MERRILL LYNCH
BASIC VALUE
FUND, INC.
FUND LOGO
Annual Report
June 30, 2000
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
Economic slowing has finally arrived in the United States. As a
result, significant increases in inflation and interest rates appear
less likely, which usually is good news for financial assets. On the
other hand, profit growth is likely to decelerate from unsustainably
high levels.
Investor sentiment changed significantly during the first half of
2000. In general, concerns centered on economic growth being too
strong. A recent inflection may indicate healthy, but slower
economic and profit growth in the second half of the year. Following
potential uncertainty during the adjustment period, the
sustainability of the economic expansion could buoy investor
expectations.
During the first half of the year, equity investors switched gears
from an excessive focus on momentum, which was prevalent during most
of 1999. This transition to a more balanced focus on both valuation
and earnings growth, which began in March, can provide a healthier
investment backdrop. However, this change has caused deterioration
in many extremely highly valued securities with speculative
fundamentals and improvement in previously neglected, solidly
performing companies.
In the coming months, we believe investors are likely to focus on
continuing cyclical economic developments as well as the
presidential election campaign. Cyclical concerns remain increasing
labor costs as well as volatile, but rising, commodity prices.
Federal budget policy, social security funding options and trade
policy are likely to shape investor interest in the outcome of the
election. Generally, financial markets have tended to do better
under divided governments, preferring legislative gridlock. In part,
US markets historically have done well as a result of fiscal policy
restraint and could react poorly to any significant reversal of that
trend.
Despite near-term uncertainties surrounding economic slowdown,
earnings growth and valuation levels, long-term forces supporting US
economic and financial market leadership seem to remain in place.
Chief among these are continued heavy investments in technology,
telecommunications and other efficiency-enhancing projects, thus
potentially enabling productivity-led growth.
Portfolio Matters
Our overall philosophy is to invest in companies whose valuations
predominantly meet one of four rather strict criteria. We will
consider a stock whose price/earnings ratio is roughly two-thirds or
below the overall stock market, a stock whose price to cash flow is
below that of the market, a stock whose price/book ratio is half of
the overall market and a stock that has a dividend yield that is
greater than the overall market. The caveat to the rigorous
fundamental analysis we employ is that, in general, we are
contrarian thinkers. We seek quality companies with great management
teams whose stock is temporarily out of favor in the market for one
reason or another, perhaps as a result of a short-term earnings
shortfall or a product transition or a restructuring situation.
Since the advent of the Internet, there has been widespread debate
of new economy versus old economy. If old economy means investing in
companies that have measurable revenues, tangible cash flow,
meaningful earnings and real customers, then we are guilty of being
old economy. Having said that, the focus of this Fund is not about
buying only inexpensive stocks whose companies' sole fortunes are
tied to the economic cycle. The Internet is real and has created a
new mechanism for companies to do business and consumers to access
information. We want to make sure that our holdings understand the
vital importance of the Internet and can use it to better grow their
revenues and earnings. We consider ourselves to be new old economy
in that respect. We do believe that in the new economy companies
have to have a viable business model that allows them to reinvest in
their business rather than solely relying on the public markets for
access to capital. Despite what many would have us believe,
earnings, cash flow and revenues do matter. Companies that can
demonstrate successful business models will be long-term winners.
This is not a fund that invests in fly-by-night companies whose
stock market valuations are exorbitant. This is a value fund that
invests in great companies with reasonable valuations.
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
We were very active in the first six months of the year. We
eliminated many positions in the Fund that were either very small or
had limited growth expectations. These included American Home
Products Corporation, Bethlehem Steel Corporation, Darden
Restaurants, Inc., Imperial Chemical Industries PLC, Kmart
Corporation, PartnerRe Ltd., Venator Group, Inc., Cinergy Corp.,
Consolidated Edison, Inc., Entergy Corporation, Liberty Property
Trust, National City Corporation, NiSource Inc., Public Service
Enterprise Group Incorporated, Simon Property Group, Inc., Texas
Utilities Company and AstraZeneca Group PLC. We sold other issues as
we grew worried about a slowing economy in the face of a series of
Federal Reserve Board interest rate increases. These included
General Motors Corporation, USX-U.S. Steel Group, Union Carbide
Corporation and ITT Industries, Inc. We sold our position in Philip
Morris Companies Inc. as we grew weary of the never-ending legal
battles facing the company. We eliminated Chevron Corporation and
Texaco Inc. as we took advantage of lofty stock prices in the face
of higher oil prices. We sold Texas Instruments Incorporated
following the stock's meteoric rise as the semiconductor industry
experienced great growth. Our holdings in Atlantic Richfield Company
were merged into another Fund holding, BP Amoco PLC, following a
merger of the two companies. On July 3, 2000, our holdings of GTE
Corporation were merged into Bell Atlantic Corporation after the two
companies merged. Our holdings in U S West took on the new name
Quest Communications following that merger after the close of the
period.
