MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Annual Report
June 30, 1998
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
Printed on post-consumer recycled paper
MERRILL LYNCH BASIC VALUE FUND, INC.
TO OUR SHAREHOLDERS
Increasing volatility characterized the capital markets during the
three-month period ended June 30, 1998. At times, US stock and bond
prices reflected expectations that the slowdown in Asian economic
growth would impact US exports and the US trade deficit and slow
overall US business activity. The deterioration of economic
conditions in Japan was of particular concern, and caused a sharp
drop in the yen's value relative to the US dollar. During other
periods, US investors appeared to expect that the positive trends of
a moderately expanding economy, declining unemployment, enhanced
productivity and corporate profits growth would continue, unimpeded
by developments in Asia. To date, there have been only a few signs
that Asia's troubles are influencing US economic activity--such as
a surge in the accumulation of inventories--largely because
domestic demand has remained strong. In Europe, the major event was
the greater progress toward achieving European Monetary Union,
although there were concerns that interest rates may have to be
increased, especially in the United Kingdom, to curtail potential
inflationary pressures.
As we move into the second half of 1998, it is likely that investor
focus will remain on developments in Asia. The US Federal Reserve
Board has kept monetary policy on hold as the Asian financial crisis
deepened, which has benefited US bond and stock prices. Looking
ahead, if there is continued evidence of noninflationary economic
growth, it should have a positive influence on US capital markets.
Portfolio Matters
Security purchases in the second quarter of 1998 amounted to $490
million, while equity sales totaled $328 million. On the buy side,
there were three new additions to the portfolio, and we also added
to 13 existing positions. On the sell side, we eliminated two
holdings and reduced 18 positions. Despite purchases exceeding sales
by more than $170 million, our cash position increased to 14.9% of
net assets on June 30, 1998 from 13.7% on March 31, 1998, as the
Fund continued to attract a positive inflow of new money.
The largest of the new positions was Union Pacific Corporation,
presently the largest railroad in the country following its
September 1996 merger with Southern Pacific Corp. The integration of
the two rail lines has proven to be more difficult than anticipated,
with losses reported in the past two quarters, and the dividend
reducing significantly. Union Pacific's stock price declined from
the low $70s per share in July 1997 to our entry level price in the
mid $40s. Recovery from the integration problems has been slow, but
the long-term earning potential is substantial, and we believe the
risk/reward prospects are favorable.
Other additions to the portfolio were Associates First Capital
Corporation, a consumer and commercial finance company, spun-off
from Ford Motor Co., and COMPAQ Computer Corporation, the surviving
company of the merger with Digital Equipment Corp. The additions to
established positions focused largely on increasing those holdings
introduced in the first quarter of 1998: Caterpillar, Inc., Diamond
Offshore Drilling, Inc., National City Corp. and Starwood Hotels and
Resorts Worldwide, Inc.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
On the sell side, our major reductions were in merger candidates,
principally Citicorp and Travelers Group, Inc. and, to a lesser
extent, Norwest Corporation and Wells Fargo & Company. While we are
positive on the merger, the initial stock market reaction to the
Citicorp/Travelers merger announcement seemed excessive (Citicorp
stock was up 26% the day of the announcement and Travelers stock
advanced 18%), and we cut back each position about 10%. At peak
prices, the combined entity would have accounted for well over 5% of
our portfolio, which we thought was too high. At current prices, the
combined company would be our largest holding at a more comfortable
4% of the portfolio. The Norwest Corporation/Wells Fargo & Company
merger was not greeted as favorably by investors as both issues
declined in price on the day of the announcement. On a long-term
basis, we are favorably disposed to this merger, but believe minor
reductions in both issues were prudent. Finally, we eliminated a
small Real Estate Investment Trust position in Avalon Properties,
Inc.
Fiscal Year In Review
Total returns for Merrill Lynch Basic Value Fund, Inc. for the
twelve months ended June 30, 1998 were below those of the unmanaged
Standard & Poor's 500 Composite (S&P 500) Index. For the fiscal year
ended June 30, 1998, total returns for the Fund's Class A, Class B,
Class C and Class D Shares were +23.23%, +21.97%, +21.98% and
+22.89%, respectively, compared to the +30.16% total return for the
S&P 500 Index.
Our cash position, which averaged 13.2% of net assets during the
fiscal year, was a detriment to performance in an almost continually
rising stock market. Also, our energy holdings (15% of the
portfolio) generally lagged the market, but we did take advantage of
the frequent shifts in sentiment toward energy by buying during
periods of pessimism and selling during times of optimism. Overall,
during the fiscal year we purchased $278 million in energy issues
while selling $170 million.
Auto, bank and insurance stocks were all above-average performers
during the fiscal year ended June 30, 1998. Telephones and electric
utilities turned in a mixed individual performance but on balance
were favorable impacters.
For the fiscal year ended June 30, 1998, we purchased $2.0 billion
in equities and sold $1.8 billion. The sales generated profits of
$951 million above the aggregate cost of the holdings. Our cash
position increased to 14.9% of net assets at fiscal year-end from
13.4% at June 30, 1997. Total Fund net assets increased to $13.1
billion from $10.2 billion a year earlier.
