MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Annual Report
June 30, 1999
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
There were some conflicting signals regarding the future direction
of the US economy during the quarter ended June 30, 1999. However,
on balance the economic outlook continued to be positive. The US
economic expansion is ongoing, especially in the consumer sector.
Economic growth is not occurring at inflationary rates, although the
Organization of Petroleum Exporting Countries (OPEC) successfully
engineered a near-term increase in the price of crude oil. Against
this backdrop, the US Federal Reserve Board raised the Federal Funds
rate 0.25% at its June 30, 1999 meeting. Outside of the United
States, signs of growth are less apparent in other major industrial
economies. European equity markets have entered a period of
consolidation, and investors are looking for evidence of an economic
pickup. In Japan, there are not yet clear signs that Japan's economy
is improving. There were growing signs of improvement in some
emerging economies (most notably South Korea and Mexico), although
concerns remain for others (such as Brazil and Argentina).
In the US capital markets, long-term interest rates rose during the
June quarter. While the spread between yields on Treasury securities
and corporate issues of similar maturities has narrowed somewhat, it
remains wide by historic standards. Although the US stock market
exhibited greater price volatility, its advances broadened beyond
relatively few growth stocks to the previously languishing cyclical
sectors.
Portfolio Matters
Security purchases in the second quarter of 1999 amounted to $410
million while equity sales totaled $741 million. On the buy side, we
initiated four new additions to the portfolio and added to six
existing positions. On the sell side, we eliminated three holdings
and reduced 22 positions.
The largest of the new positions was Sara Lee Corporation, a
diversified global consumer packaged goods company. The stock has
substantially underperformed the market in 1999, following a
bacteria problem that developed in the company's packaged meat
division late in 1998. The company responded quickly and, while
recalls were expensive and disruptive, the problems are all but
resolved. The stock's valuation is abnormally low at slightly above
one times sales, an above-average yield and well below-average
price/earnings ratio. We believe the long-term risk/reward ratio is
favorable.
We also established a new position in Emerson Electric Co., a well-
diversified manufacturer of a broad range of electrical and
electronic products. The company has one of the more enviable
records in American industry, relative to consistent growth in
earnings and dividends. About one-third of sales are generated by
new products. At our entry price, the stock was available at a below-
average price/earnings multiple and above-average yield.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
Toward the end of the June quarter, we established an initial
position in First Union Corporation, a major regional bank with a
significant presence in the US East Coast. The company has been a
major acquirer of other banks in recent years, culminating in the
takeover of CoreStates in 1998. There have been two downward
earnings revisions by the company this year, and the stock has been
severely punished, off over 30% from its peak. At our entry price,
about 13 times the reduced 1999 earnings estimate and yielding over
4%, additional price risks seem minimal, and price recovery and
growth potential are favorable.
We received Delphi Automotive Systems Corporation as a spin-off from
General Motors Corp. and added to the position of this large auto
parts supplier. Finally, we bought and sold a small position in
Telefonica Publicidad e Informacion, SA, a subsidiary of Telefonica
de Espana S.A.
On the sell side, we eliminated the final portions of Bristol-Myers
Squibb Company and The Seagram Company Ltd., based on what we
regarded as very generous valuations. Our largest sale during the
June quarter was a major reduction in Applied Materials, Inc. We had
initially purchased the stock during the third quarter of 1998 when
sales, incoming orders and earnings were all depressed and the stock
was decidedly out-of-favor. A turn in the stock market, combined
with an improvement in incoming orders, contributed to the stock
more than tripling off the low and we gradually sold into the
strength.
Fiscal Year in Review
For the 12 months ended June 30, 1999, Merrill Lynch Basic Value
Fund, Inc.'s total returns were below that of the unmanaged Standard
& Poor's 500 Composite (S&P 500) Index. For the fiscal year ended
June 30, 1999, total returns for the Fund's Class A, Class B, Class
C and Class D Shares were +14.54%, +13.40%, +13.36% and +14.25%,
respectively, compared to the +22.76% total return for the S&P 500
Index.
For most of the past 12 months, a select group of 20--30 high-priced
growth stocks have been in the forefront of the stock market's
overall advance. However, there was an abrupt shift in investor
emphasis in April 1999 and value returned to favor (at least
temporarily) and the Fund had a strong fourth fiscal quarter.
For the fiscal year, our largest position, International Business
Machines Corporation, more than doubled in price. The Fund also
benefited from the recovery of growth stocks that had been purchased
when they were out-of-favor, such as Applied Materials, Inc. and
Texas Instruments Incorporated, both of which more than doubled in
the fiscal year ended June 30, 1999, and Hewlett-Packard Company, up
over 67% during the same period. Also, telecommunication stocks,
about 11% of the portfolio, generally performed well, paced by
Ameritech Corporation, which advanced by 64% in the fiscal year.
