MERRILL
LYNCH
SPECIAL
VALUE
FUND, INC.
FUND LOGO
Quarterly Report December 31, 1993
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.
Merrill Lynch
Special Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MERRILL LYNCH SPECIAL VALUE FUND, INC.
DEAR SHAREHOLDER
As 1993 drew to a close, the US economy began to show some signs
of improvement with little evidence of an appreciable increase in
the rate of inflation. Interest rate-sensitive sectors of the US
economy are expanding, such as capital goods, consumer durables
and residential construction. However, excluding the interest
rate-sensitive sectors, the US economy grew only marginally during
1993. Growth was hampered by declining government spending, a
deteriorating trade balance, and sluggishness in other sectors of
the economy. Despite the areas of economic weakness that persist,
concerns arose late in 1993 that the rate of business activity
might increase inflationary pressures which were reflected in an
upturn of long-term interest rates.
<PAGE>
Other developments late in the year had significant long-term
implications for the US financial markets. The outline for
proposed healthcare reform is very important for the US economy.
As the various healthcare reform proposals are debated, investors
will focus on their potential effects on the Federal budget, the
US economy and the quality of healthcare delivery in the United
States. In addition, the ratification of the North American Free
Trade Agreement by the US Congress was important not only for the
prospect of expanding trade with Canada and Mexico, but also as a
positive influence on the recently concluded round of negotiations
on the General Agreement on Tariffs and Trade.
Further economic integration and growth through trade liberalization
would be positive for the capital markets in the United States and
around the world.
Portfolio Matters
In the December quarter, Merrill Lynch Special Value Fund, Inc.
slightly outperformed the unmanaged Russell 2000 Index. The Fund's
Class A Shares returned +3.10% and Class B Shares returned +2.80%,
while the Russell 2000 Index total return was +2.62%. (Complete
performance information, including average annual total returns,
can be found on pages 3 and 4 of this report to shareholders.)
During the three month period, the Fund's performance was helped by
its positions in health care, technology, capital goods and consumer
non-durables. Notable performers (in order of their contributions to
the portfolio's total return) were Cordis Corp. (up 53%), Cognos, Inc.
(up 44%), Anacomp, Inc. (up 39%), Sterling BancShares, Inc. (up 45%),
Beverly Enterprises, Inc. (up 29%), and The United States Shoe Corp.
(up 45%).
Cordis Corp. benefited from perceived opportunities to extend its
cardiac-related medical instruments business further into the angioplasty
market, following Food and Drug Administration approval of a number of
the company's new products. The stocks of Cognos, Inc., Anacomp, Inc.,
Beverly Enterprises, Inc., and The United States Shoe Corp. benefited
from improved results in these companies' operations. Sterling BancShares,
Inc. was the recipient of a buyout offer from Fleet Financial Group.
The Fund's performance was hurt by its holdings in the energy, financial
services, and retail sectors. After having advanced strongly early in the
year, energy stocks declined in the wake of sharply lower oil prices,
despite the relative stability in natural gas prices, which are a key
factor influencing the profitability of many US energy-related companies.
The declines in financial and retail stocks also followed strength earlier
in the year. Many financial stocks are now selling at steep discounts to
the stock market averages in terms of price/earnings and price/book value
ratios, while continuing to experience improving earnings. Retail stocks
are likely to benefit from increasing economic growth, in our opinion.
<PAGE>
During the quarter, the Fund bought shares in 15 new holdings and added
to positions in 25 existing investments. Purchases again spanned a variety
of businesses. Areas which received particular emphasis included financial
services, healthcare, retail, and technology. New financial stock
investments included two California-based thrift institutions with
improving asset quality: Civic Bancorp, Inc. and Coast Savings Financial,
Inc. The Fund also purchased shares in two related re-insurance companies:
Transnational Re Corp. and Phoenix Re Corp. We expect strong profits from
these two companies in the current improving pricing environment, and we
estimate that the stocks are valued at quite low multiples of expected
earnings.
The Fund's two largest purchases were Grossman's, Inc., which
represented a large addition to a very small existing holding, and
Input/Output, Inc., an entirely new position. Grossman's is a retailer
of lumber and building products to both the professional and do-it-yourself
markets, primarily in the Northeast. The stock has been selling below
book value despite having substantial real estate assets that may be
worth significantly more than their carrying value. The company brought
in new management two years ago to improve operations. Costs have been
lowered through store consolidations, and a number of stores have been
remodeled. Finances have been improved by a new credit agreement and
could improve further through a pending sale of excess real estate.
