MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Quarterly Report
March 31, 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.
<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
Stock and bond market turbulence increased during the three-month
period ended March 31, 1997. Mounting evidence of stronger-than-
expected economic growth suggested to investors that the Federal
Reserve Board would make a preemptive strike to contain inflationary
pressures. These concerns were heightened by statements made by
Federal Reserve Board Chairman Alan Greenspan, and culminated in an
announced increase in the Federal Funds rate of 0.25% to 5.5% on
March 25. As investors became concerned that this might prove to be
only the first in a series of monetary policy tightening moves,
interest rates rose and stock and bond prices declined. Following
the central bank's action, investor sentiment fluctuated from
negative to more positive, depending upon whether the latest
economic data releases were perceived to suggest an overheating or
moderating trend. It appears that clear-cut signs of continued low
inflation and moderate economic growth, as well as no further
indications of monetary policy tightening, are needed before
stability returns to the financial markets.
<PAGE>
On the international front, although the Federal Reserve Board's
action triggered some weakness in the US dollar, the US dollar
subsequently continued its strong advance relative to the yen and
the Deutschemark, raising concerns about the outlook for US trade.
In early February, the leading industrialized nations expressed
apparent agreement that it was time to seek a lower dollar and less
volatility in the foreign exchange markets. It remains to be seen
whether these stated intentions will be acted upon, or if the US
dollar will continue to rise relative to other major currencies.
Portfolio Matters
Security purchases in the first quarter of 1997 amounted to $391
million, while equity sales totaled $237 million. New assets
invested by shareholders in the Fund during the three months ended
March 31, 1997 approximated $155 million. Accordingly, our March 31,
1997 cash position of 15.4% of net assets was little changed from
the year-end 1996 level of 15.7%.
During the March quarter, we added to 23 existing holdings and
established two major new positions, Ameritech Corporation and Kmart
Corporation. Ameritech, one of the Bell telephone operating
companies, underperformed the stock market for a considerable period
of time, in conjunction with most other telephone stocks. The
industry is undergoing enormous change, which generates both
challenges and opportunities. The underperformance of the stock
reflects uncertainties, which we viewed as providing a favorable
entry level. The stock provides a well above-average yield of 3.7%
and a below-average price/earnings ratio of 14 times the 1997
earnings per share estimate. The stock offers traditional value and,
we believe, a very attractive contrary opinion situation.
We sold our Kmart holdings about 16 months ago largely because of
our concerns about their competitive position in the retail
industry. The stock languished following the sale, but has begun to
recover as new management has exhibited good progress in turning the
company around. We are optimistic this improvement will continue,
and while the stock is well off its lows, it remains severely
depressed from prior levels. We believe the reward/risk ratio is
quite favorable.
The major additions to established positions included Telefonica de
Espana, S.A., Ford Motor Co., AT&T Corp., International Business
Machines Corp., and Exxon Corp. In all, we added to six of our ten
largest holdings, with an emphasis again this quarter on energy
holdings, currently about 17% of the portfolio. The near-term
outlook for petroleum-related securities became somewhat
controversial, partially because of a decline in the price of crude
oil. Barring a further sharp drop in oil prices, which we do not
anticipate, we believe the impact on oil company operations will be
minimal, and the group continues to provide very reasonable
valuations relative to the overall market.
<PAGE>
On the sell side, we eliminated two positions and reduced 15
holdings. The major elimination was Washington Mutual Savings Bank,
which had not only reached, but exceeded, our price target. Also, we
eliminated a small holding in NCR Corporation, which we received as
a spin-off from AT&T Corp. The largest partial sales were in Philip
Morris Cos., Inc. and our two semiconductor stocks, Texas
Instruments, Inc. and Micron Technology, Inc. Some profit-taking
seemed prudent during the first quarter, and the overall sales
generated over $120 million in gains.