On the buy side, we initiated positions in Abbott Laboratories,
Bristol-Myers Squibb Company, Fox Entertainment Group, Inc.,
National Semiconductor Corporation, Northrop Grumman Corporation,
PepsiCo, Inc., Phelps Dodge Corporation, The Procter & Gamble
Company, Unocal Corporation, USA Networks, Inc., WorldCom Inc. and
Xerox Corporation.
To highlight a few, we purchased Bristol-Myers Squibb following the
company's delayed launch of a hypertension drug and $30 billion
market cap drop. We believe this decline was overdone for a drug
that was supposed to add only 1% growth to the company's top line.
We bought Procter & Gamble following the company's second earnings
disappointment at 17 times current earnings estimates. We believe
much of the bad news is reflected in the stock and believe new
management will fix the current problems of this leading consumer
product company.
WorldCom, Inc.'s stock has languished following its announcement of
a merger with Sprint Corp. There has been wide speculation as to
whether the US Justice Department would allow the merger because of
antitrust issues. WorldCom is the leading Internet backbone company
and the stock has traded down to a discount to the market on a
price/earnings ratio despite the company's earnings growth history.
Despite what happens with a potential Sprint acquisition, we believe
the stock will do better once there is clarity of the situation.
Fiscal Year in Review
The 12 months ended June 30, 2000 were difficult for the Fund. Our
holdings in many basic industry and capital goods stocks inhibited
performance as these stocks underperformed as fears of a pending
economic slowdown weighed on these economically sensitive companies.
As a result, the Fund's Class A, Class B, Class C and Class D Shares
had declines of -5.98%, -6.94%, -6.95% and -6.19%, respectively, for
the year ended June 30, 2000, significantly below that of the
Standard & Poor's (S&P) 500 Index. (Fund results shown do not
reflect sales charges and would be lower if sales charges were
included. Complete performance information can be found on pages 4-6
of this report to shareholders.) However, in the context of how we
manage the Fund, the Fund's returns were roughly equal with that of
the S&P/Barra Value Index, which had a return of -5.11% for the same
12-month period. Since we are value managers and are style
consistent, comparing our performance to a value benchmark is highly
appropriate. We remain confident that the strategies put in place
can provide for improved investment performance in the upcoming
months.
In Conclusion
Value investing has gone through a difficult time in the last few
years as the advent of the Internet has led to an infatuation with
technology and Internet companies, in some cases regardless of
valuation. We think the period between March and May, when the
NASDAQ Composite lost 40% of its value, highlighted the importance
of having a properly balanced portfolio. In fact, during this
volatile three-month stretch for the NASDAQ, the Fund actually rose
15% following a difficult first two months of the year. Value
investing, which has been around for decades, will not disappear
because of the Internet. We believe investors should not have all of
their eggs in any one basket and that an investment in the Fund can
be a good tool for achieving a balanced portfolio. We thank you for
your investment in Merrill Lynch Basic Value Fund, Inc., and we look
forward to serving your investment needs in the months and years
ahead.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Kevin M. Rendino)
Kevin M. Rendino
Senior Vice President and Portfolio Manager
August 8, 2000
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
M. Colyer Crum, Director
Laurie Simon Hodrick, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Fred G. Weiss, Director
Arthur Zeikel, Director
Robert C. Doll, Jr., Senior Vice President
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, 2000
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% contin-gent 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 re-
investment 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 6/30/00 - 5.98% -10.92%
Five Years Ended 6/30/00 +15.64 +14.40
Ten Years Ended 6/30/00 +14.40 +13.78
*Maximum sales charge is 5.25%. (Prior to October 21, 1994, Class A
Shares were offered at a higher sales charge. Thus, actual returns
would have been lower than shown for the ten-year period.)