Oil stocks, which comprised 15% of the portfolio, turned in a mixed
performance with merger candidates such as Mobil Corporation and BP
Amoco PLC outperforming the market and oil service issues such as
Halliburton Company and Diamond Offshore Drilling, Inc.
substantially underperforming. As has been the case in recent years,
we continued to trade around core energy positions during periods of
shifts in sentiment. For the year, we purchased $123 million in oil
stocks and sold $318 million.
Cyclical stocks, on balance, underperformed the market for the first
nine months of the fiscal year and clearly impeded performance.
However, beginning in early April these same laggards surged to
prominence and were major contributors to the Fund's strong fourth-
quarter performance.
In Conclusion
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,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Paul M. Hoffmann)
Paul M. Hoffmann
Senior Vice President and Co-Portfolio Manager
(Kevin M. Rendino)
Kevin M. Rendino
Senior Vice President and Co-Portfolio Manager
August 5, 1999
Effective July 12, 1999, Kevin M. Rendino was elected Senior Vice
President and named Co-Portfolio Manager of Merrill Lynch Basic
Value Fund, Inc. Mr. Rendino has been First Vice President of
Merrill Lynch Asset Management, L.P. since 1997 and Vice President
from 1993 to 1997.
Mr. Rendino's appointment coincides with the announcement of the
upcoming retirement of Paul M. Hoffmann, original manager of Merrill
Lynch Basic Value Fund, Inc. When Mr. Hoffmann retires early in
2000, Mr. Rendino will take over as the Fund's lead manager. With
Mr. Rendino's appointment, the Fund's Board of Directors looks
forward to the continued success of the legacy that Mr. Hoffmann has
established over the past 22 years in managing Merrill Lynch Basic
Value Fund, Inc.
OFFICERS AND DIRECTORS
Terry K. Glenn, 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
Arthur Zeikel, Director
Paul M. Hoffmann, Senior Vice President and Portfolio Manager
Kevin M. Rendino, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Thomas D. Jones, III, Secretary
Custodian
The Bank of New York
90 Washington Street, 12th Floor
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
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 6/30/99 +14.54% + 8.52%
Five Years Ended 6/30/99 +21.76 +20.45
Ten Years Ended 6/30/99 +15.31 +14.69
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 +13.40% + 9.40%
Five Years Ended 6/30/99 +20.53 +20.53
Ten Years Ended 6/30/99 +14.14 +14.14
[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 6/30/99 +13.36% +12.36%
Inception (10/21/94)
through 6/30/99 +20.94 +20.94
[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 6/30/99 +14.25% + 8.26%
Inception (10/21/94)
through 6/30/99 +21.89 +20.50
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
PERFORMANCE DATA (continued)
A line graph depicting the growth of an investment in the Fund's
Class A Shares and Class B Shares compared to growth of an
investment in the S&P 500 Index. Beginning and ending values are:
6/89 6/99
ML Basic Value Fund, Inc.++--
Class A Shares $ 9,475 $39,371
ML Basic Value Fund, Inc.++--
Class B Shares $10,000 $37,522
S&P 500 Index++++ $10,000 $55,893
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** 6/99
ML Basic Value Fund, Inc.++--
Class C Shares $10,000 $24,398
ML Basic Value Fund, Inc.++--
Class D Shares* $ 9,475 $23,978
S&P 500 Index++++ $10,000 $32,409
[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, 1999
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 $27,991.61 on June
30, 1999.
<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* +14.54% +13.36% +315.51%
ML Basic Value Fund Class B Shares* +13.40 +13.06 +275.19
ML Basic Value Fund Class C Shares* +13.36 +13.08 +143.98
ML Basic Value Fund Class D Shares* +14.25 +13.26 +153.05
Dow Jones Industrial Average** +24.64 +12.52 +472.35/+203.27
Standard & Poor's 500 Index** +22.76 + 7.05 +458.93/+224.09
<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/since inception periods are ten years for Class A
and Class B Shares and from 10/21/94 for Class C and Class D Shares,
respectively.