In Conclusion
The increase in interest rates by the Federal Reserve Board late in
March led to increased market volatility which we expect will
continue. Our cautious stance discussed in recent reports was
premature, but it contributed to our adopting more defensive
characteristics in the portfolio. Accordingly, the Fund is priced
conservatively relative to yield, price/earnings ratios and
price/book value, which we believe is an appropriate stance in the
prevailing stock 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 annual report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Paul M. Hoffmann)
Paul M. Hoffmann
Vice President and Portfolio Manager
April 23, 1997
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. 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.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
3/31/97 12/31/96 3/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Basic Value Fund Class A Shares* $31.89 $31.00 $30.13 +10.93%(1) +2.87%(2)
ML Basic Value Fund Class B Shares* 31.44 30.63 29.74 +10.86(1) +2.64(2)
ML Basic Value Fund Class C Shares* 31.18 30.38 29.55 +10.69(1) +2.63(2)
ML Basic Value Fund Class D Shares* 31.84 30.96 30.09 +10.91(1) +2.84(2)
Dow Jones Industrial Average** 6,583.48 6,448.27 5,587.14 +17.83 +2.10
Standard & Poor's 500 Index** 757.12 740.74 645.50 +17.29 +2.21
ML Basic Value Fund Class A Shares--Total Return* +13.88(3) +2.87(4)
ML Basic Value Fund Class B Shares--Total Return* +12.74(5) +2.64(6)
ML Basic Value Fund Class C Shares--Total Return* +12.70(7) +2.63(8)
ML Basic Value Fund Class D Shares--Total Return* +13.61(9) +2.84(10)
Dow Jones Industrial Average--Total Return** +20.45 +2.59
Standard & Poor's 500 Index--Total Return** +19.84 +2.68
<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 (continued)
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 $17,327.41 on March
31, 1997.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 3/31/97 +13.88% + 7.90%
Five Years Ended 3/31/97 +16.70 +15.45
Ten Years Ended 3/31/97 +12.37 +11.77
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 3/31/97 +12.74% + 8.74%
Five Years Ended 3/31/97 +15.52 +15.52
Inception (10/21/88) through 3/31/97 +12.10 +12.10
[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**
<PAGE>
Class C Shares*
Year Ended 3/31/97 +12.70% +11.70%
Inception (10/21/94)
through 3/31/97 +19.53 +19.53
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 3/31/97 +13.61% + 7.64%
Inception (10/21/94)
through 3/31/97 +20.47 +17.84
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<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
1/1/97--3/31/97 31.00 31.89 -- -- + 2.87
------- -------
Total $13.812 Total $13.554
<PAGE>
Cumulative total return as of 3/31/97: +1,728.75%**
<FN>
*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>
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
1/1/97--3/31/97 30.63 31.44 -- -- + 2.64
------ ------
Total $4.891 Total $4.991
Cumulative total return as of 3/31/97: +162.18%**
<FN>
*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>
PERFORMANCE DATA (concluded)
<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
1/1/97--3/31/97 30.38 31.18 -- -- + 2.63
------ ------
Total $2.002 Total $1.508
<PAGE>
Cumulative total return as of 3/31/97: +54.57%**
<FN>
*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>
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
1/1/97--3/31/97 30.96 31.84 -- -- + 2.84
------ ------
Total $2.002 Total $1.859
Cumulative total return as of 3/31/97: +57.56%**
<FN>
*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>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industry Held Stocks Cost Value Net Assets
<PAGE>
Low Price to Book Value
