000 Hanson PLC (ADR)* 27,719,944 15,681,250 0.1
Chemicals 2,300,000 Hercules Inc. 55,427,706 114,425,000 1.0
Machinery 3,765,000 ITT Industries Inc. 74,801,185 124,950,937 1.1
Information Processing 3,600,000 International Business Machines Corp. 142,797,544 381,375,000 3.4
Banking 2,800,000 NationsBank Corp. 78,736,885 173,250,000 1.6
Tobacco 2,600,000 Philip Morris Companies Inc. 74,590,120 108,062,500 1.0
Fertilizers 1,400,000 Potash Corp. of Saskatchewan Inc. 109,351,125 109,900,000 1.0
Retail 3,600,000 Sears, Roebuck & Co. 93,050,471 204,975,000 1.8
Electronics 1,500,000 Tektronix, Inc. 58,632,719 101,156,250 0.9
Insurance 2,700,000 Travelers Inc. 46,123,219 184,275,000 1.7
Chemicals 2,600,000 Union Carbide Corp. 84,717,281 126,587,500 1.1
Retail 4,000,000 Woolworth Corp. 55,901,671 88,500,000 0.8
------------- ------------- ------
1,713,190,636 3,265,347,812 29.5
============= ============= ======
Above-Average Yield
Telecommunications 3,500,000 AT&T Corp. 126,232,242 155,093,750 1.4
Telecommunications 1,800,000 Ameritech Corporation 109,809,992 119,700,000 1.1
Oil -- Domestic 2,200,000 Atlantic Richfield Co. 118,680,060 187,962,500 1.7
Real Estate Investment
Trust 700,000 Avalon Properties, Inc. 14,156,990 20,825,000 0.2
Telecommunications 1,550,000 Bell Atlantic Corp. 80,362,277 124,678,125 1.1
Utilities -- Electric 1,550,000 CINergy Corp. 41,274,637 51,828,125 0.5
Oil -- International 2,450,000 Chevron Corp. 103,854,733 203,809,375 1.8
Utilities -- Electric 1,650,000 Consolidated Edison Co. of New York, Inc. 39,941,210 56,100,000 0.5
Utilities -- Electric 637,500 DPL Inc. 6,204,369 15,618,750 0.1
Telecommunications 3,500,000 GTE Corp. 115,931,380 158,812,500 1.4
Foods/Food Processing 1,450,000 General Mills, Inc. 67,972,787 99,959,375 0.9
Real Estate Investment
Trust 440,000 Irvine Apartment Communities, Inc. 7,185,399 14,685,000 0.1
Real Estate Investment
Trust 900,000 Liberty Property Trust 17,601,647 24,243,750 0.2
Real Estate Investment
Trust 500,000 The Mills Corp. 10,505,625 12,906,250 0.1
Oil -- International 3,700,000 Mobil Corp. 124,307,498 273,800,000 2.5
Utilities -- Electric 1,200,000 NIPSCO Industries, Inc. 27,387,777 50,550,000 0.5
Oil -- Domestic 4,300,000 Occidental Petroleum Corp. 93,845,525 111,531,250 1.0
Utilities -- Electric 2,300,000 PECO Energy Co. 56,524,092 53,906,250 0.5
Utilities -- Electric 1,800,000 Public Service Enterprise Group Inc. 48,476,636 46,350,000 0.4
Real Estate Investment
Trust 1,600,000 Simon DeBartolo Group, Inc. 33,364,089 52,800,000 0.5
Real Estate Investment
Trust 500,000 Summit Properties Inc. 9,245,900 10,937,500 0.1
Oil -- International 3,600,000 Texaco Inc. 127,207,623 221,175,000 2.0
Utilities -- Electric 2,300,000 Texas Utilities Co. 79,329,333 82,800,000 0.8
Telecommunications 3,000,000 U S West Communications Group 77,072,442 115,500,000 1.1
------------- ------------- ------
1,536,474,263 2,265,572,500 20.5