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/00 - 6.94% -10.31%
Five Years Ended 6/30/00 +14.47 +14.47
Ten Years Ended 6/30/00 +13.24 +13.24
*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 6/30/00 - 6.95% - 7.79%
Five Years Ended 6/30/00 +14.45 +14.45
Inception (10/21/94)
through 6/30/00 +15.49 +15.49
*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 6/30/00 - 6.19% -11.12%
Five Years Ended 6/30/00 +15.35 +14.12
Inception (10/21/94)
through 6/30/00 +16.40 +15.30
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment
A line graph depicting the growth of ML Basic Value Fund, Inc.'s
Class A and Class B Shares compared to growth of the S&P 500
Index++++. Beginning and ending values are:
6/90 6/00
ML Basic Value Fund, Inc.*--
Class A Shares* $10,000 $36,372
ML Basic Value Fund, Inc.*--
Class B Shares $10,000 $34,665
S&P 500 Index++++ $10,000 $51,461
A line graph depicting the growth of ML Basic Value Fund, Inc.'s
Class C and Class D Shares compared to growth of the S&P 500
Index++++. Beginning and ending values are:
6/90 6/00
ML Basic Value Fund, Inc.*--
Class C Shares* $10,000 $22,703
ML Basic Value Fund, Inc.*--
Class D Shares $10,000 $22,494
S&P 500 Index++++ $10,000 $34,759
*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, 2000
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
Ten Years/
6 Month 12 Month Since Inception
As of June 30, 2000 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Basic Value Fund Class A Shares* -2.70% -5.98% +283.85%
ML Basic Value Fund Class B Shares* -3.20 -6.94 +246.62
ML Basic Value Fund Class C Shares* -3.21 -6.95 +127.03
ML Basic Value Fund Class D Shares* -2.81 -6.19 +137.38
Dow Jones Industrial Average** -8.47 -3.32 +364.01/+201.67
Standard & Poor's 500 Index** -0.42 +7.25 +414.61/+247.58
*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.
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Percent of
Industry Held Stocks Cost Value Net Assets
Low Price-to-Book Value
<S> <C> <S> <C> <C> <C>
Communications 5,000,000 AT&T Corp. $ 143,844,217 $ 158,125,000 1.6%
Insurance 3,300,000 American General Corporation 102,908,091 201,300,000 2.0
Aerospace & Defense 3,800,000 The Boeing Company 127,722,727 158,887,500 1.6
Farm Equipment 4,300,000 Deere & Company 99,032,229 159,100,000 1.6
Oil Services & Equipment 4,450,000 Diamond Offshore Drilling, Inc. 175,890,570 156,306,250 1.6
Engineering & Construction 3,500,000 Fluor Corporation 165,573,707 110,687,500 1.1
Automotive 4,900,000 Ford Motor Company 104,768,279 210,700,000 2.1
Broadcasting/Media 4,550,000 ++Fox Entertainment Group, Inc. (Class A) 120,130,690 138,206,250 1.4
Insurance 3,700,000 The Hartford Financial Services Group,
Inc.++++ 73,013,088 206,968,750 2.1
Paper & Forest Products 3,200,000 International Paper Company 129,954,457 95,400,000 1.0
Electronics 9,000,000 Koninklijke (Royal) Philips Electronics
NV (NY Registered Shares) 51,550,688 427,500,000 4.3
Aerospace & Defense 6,400,000 Lockheed Martin Corporation 138,044,987 158,800,000 1.6
Aerospace & Defense 450,000 Northrop Grumman Corporation 21,292,847 29,812,500 0.3
Metals & Mining 2,100,000 Phelps Dodge Corporation 95,641,508 78,093,750 0.8
Fertilizers 1,021,100 Potash Corporation of Saskatchewan Inc. 73,621,324 56,351,956 0.6
Electronics 2,100,000 Tektronix, Inc. 54,233,196 155,400,000 1.6
Telecommunications 4,700,000 ++Telefonica SA (ADR)* 65,444,274 301,093,750 3.0
Entertainment 212,500 ++USA Networks, Inc. 4,568,750 4,595,313 0.0
Railroads 4,050,000 Union Pacific Corporation 179,096,186 150,609,375 1.5
Banking 7,800,000 Wells Fargo Company 119,205,680 302,250,000 3.1
-------------- -------------- ------
2,045,537,495 3,260,187,894 32.9
Below-Average Price/Earnings Ratio
Insurance 5,168,500 The Allstate Corporation 65,722,737 114,999,125 1.2
Financial Services 5,200,000 Associates First Capital Corporation
(Class A) 115,855,432 116,025,000 1.2
Banking 4,200,000 Bank One Corporation 131,464,321 111,562,500 1.1
Banking 1,900,000 Bank of America Corporation 37,962,925 81,700,000 0.8
Farm Equipment 3,000,000 Caterpillar Inc. 157,509,309 101,625,000 1.0
Banking 7,600,000 Citigroup Inc. 56,214,538 457,900,000 4.6
Information Processing 7,000,000 Compaq Computer Corporation 190,440,541 178,937,500 1.8