Revenues have increased recently and comparable store sales have been
particularly strong, partly because of store consolidations. Grossman's
could be a beneficiary of continued strength in the home improvement market
and would also be a potential beneficiary of a recovery in the New England
economy.
Input/Output, Inc. manufactures sophisticated seismic data acquisition
equipment used by land seismic crews chiefly for gathering oil and gas
exploration and development data. The firm's equipment is well suited
to conducting three-dimensional seismic surveys, which are capturing a
rapidly increasing portion of the market. Input/Output is a technological
leader in the largely unpenetrated market for such equipment. The firm is
enjoying rapidly growing revenues and earnings, but the stock sells at a
price/earnings ratio (based on estimated 1994 earnings) that is below its
expected 15%-20% earnings growth rate.
The Fund re-established a position in BE Aerospace, Inc. after the stock
declined sharply in response to disappointing earnings. The Fund had sold
its BE Aerospace position in the previous quarter based on its price
appreciation. At the Fund's cost, BE Aerospace is modestly valued in
relation to its estimated cash flow and offers an attractive way to
participate in commercial aircraft refurbishment and the eventual
recovery in commercial aircraft manufacturing.
The Fund eliminated holdings in 8 securities. By far the majority of
sales was motivated by the stocks appreciating to the Fund's price
objectives. The largest such sale was NBB Bancorp, Inc. A small number
of the Fund's holdings was eliminated because of disappointing operating
results.
<PAGE>
The Fund reduced its holdings in 22 companies. Most of these
sales were in response to the shares appreciating to less-attractive
valuation levels. The most significant reductions were sales of 140,000
shares of Sigma Designs, Inc. and 65,000 shares of Cordis Corp. The
Sigma Designs, Inc. position had enjoyed particularly sharp appreciation,
with the shares sold having gained 387% since their purchase in the summer
of 1993.
Cash reserves declined during the quarter because of the Fund's purchases
and payment of distributions on Fund shares. Cash reserves were 16.9% of
the Fund's net assets at the end of the December quarter, compared to 21%
at the September quarter-end. Including the cash reserves, at the end of
the December quarter, we estimated that the Fund had approximately 106%
of the volatility of the Russell 2000 Index.
In Conclusion
We thank you for your continued investment in Merrill Lynch Special Value
Fund, Inc., and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Dennis Stattman)
Dennis Stattman
Vice President and Portfolio Manager
January 27, 1994
PERFORMANCE DATA
None of the past results shown should be considered a representation of
future performance. Investment return and principal value of Class A and
Class B Shares will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. "Results of a $1,000 Investment
Since Inception" chart measures performance since inception and may not
reflect results of investments made at any other time.
Results of a $1,000 Investment Since Inception--Class A Shares
GRAPHIC AND IMAGE MATERIALS APPEAR HERE. SEE APPENDIX ITEM 1.
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
12/31/93 9/30/93 12/31/92 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Special Value Fund, Inc. Class A Shares $15.66 $16.46 $14.96 + 8.73%(1) -1.89%(2)
ML Special Value Fund, Inc. Class B Shares 15.31 16.05 14.70 + 8.27 (1) -1.57 (2)
ML Special Value Fund, Inc. Class A Shares--Total Return +14.26 (3) +3.10 (4)
ML Special Value Fund, Inc. Class B Shares--Total Return +13.07 (5) +2.80 (6)
Russell 2000 Index**--Total Return +18.91 +2.62
<FN>
*Investment results shown for the 3-month and 12-month periods
are before the deduction of any sales charges.
**An unmanaged broad-based index comprised of common stocks.
Total investment returns for unmanaged indexes are based on estimates.
