UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-2739
811-10179
Name of Fund: Merrill Lynch Merrill Lynch Basic Value Fund, Inc.
and Master Basic Value Trust
Fund Address: P.O. Box 9011
Princeton, NJ 08543-9011
Name and address of agent for service: Terry K. Glenn, President,
Merrill Lynch Merrill Lynch Basic Value Fund, Inc. and Master Basic
Value Trust, 800 Scudders Mill Road, Plainsboro, NJ, 08536.
Mailing address: P.O. Box 9011, Princeton, NJ, 08543-9011
Registrant's telephone number, including area code: (609) 282-2800
Date of fiscal year end: 06/30/04
Date of reporting period: 07/01/03 - 12/31/03
Item 1 - Report to Shareholders
(BULL LOGO)
Merrill Lynch Investment Managers
www.mlim.ml.com
Merrill Lynch
Basic Value Fund, Inc.
Semi-Annual Report
December 31, 2003
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. Please see the Fund's prospectus for a description of
risks associated with global investments.
A description of the policies and procedures that the Fund uses to
determine how to vote proxies relating to portfolio securities is
available (1) without charge, upon request, by calling toll-free
1-800-MER-FUND (1-800-637-3863); (2) on www.mutualfunds.ml.com; and
(3) on the Securities and Exchange Commission's website at
http://www.sec.gov.
Merrill Lynch Basic Value Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
A Letter From the President
Dear Shareholder
In my 35 years in the asset management business, 2003 was among the
more memorable. The year, which opened with unrelenting economic
uncertainty and a dismal continuation of a three-year equity market
slump, vigorously reversed course in the months that followed. To be
sure, 2003 came in like a lamb and went out like a lion. Or, some
might suggest, the year started as a bear and ended as a bull.
Most notably, the U.S. stock market exceeded the expectations of
even the optimistic investor, with the Standard & Poor's 500 Index
and the Nasdaq posting respective 12-month returns of +28.68% and
+50.01% as of December 31, 2003. Gross domestic product (GDP)
growth, which started the year at 1.4% in the first quarter, grew a
remarkable 8.2% in the third quarter--the fastest rate of growth in
20 years. GDP growth is expected to come in above 3% for the year.
Modest inflation and record low interest rates in 2003 also
encouraged the American consumer who, after carrying the economy on
its own for some time, finally was supported by a $350 billion tax
cut, federal spending on the war effort and long-awaited capital
expenditures by businesses. In addition, corporate earnings for 2003
finished the year up 16.9%. As we begin a new year, the events and
efforts of 2003 leave us with a much stronger economy for 2004.
We thank you for trusting Merrill Lynch Investment Managers with
your investment assets, and we look forward to serving you in the
New Year and beyond.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director/Trustee
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
We are pleased to present to you the management team of
Merrill Lynch Basic Value Fund, Inc.
Senior Portfolio Managers Kevin Rendino and Bob Martorelli co-head
the Merrill Lynch Basic Value team. Mr. Rendino joined Merrill Lynch
Investment Managers (MLIM) in 1990. He received a bachelor's degree
from Boston College. Mr. Martorelli joined MLIM in 1985. He received
a bachelor's degree from Hofstra University and an MBA from Fordham
University.
The investment team also includes Analysts Harry Radovich, Geri
Gunn-Hertig, Carrie King and John Arege, Research Associate Michelle
Smith and Product Specialist Scott Malatesta. Mr. Radovich earned
a bachelor's degree and an MBA from St. John's University and is a
CFA R charterholder. Ms. Gunn-Hertig has a bachelor's degree from
Montclair State University and an MBA from Rutgers University.
Ms. King holds a bachelor's degree from Boston University and an MBA
from New York University. Mr. Arege received a bachelor's degree
from the Catholic University and a juris doctor degree from Touro
Law School. He is a CFA charterholder. Ms. Smith earned a bachelor's
degree from Rider University. Mr. Malatesta received a bachelor's
decree from Mount St. Mary College and a master's degree from
Fairleigh Dickinson University. The team has a combined 109 years of
investment experience.
Kevin Rendino
Senior Portfolio Manager
Bob Martorelli
Senior Portfolio Manager
Table of Contents
A Letter From the President 2
A Discussion With Your Fund's Portfolio Managers 4
Performance Data 6
Fund Financial Statements 9
Fund Financial Highlights 12
Fund Notes to Financial Statements 17
Master Schedule of Investments 20
Master Financial Statements 23
Master Financial Highlights 26
Master Notes to Financial Statements 27
Portfolio Information 30
Officers and Directors/Trustees 31
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31 2003
A Discussion With Your Fund's Portfolio Managers
The Fund outperformed its benchmarks and its Lipper category average
for the period, having benefited significantly from a strategically
overweight position in technology stocks.
How did the Fund perform during the period in light of the existing
market conditions?
For the six-month period ended December 31, 2003, Merrill Lynch
Basic Value Fund, Inc.'s Class A, Class B, Class C, Class I and
Class R Shares had total returns of +19.86%, +19.41%, +19.37%,
+20.01% and +19.70%, respectively. (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
6 - 8 of this report to shareholders.) The Fund outperformed both
the +15.14% return of the unmanaged Standard & Poor's 500 (S&P 500)
Index and the +17.36% return of the S&P 500 Barra Value Index for
the same period. Fund returns also exceeded the +15.66% average
return of the Lipper Large Cap Value Funds category for the six-
month period. (Funds in this Lipper category invest in companies
considered to be undervalued relative to a major unmanaged stock
index.)
Entering 2003, the Fund had a bias toward economic sensitivity. We
were overweight in cyclicals, including industrials, materials and
technology stocks. We also sought opportunities in portions of the
consumer discretionary sector, with an emphasis on media. We found
valuations to be most attractive in those areas of the market that
were most likely to benefit from economic recovery.
In initiating this cyclical approach, our feeling was that the
economy had suffered after the events of September 11, 2001 and well
into the following year. Yet the economy grew in 2002 despite a
myriad of scandals and misfortunes, including accounting
irregularities, corporate governance issues and impending war in
Iraq. If the economy could grow under these extreme conditions, we
felt certain that growth would accelerate in 2003, and we positioned
the portfolio accordingly. In doing so, the one concern we had
revolved around the conflict in Iraq. When combat finally broke out
and then ended relatively quickly, our concerns were allayed as the
market embarked on a strong rally that continued virtually
uninterrupted from March through December 2003.
During the six-month period, economic growth picked up steam, as was
evident in the astounding 8.2% gross domestic product (GDP) growth
in the third quarter. Many stocks that had been beaten down
rebounded dramatically. The primary beneficiaries of this upturn
were higher-beta, economically sensitive stocks, which dominated the
equity market rally through year end. Our bias in these areas
benefited Fund performance significantly.
The strong performance for the six-month period can be attributed
primarily to our focus on technology. Coming into 2003, we had a
significant overweighting in technology--15% of portfolio assets
versus 7% for the S&P 500 Barra Value Index. The technology group
appreciated 67% for the year. With 15% of our assets up 67%--and at
a double weight compared to the competitive universe--the positive
results are understandable. The same is true for the six months
ended December 31, 2003. More than half of the Fund's outperformance
came from technology. Specific holdings in technology that benefited
performance in the past six months were Advanced Micro Devices,
Inc., National Semiconductor Corporation, 3Com Corporation, Agilent
Technologies, Inc., Motorola, Inc. and LSI Logic Corporation.
Also contributing to performance in the six-month period were stocks
in the materials, industrials and consumer discretionary areas.
China has grown dramatically this year, and as a large importer of
materials, that has helped the sector immensely. Materials stocks
that benefited Fund returns in the past six months were Phelps Dodge
Corporation, Alcoa Inc. and Massey Energy Company. In industrials,
Deere & Company, Thomas & Betts Corporation and Caterpillar Inc.
contributed the most to relative returns. In consumer discretionary,
Koninklijke (Royal) Philips Electronics NV and Viacom, Inc. were
standouts.
In terms of areas that hurt performance during the six-month period,
health care was the largest culprit, with Merck & Co., Inc., Shering-
Plough Corporation and Bristol-Myers Squibb Company at the top of
the list. These represent the large cap, stable growth stocks that
really stumbled this year. Aside from poor business results from
many companies in the sector, the underperformance of health care
was partially due to market dynamics. Investors were clearly moving
assets out of large, defensive areas into those that were benefiting
from the economic recovery. Also detracting from Fund returns was
the energy sector. Despite a favorable fourth quarter, returns in
energy were negative for the six-month period. We believe this was
primarily the result of an asset allocation decision by investors.