**An unmanaged broad-based index comprised of common stocks. Ten
years/since inception total returns are for ten years and from
10/21/94, respectively.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
<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 Incorporated $ 36,667,971 $ 26,337,500 0.2%
Insurance 2,500,000 American General Corporation 65,307,992 188,437,500 1.5
Insurance 260,000 American National Insurance Company 9,749,442 18,525,000 0.1
Steel 4,500,000 ++Bethlehem Steel Corporation 56,745,956 34,593,750 0.3
Aerospace 4,100,000 The Boeing Company 138,309,307 181,168,750 1.4
Restaurants 3,900,000 Darden Restaurants, Inc. 36,505,674 85,068,750 0.7
Information Processing 1,700,000 ++Data General Corporation 23,665,586 24,756,250 0.2
Oil Services & Equipment 4,300,000 Diamond Offshore Drilling, Inc. 179,184,079 122,012,500 0.9
Electrical Equipment 1,700,000 Emerson Electric Co. 100,547,740 106,887,500 0.8
Retail 3,150,000 ++Federated Department Stores, Inc. 100,477,801 166,753,125 1.3
Capital Goods 2,800,000 Fluor Corporation 143,609,761 113,400,000 0.9
Automotive 4,600,000 Ford Motor Company 91,435,351 259,612,500 2.0
Automotive 2,700,000 General Motors Corporation 105,809,847 178,200,000 1.4
Insurance 2,500,000 The Hartford Financial Services
Group, Inc. 31,155,644 145,781,250 1.1
Chemicals 800,000 Imperial Chemical Industries PLC (ADR)* 40,564,999 31,800,000 0.2
Paper & Forest Products 1,400,000 International Paper Company 55,088,678 70,700,000 0.6
Retail 6,000,000 ++Kmart Corporation 72,061,012 98,625,000 0.8
Electrical Equipment 2,944,000 Koninklijke (Royal) Philips Electronics
NV (NY Registered Shares) 83,789,966 296,976,000 2.3
Insurance 1,400,000 PartnerRe Ltd. 29,498,937 52,325,000 0.4
Electronics 2,400,000 Tektronix, Inc.++++ 62,202,224 72,450,000 0.6
Telecommunications 1,664,640 ++Telefonica SA (ADR)* 63,336,735 244,910,160 1.9
Steel 3,000,000 USX--U.S. Steel Group 90,807,536 81,000,000 0.6
Chemicals 2,000,000 Union Carbide Corporation 74,349,765 97,500,000 0.8
Railroads 4,450,000 Union Pacific Corporation 200,466,281 259,490,625 2.0
Retail 4,000,000 ++Venator Group, Inc. 55,901,671 41,750,000 0.3
Banking 9,000,000 Wells Fargo Company 151,098,023 384,750,000 3.0
-------------- --------------- ------
2,098,337,978 3,383,811,160 26.3
Below-Average Price/Earnings Ratio
Insurance 4,700,000 The Allstate Corporation 56,065,674 168,612,500 1.3
Banking 2,600,000 Bank of America Corporation 73,705,440 190,612,500 1.5
Farm & Construction
Equipment 3,500,000 Caterpillar Inc. 189,458,106 210,000,000 1.6
Banking 10,000,000 Citigroup Inc. 118,385,172 475,000,000 3.7
Farm & Construction
Equipment 4,500,000 Deere & Company 109,887,059 178,312,500 1.4
Automotive 3,000,000 Delphi Automotive Systems Corporation 42,401,725 55,687,500 0.4
Photography 1,800,000 Eastman Kodak Company 106,085,437 121,950,000 0.9
Capital Goods 2,000,000 Eaton Corporation 119,193,864 184,000,000 1.4
Chemicals 2,800,000 Hercules Incorporated 75,478,956 110,075,000 0.9
Machinery 3,400,000 ITT Industries, Inc. 73,244,970 129,625,000 1.0
Machinery 3,200,000 Ingersoll-Rand Company 78,894,406 206,800,000 1.6
Tobacco 3,900,000 Philip Morris Companies Inc. 132,989,095 156,731,250 1.2
Fertilizers 1,750,000 Potash Corporation of Saskatchewan Inc. 133,923,782 90,562,500 0.7
Retail 4,000,000 Sears, Roebuck & Co. 123,523,136 178,250,000 1.4
Electrical Equipment 2,000,000 Thomas & Betts Corporation 94,512,198 94,500,000 0.8
Savings & Loans 2,800,000 Washington Mutual, Inc. 46,480,239 99,050,000 0.8
-------------- --------------- ------
1,574,229,259 2,649,768,750 20.6
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Value Percent of
Industry Held Stocks Cost (Note 1a) Net Assets
Above-Average Yield
<S> <C> <S> <C> <C> <C>
Oil--Domestic 2,000,000 Atlantic Richfield Company (ARCO) $ 116,082,519 $ 167,125,000 1.3%
Oil--International 1,882,000 BP Amoco PLC (ADR)* 68,589,619 204,197,000 1.6
Telecommunications 2,900,000 Bell Atlantic Corporation 78,567,640 189,587,500 1.5
Utilities--Electric 2,000,000 CINergy Corp. 56,772,786 64,000,000 0.5
Oil--International 2,000,000 Chevron Corporation 107,752,311 190,375,000 1.5
Utilities--Electric 1,550,000 Consolidated Edison, Inc. 36,876,250 70,137,500 0.5
Utilities--Electric 956,250 DPL Inc. 6,204,369 17,571,094 0.1
Utilities--Electric 2,200,000 Duke Energy Corporation 137,836,202 119,625,000 0.9
Chemicals 3,880,000 E.I. du Pont de Nemours and Company 174,918,406 265,052,500 2.1
Utilities--Electric 3,000,000 Entergy Corporation 69,641,133 93,750,000 0.7
Oil--International 3,900,000 Exxon Corporation 156,991,125 300,787,500 2.3