<S> <C> <S> <C> <C> <C>
Metals/Non-Ferrous 1,400,000 ASARCO Inc. $ 36,667,971 $ 39,375,000 0.4%
Savings & Loans 1,600,000 Ahmanson (H.F.) & Co. 29,758,454 58,400,000 0.7
Insurance 2,500,000 American General Corp. 54,530,936 101,875,000 1.1
Insurance 260,000 American National Insurance Co. 9,749,442 20,020,000 0.2
Steel 4,900,000 Bethlehem Steel Corp. 66,610,783 40,425,000 0.5
Restaurants 3,900,000 Darden Restaurants, Inc. 36,505,674 30,712,500 0.4
Information Processing 1,570,000 Data General Corp. 21,268,247 26,690,000 0.3
Information Processing 3,400,000 Digital Equipment Corp. 134,953,667 93,075,000 1.0
Utilities--Electric 2,500,000 Entergy Corp. 56,597,249 61,250,000 0.7
Retail 3,300,000 Federated Department
Stores, Inc. 93,481,549 108,487,500 1.2
Insurance 1,250,000 ITT Hartford Group Inc. 31,155,644 90,156,250 1.0
Chemicals 800,000 Imperial Chemical Industries
PLC (ADR)* 45,969,824 36,400,000 0.4
Paper & Forest Products 3,300,000 International Paper Co. 109,794,455 128,287,500 1.4
Retail 3,600,000 Kmart Corporation 44,150,930 43,650,000 0.5
Insurance 1,400,000 PartnerRe Holdings Ltd. 29,498,937 49,525,000 0.6
Electrical Equipment 3,500,000 Philips Electronics N.V. (ADR)* 84,649,762 155,750,000 1.7
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 84,150,000 0.9
Information Processing 3,400,000 Tandem Computers Inc. 42,086,495 40,375,000 0.5
Telecommunications 1,600,000 Telefonica de Espana S.A. (ADR)* 63,336,735 114,800,000 1.3
Steel 3,150,000 USX-US Steel Group 94,976,906 83,868,750 0.9
Banking 200,000 Wells Fargo & Company 17,660,298 56,825,000 0.6
-------------- -------------- ------
1,219,015,265 1,500,285,000 16.7
Below-Average Price/Earnings Ratio
Insurance 3,000,000 The Allstate Corp. 65,873,114 178,125,000 2.0
Banking 2,350,000 Citicorp 68,188,742 254,387,500 2.8
Farm & Construction
Equipment 4,500,000 Deere & Company 95,458,667 195,750,000 2.2
Capital Goods 1,400,000 Eaton Corp. 72,067,416 99,225,000 1.1
Utilities 650,000 The Energy Group PLC (ADR)* 17,750,490 20,881,250 0.2
Automotive 5,800,000 Ford Motor Co. 160,413,535 181,975,000 2.0
Automotive 2,900,000 General Motors Corp. 133,442,048 160,587,500 1.8
Conglomerates 650,000 Hanson PLC (ADR)* 27,719,944 14,787,500 0.2
Chemicals 2,000,000 Hercules Inc. 42,469,747 84,500,000 0.9
Machinery 3,400,000 ITT Industries Inc. 66,197,095 76,075,000 0.9
Machinery 2,400,000 Ingersoll-Rand Co. 82,689,726 104,700,000 1.2
Information Processing 2,050,000 International Business
Machines Corp. 160,163,634 281,618,750 3.1
Banking 2,200,000 NationsBank Corp. 44,218,900 121,825,000 1.4
Banking 3,400,000 Norwest Corp. 73,453,312 157,250,000 1.8
Tobacco 900,000 Philip Morris Companies Inc. 63,667,715 102,712,500 1.1
Retail 3,250,000 Sears, Roebuck & Co. 75,179,301 163,312,500 1.8
Electronics 1,500,000 Tektronix, Inc. 58,632,719 75,750,000 0.8
Insurance 3,000,000 Travelers Inc. 53,675,700 143,625,000 1.6
Chemicals 2,400,000 Union Carbide Corp. 75,165,781 106,200,000 1.2
Retail Apparel 4,000,000 Woolworth Corp. 55,901,671 93,500,000 1.0
-------------- -------------- ------
1,492,329,257 2,616,787,500 29.1
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Percent of
Industry Held Stocks Cost Value Net Assets
Above-Average Yield
<S> <C> <S> <C> <C> <C>
Telecommunications 3,400,000 AT&T Corp. $ 123,088,742 $ 118,150,000 1.3%
Telecommunications 1,100,000 Ameritech Corporation 67,636,952 67,650,000 0.8
Oil--Domestic 1,050,000 Atlantic Richfield Co. 112,227,760 141,750,000 1.6
Real Estate Investment 700,000 Avalon Properties, Inc. 14,156,990 19,250,000 0.2
Trust
Telecommunications 1,650,000 Bell Atlantic Corp. 82,104,903 100,443,750 1.1
Oil--International 959,197 The British Petroleum Co.