Automotive 6,694,000 Delphi Automotive Systems Corporation 103,994,091 97,481,375 1.0
Photography 2,700,000 Eastman Kodak Company 160,668,501 160,650,000 1.6
Diversified 1,825,000 Eaton Corporation 102,135,833 122,275,000 1.2
Retail 2,400,000 ++Federated Department Stores, Inc. 70,969,299 81,000,000 0.8
Chemicals 4,400,000 Hercules Incorporated 110,934,635 61,875,000 0.6
Machinery 3,000,000 Ingersoll-Rand Company 72,896,246 120,750,000 1.2
Semiconductors 750,000 ++National Semiconductor Corporation 35,913,915 42,562,500 0.5
Household Products 2,300,000 The Procter & Gamble Company 131,746,154 131,675,000 1.3
Retail 4,000,000 Sears, Roebuck & Co. 114,263,422 130,500,000 1.3
Electrical Equipment 4,125,000 Thomas & Betts Corporation++++ 153,630,183 78,890,625 0.8
Information Processing 6,100,000 ++Unisys Corporation 83,429,514 88,831,250 0.9
Energy--Exploration & 4,107,000 Unocal Corporation 113,421,402 136,044,375 1.4
Production
Automotive 641,572 ++Visteon Corporation 4,570,355 7,779,057 0.1
Savings & Loans 2,000,000 Washington Mutual, Inc. 23,287,541 57,750,000 0.6
Telecommunications 3,900,000 ++WorldCom, Inc. 170,527,335 178,912,500 1.8
Information Processing 3,300,000 Xerox Corporation 91,258,822 68,475,000 0.7
-------------- -------------- ------
2,298,817,051 2,728,200,807 27.5
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Shares Percent of
Industry Held Stocks Cost Value Net Assets
Above-Average Yield
<S> <C> <S> <C> <C> <C>
Hospital Supplies 1,700,000 Abbott Laboratories $ 56,149,504 $ 75,756,250 0.8%
Oil--International 4,000,000 BP Amoco PLC (ADR)* 92,643,947 226,250,000 2.3
Telecommunications 2,000,000 ++Bell Atlantic Corporation 50,178,712 101,625,000 1.0
Pharmaceuticals 2,700,000 Bristol-Myers Squibb Company 135,126,488 157,275,000 1.6
Utilities--Electric 2,000,000 Duke Energy Corporation 123,349,610 112,750,000 1.1
Chemicals 3,600,000 E.I. du Pont de Nemours and Company 172,769,333 157,500,000 1.6
Electrical Equipment 2,600,000 Emerson Electric Co. 149,085,999 156,975,000 1.6
Oil--International 6,000,000 Exxon Mobil Corporation 176,911,597 471,000,000 4.7
Banking 4,500,000 First Union Corporation 181,748,562 111,656,250 1.1
Telecommunications 3,300,000 GTE Corporation 111,511,851 205,425,000 2.1
Foods 3,900,000 General Mills, Inc. 101,788,117 149,175,000 1.5
Utilities--Electric 1,400,000 PECO Energy Company 29,627,853 56,437,500 0.6
Beverages 1,200,000 PepsiCo, Inc. 46,879,406 53,325,000 0.5
Oil--International 4,000,000 Royal Dutch Petroleum Company
(NY Registered Shares) 86,434,663 246,250,000 2.5
Telecommunications 5,000,000 SBC Communications Inc. 118,431,865 216,250,000 2.2
Foods/Food Processing 6,400,000 Sara Lee Corporation 148,106,121 123,600,000 1.3
Telecommunications 1,750,000 U S WEST, Inc. 42,747,635 150,062,500 1.5
-------------- -------------- ------
1,823,491,263 2,771,312,500 28.0
Special Situations
Capital Equipment 762,800 ++Agilent Technologies, Inc. 24,217,155 56,256,500 0.6
Oil Services & Equipment 4,000,000 Halliburton Company 104,403,692 188,750,000 1.9
Computer Hardware 1,700,000 Hewlett-Packard Company 75,547,883 212,287,500 2.1
Computer Hardware 4,100,000 International Business Machines
Corporation 76,723,695 449,206,250 4.5
Chemicals 2,500,000 Pharmacia Corporation 89,145,267 129,218,750 1.3
-------------- -------------- ------
370,037,692 1,035,719,000 10.4
Total Stocks 6,537,883,501 9,795,420,201 98.8
Face
Amount Issue
Short-Term Securities
Commercial Paper** $100,025,000 Associates Corporation of North America,
7% due 7/03/2000 99,966,652 99,966,652 1.0
Total Short-Term Securities 99,966,652 99,966,652 1.0
Total Investments (Cost--$6,637,850,153) $6,637,850,153 9,895,386,853 99.8
==============
Other Assets Less Liabilities 14,990,219 0.2
-------------- ------
Net Assets $9,910,377,072 100.0%
============== ======
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate 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
Insurance The Hartford 1,200,000 $41,857,444 $2,644,000
Financial
Services Group, Inc.
Electrical Thomas & Betts
Equipment Corporation 2,125,000 $59,117,985 $2,749,656
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of June 30, 2000