As money flowed into areas like technology, it flowed out of
defensive groups such as energy. Curiously, this occurred despite
the fact that commodity prices were at all-time highs. Energy stocks
that underperformed included Diamond Offshore Drilling, Inc., Exxon
Mobil Corporation, GlobalSantaFe Corporation and Royal Dutch
Petroleum Company.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31 2003
What changes were made to the portfolio during the period?
Although we ended the year with a continued bias toward an up-market
and economic sensitivity, that bias was not as strong as it was when
we entered 2003. In the last six months, we began reducing the
portfolio's beta somewhat, as we were finding more value in the
defensive areas of the market. In keeping with our underlying
investment strategy, we buy weakness and sell strength. It follows
then that those economically sensitive stocks that performed so well
would be trimmed from the portfolio as we look for next year's
winners.
Along these lines, we reduced our positions in materials,
industrials, financials and technology based on relative valuations
and stocks meeting our price targets. While selling our strong
performers, we began buying stocks in areas that have yet to
outperform. This includes stocks in the energy and consumer staples
areas, where we found a lot of value toward the end of the year. We
also have been nibbling at health care in the last six months.
Positions initiated in the portfolio during the period include
TransOcean Inc. in the energy sector, and ConAgra, Inc., Unilever
NV, Coca-Cola Enterprises Inc. and Kraft Foods Inc. in consumer
staples. We also added to our positions in Anadarko Petroleum
Corporation (energy), Raytheon Company (aerospace and defense),
Viacom, Inc. (media) and Baxter International Inc. (health care).
On the sell side, we liquidated our positions in Fox Entertainment
Group, Inc., The Gap Inc., MetLife, Inc., Textron, Inc., Tribune
Company and J.P. Morgan Chase & Co. All of these stocks performed
well and reached our price target. Largest reductions during the
period were Phelps Dodge Corporation, Deere & Company, National
Semiconductor Corporation, Wachovia Corporation, Philips Electronics
and American International Group, Inc.
How would you characterize the portfolio's position at the close of
the period?
We maintain our confidence in a continuing economic recovery. The
events and efforts of 2003 seem to have sufficiently set the stage
for sustainable growth. The variables that could derail economic
advancement at this point--terrorist activity or a dramatic change
in China's growth and consumption--are virtually unanalyzable.
Absent these types of unpredictable events, we believe that the
market will continue to head upward this year and that the economy
will continue to recover, although both at a slower pace than in
2003.
At the close of the period, the portfolio was overweight versus the
S&P 500 Barra Value Index in consumer staples, energy, health care,
information technology and materials. We had underweights in
consumer discretionary, financials, industrials, telecommunication
services and utilities. Our largest overweight remained in
technology, where we still see some appreciation potential.
Technology, in our opinion, remains a growth cyclical, and we think
information technology budgets will increase in 2004. Our next-
largest overweight was in energy. In our view, the underlying gas
and oil supply problems in the United States and elsewhere have been
masked by lack of demand due to soft economies. As economies
continue to recover, so will industrial production; and as
industrial production recovers, so will demand for energy. Energy
prices remain high, and we have a collection of companies in the
portfolio that are not priced for $30 per barrel for oil and $7 per
thousand cubic feet for gas, where we are currently. These make the
stock's valuations incredibly appealing to us. Consumers continue to
wait for oil prices to go down, yet the stocks have not reflected
the high commodity prices. We believe at some point they will, and
have positioned the portfolio with that view in mind.
As always, we will continue our search for what we believe are very
good companies that are temporarily underpriced as a result of
negative investor sentiment or short-term circumstances, and that we
believe have the potential to offer shareholders significant value
over a three-year time horizon.
Kevin M. Rendino
Vice President and Co-Portfolio Manager
Robert J. Martorelli
Vice President and Co-Portfolio Manager
January 8, 2004
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31 2003
Performance Data
About Fund Performance
Effective April 14, 2003, Class A Shares were redesignated Class I
Shares and Class D Shares were redesignated Class A Shares.
Investors are able to purchase shares of the Fund through multiple
pricing alternatives:
* Class A Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% declining to 0% after six years. All Class B Shares
purchased prior to June 1, 2001 will maintain the four-year
schedule. 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 A Shares after approximately eight
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 I Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class I Shares are available only to eligible
investors.
* Class R Shares do not incur a maximum sales charge (front-end
load) or deferred sales charge. These shares are subject to a
distribution fee of 0.25% and an account maintenance fee of 0.25%.
Class R Shares are available only to certain retirement plans.
None of the past results shown should be considered a representation
of future performance. Current performance may be lower or higher
than the performance data quoted. Refer to www.mlim.ml.com to obtain
more current performance information. Performance results do not
reflect the deduction of taxes that a shareholder would pay on fund
distributions or the redemption of fund shares. Figures shown in
each of the following 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.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31 2003
Performance Data (continued)
Recent Performance Results
10-Year/
6-Month 12-Month Since Inception
As of December 31, 2003 Total Return Total Return Total Return
ML Basic Value Fund, Inc. Class A Shares* +19.86% +32.43% +174.13%
ML Basic Value Fund, Inc. Class B Shares* +19.41 +31.35 +162.38
ML Basic Value Fund, Inc. Class C Shares* +19.37 +31.34 +155.07
ML Basic Value Fund, Inc. Class I Shares* +20.01 +32.70 +190.55
ML Basic Value Fund, Inc. Class R Shares* +19.70 -- + 28.36
S&P 500 Index** +15.14 +28.68 +185.63/+180.25/+24.60
S&P 500 Barra Value Index*** +17.36 +31.79 +172.61/+171.63/+27.69
*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 10-year/since inception periods are 10 years for Class B &
Class I Shares, from 10/21/94 for Class A & Class C Shares and from
1/03/03 for Class R Shares, respectively.
**This unmanaged Index covers 500 industrial, utility,
transportation and financial companies of the U.S. markets
(mostly NYSE issues), representing about 75% of NYSE market
capitalization and 30% of NYSE issues. Ten-year/since inception
total returns are for 10 years, from 10/21/94 and from 1/03/03,
respectively.
***This unmanaged broad-based Index is a capitalization-weighted
index of those stocks in the S&P 500 Index that have lower
price-to-book ratios. Ten-year/since inception total returns are
for 10 years, from 10/21/94 and from 1/03/03, respectively.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31,2003
Performance Data (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
One Year Ended 12/31/03 +32.43% +25.48%
Five Years Ended 12/31/03 + 4.46 + 3.34
Inception (10/21/94) through
12/31/03 +11.59 +10.94
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
One Year Ended 12/31/03 +31.35% +27.35%
Five Years Ended 12/31/03 + 3.65 + 3.38
Ten Years Ended 12/31/03 +10.13 +10.13
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after six years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
One Year Ended 12/31/03 +31.34% +30.34%
Five Years Ended 12/31/03 + 3.64 + 3.64
Inception (10/21/94) through
12/31/03 +10.72 +10.72
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class I Shares*
One Year Ended 12/31/03 +32.70% +25.73%
Five Years Ended 12/31/03 + 4.71 + 3.59
Ten Years Ended 12/31/03 +11.26 +10.66
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Aggregate Total Return
% Return
Class R Shares
Inception (1/03/03) through 12/31/03 +28.36%
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statement of Assets and Liabilities Merrill Lynch Basic Value Fund, Inc.