(1)Percent change includes reinvestment of $0.594 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.482 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.811 per share ordinary income dividends and
$0.594 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.811 per share ordinary income dividends and
$0.482 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.692 per share ordinary income dividends and
$0.594 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.692 per share ordinary income dividends and
$0.482 per share capital gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
5/5/78-12/31/78 $ 9.60 $ 8.70 -- $0.190 -7.63%
1979 8.70 10.16 $0.370 0.320 +25.67
1980 10.16 12.54 0.500 0.195 +33.62
1981 12.54 10.58 0.890 0.390 -6.27
1982 10.58 10.67 0.650 0.380 +12.70
1983 10.67 12.45 0.610 0.070 +22.40
1984 12.45 11.10 0.290 0.120 -7.60
1985 11.10 14.29 0.340 0.090 +33.14
1986 14.29 13.97 0.620 0.050 +1.88
1987 13.97 10.32 1.086 0.143 -18.52
1988 10.32 11.83 0.017 0.233 +17.06
1989 11.83 11.65 -- 0.237 +0.42
1990 11.65 8.32 -- 0.148 -27.52
1991 8.32 12.80 -- 0.080 +54.87
1992 12.80 14.96 -- 0.019 +17.04
1993 14.96 15.66 0.594 0.811 +14.26
------ ------
Total $5.967 Total $3.476
<PAGE>
Cumulative total return as of 12/31/93: +261.41%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date,
and do not include sales charge; results would be lower if sales
charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88-12/31/88 $12.01 $11.82 $0.017 $0.095 0.04%
1989 11.82 11.61 -- 0.140 0.64
1990 11.61 8.29 -- 0.050 -28.26
1991 8.29 12.69 -- 0.019 +53.32
1992 12.69 14.70 -- -- +15.84
1993 14.70 15.31 0.594 0.692 +13.07
------ ------
Total $0.611 Total $0.996
Cumulative total return as of 12/31/93: +42.24%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date,
and do not reflect deduction of any sales charge; results would be
lower if sales charge was deducted.
</TABLE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/93 +14.26% +6.83%
Five Years Ended 12/31/93 + 8.56 +7.11
Ten Years Ended 12/31/93 + 6.07 +5.36
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/93 +13.07% +9.07%
Five Years Ended 12/31/93 + 7.43 +7.43
Inception (10/21/88) through 12/31/93 + 7.01 +7.01
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced
to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Shares Held/ Percent of
Industries Face Amount Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Aerospace 85,000 Banner Aerospace, Inc. $ 585,575 $ 382,500 0.2%
193,000 BE Aerospace,Inc. 1,778,148 1,954,125 1.2
------------ -------------- ------
2,363,723 2,336,625 1.4
Agricultural 50,000 Calgene Inc. 536,875 656,250 0.4
Pharmaceuticals
Apparel 50,000 Jones Apparel Group, Inc. 1,018,000 1,493,750 1.0
20,000 Kellwood Co. 515,975 802,500 0.5
25,000 St. John Knits, Inc. 425,000 581,250 0.4
80,000 The Warnaco Group, Inc. (Class A) 2,364,255 2,430,000 1.5
------------ -------------- ------
4,323,230 5,307,500 3.4
Banks & Finance 70,000 American Federal Bank, FSB 612,500 735,000 0.5
230,000 Bankers Corp. 2,195,604 3,795,000 2.4
40,000 Banknorth Group, Inc. 632,500 780,000 0.5
105,000 Charter One Financial, Inc. 1,917,175 2,073,750 1.3
170,000 Civic Bancorp, Inc. 926,250 913,750 0.6
125,000 Coast Savings Financial, Inc. 1,836,424 1,781,250 1.1
211,100 The Co-Operative Bank of Concord 2,459,101 3,219,275 2.0
60,000 NFS Financial Corp. 641,875 945,000 0.6
48,125 ONBANCorp, Inc. 1,628,037 1,690,391 1.1
50,000 Resource Bancshares Mortgage Group, Inc. 418,750 531,250 0.3
140,000 Roosevelt Financial Group, Inc. 4,044,900 5,985,000 3.8