Banking 2,000,000 First Union Corporation 88,629,144 94,000,000 0.7
Telecommunications 3,300,000 GTE Corporation 109,572,500 249,975,000 1.9
Foods 1,900,000 General Mills, Inc. 97,543,255 152,712,500 1.2
Real Estate Investment
Trust 900,000 Liberty Property Trust 17,263,193 22,387,500 0.2
Real Estate Investment
Trust 500,000 Mills Corp. 9,691,442 10,843,750 0.1
Oil--International 2,900,000 Mobil Corporation 109,242,180 287,100,000 2.2
Banking 2,000,000 National City Corporation 133,497,230 131,000,000 1.0
Utilities--Electric 2,400,000 NiSource Inc. 27,387,777 61,950,000 0.5
Utilities--Electric 2,400,000 PECO Energy Company 56,812,882 100,500,000 0.8
Utilities--Electric 1,800,000 Public Service Enterprise Group
Incorporated 48,476,636 73,575,000 0.6
Oil--International 5,000,000 Royal Dutch Petroleum Company
(NY Registered Shares) 141,376,283 301,250,000 2.3
Foods/Food Processing 5,000,000 Sara Lee Corporation 121,608,902 113,437,500 0.9
Real Estate Investment
Trust 2,100,000 Simon Property Group, Inc. 43,206,889 53,287,500 0.4
Oil--International 3,000,000 Texaco Inc. 119,801,943 187,500,000 1.5
Utilities--Electric 2,900,000 Texas Utilities Company 103,140,138 119,625,000 0.9
Telecommunications 3,400,000 U S WEST, Inc. 99,578,668 199,750,000 1.6
-------------- --------------- ------
2,337,061,422 3,841,101,844 29.8
Special Situations
Telecommunications 3,800,000 AT&T Corp. 91,207,350 212,087,500 1.6
Telecommunications 4,300,000 Ameritech Corporation 149,083,661 316,050,000 2.5
Semiconductors 1,200,000 ++Applied Materials, Inc. 35,875,045 88,650,000 0.7
Savings & Loans 3,000,000 Associates First Capital Corporation
(Class A) 69,610,968 132,937,500 1.0
Pharmaceuticals 1,320,000 AstraZeneca Group PLC (ADR)* 12,980,000 51,727,500 0.4
Oil Services & Equipment 3,600,000 Halliburton Company 89,808,702 162,900,000 1.3
Information Processing 2,700,000 Hewlett-Packard Company 157,412,194 271,350,000 2.1
Information Processing 5,600,000 International Business Machines
Corporation 142,982,954 723,800,000 5.6
Semiconductors 1,000,000 Texas Instruments Incorporated 44,896,974 145,000,000 1.1
Information Processing 5,000,000 ++Unisys Corporation 53,702,547 194,687,500 1.5
-------------- --------------- ------
847,560,395 2,299,190,000 17.8
Total Stocks 6,857,189,054 12,173,871,754 94.5
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Issue Cost (Note 1a) Net Assets
Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper** $35,000,000 AT&T Corp., 4.82% due 7/13/1999 $ 34,939,081 $ 34,939,081 0.3%
Associates First Capital Corp.:
17,693,000 4.92% due 7/30/1999 17,620,459 17,620,459 0.1
40,000,000 5.02% due 8/17/1999 39,732,267 39,732,267 0.3
Bell South Capital Corp.:
17,535,000 4.90% due 8/02/1999 17,456,239 17,456,239 0.1
21,535,000 4.90% due 8/04/1999 21,432,410 21,432,410 0.2
25,000,000 CSW Credit Inc., 4.82% due 7/12/1999 24,959,833 24,959,833 0.2
26,767,000 Caterpillar Inc., 5% due 7/15/1999 26,711,235 26,711,235 0.2
Ford Motor Credit Company:
40,062,000 4.83% due 7/15/1999 39,981,375 39,981,375 0.3
22,471,000 4.90% due 7/19/1999 22,412,887 22,412,887 0.2
48,262,000 4.87% due 7/20/1999 48,131,424 48,131,424 0.4
23,942,000 4.94% due 8/09/1999 23,810,585 23,810,585 0.2
17,743,000 5.01% due 8/17/1999 17,624,477 17,624,477 0.1
12,100,000 Formosa Plastics Corporation, 4.90% due
7/21/1999 12,065,414 12,065,414 0.1
30,000,000 General Electric Capital Corp., 4.90% due
8/02/1999 29,865,250 29,865,250 0.2
39,024,000 General Motors Acceptance Corp., 5.63%
due 7/01/1999 39,017,897 39,017,897 0.3
50,000,000 International Business Machines
Corporation, 5.01% due 8/13/1999 49,693,833 49,693,833 0.4
25,000,000 Motorola Credit Corporation, 5.02% due
8/16/1999 24,836,153 24,836,153 0.2
10,000,000 Newell Rubbermaid Inc., 4.87% due
7/19/1999 9,974,297 9,974,297 0.1
15,000,000 Procter & Gamble, Inc., 5% due 8/17/1999 14,900,000 14,900,000 0.1
50,000,000 Toys 'R' Us, Inc., 5.05% due 7/23/1999 49,838,681 49,838,681 0.4
45,000,000 Xerox Capital (Europe) PLC, 4.90% due
8/13/1999 44,730,500 44,730,500 0.3
-------------- --------------- ------
609,734,297 609,734,297 4.7
US Government Agency Federal Home Loan Mortgage Corporation:
Obligations** 84,677,000 4.74% due 7/14/1999 84,519,340 84,519,340 0.6
48,000,000 4.75% due 7/22/1999 47,860,667 47,860,667 0.4
32,568,000 4.81% due 7/26/1999 32,454,862 32,454,862 0.3
42,000,000 4.91% due 8/12/1999 41,753,682 41,753,682 0.3
40,000,000 Federal National Mortgage Association,
4.75% due 7/21/1999 39,889,167 39,889,167 0.3
-------------- --------------- ------
246,477,718 246,477,718 1.9