In Conclusion
We thank you for your investment in Merrill Lynch Basic Value Fund,
Inc. We look forward to reviewing our outlook and strategy in our
upcoming quarterly report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Paul M. Hoffmann)
Paul M. Hoffmann
Senior Vice President and
Portfolio Manager
July 7, 1998
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions
paid by Merrill Lynch Basic Value Fund, Inc. during its taxable year
ended June 30, 1998:
<TABLE>
<CAPTION>
Qualifying Non-Qualifying Total Long-Term
Record Payable Ordinary Ordinary Ordinary Capital
Date Date Income Income Income Gains
<S> <C> <C> <C> <C> <C> <C>
Class A Shares: 8/12/97 8/20/97 $.376821 $.037185 $.414006 $1.223162*
12/05/97 12/15/97 $.391389 $.119074 $.510463 $ .857435**
Class B Shares: 8/12/97 8/20/97 $.222579 $.021964 $.244543 $1.223162*
12/05/97 12/15/97 $.245522 $.074697 $.320219 $ .857435**
Class C Shares: 8/12/97 8/20/97 $.236736 $.023361 $.260097 $1.223162*
12/05/97 12/15/97 $.252362 $.076777 $.329139 $ .857435**
Class D Shares: 8/12/97 8/20/97 $.347625 $.034304 $.381929 $1.223162*
12/05/97 12/15/97 $.358517 $.109074 $.467591 $ .857435**
<FN>
*Of this long-term capital gain distribution, 68.46% is subject to
the 28% tax rate and 31.54% is subject to the 20% tax rate.
**Of this long-term capital gain distribution, 10.32% is subject to
the 28% tax rate and 89.68% is subject to the 20% tax rate.
The domestic qualifying ordinary income qualifies for the dividends-
received deduction for corporations.
Please retain this information for your records.
</TABLE>
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
Fred G. Weiss, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Paul M. Hoffmann, Senior Vice President
and Portfolio Manager
Donald C. Burke, Vice President
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
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
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 "Recent Performance
Results" and "Average Annual Total Return" 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/98 +23.23% +16.76%
Five Years Ended 6/30/98 +19.81 +18.53
Ten Years Ended 6/30/98 +15.48 +14.86
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/98 +21.97% +17.97%
Five Years Ended 6/30/98 +18.60 +18.60
Inception (10/21/88) through 6/30/98 +14.30 +14.30
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/98 +21.98% +20.98%
Inception (10/21/94)
through 6/30/98 +23.08 +23.08
[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 6/30/98 +22.89% +16.44%
Inception (10/21/94)
through 6/30/98 +24.04 +22.24
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
6/88 6/98
ML Basic Value Fund, Inc.++--
Class A Shares* $ 9,475 $39,972
S&P 500 Index++++ $10,000 $54,889
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
10/21/88** 6/98
ML Basic Value Fund, Inc.++--
Class B Shares* $10,000 $36,505
S&P 500 Index++++ $10,000 $52,382
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to growth of an
investment in the S&P 500 Index. Beginning and ending values are:
10/21/94** 6/98
ML Basic Value Fund, Inc.++--
Class C Shares* $10,000 $21,522
ML Basic Value Fund, Inc.++--
Class D Shares* $ 9,475 $20,987
S&P 500 Index++++ $10,000 $26,401
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of operations.
++ML Basic Value Fund, Inc. invests in securities, primarily
equities, that management of the Fund believes are undervalued and
therefore represent basic investment value.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
PERFORMANCE DATA (concluded)
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 $24,438.77 on June
30, 1998.
<TABLE>
Recent Performance Results
<CAPTION>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Basic Value Fund Class A Shares* +23.23% +0.48% +321.86%
ML Basic Value Fund Class B Shares* +21.97 +0.22 +265.05
ML Basic Value Fund Class C Shares* +21.98 +0.25 +115.22
ML Basic Value Fund Class D Shares* +22.89 +0.41 +121.48
Dow Jones Industrial Average** +18.67 +2.13 +460.35/+451.23/+150.12
Standard & Poor's 500 Index** +30.16 +3.30 +448.89/+423.82/+164.01
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's ten-year/inception dates are: Class A Shares, ten years ended
6/30/98; Class B Shares, 10/21/88; and Class C and Class D Shares,
10/21/94.