28,000 Simmons First National Corp. 616,000 770,000 0.5
55,000 Sterling BancShares, Inc. 1,088,750 2,062,500 1.3
------------ -------------- ------
19,017,866 25,282,166 16.0
<PAGE>
Biotechnology 50,000 Alteon, Inc. 633,550 425,000 0.3
212,643 Applied Immune Sciences, Inc. 3,478,381 2,126,430 1.4
42,900 AutoImmune, Inc. 284,213 321,750 0.2
34,200 Cyto Therapeutics, Inc. 374,268 418,950 0.3
164,000 The Immune Response Corp. 2,157,484 1,681,000 1.1
76,100 National Patent Development Corp. 208,155 313,912 0.2
50,000 Sepracor, Inc. 386,875 325,000 0.2
10,000 Somatogen Inc. 190,000 95,000 0.1
------------ ------------- ------
7,712,926 5,707,042 3.8
Business Services 192,500 Applied Bioscience International, Inc. 1,122,831 986,562 0.6
Computer Equipment 125,000 MicronicsComputers, Inc. 709,811 765,625 0.5
Computer Products 20,000 Sigma Designs, Inc. 62,500 305,000 0.2
Computer Services 725,000 Anacomp, Inc. 2,691,367 2,900,000 1.8
153,300 Boole & Babbage, Inc. 2,797,217 3,832,500 2.4
35,950 Computer Task Group, Inc. 449,573 251,650 0.2
25,000 Primark Corp. 282,750 281,250 0.2
------------ ------------- ------
6,220,907 7,265,400 4.6
Computer Software 271,500 Cognos, Inc. 1,712,435 2,986,500 1.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Percent of
Industries Face Amount Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Computers 130,000 Alpha Industries, Inc. $ 629,856 $ 536,250 0.3%
100,000 Amdahl Corp. 454,000 600,000 0.4
50,000 DH Technology, Inc. 688,750 881,250 0.6
------------ ------------- ------
1,772,606 2,017,500 1.3
Consumer Electronics 40,000 Harman International Industries, Inc. 424,900 1,150,000 0.7
Cosmetics 12,420 Alfin, Inc. 17,854 12,420 0.0
1,317 Alfin, Inc., Preferred 0 0 0.0
------------ ------------- ------
17,854 12,420 0.0
Electrical Equipment 60,000 Catalina Lighting, Inc. 471,291 540,000 0.3
135,000 Comptek Research, Inc. 2,159,300 2,328,750 1.5
14,600 Core Industries, Inc. 223,518 217,175 0.1
26,300 WPI Group, Inc. 164,375 95,338 0.1
------------ ------------- ------
3,018,484 3,181,263 2.0
<PAGE>
Electronics 100,000 Alden Electronics, Inc. 422,500 350,000 0.2
27,563 Maxwell Laboratories, Inc. 316,726 289,406 0.2
270,000 Tokos Medical Corp. 1,778,445 1,417,500 0.9
50,000 VLSI Technology, Inc. 503,915 537,500 0.3
------------ ------------- ------
3,021,586 2,594,406 1.6
Electronics Distribution 7,000 Bell Industries, Inc. 82,163 122,500 0.1
Energy $ 900,000 Swift Energy Corp., Convertible Bonds,
6.50% due 6/30/2003 924,000 918,000 0.6
Environmental Control 380,250 NSC Corp. 2,028,275 1,295,246 0.8
Health Care-- 200,000 Beverly Enterprises, Inc. 1,870,609 2,650,000 1.7
Products & Services 10,000 Columbia/HCA Healthcare Corp. (a) 207,500 332,500 0.2
120,000 Community Psychiatric Centers 1,362,031 1,680,000 1.1
105,000 Healthcare Services Group, Inc. 1,015,700 1,233,750 0.8
154,000 The Hillhaven Corp. 2,153,392 2,906,750 1.9
160,000 NovaCare, Inc. 2,120,123 2,440,000 1.6
$1,000,000 PhyCor, Inc., Convertible Bonds,
6.50% due 1/15/2003 956,250 1,430,000 0.9
7,500 Vivra, Inc. 149,975 173,438 0.1
------------ ------------- ------
9,835,580 12,846,438 8.3
Home Builders 30,000 Washington Homes, Inc. 270,000 296,250 0.2
Home Furnishings 30,000 Crown Crafts, Inc. 524,300 528,750 0.3
Housing 80,000 Redman Industries, Inc. 1,221,480 1,620,000 1.0
Instruments 80,000 Instron Corp. 1,010,849 890,000 0.6
Photo-Optical
Insurance 5,000 Phoenix Re Corp. 136,250 136,250 0.1
100,000 Transnational Re Corp. (Class A) 2,055,250 2,700,000 1.7
------------ ------------- ------