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$6,637,850,153) $ 9,895,386,853
Cash 94,766
Receivables:
Securities sold $ 65,861,428
Dividends 15,420,502
Capital shares sold 13,598,838 94,880,768
---------------
Prepaid registration fees and other assets 181,337
---------------
Total assets 9,990,543,724
---------------
Liabilities: Payables:
Capital shares redeemed 41,608,208
Securities purchased 27,144,076
Distributor 3,613,432
Investment adviser 3,221,058 75,586,774
---------------
Accrued expenses and other liabilities 4,579,878
---------------
Total liabilities 80,166,652
---------------
Net Assets: Net assets $ 9,910,377,072
===============
Net Assets Class A Shares of Common Stock, $.10 par value, 400,000,000
Consist of: shares authorized $ 11,924,260
Class B Shares of Common Stock, $.10 par value, 400,000,000
shares authorized 9,098,949
Class C Shares of Common Stock, $.10 par value, 200,000,000
shares authorized 1,151,639
Class D Shares of Common Stock, $.10 par value, 200,000,000
shares authorized 4,770,781
Paid-in capital in excess of par 5,740,179,999
Undistributed investment income--net 62,008,656
Undistributed realized capital gains on investments and
foreign currency transactions--net 823,706,088
Unrealized appreciation on investments--net 3,257,536,700
---------------
Net assets $ 9,910,377,072
===============
Net Asset Value: Class A--Based on net assets of $4,426,635,080 and 119,242,595
shares outstanding $ 37.12
===============
Class B--Based on net assets of $3,305,961,055 and 90,989,493
shares outstanding $ 36.33
===============
Class C--Based on net assets of $413,239,981 and 11,516,392
shares outstanding $ 35.88
===============
Class D--Based on net assets of $1,764,540,956 and 47,707,813
shares outstanding $ 36.99
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended June 30, 2000
<S> <S> <C> <C>
Investment Dividends (net of $2,231,224 foreign withholding tax) $ 232,472,261
Income: Interest and discount earned 23,637,423
Other 686,978
---------------
Total income 256,796,662
---------------
Expenses: Investment advisory fees $ 45,982,909
Account maintenance and distribution fees--Class B 41,246,049
Transfer agent fees--Class A 6,729,741
Transfer agent fees--Class B 6,400,026
Account maintenance and distribution fees--Class C 4,769,630
Account maintenance fees--Class D 4,663,337
Transfer agent fees--Class D 2,514,699
Transfer agent fees--Class C 783,592
Accounting services 772,649
Custodian fees 413,576
Printing and shareholder reports 359,653
Professional fees 196,328
Registration fees 195,070
Pricing fees 49,549
Directors' fees and expenses 43,179
Other 202,368
---------------
Total expenses 115,322,355
---------------
Investment income--net 141,474,307
---------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 1,093,573,875
(Loss) on Foreign currency transactions--net (5,437) 1,093,568,438
Investments & ---------------
Foreign Currency Change in unrealized appreciation on:
Transactions--Net: Investments--net (2,059,146,000)
Foreign currency transactions--net (265) (2,059,146,265)
--------------- ---------------
Net Decrease in Net Assets Resulting from Operations $ (824,103,520)
===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year
Ended June 30,
Increase (Decrease) in Net Assets: 2000 1999
<S> <S> <C> <C>
Operations: Investment income--net $ 141,474,307 $ 183,364,066
Realized gain on investments and foreign currency
transactions--net 1,093,568,438 860,992,271
Change in unrealized appreciation on investments and
foreign currency transactions--net (2,059,146,265) 540,926,112
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations (824,103,520) 1,585,282,449
--------------- ---------------
Dividends & Investment income--net:
Distributions to Class A (93,013,200) (115,384,648)
Shareholders: Class B (34,515,924) (52,615,335)
Class C (4,093,536) (5,952,343)
Class D (29,446,702) (31,919,617)
Realized gain on investments--net:
Class A (433,005,279) (342,278,197)
Class B (379,827,183) (297,574,541)
Class C (43,240,165) (32,811,336)
Class D (157,636,048) (104,731,011)
--------------- ---------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (1,174,778,037) (983,267,028)
--------------- ---------------