============= ============= ======
Special Situations
Pharmaceuticals 1,850,000 Bristol-Myers Squibb Co. 52,947,299 153,087,500 1.4
Oil -- International 1,952,523 The British Petroleum Co. PLC (ADR)* 61,438,151 177,313,495 1.6
Information Processing 1,200,000 Data General Corp. 14,518,510 31,950,000 0.3
Oil Services & Equipment 3,400,000 Dresser Industries, Inc. 79,584,474 146,200,000 1.3
Chemicals 3,350,000 duPont (E.I.) de Nemours & Co. 141,127,952 206,234,375 1.9
Oil -- International 4,300,000 Exxon Corp. 146,983,415 275,468,750 2.5
Insurance 2,100,000 ITT Corp. 76,665,244 142,275,000 1.3
Machinery 3,600,000 Ingersoll-Rand Co. 83,867,995 155,025,000 1.4
Pharmaceuticals 1,500,000 Merck & Co., Inc. 50,511,287 149,906,250 1.3
Banking 3,700,000 Norwest Corp. 87,114,122 226,625,000 2.0
Electrical Equipment 3,150,000 Philips Electronics N.V. (ADR)* 79,068,977 264,600,000 2.4
Oil -- International 4,600,000 Royal Dutch Petroleum Co. (ADR)* 93,399,435 255,300,000 2.3
Information Processing 5,600,000 Unisys Corp. 60,913,547 85,750,000 0.8
Pharmaceuticals 440,000 Zeneca Group PLC (ADR)* 12,980,000 43,037,500 0.4
------------- ------------- ------
1,041,120,408 2,312,772,870 20.9
------------- ------------- ------
Total Stocks 5,509,533,558 9,653,763,807 87.2
============= ============= ======
<CAPTION>
Face Percent of
Amount Issue Cost Value Net Assets
<S> <C> <C> <C> <C> <C>
Commercial Paper** Allomon Funding Corp.:
$17,245,000 5.53% due 10/07/1997 $17,226,457 $17,226,457 0.1%
25,234,000 5.52% due 10/20/1997 25,156,616 25,156,616 0.2
40,000,000 Apreco, Inc., 5.55% due 10/28/1997 39,827,333 39,827,333 0.3
27,000,000 Atlantic Asset Securitization Corp.,
5.57% due 10/16/1997 26,933,160 26,933,160 0.2
20,000,000 Bell Atlantic Financial Services Inc.,
5.52% due 10/24/1997 19,926,400 19,926,400 0.2
CXC Inc.:
50,000,000 5.52% due 10/14/1997 49,892,667 49,892,667 0.4
40,000,000 5.52% due 10/17/1997 39,895,733 39,895,733 0.4
60,000,000 5.52% due 10/31/1997 59,714,800 59,714,800 0.5
Corporate Receivables Corp.:
25,000,000 5.52% due 10/08/1997 24,969,333 24,969,333 0.2
20,000,000 5.52% due 10/15/1997 19,954,000 19,954,000 0.2
Countrywide Home Loans, Inc.:
40,000,000 5.54% due 10/24/1997 39,852,267 39,852,267 0.4
20,500,000 5.55% due 10/24/1997 20,424,150 20,424,150 0.2
10,000,000 Delaware Funding Corp., 5.54% due
10/15/1997 9,976,917 9,976,917 0.1
Falcon Asset Securitization Corp.:
30,000,000 5.53% due 10/09/1997 29,958,525 29,958,525 0.3
42,000,000 5.53% due 10/10/1997 41,935,483 41,935,483 0.4
100,000,000 5.53% due 10/14/1997 99,784,944 99,784,944 0.9
Finova Capital Corp.:
37,000,000 5.53% due 10/20/1997 36,886,328 36,886,328 0.3
36,000,000 5.54% due 10/24/1997 35,867,040 35,867,040 0.3
37,000,000 GTE Corporation, 5.56% due 10/14/1997 36,919,998 36,919,998 0.3
50,000,000 General Electric Company, 6.375% due
10/01/1997 49,991,146 49,991,146 0.5
44,439,000 General Motors Acceptance Corp.,