2,191,500 2,836,250 1.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Percent of
Industries Face Amount Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Leasing 167,100 LDI Corp. $ 1,682,660 $ 1,169,700 0.7%
75,200 Sea Containers, Ltd. 1,754,596 1,287,800 0.8
------------ ------------- ------
3,437,256 2,457,500 1.5
<PAGE>
Machine Tools 34,245 Varity Corp. 1,138,324 1,532,464 1.0
& Machinery
Medical 20,000 Cordis Corp. 475,000 987,500 0.6
32,600 Everest & Jennings International (Class A) 456,544 36,675 0.0
15,000 Fischer Imaging Corp. 288,440 80,625 0.1
36,000 Thermo Cardiosystems, Inc. 308,225 648,000 0.4
------------ ------------- ------
1,528,209 1,752,800 1.1
Metals--Non-Ferrous 76,800 Handy & Harman 1,205,929 1,152,000 0.7
Natural Resources 35,000 Abraxas Petroleum Corp. 393,750 358,750 0.2
35,000 Addington Resources, Inc. 227,290 665,000 0.4
110,000 American Oilfield Divers, Inc. 1,008,750 1,045,000 0.7
90,900 Atwood Oceanics, Inc. 763,562 1,011,262 0.6
95,000 Tom Brown, Inc. 410,463 1,068,750 0.7
38,300 Cliffs Drilling Co. 494,562 478,750 0.3
29,000 Cliffs Drilling Co., Convertible Preferred 774,875 783,000 0.5
282,253 Coho Resources, Inc. 1,990,477 1,340,702 0.9
25,000 Energy Ventures, Inc. 468,750 312,500 0.2
250,000 Gerrity Oil & Gas Corp. 3,326,250 2,906,250 1.9
65,000 Grant Tensor Geophysical Corp.,
Convertible Preferred 1,103,750 617,500 0.4
130,000 Input/Output, Inc. 2,553,276 3,120,000 2.0
359,000 International Petroleum Corp. 990,247 381,437 0.2
30,000 Nuevo Energy Co. 638,100 585,000 0.4
169,000 Plains Resources, Inc. 1,586,600 1,098,500 0.7
30,000 Weatherford International, Inc. 90,000 318,750 0.2
20,000 The Wiser Oil Co. 360,000 350,000 0.2
------------ ------------- ------
17,180,702 16,441,151 10.5
Personal Care Products 50,000 Marietta Corp. 441,875 418,750 0.3
Pharmaceuticals 10,000 Amylin Pharmaceuticals, Inc. 108,750 130,000 0.1
10,000 Collagen Corp. 222,500 277,500 0.2
------------ -------------- ------
331,250 407,500 0.3
Plastics 19,800 Tredegar Industries, Inc. 297,088 297,000 0.2
Pollution Control 60,000 Attwoods PLC (ADR) (b) 567,376 600,000 0.4
Real Estate $1,000,000 Alexander Haagen Properties, Inc., 7.25%
due 12/01/2003 1,000,000 990,000 0.6
Real Estate 67,100 Carr Realty Corp. 1,476,200 1,543,300 1.0
Investment Trusts 100,000 Health Equity Properties, Inc. 842,500 950,000 0.6
------------ ------------- ------
2,318,700 2,493,300 1.6
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Percent of
Industries Shares Held Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Restaurants 30,000 Chart House Enterprises, Inc. $ 348,150 $ 360,000 0.2%
115,000 TPI Enterprises, Inc. 1,166,669 1,135,625 0.7
------------ ------------- ------
1,514,819 1,495,625 0.9
Retail Stores 285,000 J. Baker, Inc. 4,720,023 4,987,500 3.2
51,500 Bradlees, Inc. 876,378 688,812 0.4
67,800 Catherines Stores Corp. 818,300 1,186,500 0.8
40,000 Gantos, Inc. 497,276 100,000 0.1
928,000 Grossman's, Inc. 2,741,608 2,784,000 1.8
82,500 Just Toys, Inc. 536,250 515,625 0.3
20,000 The Pep Boys -- Manny, Moe & Jack 237,200 525,000 0.3
106,951 Pier 1 Imports, Inc. 1,153,213 1,042,772 0.7
300,000 Service Merchandise Co., Inc. 2,307,158 3,000,000 1.9
101,100 The United States Shoe Corp. 981,761 1,516,500 1.0
30,000 Venture Stores, Inc. 784,580 701,250 0.4
380,000 The Wet Seal, Inc. (Class A) 1,542,910 1,710,000 1.1
------------ ------------- ------
17,196,657 18,757,959 12.0
Utilities 105,000 American Water Works Co., Inc. 1,394,798 3,150,000 2.0
Total Stocks & Convertible Bonds 119,679,664 133,853,742 85.2