**An unmanaged broad-based index comprised of common stocks. Ten
years/since inception total returns are: for the ten years ended
6/30/98; from 10/21/88 to 6/30/98; and from 10/21/94 to 6/30/98,
respectively.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Low Price to Book Value
Metals/Non-Ferrous 1,400,000 ASARCO Inc. $ 36,667,971 $ 31,150,000 0.2%
Insurance 2,500,000 American General Corporation 54,530,936 177,968,750 1.4
Insurance 260,000 American National Insurance Co. 9,749,442 27,186,250 0.2
Steel 4,500,000 ++Bethlehem Steel Corporation 56,745,956 55,968,750 0.4
Restaurants 3,900,000 Darden Restaurants, Inc. 36,505,673 61,912,500 0.5
Information Processing 1,700,000 ++Data General Corporation 23,665,586 25,393,750 0.2
Utilities--Electric 3,000,000 Entergy Corporation 69,641,133 86,250,000 0.7
Retail 2,800,000 ++Federated Department Stores, Inc. 81,540,624 150,675,000 1.1
Machinery & Equipment 2,500,000 Fluor Corporation 134,723,501 127,500,000 1.0
Automotive 5,200,000 Ford Motor Company 102,542,550 306,800,000 2.3
Insurance 1,250,000 Hartford Financial Services Group
Inc. (The) 31,155,644 142,968,750 1.1
Chemicals 800,000 Imperial Chemical Industries
PLC (ADR)* 45,969,824 51,600,000 0.4
Paper & Forest Products 3,000,000 International Paper Company 106,179,539 129,000,000 1.0
Retail 5,800,000 ++Kmart Corporation 69,437,129 111,650,000 0.9
Insurance 1,400,000 PartnerRe Ltd. 29,498,937 71,400,000 0.5
Beverages 2,600,000 Seagram Company Ltd. (The) 87,765,911 106,437,500 0.8
Steel 3,000,000 USX--US Steel Group, Inc. 90,807,536 99,000,000 0.8
Railroads 2,800,000 Union Pacific Corporation 129,195,432 123,550,000 0.9
Banking 430,000 Wells Fargo & Company 86,351,821 158,670,000 1.2
-------------- --------------- ------
1,282,675,145 2,045,081,250 15.6
Below-Average Price/Earnings Ratio
Telecommunications 2,800,000 AT&T Corp. 100,871,726 159,950,000 1.2
Insurance 2,500,000 Allstate Corporation (The) 58,084,911 228,906,250 1.8
Machinery & Equipment 3,000,000 Caterpillar, Inc. 167,710,296 158,625,000 1.2
Banking 2,200,000 Citicorp 141,440,387 328,350,000 2.5
Farm & Construction
Equipment 4,500,000 Deere & Company 108,686,341 237,937,500 1.8
Oil & Gas Producers 3,400,000 Diamond Offshore Drilling, Inc. 153,665,471 136,000,000 1.0
Photography 2,000,000 Eastman Kodak Company 115,759,658 146,125,000 1.1
Capital Goods 1,785,000 Eaton Corporation 105,162,263 138,783,750 1.1
Automotive 2,700,000 General Motors Corporation 118,385,267 180,393,750 1.4
Chemicals 2,600,000 Hercules Inc. 69,675,936 106,925,000 0.8
Machinery 4,000,000 ITT Industries Inc. 83,357,038 149,500,000 1.1
Machinery 3,600,000 Ingersoll-Rand Company 83,867,995 158,625,000 1.2
Information Processing 3,100,000 International Business Machines Corp. 128,972,514 355,918,750 2.7
Banking 2,800,000 NationsBank Corporation 85,514,320 214,200,000 1.6
Tobacco 3,500,000 Philip Morris Companies, Inc. 112,337,500 137,812,500 1.1
Electrical Equipment 3,150,000 Philips Electronics N.V. (NY
Registered Shares) 84,665,368 267,750,000 2.0
Fertilizers 1,600,000 Potash Corp. of Saskatchewan Inc. 125,426,223 120,900,000 0.9
Retail 3,650,000 Sears, Roebuck & Co. 100,683,617 222,878,125 1.7
Real Estate Investment
Trust 2,700,000 Starwood Hotels & Resorts
Worldwide, Inc. 140,938,372 130,443,750 1.0
Electronics 2,250,000 Tektronix, Inc. 58,632,719 79,593,750 0.6
Electrical Equipment 1,700,000 Thomas & Betts Corporation 81,726,521 83,725,000 0.6
Chemicals 2,600,000 Union Carbide Corporation 84,717,281 138,775,000 1.1
Retail 4,000,000 ++Venator Group, Inc. (a) 55,901,671 76,500,000 0.6
-------------- --------------- ------
2,366,183,395 3,958,618,125 30.1
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Above-Average Yield
Telecommunications 3,800,000 Ameritech Corporation $ 118,458,152 $ 170,525,000 1.3%