Capital Share Net decrease in net assets derived from capital share
Transactions: transactions (974,351,249) (856,068,652)
--------------- ---------------
Net Assets: Total decrease in net assets (2,973,232,806) (254,053,231)
Beginning of year 12,883,609,878 13,137,663,109
--------------- ---------------
End of year* $ 9,910,377,072 $12,883,609,878
=============== ===============
*Undistributed investment income--net $ 62,008,656 $ 81,609,148
=============== ===============
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived Class A
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 43.70 $ 41.55 $ 36.50 $ 30.22 $ 26.44
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .66 .76 .83 .81 .80
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (3.14) 4.61 7.23 7.66 4.31
---------- ---------- ---------- ---------- ----------
Total from investment operations (2.48) 5.37 8.06 8.47 5.11
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.72) (.81) (.78) (.80) (.76)
Realized gain on investments--net (3.38) (2.41) (2.23) (1.39) (.57)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (4.10) (3.22) (3.01) (2.19) (1.33)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 37.12 $ 43.70 $ 41.55 $ 36.50 $ 30.22
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (5.98%) 14.54% 23.23% 29.95% 19.92%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .56% .55% .54% .55% .56%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.68% 1.95% 2.14% 2.54% 2.88%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $4,426,635 $5,521,623 $5,888,853 $4,921,834 $3,587,558
========== ========== ========== ========== ==========
Portfolio turnover 27.80% 15.52% 17.79% 13.00% 13.94%
========== ========== ========== ========== ==========
<CAPTION>
Class B
For the Year Ended June 30,
2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 42.84 $ 40.78 $ 35.89 $ 29.76 $ 26.08
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .26 .36 .43 .48 .53
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (3.08) 4.53 7.11 7.55 4.23
---------- ---------- ---------- ---------- ----------
Total from investment operations (2.82) 4.89 7.54 8.03 4.76
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.31) (.42) (.42) (.51) (.51)
Realized gain on investments--net (3.38) (2.41) (2.23) (1.39) (.57)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.69) (2.83) (2.65) (1.90) (1.08)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 36.33 $ 42.84 $ 40.78 $ 35.89 $ 29.76
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (6.94%) 13.40% 21.97% 28.61% 18.71%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.57% 1.57% 1.56% 1.57% 1.58%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .67% .93% 1.13% 1.53% 1.86%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $3,305,961 $4,846,702 $4,976,004 $4,088,755 $3,288,963
========== ========== ========== ========== ==========
Portfolio turnover 27.80% 15.52% 17.79% 13.00% 13.94%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived Class C
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 42.37 $ 40.39 $ 35.59 $ 29.56 $ 25.98
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .25 .35 .43 .47 .55
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (3.04) 4.48 7.04 7.49 4.18
---------- ---------- ---------- ---------- ----------
Total from investment operations (2.79) 4.83 7.47 7.96 4.73
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.32) (.44) (.44) (.54) (.58)
Realized gain on investments--net (3.38) (2.41) (2.23) (1.39) (.57)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.70) (2.85) (2.67) (1.93) (1.15)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 35.88 $ 42.37 $ 40.39 $ 35.59 $ 29.56
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (6.95%) 13.36% 21.98% 28.60% 18.69%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.58% 1.58% 1.57% 1.58% 1.59%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net .66% .92% 1.12% 1.51% 1.83%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $ 413,240 $ 535,132 $ 538,104 $ 337,828 $ 211,787
========== ========== ========== ========== ==========
Portfolio turnover 27.80% 15.52% 17.79% 13.00% 13.94%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived Class D