6.50% due 10/01/1997 44,430,976 44,430,976 0.4
25,000,000 Goldman Sachs Group, L.P., 5.53% due
10/24/1997 24,907,833 24,907,833 0.2
International Securitization Corp.:
19,389,000 5.54% due 10/14/1997 19,347,227 19,347,227 0.2
50,436,000 5.54% due 10/21/1997 50,273,008 50,273,008 0.5
100,000,000 5.54% due 11/06/1997 99,430,611 99,430,611 0.9
Lexington Parker Capital Company:
50,000,000 5.53% due 10/09/1997 49,930,875 49,930,875 0.5
30,015,000 5.54% due 10/17/1997 29,936,477 29,936,477 0.3
82,000,000 5.54% due 10/24/1997 81,697,147 81,697,147 0.7
Park Avenue Receivables Corp.:
12,410,000 5.53% due 10/14/1997 12,383,312 12,383,312 0.1
16,753,000 5.53% due 10/15/1997 16,714,398 16,714,398 0.2
40,000,000 5.54% due 10/15/1997 39,907,667 39,907,667 0.4
69,550,000 Preferred Receivables Funding Corp.,
5.55% due 10/01/1997 69,539,278 69,539,278 0.6
25,000,000 Riverwoods Funding Corp., 5.52% due
10/09/1997 24,965,500 24,965,500 0.2
30,000,000 WCP Funding Inc., 5.53% due 10/24/1997 29,889,400 29,889,400 0.3
------------- ------------- ------
1,318,447,006 1,318,447,006 11.9
============= ============= ======
US Government Agency 12,000,000 Federal Home Loan Mortgage Corp.,
Obligations** 5.40% due 10/16/1997 11,971,200 11,971,200 0.1
Federal National Mortgage Association:
12,000,000 5.41% due 10/09/1997 11,983,770 11,983,770 0.1
15,000,000 5.41% due 10/24/1997 14,945,900 14,945,900 0.2
25,000,000 5.47% due 10/30/1997 24,886,042 24,886,042 0.2
20,000,000 5.43% due 11/05/1997 19,891,400 19,891,400 0.2
------------- ------------- ------
83,678,312 83,678,312 0.8
------------- ------------- ------
Total Short-Term Securities 1,402,125,318 1,402,125,318 12.7
============= ============= ======
Total Investments $6,911,658,876 11,055,889,125 99.9
==============
Other Assets Less Liabilities 15,309,105 0.1
--------------- ------
Net Assets $11,071,198,230 100.0%
=============== ======
Net Asset Value: Class A -- Based on net assets of $5,190,181,431 and 136,526,729 shares
outstanding $38.02
===============
Class B -- Based on net assets of $4,376,986,471 and 116,939,557 shares
outstanding $37.43
===============
Class C -- Based on net assets of $391,088,331 and 10,544,773 shares
outstanding $37.09
===============
Class D -- Based on net assets of $1,112,941,997 and 29,340,461 shares
outstanding $37.93
===============
* 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.
</TABLE>
PORTFOLIO INFORMATION
As of September 30, 1997
Percent of
Ten Largest Stock Holdings Net Assets
International Business Machines Corp. 3.4%
Citicorp 2.8
Exxon Corp. 2.5
Mobil Corp. 2.5
Philips Electronics N.V. (ADR) 2.4
Royal Dutch Petroleum Co. (ADR) 2.3
Ford Motor Co. 2.3
Deere & Company 2.2
Norwest Corp. 2.0
Texaco Inc. 2.0
Portfolio Changes for the Quarter
Ended September 30, 1997
Additions
Eastman Kodak Company
Fluor Corporation
Potash Corp. of Saskatchewan Inc.
Deletions
Micron Technology, Inc.
Tandem Computers Inc.
Texas Instruments, Inc.