Oil--Domestic 1,950,000 Atlantic Richfield Company 106,571,450 152,343,750 1.1
Telecommunications 2,900,000 Bell Atlantic Corporation 78,567,640 132,312,500 1.0
Oil--International 1,983,215 British Petroleum Company PLC
(The)(ADR)* 67,971,109 175,018,723 1.3
Utilities--Electric 1,951,900 CINergy Corp. 55,134,500 68,316,500 0.5
Oil--International 2,700,000 Chevron Corporation 129,731,902 224,268,750 1.7
Utilities--Electric 1,650,000 Consolidated Edison Co. of
New York, Inc. 39,941,209 76,003,125 0.6
Utilities--Electric 956,250 DPL Inc. 6,204,369 17,332,031 0.1
Telecommunications 3,300,000 GTE Corp. 109,572,500 183,562,500 1.4
Foods/Food Processing 1,750,000 General Mills, Inc. 88,326,700 119,656,250 0.9
Real Estate Investment
Trust 440,000 Irvine Apartment Communities, Inc. 7,126,791 12,732,500 0.1
Real Estate Investment
Trust 900,000 Liberty Property Trust 17,263,193 23,006,250 0.2
Real Estate Investment
Trust 500,000 Mills Corporation (The) 10,080,375 12,000,000 0.1
Oil--International 3,600,000 Mobil Corporation 122,850,898 275,850,000 2.1
Utilities--Electric 2,400,000 NIPSCO Industries, Inc. 27,387,777 67,200,000 0.5
Banking 1,300,000 National City Corp. 86,062,731 92,300,000 0.7
Oil--Domestic 4,000,000 Occidental Petroleum Corporation 89,410,660 108,000,000 0.8
Utilities--Electric 2,600,000 PECO Energy Company 62,537,242 75,887,500 0.6
Utilities--Electric 1,800,000 Public Service Enterprise Group, Inc. 48,476,636 61,987,500 0.5
Oil--International 5,200,000 Royal Dutch Petroleum Company (NY
Registered Shares) 136,836,303 285,025,000 2.2
Real Estate Investment
Trust 1,600,000 Simon DeBartolo Group, Inc. 32,239,889 52,000,000 0.4
Real Estate Investment
Trust 500,000 Summit Properties Inc. 9,048,400 9,468,750 0.1
Oil--International 3,500,000 Texaco Inc. 133,671,295 208,906,250 1.6
Utilities--Electric 2,900,000 Texas Utilities Company 103,140,138 120,712,500 0.9
Telecommunications 3,000,000 U S West Communications Group, Inc. 77,072,442 141,000,000 1.1
-------------- --------------- ------
1,763,684,301 2,865,415,379 21.8
Special Situations
Savings & Loans 1,700,000 Ahmanson (H.F.) & Company 37,928,399 120,700,000 0.9
Savings & Loans 1,700,000 Associates First Capital
Corporation (b) 72,355,994 130,687,500 1.0
Pharmaceuticals 1,200,000 Bristol-Myers Squibb Co. 34,026,064 137,925,000 1.1
Computers 3,000,000 COMPAQ Computer Corporation (c) 84,705,901 85,125,000 0.6
Oil Services & Equipment 3,400,000 Dresser Industries, Inc. 79,584,474 149,812,500 1.1
Chemicals 3,650,000 duPont (E.I.) de Nemours & Co. 160,544,721 272,381,250 2.1
Oil--International 4,500,000 Exxon Corporation 158,275,415 320,906,250 2.4
Pharmaceuticals 850,000 Merck & Co., Inc. 29,557,312 113,687,500 0.9
Banking 6,500,000 Norwest Corporation 85,042,664 242,937,500 1.9
Telecommunications 1,600,000 Telefonica de Espana S.A. (ADR)* 63,336,735 222,500,000 1.7
Semiconductors 2,000,000 Texas Instruments Inc. 89,868,412 116,625,000 0.9
Insurance 3,200,000 Travelers Group, Inc. 35,097,922 194,000,000 1.5
Information Processing 5,600,000 ++Unisys Corporation 60,913,547 158,200,000 1.2
Pharmaceuticals 1,320,000 Zeneca Group PLC (ADR)* 12,980,000 57,915,000 0.4
-------------- --------------- ------
1,004,217,560 2,323,402,500 17.7
Total Stocks 6,416,760,401 11,192,517,254 85.2
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Short-Term Securities
Commercial Paper** Aesop Funding Corp.:
$28,500,000 5.52% due 7/23/1998 $ 28,399,490 $ 28,399,490 0.2%
35,800,000 5.52% due 7/24/1998 35,668,256 35,668,256 0.3
30,000,000 Apreco, Inc., 5.53% due 8/05/1998 29,834,100 29,834,100 0.2
30,136,000 Atlantic Asset Securitization Corp.,
5.55% due 7/10/1998 30,089,540 30,089,540 0.2
33,000,000 CSW Credit, Inc., 5.52% due
8/03/1998 32,827,960 32,827,960 0.2
50,000,000 CXC Inc., 5.54% due 7/28/1998 49,784,556 49,784,556 0.4
30,127,000 Concord Minutemen Capital Co.