PLC (ADR)* 59,075,328 131,649,789 1.5
Utilities--Electric 1,550,000 CINergy Corp. 41,274,637 52,893,750 0.6
Oil--International 2,500,000 Chevron Corp. 104,663,179 174,062,500 1.9
Utilities--Electric 1,650,000 Consolidated Edison Co. of
New York, Inc. 39,941,210 49,500,000 0.6
Utilities--Electric 637,500 DPL Inc. 6,204,369 15,379,688 0.2
Oil--International 2,250,000 Exxon Corp. 151,363,705 242,437,500 2.7
Telecommunications 3,300,000 GTE Corp. 107,131,875 153,862,500 1.7
Foods/Food Processing 1,450,000 General Mills, Inc. 67,972,787 90,081,250 1.0
Real Estate Investment 440,000 Irvine Apartment Communities,
Trust Inc. 7,185,399 12,485,000 0.1
Real Estate Investment 900,000 Liberty Property Trust 17,601,647 22,050,000 0.3
Trust
Real Estate Investment 500,000 The Mills Corp. 10,505,625 12,625,000 0.2
Trust
Oil--International 1,950,000 Mobil Corp. 127,151,108 254,718,750 2.8
Utilities--Electric 1,200,000 NIPSCO Industries, Inc. 27,387,777 47,100,000 0.5
Oil--Domestic 4,100,000 Occidental Petroleum Corp. 89,048,665 100,962,500 1.1
Utilities--Electric 2,100,000 PECO Energy Co. 52,368,332 42,787,500 0.5
Utilities--Electric 1,800,000 Public Service Enterprise
Group Inc. 48,476,636 47,250,000 0.5
Oil--International 1,275,000 Royal Dutch Petroleum Co. (ADR)* 102,034,053 223,125,000 2.5
Real Estate Investment 1,600,000 Simon DeBartolo Group, Inc. 33,364,089 48,400,000 0.5
Trust
Real Estate Investment 500,000 Summit Properties Inc. 9,245,900 10,125,000 0.1
Trust
Oil--International 1,684,000 Texaco Inc. 114,817,476 184,398,000 2.1
Utilities--Electric 1,650,000 Texas Utilities Co. 57,381,565 56,512,500 0.6
Telecommunications 3,000,000 U S West Communications Group 77,072,442 102,000,000 1.1
-------------- -------------- ------
1,750,483,151 2,521,649,977 28.1
<PAGE>
Special Situations
Pharmaceuticals 2,200,000 Bristol-Myers Squibb Co. 62,654,406 129,800,000 1.5
Oil Services & Equipment 2,800,000 Dresser Industries, Inc. 61,737,648 84,700,000 1.0
Chemicals 1,450,000 du Pont (E.I.) de Nemours & Co. 115,412,847 153,700,000 1.7
Entertainment 2,200,000 ITT Corp. 78,503,786 129,525,000 1.4
Pharmaceuticals 1,750,000 Merck & Co., Inc. 55,697,498 147,437,500 1.6
Semiconductors 2,000,000 Micron Technology, Inc. 59,262,690 81,000,000 0.9
Semiconductors 1,700,000 Texas Instruments, Inc. 84,030,909 127,287,500 1.4
Telecommunications 2,000,000 U S West Media Group 29,542,902 37,250,000 0.4
Information Processing 5,600,000 Unisys Corp. 60,913,547 35,700,000 0.4
Pharmaceuticals 440,000 Zeneca Group PLC (ADR)* 12,980,000 37,510,000 0.4
-------------- -------------- ------
620,736,233 963,910,000 10.7
Total Stocks 5,082,563,906 7,602,632,477 84.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Percent of
Amount Issue Cost Value Net Assets
<PAGE>
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper** $ 20,000,000 A.H. Robins Co., Inc., 5.29%
due 4/14/1997 $ 19,958,856 $ 19,958,856 0.2%
15,000,000 American Brands Inc., 5.28%
due 4/10/1997 14,978,000 14,978,000 0.2
American Home Products
Corporation:
25,000,000 5.32% due 4/07/1997 24,974,139 24,974,139 0.3
20,000,000 5.29% due 4/11/1997 19,967,672 19,967,672 0.2
44,000,000 CS First Boston, Inc., 5.41%
due 4/24/1997 43,841,307 43,841,307 0.5
19,200,000 CSW Credit, Inc., 5.30% due
4/04/1997 19,188,693 19,188,693 0.2
CXC Inc.:
30,000,000 5.27% due 4/07/1997 29,969,258 29,969,258 0.3
50,000,000 5.34% due 4/30/1997 49,777,500 49,777,500 0.5
60,000,000 Carnival Corporation, 5.30%
due 4/08/1997 59,929,333 59,929,333 0.7
53,000,000 Columbia/HCA Healthcare
Corporation, 5.33% due 4/07/1997 52,945,071 52,945,071 0.6
Corporate Receivables Corp.:
20,000,000 5.30% due 4/02/1997 19,994,111 19,994,111 0.2
30,000,000 5.27% due 4/07/1997 29,969,258 29,969,258 0.3