As of December 31, 2003
Assets
Investment in Master Basic Value Trust, at value
(identified cost--$6,262,339,688) $ 8,630,914,304
Prepaid registration fees 40,948
---------------
Total assets 8,630,955,252
---------------
Liabilities
Payables:
Distributor $ 2,510,008
Other affiliates 1,820,000 4,330,008
---------------
Accrued expenses and other liabilities 120,710
---------------
Total liabilities 4,450,718
---------------
Net Assets
Net assets $ 8,626,504,534
===============
Net Assets Consist of
Class A Shares of Common Stock, $.10 par value, 200,000,000 shares authorized $ 6,721,419
Class B Shares of Common Stock, $.10 par value, 400,000,000 shares authorized 5,863,647
Class C Shares of Common Stock, $.10 par value, 200,000,000 shares authorized 2,080,476
Class I Shares of Common Stock, $.10 par value, 400,000,000 shares authorized 13,774,664
Class R Shares of Common Stock, $.10 par value, 400,000,000 shares authorized 13,484
Paid-in capital in excess of par 6,361,578,416
Accumulated distributions in excess of investment income--net $ (101,852)
Accumulated realized capital losses on investments and foreign currency
transactions from the Trust--net (132,000,336)
Unrealized appreciation on investments from the Trust--net 2,368,574,616
---------------
Total accumulated earnings--net 2,236,472,428
---------------
Net Assets $ 8,626,504,534
===============
Net Asset Value
Class A--Based on net assets of $2,047,074,293 and 67,214,189 shares
outstanding $ 30.46
===============
Class B--Based on net assets of $1,755,585,008 and 58,636,468 shares
outstanding $ 29.94
===============
Class C--Based on net assets of $609,648,925 and 20,804,760 shares
outstanding $ 29.30
===============
Class I--Based on net assets of $4,210,157,681 and 137,746,637 shares
outstanding $ 30.56
===============
Class R--Based on net assets of $4,038,627 and 134,837 shares outstanding $ 29.95
===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statement of Operations Merrill Lynch Basic Value Fund, Inc.
For the Six Months Ended December 31, 2003
Investment Income Allocated from the Trust--Net
Net investment income allocated from the Trust:
Dividends (net of $805,844 foreign withholding tax) $ 78,968,772
Interest 1,924,528
Securities lending--net 503,620
Expenses (16,829,275)
---------------
Net investment income allocated from the Trust 64,567,645
---------------
Expenses
Account maintenance and distribution fees--Class B $ 8,321,563
Account maintenance and distribution fees--Class C 2,721,466
Transfer agent fees--Class I 2,654,157
Account maintenance fees--Class A 2,294,755
Transfer agent fees--Class B 1,353,374
Transfer agent fees--Class A 1,276,440
Transfer agent fees--Class C 464,157
Printing and shareholder reports 160,095
Professional fees 85,997
Registration fees 71,391
Directors' fees and expenses 19,676
Account maintenance and distribution fees--Class R 3,243
Transfer agent fees--Class R 875
Other 22,450
---------------
Total expenses 19,449,639
---------------
Investment income--net 45,118,006
---------------
Realized & Unrealized Gain (Loss) Allocated from the Trust--Net
Realized gain (loss) allocated from the Trust on:
Investments--net 125,767,092
Foreign currency transactions--net (75,651) 125,691,441
---------------
Change in unrealized appreciation on investments and foreign currency
transactions allocated from the Trust--net 1,269,759,474
---------------
Total realized and unrealized gain allocated from the Trust--net 1,395,450,915
---------------
Net Increase in Net Assets Resulting from Operations $ 1,440,568,921
===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statements of Changes in Net Assets Merrill Lynch Basic Value Fund, Inc.
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2003 2003
Operations
Investment income--net $ 45,118,006 $ 78,806,693
Realized gain (loss) on investments and foreign currency transactions
allocated from the Trust--net 125,691,441 (192,510,157)
Change in unrealized appreciation on investments and foreign currency
transactions allocated from the Trust--net 1,269,759,474 (64,952,123)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 1,440,568,921 (178,655,587)
--------------- ---------------
Dividends & Distributions to Shareholders
Investment income--net:
Class A (22,287,695) (17,970,278)
Class B (7,631,036) (4,440,205)
Class C (2,964,544) (1,875,542)
Class I (54,483,536) (49,088,458)
Class R (22,016) --
Realized gain on investments allocated from the Trust--net:
Class A -- (42,802,984)
Class B -- (50,808,427)
Class C -- (13,766,398)
Class I -- (94,987,362)
--------------- ---------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (87,388,827) (275,739,654)
--------------- ---------------
Capital Share Transactions
Net decrease in net assets derived from capital share transactions (100,352,149) (460,434,673)
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 1,252,827,945 (914,829,914)
Beginning of period 7,373,676,589 8,288,506,503
--------------- ---------------
End of period* $ 8,626,504,534 $ 7,373,676,589
=============== ===============
*Undistributed (accumulated distributions in excess of)
investment income--net $ (101,852) $ 42,168,969
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights Merrill Lynch Basic Value Fund, Inc.
The following per share data and ratios Class A
have been derived from information For the Six
provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,++++++
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001+++++ 2000
Per Share Operating Performance
Net asset value, beginning of period $ 25.72 $ 27.01 $ 33.63 $ 36.99 $ 43.55
------------ ------------ ------------ ------------ ------------
Investment income--net*** .17 .29 .27 .46 .56
Realized and unrealized gain (loss)
on investments, foreign currency
transactions and from the Trust--net 4.90 (.63) (3.52) 2.50 (3.12)
------------ ------------ ------------ ------------ ------------
Total from investment operations 5.07 (.34) (3.25) 2.96 (2.56)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.33) (.28) (.32) (.56) (.62)
Realized gain on investments and
from the Trust--net -- (.67) (3.05) (5.76) (3.38)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (.33) (.95) (3.37) (6.32) (4.00)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 30.46 $ 25.72 $ 27.01 $ 33.63 $ 36.99
============ ============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 19.86%+++ (.94%) (10.62%) 8.82% (6.19%)
============ ============ ============ ============ ============
Ratios to Average Net Assets
Expenses++ .82%* .85% .81% .81% .80%
============ ============ ============ ============ ============
Investment income--net 1.24%* 1.23% .94% 1.34% 1.43%
============ ============ ============ ============ ============
Supplemental Data
Net assets, end of period
(in thousands) $ 2,047,074 $ 1,679,935 $ 1,737,025 $ 1,823,948 $ 1,764,541
============ ============ ============ ============ ============
Portfolio turnover 13.31%++++ 31.92%++++ 38.15%++++ 37.53%++++++++ 27.80%
============ ============ ============ ============ ============
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Includes the Fund's share of the Trust's allocated expenses.
++++Portfolio turnover for the Trust.
++++++Effective April 14, 2003, Class D Shares were redesignated
Class A Shares.
+++Aggregate total investment return.
+++++On October 13, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
++++++++Portfolio turnover for the Trust for the period October 13,
2000 (commencement of operations of the Trust) to June 30, 2001.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights (continued) Merrill Lynch Basic Value Fund, Inc.
The following per share data and ratios Class B
have been derived from information For the Six
provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001+++++ 2000
Per Share Operating Performance
Net asset value, beginning of period $ 25.19 $ 26.44 $ 32.98 $ 36.33 $ 42.84
------------ ------------ ------------ ------------ ------------
Investment income--net*** .06 .11 .05 .20 .26
Realized and unrealized gain (loss)
on investments, foreign currency
transactions and from the Trust--net 4.82 (.63) (3.46) 2.46 (3.08)
------------ ------------ ------------ ------------ ------------
Total from investment operations 4.88 (.52) (3.41) 2.66 (2.82)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.13) (.06) (.08) (.25) (.31)
Realized gain on investments and
from the Trust--net -- (.67) (3.05) (5.76) (3.38)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (.13) (.73) (3.13) (6.01) (3.69)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 29.94 $ 25.19 $ 26.44 $ 32.98 $ 36.33
============ ============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 19.41%+++ (1.72%) (11.33%) 8.02% (6.94%)
============ ============ ============ ============ ============
Ratios to Average Net Assets
Expenses++ 1.60%* 1.63% 1.58% 1.59% 1.57%
============ ============ ============ ============ ============
Investment income--net .47%* .45% .17% .58% .67%
============ ============ ============ ============ ============
Supplemental Data
Net assets, end of period
(in thousands) $ 1,755,585 $ 1,626,835 $ 2,099,660 $ 2,838,319 $ 3,305,961
============ ============ ============ ============ ============
Portfolio turnover 13.31%++++ 31.92%++++ 38.15%++++ 37.53%++++++++ 27.80%
============ ============ ============ ============ ============
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Includes the Fund's share of the Trust's allocated expenses.
++++Portfolio turnover for the Trust.
+++Aggregate total investment return.
+++++On October 13, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
++++++++Portfolio turnover for the Trust for the period October 13,
2000 (commencement of operations of the Trust) to June 30, 2001.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights (continued) Merrill Lynch Basic Value Fund, Inc.