LLC, 5.55% due 8/03/1998 29,969,084 29,969,084 0.2
25,000,000 Corporate Asset Funding Co.,
Inc., 5.55% due 8/03/1998 24,868,958 24,868,958 0.2
Countrywide Home Loans, Inc.:
22,650,000 5.56% due 7/17/1998 22,590,531 22,590,531 0.2
77,000,000 5.58% due 7/20/1998 76,761,300 76,761,300 0.6
Delaware Funding Corp.:
55,000,000 5.68% due 7/09/1998 54,921,900 54,921,900 0.4
70,000,000 5.54% due 7/15/1998 69,838,417 69,838,417 0.5
Edison Asset Securitization LLC:
36,000,000 5.53% due 7/13/1998 35,928,110 35,928,110 0.3
18,773,000 5.54% due 7/20/1998 18,715,221 18,715,221 0.1
12,707,000 5.54% due 7/22/1998 12,663,980 12,663,980 0.1
50,000,000 5.57% due 7/29/1998 49,775,653 49,775,653 0.4
Eureka Securitization Inc.:
20,000,000 5.54% due 7/01/1998 19,996,922 19,996,922 0.1
60,000,000 5.53% due 7/20/1998 59,815,667 59,815,667 0.5
30,000,000 5.52% due 7/29/1998 29,866,600 29,866,600 0.2
14,010,000 Falcon Asset Securitization Corp.,
5.55% due 8/21/1998 13,897,687 13,897,687 0.1
Finova Capital Corp.:
15,000,000 5.55% due 7/17/1998 14,960,688 14,960,688 0.1
39,000,000 5.53% due 7/27/1998 38,838,248 38,838,248 0.3
62,000,000 General Electric Capital Corp.,
5.52% due 7/07/1998 61,933,453 61,933,453 0.5
72,701,000 General Motors Acceptance Corp.,
6.50% due 7/01/1998 72,687,873 72,687,873 0.5
International Securitization Corp.:
41,000,000 5.53% due 7/09/1998 40,943,318 40,943,318 0.3
35,000,000 5.55% due 7/14/1998 34,924,458 34,924,458 0.3
50,000,000 5.53% due 7/23/1998 49,823,347 49,823,347 0.4
25,200,000 5.54% due 7/23/1998 25,110,806 25,110,806 0.2
75,000,000 Lehman Brothers Holdings Inc.,
5.56% due 8/21/1998 74,397,667 74,397,667 0.6
Lexington Parker, Inc.:
65,000,000 5.53% due 7/06/1998 64,940,091 64,940,091 0.5
50,000,000 5.57% due 7/10/1998 49,922,639 49,922,639 0.4
50,000,000 5.55% due 7/16/1998 49,876,667 49,876,667 0.4
39,056,000 5.55% due 7/24/1998 38,911,493 38,911,493 0.3
Park Avenue Receivables Corp.:
31,534,000 5.53% due 7/13/1998 31,471,028 31,471,028 0.2
35,628,000 5.58% due 7/15/1998 35,545,165 35,545,165 0.3
33,205,000 5.53% due 8/04/1998 33,026,477 33,026,477 0.2
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Short-Term Securities (concluded)
Commercial Paper Republic Industries, Inc.:
(concluded) $50,000,000 5.53% due 7/22/1998 $ 49,831,028 $ 49,831,028 0.4%
35,000,000 5.52% due 7/24/1998 34,871,200 34,871,200 0.3
70,000,000 5.53% due 7/31/1998 69,666,664 69,666,664 0.5
Riverwoods Funding Corp.:
27,609,000 5.51% due 7/01/1998 27,604,774 27,604,774 0.2
70,000,000 5.52% due 7/21/1998 69,774,600 69,774,600 0.5
40,000,000 5.52% due 7/27/1998 39,834,400 39,834,400 0.3
Variable Funding Capital Corp.:
75,000,000 5.53% due 7/16/1998 74,815,667 74,815,667 0.6
50,000,000 5.54% due 7/17/1998 49,869,194 49,869,194 0.4
50,000,000 5.53% due 8/07/1998 49,708,139 49,708,139 0.4
-------------- --------------- ------
1,909,503,016 1,909,503,016 14.5
US Government Agency 50,000,000 Federal National Mortgage
Obligations** Association, 5.46% due 7/14/1998 49,893,833 49,893,833 0.4
Total Short-Term Securities 1,959,396,849 1,959,396,849 14.9
Total Investments $8,376,157,250 13,151,914,103 100.1
==============
Liabilities in Excess of Other Assets (14,250,994) (0.1)
--------------- ------
Net Assets $13,137,663,109 100.0%
=============== ======
<FN>
++Non-income producing security.
*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)Formerly Woolworth Corporation.
(b)Associates First Capital Corporation is a spin-off from Ford
Motor Company.
(c)Digital Equipment Corporation was acquired by COMPAQ Computer
Corporation.