Total Short-Term Securities 856,212,015 856,212,015 6.6
Total Investments $7,713,401,069 13,030,083,769 101.1
==============
Liabilities in Excess of Other Assets (146,473,891) (1.1)
--------------- ------
Net Assets $12,883,609,878 100.0%
=============== ======
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
++Non-income producing security.
++++Investments in companies 5% or more of whose outstanding
securities are held by the Fund (such companies are defined as
"Affiliated Companies" in section 2(a)(3) of the Investment Company
Act of 1940) are as follows:
Net Share Net Dividend
Industry Affiliate Activity Cost Income
Electronics Tektronix, Inc. 150,000 $3,569,505 $1,134,000
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Statement of Assets and Liabilities as of June 30, 1999
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$7,713,401,069)
(Note 1a) $13,030,083,769
Receivables:
Securities sold $ 20,290,871
Capital shares sold 15,848,279
Dividends 13,944,500 50,083,650
---------------
Prepaid registration fees and other assets (Note 1d) 164,715
---------------
Total assets 13,080,332,134
---------------
Liabilities: Payables:
Capital shares redeemed 162,394,320
Securities purchased 18,160,075
Distributor (Note 2) 5,237,824
Investment adviser (Note 2) 4,652,997
Custodian bank (Note 1h) 2,200,345 192,645,561
---------------
Accrued expenses and other liabilities 4,076,695
---------------
Total liabilities 196,722,256
---------------
Net Assets: Net assets $12,883,609,878
===============
Net Assets Class A Shares of Common Stock, $0.10 par value, 400,000,000
Consist of: shares authorized $ 12,635,436
Class B Shares of Common Stock, $0.10 par value, 400,000,000
shares authorized 11,314,481
Class C Shares of Common Stock, $0.10 par value, 200,000,000
shares authorized 1,263,079
Class D Shares of Common Stock, $0.10 par value, 200,000,000
shares authorized 4,546,504
Paid-in capital in excess of par 6,711,717,377
Undistributed investment income--net 81,609,148
Undistributed realized capital gains on investments and foreign
currency transactions--net 743,840,888
Unrealized appreciation on investments and foreign currency
transactions--net 5,316,682,965
---------------
Net assets $12,883,609,878
===============
Net Asset Value: Class A--Based on net assets of $5,521,623,292 and 126,354,364
shares outstanding $ 43.70
===============
Class B--Based on net assets of $4,846,702,228 and 113,144,805
shares outstanding $ 42.84
===============
Class C--Based on net assets of $535,132,028 and 12,630,794
shares outstanding $ 42.37
===============
Class D--Based on net assets of $1,980,152,330 and 45,465,044
shares outstanding $ 43.55
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended June 30, 1999
<S> <S> <C> <C>
Investment Dividends (net of $2,458,198 foreign withholding tax) $ 239,194,808
Income Interest and discount earned 68,585,167
(Notes 1b & 1c): Other 571,629
---------------
Total income 308,351,604
---------------
Expenses: Investment advisory fees (Note 2) $ 49,616,814
Account maintenance and distribution fees--Class B (Note 2) 46,490,232
Transfer agent fees--Class A (Note 2) 7,259,784
Transfer agent fees--Class B (Note 2) 6,998,628
Account maintenance and distribution fees--Class C (Note 2) 5,049,032
Account maintenance fees--Class D (Note 2) 4,408,011
Transfer agent fees--Class D (Note 2) 2,370,890
Transfer agent fees--Class C (Note 2) 812,660
Accounting services (Note 2) 522,101
Printing and shareholder reports 507,014
Custodian fees 417,871
Registration fees (Note 1d) 177,824
Professional fees 158,450
Directors' fees and expenses 49,408
Pricing fees 17,509
Other 131,310
---------------
Total expenses 124,987,538
---------------
Investment income--net 183,364,066
---------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 861,011,402
(Loss) on Foreign currency transactions--net (19,131) 860,992,271
Investments--Net ---------------
(Notes 1c, 1e, Change in unrealized appreciation on:
1f & 3): Investments--net 540,925,847
Foreign currency transactions--net 265 540,926,112
--------------- ---------------
Net Increase in Net Assets Resulting from Operations $ 1,585,282,449
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 1999 1998
<S> <S> <C> <C>
Operations: Investment income--net $ 183,364,066 $ 196,693,190
Realized gain on investments and foreign currency
transactions--net 860,992,271 950,656,787
Change in unrealized appreciation on investments and
foreign currency transactions--net 540,926,112 1,196,444,669
--------------- ---------------
Net increase in net assets resulting from operations 1,585,282,449 2,343,794,646