The following per share data and ratios Class C
have been derived from information For the Six
provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001+++++ 2000
Per Share Operating Performance
Net asset value, beginning of period $ 24.68 $ 25.96 $ 32.47 $ 35.88 $ 42.37
------------ ------------ ------------ ------------ ------------
Investment income--net*** .06 .10 .05 .18 .25
Realized and unrealized gain (loss)
on investments, foreign currency
transactions and from the Trust--net 4.70 (.62) (3.39) 2.43 (3.04)
------------ ------------ ------------ ------------ ------------
Total from investment operations 4.76 (.52) (3.34) 2.61 (2.79)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.14) (.09) (.12) (.26) (.32)
Realized gain on investments and
from the Trust--net -- (.67) (3.05) (5.76) (3.38)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (.14) (.76) (3.17) (6.02) (3.70)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 29.30 $ 24.68 $ 25.96 $ 32.47 $ 35.88
============ ============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 19.37%+++ (1.75%) (11.30%) 8.00% (6.95%)
============ ============ ============ ============ ============
Ratios to Average Net Assets
Expenses++ 1.60%* 1.64% 1.59% 1.59% 1.58%
============ ============ ============ ============ ============
Investment income--net .46%* .45% .16% .56% .66%
============ ============ ============ ============ ============
Supplemental Data
Net assets, end of period
(in thousands) $ 609,649 $ 502,623 $ 541,921 $ 435,973 $ 413,240
============ ============ ============ ============ ============
Portfolio turnover 13.31%++++ 31.92%++++ 38.15%++++ 37.53%++++++++ 27.80%
============ ============ ============ ============ ============
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Includes the Fund's share of the Trust's allocated expenses.
++++Portfolio turnover for the Trust.
+++Aggregate total investment return.
+++++On October 13, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
++++++++Portfolio turnover for the Trust for the period October 13,
2000 (commencement of operations of the Trust) to June 30, 2001.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights (continued) Merrill Lynch Basic Value Fund, Inc.
The following per share data and ratios Class I
have been derived from information For the Six
provided in the financial statements. Months Ended
December 31, For the Year Ended June 30,++++++
Increase (Decrease) in Net Asset Value: 2003 2003 2002 2001+++++ 2000
Per Share Operating Performance
Net asset value, beginning of period $ 25.83 $ 27.14 $ 33.77 $ 37.12 $ 43.70
------------ ------------ ------------ ------------ ------------
Investment income--net*** .21 .35 .35 .55 .66
Realized and unrealized gain (loss)
on investments, foreign currency
transactions and from the Trust--net 4.92 (.65) (3.53) 2.51 (3.14)
------------ ------------ ------------ ------------ ------------
Total from investment operations 5.13 (.30) (3.18) 3.06 (2.48)
------------ ------------ ------------ ------------ ------------
Less dividends and distributions:
Investment income--net (.40) (.34) (.40) (.65) (.72)
Realized gain on investments and
from the Trust--net -- (.67) (3.05) (5.76) (3.38)
------------ ------------ ------------ ------------ ------------
Total dividends and distributions (.40) (1.01) (3.45) (6.41) (4.10)
------------ ------------ ------------ ------------ ------------
Net asset value, end of period $ 30.56 $ 25.83 $ 27.14 $ 33.77 $ 37.12
============ ============ ============ ============ ============
Total Investment Return**
Based on net asset value per share 20.01%+++ (.74%) (10.38%) 9.11% (5.98%)
============ ============ ============ ============ ============
Ratios to Average Net Assets
Expenses++ .57%* .60% .56% .56% .56%
============ ============ ============ ============ ============
Investment income--net 1.49%* 1.48% 1.19% 1.60% 1.68%
============ ============ ============ ============ ============
Supplemental Data
Net assets, end of period
(in thousands) $ 4,210,158 $ 3,564,283 $ 3,909,901 $ 4,302,609 $ 4,426,635
============ ============ ============ ============ ============
Portfolio turnover 13.31%++++ 31.92%++++ 38.15%++++ 37.53%++++++++ 27.80%
============ ============ ============ ============ ============
*Annualized.
**Total investment returns exclude the effects of sales charges.
***Based on average shares outstanding.
++Includes the Fund's share of the Trust's allocated expenses.
++++Portfolio turnover for the Trust.
++++++Effective April 14, 2003, Class A Shares were redesignated
Class I Shares.
+++Aggregate total investment return.
+++++On October 13, 2000, the Fund converted from a stand-alone
investment company to a "feeder" fund that seeks to achieve its
investment objective by investing all of its assets in the Trust, a
mutual fund that has the same investment objective as the Fund. All
investments will be made at the Trust level. This structure is
sometimes called a "master/feeder" structure.
++++++++Portfolio turnover for the Trust for the period October 13,
2000 (commencement of operations of the Trust) to June 30, 2001.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights (concluded) Merrill Lynch Basic Value Fund, Inc.
Class R
For the Six For the Period
The following per share data and ratios have been derived Months Ended January 3, 2003++
from information provided in the financial statements. December 31, to June 30,
Increase (Decrease) in Net Asset Value: 2003 2003
Per Share Operating Performance
Net asset value, beginning of period $ 25.36 $ 23.65
------------ ------------
Investment income--net** .13 .21
Realized and unrealized gain on investments, foreign currency
transactions and from the Trust--net 4.83 1.50
------------ ------------
Total from investment operations 4.96 1.71
------------ ------------
Less dividends from investment income--net (.37) --
------------ ------------
Net asset value, end of period $ 29.95 $ 25.36
============ ============
Total Investment Return++++
Based on net asset value per share 19.70%+++ 7.23%+++
============ ============
Ratios to Average Net Assets
Expenses+++++ 1.07%* 1.10%*
============ ============
Investment income--net 96%* 1.09%*
============ ============
Supplemental Data
Net assets, end of period (in thousands) $ 4,039 $ 1
============ ============
Portfolio turnover of the Trust 13.31% 31.92%
============ ============
*Annualized.
**Based on average shares outstanding.
++Commencement of operations.
++++Total investment returns exclude the effects of sales charges.
+++Aggregate total investment return.
+++++Includes the Fund's share of the Trust's allocated expenses.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements
Merrill Lynch Basic Value Fund, Inc.
1. Significant Accounting Policies:
Merrill Lynch Basic Value Fund, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended, as a
diversified, open-end investment company. The Fund seeks to achieve
its investment objective by investing all of its assets in Master
Basic Value Trust (the "Trust"), which has the same investment
objective as the Fund. The value of the Fund's investment in the
Trust reflects the Fund's proportionate interest in the net assets
of the Trust. The performance of the Fund is directly affected by
the performance of the Trust. The financial statements of the Trust,
including the Schedule of Investments, are included elsewhere in
this report and should be read in conjunction with the Fund's
financial statements. The Fund's financial statements are prepared
in conformity with accounting principles generally accepted in the
United States of America, which may require the use of management
accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented.
All such adjustments are of a normal, recurring nature. The
percentage of the Trust owned by the Fund at December 31, 2003 was
99.9%. The Fund offers multiple classes of shares. Shares of Class A
and Class I are sold with a front-end sales charge. Shares of Class
B and Class C may be subject to a contingent deferred sales charge.
Class R Shares are sold only to certain retirement plans. All
classes of shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except that Class A,
Class B, Class C and Class R Shares bear certain expenses related to
the account maintenance of such shares, and Class B, Class C and
Class R 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. Income, expenses (other than expenses
attributable to a specific class) and realized and unrealized gains
and losses on investments and foreign currency transactions are
allocated daily to each class based on its relative net assets. The
following is a summary of significant accounting policies followed
by the Fund.
(a) Valuation of investments--The Fund records its investment in the
Trust at fair value. Valuation of securities held by the Trust is
discussed in Note 1a of the Trust's Notes to Financial Statements,
which are included elsewhere in this report.
(b) Investment income and expenses--The Fund records daily its
proportionate share of the Trust's income, expenses and realized and
unrealized gains and losses. In addition, the Fund accrues its own
expenses.
(c) 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 shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law,
withholding taxes may be imposed on interest, dividends and capital
gains at various rates.
(d) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(e) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
(f) Investment transactions--Investment transactions in the Trust
are accounted for on a trade date basis.
2. Transactions with Affiliates:
The Fund has entered into a Distribution Agreement and Distribution
Plans with FAM Distributors, Inc. ("FAMD" or the "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc. 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. The
fees are accrued daily and paid monthly at annual rates based upon
the average daily net assets of the shares as follows:
Account
Maintenance Distribution
Fee Fee
Class A .25% --
Class B .25% .75%
Class C .25% .75%
Class R .25% .25%
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements (continued)
Merrill Lynch Basic Value Fund, Inc.