from information provided in the financial statements. For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2000++ 1999++ 1998++ 1997++ 1996
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 43.55 $ 41.42 $ 36.42 $ 30.16 $ 26.41
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income--net .56 .65 .74 .73 .76
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (3.12) 4.61 7.19 7.66 4.27
---------- ---------- ---------- ---------- ----------
Total from investment operations (2.56) 5.26 7.93 8.39 5.03
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income--net (.62) (.72) (.70) (.74) (.71)
Realized gain on investments--net (3.38) (2.41) (2.23) (1.39) (.57)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (4.00) (3.13) (2.93) (2.13) (1.28)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year $ 36.99 $ 43.55 $ 41.42 $ 36.42 $ 30.16
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share (6.19%) 14.25% 22.89% 29.65% 19.61%
Return:* ========== ========== ========== ========== ==========
Ratios to Average Expenses .80% .80% .79% .80% .81%
Net Assets: ========== ========== ========== ========== ==========
Investment income--net 1.43% 1.69% 1.89% 2.28% 2.61%
========== ========== ========== ========== ==========
Supplemental Net assets, end of year (in
Data: thousands) $1,764,541 $1,980,153 $1,734,702 $ 886,391 $ 434,396
========== ========== ========== ========== ==========
Portfolio turnover 27.80% 15.52% 17.79% 13.00% 13.94%
========== ========== ========== ========== ==========
*Total investment returns exclude the effects of sales charges.
++Based on average shares outstanding.
See Notes to Financial Statements.
</TABLE>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
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 accounting principles generally accepted
in the United States of America, which may require the use of
management accruals and estimates. 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 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) Derivative financial instruments--The Fund may engage in various
portfolio investment strategies to increase or decrease the level of
risk to which the Fund is exposed more quickly and efficiently than
transactions in other types of instruments. 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.
(c) 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.
(d) 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.
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
NOTES TO FINANCIAL STATEMENTS (continued)
(e) 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.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(h) 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 $5,437
have been reclassified between undistributed net investment income
and undistributed net realized capital gains. 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 FAM Distributors, Inc. ("FAMD"
or the "Distributor"), 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:
.60% of the Fund's average daily net assets not exceeding $100
million; .50% of the Fund's average daily net assets in excess of
$100 million but not exceeding $200 million; and .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 .25% .75%
Class C .25% .75%
Class D .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, 2000, FAMD 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:
FAMD MLPF&S
Class A $22,619 $205,127
Class D $62,128 $886,622
For the year ended June 30, 2000, MLPF&S received contingent
deferred sales charges of $5,763,029 and $147,381 relating to
transactions in Class B and Class C Shares, respectively.
Furthermore, MLPF&S received contingent deferred sales charges of
$1,354 and $5,631 relating to transactions subject to front-end
sales charge waivers in Class A and Class D Shares, respectively.
In addition, MLPF&S received $870,372 in commissions on the
execution of portfolio security transactions for the Fund for the
year ended June 30, 2000.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
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, FAMD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended June 30, 2000 were $3,037,606,426 and
$4,447,906,405, respectively.