--------------- ---------------
Dividends & Investment income--net:
Distributions to Class A (115,384,648) (104,991,974)
Shareholders Class B (52,615,335) (48,188,281)
(Note 1g): Class C (5,952,343) (4,614,624)
Class D (31,919,617) (20,742,423)
Realized gain on investments--net:
Class A (342,278,197) (298,730,147)
Class B (297,574,541) (254,752,228)
Class C (32,811,336) (22,962,880)
Class D (104,731,011) (64,611,806)
--------------- ---------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (983,267,028) (819,594,363)
--------------- ---------------
Capital Share Net increase (decrease) in net assets derived from
Transactions capital share transactions (856,068,652) 1,378,654,564
(Note 4): --------------- ---------------
Net Assets: Total increase (decrease) in net assets (254,053,231) 2,902,854,847
Beginning of year 13,137,663,109 10,234,808,262
--------------- ---------------
End of year* $12,883,609,878 $13,137,663,109
=============== ===============
<FN>
*Undistributed investment income--net (Note 1i) $ 81,609,148 $ 104,136,156
=============== ===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
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: 1999++ 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 41.55 $ 36.50 $ 30.22 $ 26.44 $ 23.17
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .76 .83 .81 .80 .74
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.61 7.23 7.66 4.31 4.01
---------- ---------- ---------- ---------- ----------
Total from investment operations 5.37 8.06 8.47 5.11 4.75
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.81) (.78) (.80) (.76) (.69)
Realized gain on investments--net (2.41) (2.23) (1.39) (.57) (.79)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.22) (3.01) (2.19) (1.33) (1.48)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 43.70 $ 41.55 $ 36.50 $ 30.22 $ 26.44
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.54% 23.23% 29.95% 19.92% 21.67%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .55% .54% .55% .56% .59%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.95% 2.14% 2.54% 2.88% 3.19%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $5,521,623 $5,888,853 $4,921,834 $3,587,558 $2,834,652
========== ========== ========== ========== ==========
Portfolio turnover 15.52% 17.79% 13.00% 13.94% 11.69%
========== ========== ========== ========== ==========
<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, 1999
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: 1999++ 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 40.78 $ 35.89 $ 29.76 $ 26.08 $ 22.87
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .36 .43 .48 .53 .53
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.53 7.11 7.55 4.23 3.93
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.89 7.54 8.03 4.76 4.46
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.42) (.42) (.51) (.51) (.46)
Realized gain on investments--net (2.41) (2.23) (1.39) (.57) (.79)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.83) (2.65) (1.90) (1.08) (1.25)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 42.84 $ 40.78 $ 35.89 $ 29.76 $ 26.08
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.40% 21.97% 28.61% 18.71% 20.45%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.57% 1.56% 1.57% 1.58% 1.61%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .93% 1.13% 1.53% 1.86% 2.16%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $4,846,702 $4,976,004 $4,088,755 $3,288,963 $2,464,248
========== ========== ========== ========== ==========
Portfolio turnover 15.52% 17.79% 13.00% 13.94% 11.69%
========== ========== ========== ========== ==========
<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, 1999
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. 1994++++ to
For the Year Ended June 30, June 30,
Increase (Decrease) in Net Asset Value: 1999++ 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 40.39 $ 35.59 $ 29.56 $ 25.98 $ 22.92
Performance: ---------- ---------- ---------- ---------- ----------
Investment income--net .35 .43 .47 .55 .44
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.48 7.04 7.49 4.18 3.05
---------- ---------- ---------- ---------- ----------
Total from investment operations 4.83 7.47 7.96 4.73 3.49
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.44) (.44) (.54) (.58) (.33)
Realized gain on investments--net (2.41) (2.23) (1.39) (.57) (.10)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (2.85) (2.67) (1.93) (1.15) (.43)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 42.37 $ 40.39 $ 35.59 $ 29.56 $ 25.98