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), a subsidiary of
Merrill Lynch & Co., Inc. ("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 A, Class B, Class C
and Class R shareholders. The ongoing distribution fee compensates
the Distributor and MLPF&S for providing shareholder and
distribution-related services to Class B, Class C and Class R
shareholders.
For the six months ended December 31, 2003, FAMD earned underwriting
discounts and direct commissions and MLPF&S earned dealer
concessions on sales of the Fund's Class A and Class I Shares as
follows:
FAMD MLPF&S
Class A $ 22,644 $284,936
Class I $ 3,971 $ 43,637
For the six months ended December 31, 2003, MLPF&S received
contingent deferred sales charges of $531,754 and $23,115 relating
to transactions in Class B and Class C Shares, respectively.
Financial Data Services, Inc. ("FDS"), an indirect, wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Certain officers and/or directors of the Fund are officers and/or
directors of FAMD, FDS, and/or ML & Co.
3. Capital Share Transactions:
Net decrease in net assets derived from capital share transactions
was $100,352,149 and $460,434,673 for the six months ended December
31, 2003 and for the year ended June 30, 2003, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the
Six Months Ended Dollar
December 31, 2003 Shares Amount
Shares sold 3,444,988 $ 95,208,280
Automatic conversion of shares 3,739,881 102,481,947
Shares issued to shareholders
in reinvestment of dividends 716,424 19,827,623
--------------- ---------------
Total issued 7,901,293 217,517,850
Shares redeemed (6,015,513) (166,080,874)
--------------- ---------------
Net increase 1,885,780 $ 51,436,976
=============== ===============
Class A Shares for the Year Dollar
Ended June 30, 2003++ Shares Amount
Shares sold 7,460,673 $ 175,120,901
Automatic conversion of shares 7,541,843 177,846,033
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,311,118 54,486,981
--------------- ---------------
Total issued 17,313,634 407,453,915
Shares redeemed (16,289,262) (379,049,622)
--------------- ---------------
Net increase 1,024,372 $ 28,404,293
=============== ===============
++Effective April 14, 2003, Class D Shares were redesignated Class A
Shares.
Class B Shares for the
Six Months Ended Dollar
December 31, 2003 Shares Amount
Shares sold 3,774,408 $ 101,578,009
Shares issued to shareholders
in reinvestment of dividends 249,280 6,755,313
--------------- ---------------
Total issued 4,023,688 108,333,322
Automatic conversion of shares (3,815,258) (102,481,947)
Shares redeemed (6,154,766) (166,410,909)
--------------- ---------------
Net decrease (5,946,336) $ (160,559,534)
=============== ===============
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements (concluded)
Merrill Lynch Basic Value Fund, Inc.
Class B Shares for the Year Dollar
Ended June 30, 2003 Shares Amount
Shares sold 10,355,395 $ 238,133,665
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,125,767 49,165,466
--------------- ---------------
Total issued 12,481,162 287,299,131
Automatic conversion of shares (7,690,243) (177,846,033)
Shares redeemed (19,609,170) (447,289,074)
--------------- ---------------
Net decrease (14,818,251) $ (337,835,976)
=============== ===============
Class C Shares for the
Six Months Ended Dollar
December 31, 2003 Shares Amount
Shares sold 2,016,754 $ 53,473,381
Shares issued to shareholders
in reinvestment of dividends 98,510 2,618,134
--------------- ---------------
Total issued 2,115,264 56,091,515
Shares redeemed (1,680,014) (44,366,582)
--------------- ---------------
Net increase 435,250 $ 11,724,933
=============== ===============
Class C Shares for the Year Dollar
Ended June 30, 2003 Shares Amount
Shares sold 3,933,831 $ 88,911,514
Shares issued to shareholders
in reinvestment of dividends
and distributions 621,702 14,094,151
--------------- ---------------
Total issued 4,555,533 103,005,665
Shares redeemed (5,064,523) (113,017,198)
--------------- ---------------
Net decrease (508,990) $ (10,011,533)
=============== ===============
Class I Shares for the
Six Months Ended Dollar
December 31, 2003 Shares Amount
Shares sold 9,295,644 $ 257,374,749
Shares issued to shareholders
in reinvestment of dividends 1,741,317 48,371,528
--------------- ---------------
Total issued 11,036,961 305,746,277
Shares redeemed (11,274,526) (312,431,528)
--------------- ---------------
Net decrease (237,565) $ (6,685,251)
=============== ===============
Class I Shares for the Year Dollar
Ended June 30, 2003++ Shares Amount
Shares sold 22,562,520 $ 529,217,648
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,439,951 128,721,636
--------------- ---------------
Total issued 28,002,471 657,939,284
Shares redeemed (34,105,397) (798,931,624)
--------------- ---------------
Net decrease (6,102,926) $ (140,992,340)
=============== ===============
++Effective April 14, 2003, Class A Shares were redesignated Class I
Shares.
Class R Shares for the
Six Months Ended Dollar
December 31, 2003 Shares Amount
Shares sold 139,452 $ 3,866,753
Shares issued to shareholders
in reinvestment of dividends 785 22,017
--------------- ---------------
Total issued 140,237 3,888,770
Shares redeemed (5,435) (158,043)
--------------- ---------------
Net increase 134,802 $ 3,730,727
=============== ===============
Class R Shares for the
Period January 3, 2003++ Dollar
to June 30, 2003 Shares Amount
Shares sold 35 $ 883
--------------- ---------------
Net increase 35 $ 883
=============== ===============
++Commencement of operations.
4. Capital Loss Carryforward:
On June 30, 2003, the Fund had a net capital loss carryforward of
$121,900,876, all of which expires in 2011. This amount will be
available to offset like amounts of any future taxable gains.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Schedule of Investments Master Basic Value Trust
Value Percent of
Industry+++ Shares Held Common Stocks (in U.S. dollars) Net Assets
Above-Average Yield
Metals & Mining 4,131,400 Alcoa Inc. $ 156,993,200 1.8%
Metals & Mining 8,103,000 BHP Billiton Limited 74,422,457 0.9
Pharmaceuticals 3,397,900 Bristol-Myers Squibb Company 97,179,940 1.1
Oil & Gas 961,000 ChevronTexaco Corporation 83,020,790 1.0
Food Products 4,168,900 ConAgra, Inc. 110,017,271 1.3
Chemicals 3,421,600 E.I. du Pont de Nemours and Company 157,017,224 1.8
Oil & Gas 8,716,000 Exxon Mobil Corporation 357,356,000 4.1
Personal Products 3,096,500 The Gillette Company 113,734,445 1.3
Aerospace & Defense 4,033,700 Honeywell International Inc. 134,846,591 1.6
Oil & Gas 2,315,600 Kerr-McGee Corporation 107,652,244 1.3
Capital Markets 2,353,600 Mellon Financial Corporation 75,574,096 0.9
Oil & Gas 4,689,500 Royal Dutch Petroleum Company
(NY Registered Shares) 245,682,905 2.8
Diversified
Telecommunication
Services 5,029,700 SBC Communications Inc. 131,124,279 1.5
Food Products 3,924,000 Sara Lee Corporation 85,190,040 1.0