Categories of companies shown have not been audited by Deloitte &
Touche LLP.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 1998
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$8,376,157,250)
(Note 1a) $13,151,914,103
Cash 31,040
Receivables:
Capital shares sold $ 20,336,030
Dividends 16,297,942
Securities sold 5,446,218 42,080,190
---------------
Prepaid registration fees and other assets (Note 1d) 206,428
---------------
Total assets 13,194,231,761
---------------
Liabilities: Payables:
Securities purchased 23,679,969
Capital shares redeemed 19,580,164
Distributor (Note 2) 5,196,550
Investment adviser (Note 2) 4,606,836 53,063,519
---------------
Accrued expenses and other liabilities 3,505,133
---------------
Total liabilities 56,568,652
---------------
Net Assets: Net assets $13,137,663,109
===============
Net Assets Class A Shares of Common Stock, $0.10 par value,
Consist of: 400,000,000 shares authorized $ 14,173,313
Class B Shares of Common Stock, $0.10 par value,
400,000,000 shares authorized 12,201,371
Class C Shares of Common Stock, $0.10 par value,
200,000,000 shares authorized 1,332,398
Class D Shares of Common Stock, $0.10 par value,
200,000,000 shares authorized 4,187,710
Paid-in capital in excess of par 7,565,650,737
Undistributed investment income--net 104,136,156
Undistributed realized capital gains on investments--net 660,224,571
Unrealized appreciation on investments--net 4,775,756,853
---------------
Net assets $13,137,663,109
===============
Net Asset Value: Class A--Based on net assets of $5,888,852,608 and 141,733,126
shares outstanding $ 41.55
===============
Class B--Based on net assets of $4,976,004,010 and 122,013,710
shares outstanding $ 40.78
===============
Class C--Based on net assets of $538,104,305 and 13,323,980
shares outstanding $ 40.39
===============
Class D--Based on net assets of $1,734,702,186 and 41,877,096
shares outstanding $ 41.42
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended June 30, 1998
<S> <S> <C> <C>
Investment Dividends (net of $3,033,521 foreign withholding tax) $ 225,114,618
Income Interest and discount earned 88,532,399
(Notes 1b & 1c): Other 236,382
---------------
Total income 313,883,399
---------------
Expenses: Investment advisory fees (Note 2) $ 47,100,812
Account maintenance and distribution fees--Class B (Note 2) 45,441,695
Transfer agent fees--Class A (Note 2) 6,415,643
Transfer agent fees--Class B (Note 2) 6,118,820
Account maintenance and distribution fees--Class C (Note 2) 4,356,852
Account maintenance fees--Class D (Note 2) 3,298,009
Transfer agent fees--Class D (Note 2) 1,574,734
Registration fees (Note 1d) 715,728
Transfer agent fees--Class C (Note 2) 627,823
Accounting services (Note 2) 483,549
Printing and shareholder reports 413,103
Custodian fees 402,888
Professional fees 89,698
Directors' fees and expenses 47,987
Pricing fees 11,550
Other 91,318
---------------
Total expenses 117,190,209
---------------
Investment income--net 196,693,190
---------------
Realized & Realized gain on investments--net 950,656,787
Unrealized Change in unrealized appreciation on investments--net 1,196,444,669
Gain on ---------------
Investments Net Increase in Net Assets Resulting from Operations $ 2,343,794,646
- --Net (Notes ===============
1c, 1e & 3):
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 1998 1997
<S> <S> <C> <C>
Operations: Investment income--net $ 196,693,190 $ 179,493,575
Realized gain on investments--net 950,656,787 465,029,995
Change in unrealized appreciation on investments--net 1,196,444,669 1,657,307,021
--------------- ---------------
Net increase in net assets resulting from operations 2,343,794,646 2,301,830,591
--------------- ---------------
Dividends & Investment income--net:
Distributions to Class A (104,991,974) (100,659,426)
Shareholders Class B (48,188,281) (58,137,865)
(Note 1g): Class C (4,614,624) (4,393,794)
Class D (20,742,423) (11,669,904)
Realized gain on investments--net:
Class A (298,730,147) (170,767,565)
Class B (254,752,228) (157,008,366)
Class C (22,962,880) (10,983,674)
Class D (64,611,806) (21,395,471)
--------------- ---------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (819,594,363) (535,016,065)
--------------- ---------------
Capital Share Net increase in net assets derived from capital
Transactions share transactions 1,378,654,564 945,290,139
(Note 4): --------------- ---------------
Net Assets: Total increase in net assets 2,902,854,847 2,712,104,665
Beginning of year 10,234,808,262 7,522,703,597
--------------- ---------------
End of year* $13,137,663,109 $10,234,808,262
=============== ===============
<FN>
*Undistributed investment income--net $ 104,136,156 $ 85,980,268
=============== ===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 36.50 $ 30.22 $ 26.44 $ 23.17 $ 23.31
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .83 .81 .80 .74 .62
Realized and unrealized gain on
investments and foreign currency
transactions--net 7.23 7.66 4.31 4.01 .67
---------- ---------- ---------- ---------- ----------
Total from investment operations 8.06 8.47 5.11 4.75 1.29
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.78) (.80) (.76) (.69) (.70)
Realized gain on investments--net (2.23) (1.39) (.57) (.79) (.73)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.01) (2.19) (1.33) (1.48) (1.43)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 41.55 $ 36.50 $ 30.22 $ 26.44 $ 23.17
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 23.23% 29.95% 19.92% 21.67% 5.68%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .54% .55% .56% .59% .53%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 2.14% 2.54% 2.88% 3.19% 2.76%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $5,888,853 $4,921,834 $3,587,558 $2,834,652 $2,272,983
Data: ========== ========== ========== ========== ==========
Portfolio turnover 17.79% 13.00% 13.94% 11.69% 21.79%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996 1995 1994
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 35.89 $ 29.76 $ 26.08 $ 22.87 $ 23.04