Net realized gains (losses) for the year ended June 30, 2000 and net
unrealized gains as of June 30, 2000 were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $1,093,535,228 $3,257,536,700
Short-term investments 38,647 --
Foreign currency
transactions (5,437) --
-------------- --------------
Total $1,093,568,438 $3,257,536,700
============== ==============
As of June 30, 2000, net unrealized appreciation for Federal income
tax purposes aggregated $3,254,170,497, of which $3,886,808,646
related to appreciated securities and $632,638,149 related to
depreciated securities. At June 30, 2000, the aggregate cost of
investments for Federal income tax purposes was $6,641,216,356.
4. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $974,351,249 and $856,068,652 for the years ended June 30, 2000
and June 30, 1999, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 21,748,421 $ 840,385,437
Shares issued to share-
holders in reinvestment of
dividends and distributions 11,830,766 463,822,355
------------- --------------
Total issued 33,579,187 1,304,207,792
Shares redeemed (40,690,956) (1,542,137,894)
------------- --------------
Net decrease (7,111,769) $ (237,930,102)
============= ==============
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 B Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 17,917,716 $ 683,877,947
Shares issued to share-
holders in reinvestment of
dividends and
distributions 9,453,124 364,692,253
------------- --------------
Total issued 27,370,840 1,048,570,200
Automatic conversion of
shares (8,316,014) (312,475,761)
Shares redeemed (41,210,138) (1,533,109,301)
------------- --------------
Net decrease (22,155,312) $ (797,014,862)
============= ==============
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 C Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 3,284,218 $ 123,460,935
Shares issued to share-
holders in reinvestment of
dividends and
distributions 1,088,326 41,475,630
------------- --------------
Total issued 4,372,544 164,936,565
Shares redeemed (5,486,946) (201,554,584)
------------- --------------
Net decrease (1,114,402) $ (36,618,019)
============= ==============
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
NOTES TO FINANCIAL STATEMENTS (concluded)
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)
============= ==============
Class D Shares for the Year Dollar
Ended June 30, 2000 Shares Amount
Shares sold 8,132,011 $ 311,680,464
Automatic conversion of
shares 8,185,410 312,475,761
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,234,118 165,539,229
------------- --------------
Total issued 20,551,539 789,695,454
Shares redeemed (18,308,770) (692,483,720)
------------- --------------
Net increase 2,242,769 $ 97,211,734
============= ==============
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
============= ==============
<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, 2000, 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 auditing standards
generally accepted in the United States of America. 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, evi-dence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmation of securities owned at June 30, 2000 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, 2000, the
results of its operations, the changes in its net assets, and the
financial highlights for the respective stated periods in accordance
with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Princeton, New Jersey
August 10, 2000
</AUDIT-REPORT>
Merrill Lynch Basic Value Fund, Inc.
June 30, 2000
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, 2000:
<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: 8/09/1999 8/17/1999 $.498424 $.129745 $.628169 $2.253290
12/03/1999 12/09/1999 $.397845 $.172074 $.569919 $ .647517
Class B Shares: 8/09/1999 8/17/1999 $.330757 $.086100 $.416857 $2.253290
12/03/1999 12/09/1999 $.255969 $.110711 $.366680 $ .647517
Class C Shares: 8/09/1999 8/17/1999 $.336666 $.087638 $.424304 $2.253290
12/03/1999 12/09/1999 $.258419 $.111770 $.370189 $ .647517
Class D Shares: 8/09/1999 8/17/1999 $.458818 $.119435 $.578253 $2.253290
12/03/1999 12/09/1999 $.363476 $.157209 $.520685 $ .647517
*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.
As of June 30, 2000
Percent of
Ten Largest Holdings Net Assets
Exxon Mobil Corporation 4.7%
Citigroup Inc. 4.6
International Business Machines
Corporation 4.5
Koninklijke (Royal) Philips Electronics
NV (NY Registered Shares) 4.3
Wells Fargo Company 3.1
Telefonica SA (ADR) 3.0
Royal Dutch Petroleum Company
(NY Registered Shares) 2.5
BP Amoco PLC (ADR) 2.3
SBC Communications Inc. 2.2
Hewlett-Packard Company 2.1