Diversified 2,957,100 Verizon Communications 103,735,068 1.2
Telecommunication
Services
Commercial Banks 2,247,300 Wachovia Corporation 104,701,707 1.2
---------------- ------
2,138,248,257 24.8
Below-Average Price Earnings/Ratio
Insurance 2,166,700 ACE Limited 89,744,714 1.0
Insurance 2,238,700 The Allstate Corporation 96,308,874 1.1
Insurance 2,492,700 American International Group, Inc. 165,216,156 1.9
Commercial Banks 4,800,600 Bank One Corporation 218,859,354 2.5
Commercial Banks 1,460,100 Bank of America Corporation 117,435,843 1.4
Health Care Equipment
& Supplies 2,110,800 Baxter International Inc. 64,421,616 0.8
Machinery 706,800 Caterpillar Inc. 58,678,536 0.7
Diversified Financial
Services 6,018,500 Citigroup Inc. 292,137,990 3.4
Beverages 2,943,900 Coca-Cola Enterprises Inc. 64,383,093 0.7
Auto Components 4,660,626 Delphi Automotive Systems Corporation 47,584,992 0.6
Automobiles 4,062,700 Ford Motor Company 65,003,200 0.8
Computers & Peripherals 4,984,100 Hewlett-Packard Company 114,484,777 1.3
Household Durables 2,780,700 Koninklijke (Royal) Philips Electronics NV 80,890,563 0.9
(NY Registered Shares)
Food Products 2,078,400 Kraft Foods Inc. (Class A) 66,966,048 0.8
Hotels, Restaurants &
Leisure 4,418,100 McDonald's Corporation 109,701,423 1.3
Pharmaceuticals 1,626,000 Merck & Co., Inc. 75,121,200 0.9
Capital Markets 2,156,900 Morgan Stanley 124,819,803 1.4
Semiconductors &
Semiconductor Equipment 473,500 ++National Semiconductor Corporation 18,660,635 0.2
Pharmaceuticals 5,955,100 Schering-Plough Corporation 103,559,189 1.2
Electrical Equipment 3,600,000 Thomas & Betts Corporation (a) 82,404,000 1.0
Energy Equipment &
Services 4,333,800 ++Transocean Inc. 104,054,538 1.2
Insurance 6,810,600 Travelers Property Casualty Corp. (Class A) 114,281,868 1.3
Food Products 2,023,900 Unilever NV (NY Registered Shares) 131,351,110 1.5
IT Services 10,080,100 ++Unisys Corporation 149,689,485 1.7
Oil & Gas 5,640,000 Unocal Corporation 207,721,200 2.4
---------------- ------
2,763,480,207 32.0
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Schedule of Investments (continued) Master Basic Value Trust
Value Percent of
Industry+++ Shares Held Common Stocks (in U.S. dollars) Net Assets
Low Price-to-Book Value
Communications Equipment 10,329,600 ++3Com Corporation $ 84,392,832 1.0%
Semiconductors &
Semiconductor Equipment 5,993,400 ++Advanced Micro Devices, Inc. 89,301,660 1.0
Electronic Equipment
& Instruments 3,008,900 ++Agilent Technologies, Inc. 87,980,236 1.0
Oil & Gas 1,866,600 Anadarko Petroleum Corporation 95,215,266 1.1
Aerospace & Defense 2,044,100 The Boeing Company 86,138,374 1.0
Media 1,342,200 ++Comcast Corporation (Special Class A) 41,984,016 0.5
Automobiles 1,843,000 DaimlerChrysler AG 85,183,460 1.0
Machinery 2,612,600 Deere & Company 169,949,630 2.0
Energy Equipment &
Services 5,600,000 Diamond Offshore Drilling, Inc. 114,856,000 1.3
Energy Equipment &
Services 4,679,300 GlobalSantaFe Corporation 116,187,019 1.3
Energy Equipment &
Services 3,283,500 Halliburton Company 85,371,000 1.0
Insurance 2,301,800 The Hartford Financial Services Group, Inc. 135,875,254 1.6
Paper & Forest Products 3,100,000 International Paper Company 133,641,000 1.5
Household Products 2,418,600 Kimberly-Clark Corporation 142,915,074 1.7
Semiconductors &
Semiconductor Equipment 11,248,100 ++LSI Logic Corporation 99,770,647 1.2
Media 10,278,800 ++Liberty Media Corporation (Class A) 122,214,932 1.4
Communications Equipment 15,777,800 ++Lucent Technologies Inc. 44,808,952 0.5
Metals & Mining 3,834,300 Massey Energy Company (a) 79,753,440 0.9
Semiconductors &
Semiconductor Equipment 4,261,700 ++Micron Technology, Inc. 57,405,099 0.7
Communications Equipment 8,775,500 Motorola, Inc. 123,471,285 1.4
Metals & Mining 728,600 ++Phelps Dodge Corporation 55,439,174 0.6
Aerospace & Defense 5,440,700 Raytheon Company 163,438,628 1.9
Electronic Equipment
& Instruments 1,537,900 Tektronix, Inc. 48,597,640 0.6
Media 9,819,700 ++Time Warner Inc. 176,656,403 2.0
Specialty Retail 2,571,500 ++Toys 'R' Us, Inc. 32,503,760 0.4
Media 2,983,300 Viacom, Inc. (Class B) 132,398,854 1.5
Media 4,424,200 The Walt Disney Company 103,216,586 1.2
Commercial Banks 6,000,000 Wells Fargo & Company 353,340,000 4.1
---------------- ------
3,062,006,221 35.4
Special Situations
Software 2,544,700 Computer Associates International, Inc. 69,572,098 0.8
Computers & Peripherals 1,267,300 International Business Machines Corporation 117,453,364 1.3
Computers & Peripherals 16,534,600 ++Sun Microsystems, Inc. 74,240,354 0.9
---------------- ------
261,265,816 3.0
Total Common Stocks
(Cost--$5,827,903,681) 8,225,000,501 95.2
Beneficial Interest/
Shares Held Short-Term Securities
Short-Term Securities
$436,676,792 Merrill Lynch Liquidity Series, LLC Cash Sweep 436,676,792 5.0
Series I (b)
$793,587,037 Merrill Lynch Liquidity Series, LLC Money Market 793,587,037 9.2
Series (b)(c)
264,529,013 Merrill Lynch Premier Institutional Fund (b)(c) 264,529,013 3.1
Total Short-Term Securities
(Cost--$1,494,792,842) 1,494,792,842 17.3
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Schedule of Investments (concluded) Master Basic Value Trust
Number of Value Percent of
Contracts Issue (in U.S. dollars) Net Assets
Options Purchased
Put Options Purchased 13,000 American International Group, Inc., expiring
February 2004 at USD 60, Broker Morgan Stanley $ 520,000 0.0%
15,000 Citigroup Inc., expiring January 2004 at
USD 45, Broker UBS Warburg 150,000 0.0
5,000 International Business Machines Corporation,
expiring January 2004 at USD 90, Broker
UBS Warburg 350,000 0.0
20,000 Wells Fargo & Company, expiring January 2004
at USD 55, Broker UBS Warburg 300,000 0.0
Total Options Purchased
(Premiums Paid--$16,675,850) 1,320,000 0.0
Total Investments (Cost--$7,339,372,373)
Options Written
Call Options Written 13,000 American International Group, Inc., expiring (8,710,000) (0.1)
February 2004 at USD 60, Broker Morgan Stanley
5,000 International Business Machines Corporation, (350,000) 0.0
expiring January 2004 at USD 95, Broker UBS
Warburg
6,000 International Paper Company, expiring January (1,920,000) 0.0
2004 at USD 40, Broker Morgan Stanley
19,500 Wells Fargo & Company, expiring January 2004 (7,605,000) (0.1)
at USD 55, Broker UBS Warburg
Total Options Written
(Premiums Received--$8,789,043) (18,585,000) (0.2)
Total Investments, Net of Options Written (Cost--$7,330,583,330) 9,702,528,343 112.3
Liabilities in Excess of Other Assets (1,059,694,942) (12.3)
---------------- ------
Net Assets $ 8,642,833,401 100.0%
================ ======
++Non-income producing security.
+++For Trust compliance purposes, "Industry" means any one or more
of the industry sub-classifications used by one or more widely
recognized market indexes or ratings group indexes, and/or as
defined by Trust management. This definition may not apply for
purposes of this report, which may combine such industry sub-
classifications for reporting ease.