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .43 .48 .53 .53 .42
Realized and unrealized gain on
investments and foreign currency
transactions--net 7.11 7.55 4.23 3.93 .62
---------- ---------- ---------- ---------- ----------
Total from investment operations 7.54 8.03 4.76 4.46 1.04
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.42) (.51) (.51) (.46) (.48)
Realized gain on investments--net (2.23) (1.39) (.57) (.79) (.73)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.65) (1.90) (1.08) (1.25) (1.21)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 40.78 $ 35.89 $ 29.76 $ 26.08 $ 22.87
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 21.97% 28.61% 18.71% 20.45% 4.61%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.56% 1.57% 1.58% 1.61% 1.55%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.13% 1.53% 1.86% 2.16% 1.75%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in thousands) $4,976,004 $4,088,755 $3,288,963 $2,464,248 $1,744,704
Data: ========== ========== ========== ========== ==========
Portfolio turnover 17.79% 13.00% 13.94% 11.69% 21.79%
========== ========== ========== ========== ==========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class C
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended 1994++++ to
June 30, June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 35.59 $ 29.56 $ 25.98 $ 22.92
Operating ---------- --------- --------- ---------
Performance: Investment income--net .43 .47 .55 .44
Realized and unrealized gain on investments
and foreign currency transactions--net 7.04 7.49 4.18 3.05
---------- --------- --------- ---------
Total from investment operations 7.47 7.96 4.73 3.49
---------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.44) (.54) (.58) (.33)
Realized gain on investments--net (2.23) (1.39) (.57) (.10)
---------- --------- --------- ---------
Total dividends and distributions (2.67) (1.93) (1.15) (.43)
---------- --------- --------- ---------
Net asset value, end of period $ 40.39 $ 35.59 $ 29.56 $ 25.98
========== ========= ========= =========
Total Investment Based on net asset value per share 21.98% 28.60% 18.69% 15.59%+++
Return:** ========== ========= ========= =========
Ratios to Average Expenses 1.57% 1.58% 1.59% 1.66%*
Net Assets: ========== ========= ========= =========
Investment income--net 1.12% 1.51% 1.83% 2.09%*
========== ========= ========= =========
Supplemental Net assets, end of period (in thousands) $ 538,104 $ 337,828 $ 211,787 $ 74,334
Data: ========== ========= ========= =========
Portfolio turnover 17.79% 13.00% 13.94% 11.69%
========== ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class D
For the
Period
The following per share data and ratios have been derived Oct. 21,
from information provided in the financial statements. For the Year Ended 1994++++ to
June 30, June 30,
Increase (Decrease) in Net Asset Value: 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 36.42 $ 30.16 $ 26.41 $ 23.19
Operating ---------- --------- --------- ---------
Performance: Investment income--net .74 .73 .76 .50
Realized and unrealized gain on investments
and foreign currency transactions--net 7.19 7.66 4.27 3.17
---------- --------- --------- ---------
Total from investment operations 7.93 8.39 5.03 3.67
---------- --------- --------- ---------
Less dividends and distributions:
Investment income--net (.70) (.74) (.71) (.35)
Realized gain on investments--net (2.23) (1.39) (.57) (.10)
---------- --------- --------- ---------
Total dividends and distributions (2.93) (2.13) (1.28) (.45)
---------- --------- --------- ---------
Net asset value, end of period $ 41.42 $ 36.42 $ 30.16 $ 26.41
========== ========= ========= =========
Total Investment Based on net asset value per share 22.89% 29.65% 19.61% 16.23%+++
Return:** ========== ========= ========= =========
Ratios to Average Expenses .79% .80% .81% .87%*
Net Assets: ========== ========= ========= =========
Investment income--net 1.89% 2.28% 2.61% 2.88%*
========== ========= ========= =========
Supplemental Net assets, end of period (in thousands) $1,734,702 $ 886,391 $ 434,396 $ 203,033
Data: ========== ========= ========= =========
Portfolio turnover 17.79% 13.00% 13.94% 11.69%
========== ========= ========= =========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding.
++++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Basic Value Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a diversified, open-end
management investment company. The Fund offers four classes of
shares under the Merrill Lynch Select PricingSM 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.
(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 or under the authority of 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. 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).
Written options are non-income producing investments.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
(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 ("MLFD" or "Distributor"), a division of Princeton Funds
Distributor, Inc. ("PFD"), which is 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 adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees, which are accrued daily and paid monthly at annual rates based
upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co.,
also provides account maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class B, Class C and Class D shareholders. The ongoing distribution
fee compensates the Distributor and MLPF&S for providing shareholder
and distribution-related services to Class B and Class C
shareholders.
For the year ended June 30, 1998, 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 $ 50,429 $ 640,211
Class D $152,493 $2,168,092
For the year ended June 30, 1998, MLPF&S received contingent
deferred sales charges of $4,181,163 and $111,981 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $33,000 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
June 30, 1998.