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 13.36% 21.98% 28.60% 18.69% 15.59%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.58% 1.57% 1.58% 1.59% 1.66%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .92% 1.12% 1.51% 1.83% 2.09%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in
Data: thousands) $ 535,132 $ 538,104 $ 337,828 $ 211,787 $ 74,334
========== ========== ========== ========== ==========
Portfolio turnover 15.52% 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, 1999
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. 1994++++ to
For the Year Ended June 30, June 30,
Increase (Decrease) in Net Asset Value: 1999++ 1998++ 1997++ 1996 1995
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 41.42 $ 36.42 $ 30.16 $ 26.41 $ 23.19
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .65 .74 .73 .76 .50
Realized and unrealized gain on
investments and foreign currency
transactions--net 4.61 7.19 7.66 4.27 3.17
---------- ---------- ---------- ---------- ----------
Total from investment operations 5.26 7.93 8.39 5.03 3.67
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.72) (.70) (.74) (.71) (.35)
Realized gain on investments--net (2.41) (2.23) (1.39) (.57) (.10)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.13) (2.93) (2.13) (1.28) (.45)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $ 43.55 $ 41.42 $ 36.42 $ 30.16 $ 26.41
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 14.25% 22.89% 29.65% 19.61% 16.23%+++
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses .80% .79% .80% .81% .87%*
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.69% 1.89% 2.28% 2.61% 2.88%*
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in
Data: thousands) $1,980,153 $1,734,702 $ 886,391 $ 434,396 $ 203,033
========== ========== ========== ========== ==========
Portfolio turnover 15.52% 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, 1999
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's financial statements are
prepared in accordance with generally accepted accounting
principles, which may require the use of management accruals and
estimates. The Fund offers four classes of shares under the Merrill
Lynch Select Pricing SM System. Shares of Class A and Class D are
sold with a front-end sales charge. Shares of Class B and Class C
may be subject to a contingent deferred sales charge. All classes of
shares have identical voting, dividend, liquidation and other rights
and the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and distribution expenditures. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--Portfolio securities that 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 that 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. In
the case of options traded in the over-the-counter market, valuation
is 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).
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
NOTES TO FINANCIAL STATEMENTS (continued)
Written options are non-income producing investments.
(f) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates on
investments.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) Custodian bank--The Fund recorded an amount payable to the
custodian bank reflecting an overnight overdraft resulting from a
failed trade that settled the next day.
(i) Reclassification--Generally accepted accounting principles
require that certain components of net assets be adjusted to reflect
permanent differences between financial and tax reporting.
Accordingly, current year's permanent book/tax differences of
$19,131 have been reclassified between undistributed net realized
capital gains and undistributed net investment income. These
reclassifications have no effect on net assets or net asset values
per share.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor ("MLFD" or the "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 Incorporated ("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, 1999, 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 $25,518 $320,804
Class D $66,060 $956,648
For the year ended June 30, 1999, MLPF&S received contingent
deferred sales charges of $6,107,531 and $193,976 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$4,174 relating to transactions subject to front-end sales charge
waivers in Class D Shares.
In addition, MLPF&S received $194,500 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended June 30, 1999.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 1999 were $1,708,124,508 and
$2,112,166,648, respectively.