(a)Investments in companies 5% or more of whose outstanding
securities are held by the Trust (such companies are defined as
"Affiliated Companies" in Section 2(a)(3) of the Investment Company
Act of 1940) are as follows:
Net Share Purchase Sales Realized Dividend
Affiliate Activity Cost Cost Gain Income
Massey Energy Company (1,990,100) -- 29,053,507 $4,748,744 $441,776
Thomas & Betts Corporation -- -- -- -- $ 18,000
(b)Investments in companies considered to be an affiliate of the
Trust (such companies are defined as "Affiliated Companies" in
Section 2(a)(3) of the Investment Company Act of 1940) are as
follows:
Interest/
Net Dividend
Affiliate Activity Income
Merrill Lynch Liquidity Series, LLC Cash
Sweep Series I $ 374,788,899 $1,933,424
Merrill Lynch Liquidity Series, LLC Money
Market Series $ 126,272,517 $ 338,918
Merrill Lynch Premier Institutional Fund (180,347,332) $ 165,407
(c)Security was purchased with the cash proceeds from securities
loans.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statement of Assets and Liabilities Master Basic Value Trust
As of December 31, 2003
Assets
Investments, at value (including securities loaned of $1,025,149,771)
(identified cost--$7,322,696,523) $ 9,719,793,343
Options purchased, at value (premiums paid--$16,675,850) 1,320,000
Cash 107,726
Receivables:
Dividends $ 14,311,139
Contributions 8,840,825
Securities sold 8,063,129
Interest 463,134
Securities lending--net 94,024 31,772,251
---------------
Prepaid expenses and other assets 50,936
---------------
Total assets 9,753,044,256
---------------
Liabilities
Collateral on securities loaned, at value 1,058,116,050
Options written, at value (premiums received--$8,789,043) 18,585,000
Payables:
Withdrawals 32,921,910
Investment adviser 473,489
Other affiliates 84,318 33,479,717
---------------
Accrued expenses 30,088
---------------
Total liabilities 1,110,210,855
---------------
Net Assets
Net assets $ 8,642,833,401
===============
Net Assets Consist of
Investors' capital $ 6,270,888,388
Unrealized appreciation on investments and foreign currency transactions--net 2,371,945,013
---------------
Net Assets $ 8,642,833,401
===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statement of Operations Master Basic Value Trust
For the Six Months Ended December 31, 2003
Investment Income
Dividends (net of $806,990 foreign withholding tax) $ 79,079,988
Interest 1,927,223
Securities lending--net 504,325
---------------
Total income 81,511,536
---------------
Expenses
Investment advisory fees $ 15,901,142
Accounting services 549,758
Custodian fees 156,394
Professional fees 87,479
Pricing fees 56,762
Trustees' fees and expenses 27,401
Printing and shareholder reports 4,948
Other 69,083
---------------
Total expenses 16,852,967
---------------
Investment income--net 64,658,569
---------------
Realized & Unrealized Gain (Loss) on Investments & Foreign Currency Transactions--Net
Realized gain (loss) from:
Investments--net 125,942,039
Foreign currency transactions--net (75,759) 125,866,280
Change in unrealized appreciation/depreciation on:
Investments--net 1,271,519,526
Foreign currency transactions--net 16,708 1,271,536,234
--------------- ---------------
Total realized and unrealized gain on investments and foreign currency
transactions--net 1,397,402,514
---------------
Net Increase in Net Assets Resulting from Operations $ 1,462,061,083
===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Statements of Changes in Net Assets Master Basic Value Trust
For the Six For the
Months Ended Year Ended
December 31, June 30,
Increase (Decrease) in Net Assets: 2003 2003
Operations
Investment income--net $ 64,658,569 $ 117,205,529
Realized gain (loss) on investments and foreign currency
transactions--net 125,866,280 (194,293,023)
Change in unrealized appreciation (depreciation) on investments
and foreign currency transactions--net 1,271,536,234 (63,780,449)
--------------- ---------------
Net increase (decrease) in net assets resulting from operations 1,462,061,083 (140,867,943)
--------------- ---------------
Capital Transactions
Proceeds from contributions 511,645,927 1,032,235,075
Fair value of withdrawals (719,368,632) (1,810,048,195)
--------------- ---------------
Net decrease in net assets derived from capital transactions (207,722,705) (777,813,120)
--------------- ---------------
Net Assets
Total increase (decrease) in net assets 1,254,338,378 (918,681,063)
Beginning of period 7,388,495,023 8,307,176,086
--------------- ---------------
End of period $ 8,642,833,401 $ 7,388,495,023
=============== ===============
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Financial Highlights Master Basic Value Trust
For the For the Period
Six Months October 13,
Ended For the Year Ended 2000++ to
The following ratios have been derived from December 31, June 30, June 30,
information provided in the financial statements. 2003 2003 2002 2001
Total Investment Return**
Total investment return 20.09%+++ (.09%) (9.93%) --
=========== =========== =========== ===========
Ratios to Average Net Assets
Expenses .43%* .43% .42% .42%*
=========== =========== =========== ===========
Investment income--net 1.64%* 1.66% 1.33% 1.57%*
=========== =========== =========== ===========
Supplemental Data
Net assets, end of period (in thousands) $ 8,642,833 $ 7,388,495 $ 8,307,176 $ 9,409,683
=========== =========== =========== ===========
Portfolio turnover 13.31% 31.92% 38.15% 37.53%
=========== =========== =========== ===========
*Annualized.
**Total return is required to be disclosed for fiscal years
beginning after December 15, 2000.
++Commencement of operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements
Master Basic Value Trust
1. Significant Accounting Policies:
Master Basic Value Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, and is organized as a
Delaware statutory trust. The Declaration of Trust permits the
Trustees to issue nontransferable interests in the Trust, subject to
certain limitations. The Trust's financial statements are prepared
in conformity with accounting principles generally accepted in the
United States of America, which may require the use of management
accruals and estimates. These unaudited financial statements reflect
all adjustments, which are, in the opinion of management, necessary
to a fair statement of the results for the interim period presented.
The following is a summary of significant accounting policies
followed by the Trust.
(a) Valuation of investments--Equity securities that are held by the
Trust that are traded on stock exchanges or the Nasdaq National
Market are valued at the last sale price or official close price on
the exchange, as of the close of business on the day the securities
are being valued or, lacking any sales, at the last available bid
price for long positions, and at the last available ask price for
short positions. In cases where equity securities are traded on more
than one exchange, the securities are valued on the exchange
designated as the primary market by or under the authority of the
Board of Trustees of the Trust. Long positions traded in the over-
the-counter ("OTC") market, Nasdaq Small Cap or Bulletin Board are
valued at the last available bid price or yield equivalent obtained
from one or more dealers or pricing services approved by the Board
of Trustees of the Trust. Short positions traded in the OTC market
are valued at the last available ask price. Portfolio securities
that are traded both in the OTC market and on a stock exchange are
valued according to the broadest and most representative market.
Options written are valued at the last sale price in the case of
exchange-traded options or, in the case of options traded in the OTC
market, the last ask price. Options purchased are valued at their
last sale price in the case of exchange-traded options or, in the
case of options traded in the OTC market, the last bid price. Swap
agreements are valued daily based upon quotations from market
makers. Financial futures contracts and options thereon, which are
traded on exchanges, are valued at their last sale price as of the
close of such exchanges. Obligations with remaining maturities of 60
days or less are valued at amortized cost unless the Investment
Adviser believes that this method no longer produces fair
valuations.
Repurchase agreements are valued at cost plus accrued interest. The
Trust employs pricing services to provide certain securities prices
for the Trust. Securities and assets for which market quotations are
not readily available are valued at fair value as determined in good
faith by or under the direction of the Board of Trustees of the
Trust, including valuations furnished by the pricing services
retained by the Trust, which may use a matrix system for valuations.
The procedures of a pricing service and its valuations are reviewed
by the officers of the Trust under the general supervision of the
Trust's Board of Trustees. Such valuations and procedures will be
reviewed periodically by the Board of Trustees of the Trust.
Generally, trading in foreign securities, as well as U.S. government
securities and money market instruments, is substantially completed
each day at various times prior to the close of business on the New
York Stock Exchange ("NYSE"). The values of such securities used in
computing the net assets of the Portfolio are determined as of such
times. Foreign currency exchange rates also are generally determined
prior to the close of business on the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close
of business on the NYSE that may not be reflected in the computation
of the Trust's net assets. If events (for example, a company
announcement, market volatility or a natural disaster) occur during
such periods that are expected to materially affect the value of
such securities, those securities may be valued at their fair value
as determined in good faith by the Trust's Board of Trustees or by
the Investment Adviser using a pricing service and/or procedures
approved by the Trust's Board of Trustees.
(b) Derivative financial instruments--The Trust may engage in
various portfolio investment strategies both to increase the return
of the Trust and to hedge, or protect, its exposure to interest rate
movements and movements in the securities 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 Trust may purchase and write covered call and put
options. When the Trust writes an option, an amount equal to the
premium received by the Trust 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.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements (continued)
Master Basic Value Trust
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 Trust enters into a closing transaction), the Trust
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 and purchased 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 U.S. dollars. Realized and unrealized gains or
losses from investments include the effects of foreign exchange
rates on investments.