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.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
NOTES TO FINANCIAL STATEMENTS (concluded)
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLFDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1998 were $1,965,665,763 and
$1,794,266,164, respectively.
Net realized gains for the year ended June 30, 1998 and net
unrealized gains as of June 30, 1998 were as follows:
Realized Unrealized
Gains Gains
Long-term investments $950,656,774 $4,775,756,853
Short-term investments 13 --
------------ --------------
Total $950,656,787 $4,775,756,853
============ ==============
As of June 30, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $4,773,439,526, of which $4,834,375,248
related to appreciated securities and $60,935,722 related to
depreciated securities. At June 30, 1998, the aggregate cost of
investments for Federal income tax purposes was $8,378,474,577.
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $1,378,654,564 and $945,290,139 for the years ended June 30,
1998 and June 30, 1997, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 25,708,451 $1,003,040,580
Shares issued to shareholders
in reinvestment of dividends
and distributions 9,831,759 365,328,091
------------- --------------
Total issued 35,540,210 1,368,368,671
Shares redeemed (28,641,119) (1,113,034,866)
------------- --------------
Net increase 6,899,091 $ 255,333,805
============= ==============
Class A Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 37,081,337 $1,162,009,521
Shares issued to shareholders
in reinvestment of dividends
and distributions 8,257,275 243,407,144
------------- --------------
Total issued 45,338,612 1,405,416,665
Shares redeemed (29,216,897) (932,986,327)
------------- --------------
Net increase 16,121,715 $ 472,430,338
============= ==============
Class B Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 33,888,364 $1,301,745,206
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,366,044 269,955,814
------------- --------------
Total issued 41,254,408 1,571,701,020
Automatic conversion of
shares (12,361,173) (468,787,712)
Shares redeemed (20,794,428) (797,426,917)
------------- --------------
Net increase 8,098,807 $ 305,486,391
============= ==============
Class B Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 26,759,273 $ 836,475,969
Shares issued to shareholders
in reinvestment of dividends
and distributions 6,603,697 191,804,853
------------- --------------
Total issued 33,362,970 1,028,280,822
Automatic conversion of
shares (5,951,632) (194,812,554)
Shares redeemed (24,018,657) (750,923,397)
------------- --------------
Net increase 3,392,681 $ 82,544,871
============= ==============
Class C Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 5,944,133 $ 226,061,127
Shares issued to shareholders
in reinvestment of dividends
and distributions 685,367 24,889,642
------------- --------------
Total issued 6,629,500 250,950,769
Shares redeemed (2,796,591) (106,127,637)
------------- --------------
Net increase 3,832,909 $ 144,823,132
============= ==============
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
Class C Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 4,511,986 $ 139,349,120
Shares issued to shareholders
in reinvestment of dividends
and distributions 485,970 14,024,176
------------- --------------
Total issued 4,997,956 153,373,296
Shares redeemed (2,671,622) (83,360,975)
------------- --------------
Net increase 2,326,334 $ 70,012,321
============= ==============
Class D Shares for the Year Dollar
Ended June 30, 1998 Shares Amount
Shares sold 10,001,666 $390,347,881
Automatic conversion of
shares 12,192,461 468,787,712
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,069,455 76,804,608
----------- ------------
Total issued 24,263,582 935,940,201
Shares redeemed (6,725,865) (262,928,965)
----------- ------------
Net increase 17,537,717 $673,011,236
=========== ============
Class D Shares for the Year Dollar
Ended June 30, 1997 Shares Amount
Shares sold 7,052,734 $223,824,582
Automatic conversion of
shares 5,871,627 194,812,554
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,008,878 29,701,013
----------- ------------
Total issued 13,933,239 448,338,149
Shares redeemed (3,996,236) (128,035,540)
----------- ------------
Net increase 9,937,003 $320,302,609
=========== ============
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Basic Value Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Basic Value Fund, Inc. as of June 30, 1998, the related statements
of operations for the year then ended and changes in net assets for
each of the years in the two-year period then ended, and the
financial highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at June 30,
1998 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Merrill Lynch Basic Value Fund, Inc. as of June 30, 1998, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 12, 1998
</AUDIT-REPORT>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1998
PORTFOLIO INFORMATION (unaudited)
As of June 30, 1998
Percent of
Ten Largest Stock Holdings Net Assets
International Business
Machines Corp. 2.7%
Citicorp 2.5
Exxon Corporation 2.4
Ford Motor Company 2.3
Royal Dutch Petroleum Company
(NY Registered Shares) 2.2
Mobil Corporation 2.1
duPont (E.I.) de Nemours & Co. 2.1
Philips Electronics N.V. (NY
Registered Shares) 2.0
Norwest Corporation 1.9
Deere & Company 1.8
Portfolio Changes for the Quarter
Ended June 30, 1998
Additions
Associates First Capital Corporation
*Avalon Bay Communities, Inc.
COMPAQ Computer Corporation
Union Pacific Corporation
Deletions
*Avalon Bay Communities, Inc.
Avalon Properties, Inc.
Digital Equipment Corporation
*Added and deleted in the same quarter.