Net realized gains (losses) for the year ended June 30, 1999 and net
unrealized gains as of June 30, 1999 were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $861,001,925 $5,316,682,700
Short-term investments 9,477 --
Foreign currency
transactions (19,131) 265
------------ --------------
Total $860,992,271 $5,316,682,965
============ ==============
As of June 30, 1999, net unrealized appreciation for Federal income
tax purposes aggregated $5,314,365,373, of which $5,539,206,908
related to appreciated securities and $224,841,535 related to
depreciated securities. At June 30, 1999, the aggregate cost of
investments for Federal income tax purposes was $7,715,718,396.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $(856,068,652) and $1,378,654,564 for the years
ended June 30, 1999 and June 30, 1998, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares For the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 20,196,939 $ 780,540,464
Shares issued to share-
holders in reinvestment of
dividends and distributions 11,153,781 409,873,748
------------- --------------
Total issued 31,350,720 1,190,414,212
Shares redeemed (46,729,482) (1,810,824,259)
------------- --------------
Net decrease (15,378,762) $ (620,410,047)
============= ==============
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 share-
holders 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 B Shares
For the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 27,355,260 $1,040,580,495
Shares issued to share-
holders in reinvestment of
dividends and distributions 8,668,007 313,408,370
------------- --------------
Total issued 36,023,267 1,353,988,865
Automatic conversion of
shares (6,408,614) (245,296,730)
Shares redeemed (38,483,558) (1,454,712,411)
------------- --------------
Net decrease (8,868,905) $ (346,020,276)
============= ==============
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 share-
holders 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 C Shares
For the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 3,468,691 $ 131,902,536
Shares issued to share-
holders in reinvestment of
dividends and distributions 968,946 34,651,917
------------- --------------
Total issued 4,437,637 166,554,453
Shares redeemed (5,130,823) (190,784,222)
------------- --------------
Net decrease (693,186) $ (24,229,769)
============= ==============
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
NOTES TO FINANCIAL STATEMENTS (concluded)
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
============= ==============
Class D Shares
For the Year Dollar
Ended June 30, 1999 Shares Amount
Shares sold 8,724,946 $ 335,847,226
Automatic conversion of
shares 6,315,960 245,296,730
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,334,999 122,301,439
------------- --------------
Total issued 18,375,905 703,445,395
Shares redeemed (14,787,957) (568,853,955)
------------- --------------
Net increase 3,587,948 $ 134,591,440
============= ==============
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
============= ==============
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
<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, 1999, 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,
1999 by correspondence with the custodian and broker. 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, 1999, 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 9, 1999
</AUDIT-REPORT>
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, 1999:
<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: 8/05/98 8/13/98 $.386836 $.108532 $.495368 $1.985110
12/04/98 12/14/98 $.312420 $.081326 $.393746 $ .347588
Class B Shares: 8/05/98 8/13/98 $.233952 $.065638 $.299590 $1.985110
12/04/98 12/14/98 $.163223 $.042488 $.205711 $ .347588
Class C Shares: 8/05/98 8/13/98 $.243818 $.068407 $.312225 $1.985110
12/04/98 12/14/98 $.162510 $.042303 $.204813 $ .347588
Class D Shares: 8/05/98 8/13/98 $.351939 $.098741 $.450680 $1.985110
12/04/98 12/14/98 $.276019 $.071850 $.347869 $ .347588
<FN>
*All of the long-term capital gains distributions are subject to the
20% tax rate.
</TABLE>
The domestic qualifying ordinary income qualifies for the dividends
received deduction for corporations.
Please retain this information for your records.
Merrill Lynch Basic Value Fund, Inc.
June 30, 1999
PORTFOLIO INFORMATION (unaudited)
As of June 30, 1999
Percent of
Ten Largest Stock Holdings Net Assets
International Business Machines
Corporation 5.6%
Citigroup Inc. 3.7
Wells Fargo Company 3.0
Ameritech Corporation 2.5
Royal Dutch Petroleum Company
(NY Registered Shares) 2.3
Exxon Corporation 2.3
Koninklijke (Royal) Philips Electronics
NV (NY Registered Shares) 2.3
Mobil Corporation 2.2
Hewlett-Packard Company 2.1
E.I. du Pont de Nemours and Company 2.1
Portfolio Changes for the Quarter
Ended June 30, 1999
Additions
Delphi Automotive Systems Corporation
Emerson Electric Co.
First Union Corporation
Sara Lee Corporation
*Telefonica Publicidad e Informacion, SA
Deletions
Bristol-Myers Squibb Company
Irvine Apartment Communities, Inc.
The Seagram Company Ltd.
*Telefonica Publicidad e Informacion, SA
[FN]
*Added and deleted in the same quarter.