(d) Income taxes--The Trust is classified as a partnership for
Federal income tax purposes. As such, each investor in the Trust is
treated as owner of its proportionate share of the net assets,
income, expenses and realized and unrealized gains and losses of the
Trust. Therefore, no Federal income tax provision is required. Under
the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends and capital gains at various rates. It is
intended that the Trust's assets will be managed so an investor in
the Trust can satisfy the requirements of subchapter M of the
Internal Revenue Code.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Realized gains and losses on security
transactions are determined on the identified cost basis. Dividend
income is recorded on the ex-dividend dates. Interest income is
recognized on the accrual basis.
(f) Securities lending--The Trust may lend securities to financial
institutions that provide cash or securities issued or guaranteed by
the U.S. government as collateral, which will be maintained at all
times in an amount equal to at least 100% of the current market
value of the loaned securities. The market value of the loaned
securities is determined at the close of business of the Trust and
any additional required collateral is delivered to the Trust on the
next business day. Where the Trust receives securities as collateral
for the loaned securities, it collects a fee from the borrower. The
Trust typically receives the income on the loaned securities but
does not receive the income on the collateral. Where the Trust
receives cash collateral, it may invest such collateral and retain
the amount earned on such investment, net of any amount rebated to
the borrower. Loans of securities are terminable at any time and the
borrower, after notice, is required to return borrowed securities
within five business days. The Trust may pay reasonable finder's,
lending agent, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation
to return borrowed securities because of insolvency or for any other
reason, the Trust could experience delays and costs in gaining
access to the collateral. The Trust also could suffer a loss where
the value of the collateral falls below the market value of the
borrowed securities, in the event of borrower default or in the
event of losses on investments made with cash collateral.
2. Investment Advisory Agreement and Transactions with Affiliates:
The Trust 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.
FAM is responsible for the management of the Trust's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Trust. For such
services, the Trust pays a monthly fee upon the average daily value
of the Trust's net assets at the following annual rates: .60% of the
Trust's average net assets not exceeding $100 million; .50% of
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.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Notes to Financial Statements (concluded)
Master Basic Value Trust
The Trust has received an exemptive order from the Securities and
Exchange Commission permitting it to lend portfolio securities to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
subsidiary of ML & Co., or its affiliates. As of December 31, 2003,
the Trust lent securities with a value of $164,612,911 to MLPF&S or
its affiliates. Pursuant to that order, the Trust also has retained
Merrill Lynch Investment Managers, LLC ("MLIM, LLC"), an affiliate
of FAM, as the securities lending agent for a fee based on a share
of the returns on investment of cash collateral. MLIM, LLC may, on
behalf of the Trust, invest cash collateral received by the Trust
for such loans, among other things, in a private investment company
managed by MLIM, LLC or in registered money market funds advised by
FAM or its affiliates. For the six months ended December 31, 2003,
MLIM, LLC received $214,941 in securities lending agent fees.
In addition, MLPF&S received $524,639 in commissions on the
execution of portfolio security transactions for the Trust for the
six months ended December 31, 2003.
For the six months ended December 31, 2003, the Trust reimbursed FAM
$79,413 for certain accounting services.
Certain officers and/or trustees of the Trust are officers and/or
directors of FAM, PSI, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended December 31, 2003 were $993,669,271 and
$1,591,251,244, respectively.
Net realized gains (losses) for the six months ended December 31,
2003 and net unrealized gains (losses) as of December 31, 2003 were
as follows:
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 141,874,993 $ 2,397,096,820
Options purchased (27,780,696) (15,355,850)
Options written 11,847,742 (9,795,957)
Foreign currency transactions (75,759) --
--------------- ---------------
Total $ 125,866,280 $ 2,371,945,013
=============== ===============
As of December 31, 2003, net unrealized appreciation for Federal
income tax purposes aggregated $2,294,490,369, of which
$2,620,479,400 related to appreciated securities and $325,989,031
related to depreciated securities. At December 31, 2003, the
aggregate cost of investments, net of options written, for Federal
income tax purposes was $7,408,037,974.
Transactions in call options written for the six months ended
December 31, 2003 were as follows:
Number of Premiums
Contracts Received
Outstanding call options written,
beginning of year 60,000 $ 10,746,601
Options written 85,000 18,852,174
Options closed (90,500) (18,102,860)
Options expired (11,000) (2,706,872)
------------- ---------------
Outstanding call options written,
end of period 43,500 $ 8,789,043
============= ===============
4. Short-Term Borrowings:
The Trust, along with certain other funds managed by FAM and its
affiliates, is a party to a $500,000,000 credit agreement with Bank
One, N.A. and certain other lenders. The Trust may borrow under the
credit agreement to fund investor withdrawals and for other lawful
purposes other than for leverage. The Trust may borrow up to the
maximum amount allowable under the Trust's current prospectus and
statement of additional information, subject to various other legal,
regulatory or contractual limits. The Trust pays a commitment fee of
..09% per annum based on the Trust's pro rata share of the unused
portion of the credit agreement. Amounts borrowed under the credit
agreement bear interest at a rate equal to, at each fund's election,
the Federal Funds rate plus .50% or a base rate as determined by
Bank One, N.A. On November 28, 2003, the credit agreement was
renewed for one year under the same terms. The Trust did not borrow
under the credit agreement during the six months ended December 31,
2003.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Portfolio Information
Master Basic Value Trust
As of December 31, 2003
Percent of
Ten Largest Stock Holdings Net Assets
Exxon Mobil Corporation 4.1%
Wells Fargo & Company 4.1
Citigroup Inc. 3.4
Royal Dutch Petroleum Company
(NY Registered Shares) 2.8
Bank One Corporation 2.5
Unocal Corporation 2.4
Deere & Company 2.0
Time Warner Inc. 2.0
American International Group, Inc. 1.9
Raytheon Company 1.9
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Officers and Directors/Trustees
Terry K. Glenn, President and Director/Trustee
Donald W. Burton, Director/Trustee
M. Colyer Crum, Director/Trustee
Laurie Simon Hodrick, Director/Trustee
David H. Walsh, Director/Trustee
Fred G. Weiss, Director/Trustee
Robert C. Doll, Jr., Senior Vice President
Robert J. Martorelli, Vice President and
Co-Portfolio Manager
Kevin M. Rendino, Vice President and
Co-Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Phillip S. Gillespie, Secretary
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
800-637-3863
Electronic Delivery
The Fund offers electronic delivery of communications to its
shareholders. In order to receive this service, you must
register your account and provide us with e-mail information.
To sign up for this service, simply access this website
http://www.icsdelivery.com/live and follow the instructions.
When you visit this site, you will obtain a personal identification
number (PIN). You will need this PIN should you wish to update your
e-mail address, choose to discontinue this service and/or make any
other changes to the service. This service is not available for
certain retirement accounts at this time.
MERRILL LYNCH BASIC VALUE FUND, INC., DECEMBER 31, 2003
Item 2 - Code of Ethics - Not Applicable to this semi-annual report
Item 3 - Audit Committee Financial Expert - Not Applicable to this
semi-annual report
Item 4 - Principal Accountant Fees and Services - Not Applicable to
this semi-annual report
Item 5 - Audit Committee of Listed Registrants - Not Applicable
Item 6 - Reserved
Item 7 - Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies - Not Applicable
Item 8 - Reserved
Item 9 - Controls and Procedures
9(a) - The registrant's certifying officers have reasonably designed
such disclosure controls and procedures to ensure material
information relating to the registrant is made known to us by others
particularly during the period in which this report is being
prepared. The registrant's certifying officers have determined that
the registrant's disclosure controls and procedures are effective
based on our evaluation of these controls and procedures as of a
date within 90 days prior to the filing date of this report.
9(b) - There were no significant changes in the registrant's
internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 10 - Exhibits attached hereto
10(a) - Not Applicable
10(b) - Attached hereto
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Merrill Lynch Merrill Lynch Basic Value Fund, Inc. and Master Basic
Value Trust
By: _/s/ Terry K. Glenn_______
Terry K. Glenn,
President of
Merrill Lynch Merrill Lynch Basic Value Fund, Inc. and
Master Basic Value Trust
Date: February 23, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934
and the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By: _/s/ Terry K. Glenn________
Terry K. Glenn,
President of
Merrill Lynch Merrill Lynch Basic Value Fund, Inc. and
Master Basic Value Trust
Date: February 23, 2004
By: _/s/ Donald C. Burke________
Donald C. Burke,
Chief Financial Officer of
Merrill Lynch Merrill Lynch Basic Value Fund, Inc. and
Master Basic Value Trust
Date: February 23, 2004