<CAPTION>
Face Amount Short-Term Securities
<S> <C> <S> <C> <C> <C>
Commercial Paper* $ 4,000,000 Cooper Industry, Inc., 3.20%
due 1/14/1994 3,995,378 3,995,378 2.5
2,516,000 General Electric Capital Corp., 3.22%
due 1/03/1994 2,515,550 2,515,550 1.6
5,000,000 Hertz Funding Corp., 3.37% due 1/20/1994 4,991,107 4,991,107 3.2
5,000,000 Matterhorn Capital Corp., 3.32%
due 1/05/1994 4,998,156 4,998,156 3.2
5,000,000 MetLife Funding Corp., 3.33%
due 1/04/1994 4,998,612 4,998,612 3.2
5,000,000 Siemens Capital Corp., 3.32%
due 1/31/1994 4,986,167 4,986,167 3.2
Total Short-Term Securities 26,484,970 26,484,970 16.9
<PAGE>
Total Investments $146,164,634 160,338,712 102.1
============
Liabilities in Excess of Other Assets (3,286,899) (2.1)
------------- ------
Net Assets $ 157,051,813 100.0%
============= ======
Net Asset Value: Class A--Based on net assets of $70,675,293 and 4,514,331 shares
outstanding $ 15.66
=============
Class B--Based on net assets of $86,376,520 and 5,641,608 shares
outstanding $ 15.31
=============
<FN>
*Commercial Paper is traded on a discount
basis; the interest rates shown are the discount rates paid at
the time of purchase by the Fund.
(a)Formerly Columbia Hospital Corp.
(b)American Depository Receipt (ADR).
</TABLE>
PORTFOLIO INFORMATION
Percent of
Top Ten Equity Holdings Net Assets
Roosevelt Financial Group, Inc. 3.8%
J. Baker, Inc. 3.2
Boole & Babbage, Inc. 2.4
Bankers Corp 2.4
The Co-Operative Bank of Concord 2.0
American Water Works Co., Inc. 2.0
Input/Output, Inc. 2.0
Service Merchandise Co., Inc. 1.9
Cognos, Inc. 1.9
The Hillhaven Corp. 1.9
Percent of
Ten Largest Industries Net Assets
Banks & Finance 16.0%
Retail Stores 12.0
Natural Resources 10.5
Health Care--Products & Services 8.3
Computer Services 4.6
Biotechnology 3.8
Apparel 3.4
Electrical Equipment 2.0
Insurance 1.8
Electronics 1.6
<PAGE>
Portfolio Changes for the Quarter Ended
December 31, 1993
Additions
Abraxas Petroleum Corp.
Alexander Haagen Properties, Inc., 7.25% due 12/01/2003
Amdahl Corp.
Attwoods PLC (ADR)
BE Aerospace, Inc.
Civic Bancorp, Inc.
Coast Savings Financial, Inc.
Cyto Therapeutics, Inc.
*Deckers Outdoors Corporation
*FTP Software, Inc.
Input/Output, Inc.
*Insignia Financial Group, Inc.
*Itron, Inc.
Just Toys, Inc.
*McArthur/Glen Realty Corp.
Micronics Computers, Inc.
*Talbots, Inc.
Phoenix Re Corp.
Transnational Re Corp. (Class A)
*Urban Outfitters, Inc.
Varity Corp.
VLSI Technology, Inc.
Deletions
**Coho Resources, Inc.
*Deckers Outdoors Corporation
Digital Communications Associates, Inc.
Escagenetics Corp.
*FTP Software, Inc.
Informix Corp.
*Insignia Financial Group, Inc.
*Itron, Inc.
*McArthur/Glen Realty Corp.
NBB Bancorp, Inc.
Ross Stores, Inc.
Scientific Games Holding Corp.
*Talbots, Inc.
Teradyne, Inc., Convertible Bonds, 9.25% due 3/15/2012
*Urban Outfitters, Inc.
Varity Corp. (C.V. Pfd.)
[FN]
*Added and deleted in the same quarter.
**Coho Resources, Inc. of Canada merged into Coho Resources,
Inc. of Canada merged into Coho Resources, Inc. of the United States.
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
M. Colyer Crum, Director
Edward H. Meyer, Director
Jack B. Sunderland, Director
J. Thomas Touchton, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Dennis W. Stattman, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
APPENDIX GRAPHIC AND IMAGE MATERIALS.
ITEM 1:
Results of a $1,000 Investment Since Inception--Class A Shares.
(6.5% sales charge--$935.00 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 $935 on May 5, 1978 to $3,379.18 on
December 31, 1993.