Countrywide Home Loans:
28,000,000 5.33% due 4/07/1997 27,970,981 27,970,981 0.3
25,500,000 5.34% due 4/08/1997 25,469,740 25,469,740 0.3
21,000,000 5.44% due 5/16/1997 20,854,027 20,854,027 0.2
23,950,000 Deer Park Refining L.P., 5.33%
due 4/07/1997 23,925,178 23,925,178 0.3
Delaware Funding Corp.:
50,000,000 5.37% due 4/15/1997 49,888,125 49,888,125 0.5
41,414,000 5.55% due 4/24/1997 41,260,768 41,260,768 0.4
Eureka Securitization PLC:
25,000,000 5.27% due 4/09/1997 24,967,063 24,967,063 0.3
50,000,000 5.34% due 5/02/1997 49,762,667 49,762,667 0.6
42,000,000 5.33% due 5/08/1997 41,763,703 41,763,703 0.5
20,000,000 Finova Capital Corp., 5.32%
due 4/14/1997 19,958,622 19,958,622 0.2
GTE Corporation:
25,000,000 5.34% due 4/07/1997 24,974,042 24,974,042 0.3
25,000,000 5.34% due 4/08/1997 24,970,333 24,970,333 0.3
10,000,000 5.58% due 4/16/1997 9,975,200 9,975,200 0.1
General Motors Acceptance Corp.:
55,236,000 6.75% due 4/01/1997 55,225,643 55,225,643 0.6
84,000,000 5.34% due 4/21/1997 83,738,340 83,738,340 0.9
60,000,000 5.34% due 5/09/1997 59,652,900 59,652,900 0.7
100,000,000 International Securitization
Corp., 5.48% due 5/15/1997 99,315,000 99,315,000 1.1
50,000,000 Lehman Brothers Holdings, Inc.,
5.67% due 5/23/1997 49,582,625 49,582,625 0.6
38,409,000 McKenna Triangle National Corp.,
5.30% due 4/11/1997 38,346,799 38,346,799 0.4
35,000,000 NYNEX Corporation, 5.34% due
4/01/1997 34,994,808 34,994,808 0.4
15,000,000 National Fleet Funding Corp.,
5.33% due 5/01/1997 14,931,154 14,931,154 0.2
30,000,000 WCP Funding, Inc., 5.30% due
4/02/1997 29,991,167 29,991,167 0.3
50,000,000 Xerox Corporation, 5.31% due
5/08/1997 49,719,750 49,719,750 0.6
-------------- -------------- ------
1,286,731,833 1,286,731,833 14.3
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Percent of
Amount Issue Cost Value Net Assets
Short-Term Securities (concluded)
<S> <C> <S> <C> <C> <C>
US Government Agency Federal Home Loan Mortgage
Obligations** Corp.:
$ 50,000,000 5.23% due 4/10/1997 $ 49,927,361 $ 49,927,361 0.5%
25,000,000 5.30% due 4/17/1997 24,937,431 24,937,431 0.3
27,000,000 Federal National Mortgage
Association, 5.20% due 4/10/1997 26,961,000 26,961,000 0.3
-------------- -------------- ------
101,825,792 101,825,792 1.1
Total Short-Term Securities 1,388,557,625 1,388,557,625 15.4
Total Investments $6,471,121,531 8,991,190,102 100.0
==============
Liabilities in Excess of Other Assets (3,437,316) 0.0
-------------- ------
Net Assets $8,987,752,786 100.0%
============== ======
Net Asset Value: Class A--Based on net assets of $4,405,896,087
and 138,156,891 shares outstanding $ 31.89
==============
Class B--Based on net assets of $3,659,837,410
and 116,416,776 shares outstanding $ 31.44
==============
Class C--Based on net assets of $282,814,171
and 9,071,425 shares outstanding $ 31.18
==============
Class D--Based on net assets of $639,205,118
and 20,078,071 shares outstanding $ 31.84
==============
<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.
</TABLE>
PORTFOLIO INFORMATION
<PAGE>
Percent of
Ten Largest Stock Holdings Net Assets
International Business Machines Corp. 3.1%
Mobil Corp. 2.8
Citicorp 2.8
Exxon Corp. 2.7
Royal Dutch Petroleum Co. (ADR) 2.5
Deere & Company 2.2
Texaco Inc. 2.1
Ford Motor Co. 2.0
The Allstate Corp. 2.0
Chevron Corp. 1.9
Portfolio Changes for the Quarter Ended
March 31, 1997
Additions
Ameritech Corporation
The Energy Group PLC (ADR)
Kmart Corporation
Deletions
*NCR Corporation
Washington Mutual Savings Bank
[FN]
*Received as a spin-off from AT&T Corp.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Paul M. Hoffmann, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
<PAGE>
Custodian
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
