MERRILL LYNCH
SPECIAL VALUE
FUND, INC.
FUND LOGO
Quarterly Report
June 30, 1995
<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 and
Portfolio Manager
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
90 Washington Street
New York, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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
<PAGE>
MERRILL LYNCH SPECIAL VALUE FUND, INC.
DEAR SHAREHOLDER
In the June quarter economic data showed evidence of slowing
activity. Gross domestic product (GDP) growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included slowing growth
in the manufacturing sector in May and June as well as three
consecutive months of declines in the Index of Leading Economic
Indicators, an occurrence which has often (but not always) forecast
recessions. As a result, by the end of the June quarter concerns had
arisen that the economic "soft landing" could turn into an actual
recession. However, at the same time there were also expectations
that a few months of very slow or zero growth would be followed by a
pickup in economic activity later in the year. This view was
supported by the stronger-than-expected employment data for June and
an upward revision in May's employment figures.
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and well-
contained inflationary pressures could provide further assurance
that the peak in US interest rates is behind us, creating a stronger
foundation for higher stock and bond prices. On the other hand,
indications of reaccelerating growth and increasing inflationary
pressures would likely suggest that higher interest rates are on the
horizon, a negative development for the US financial markets.
<PAGE>
Portfolio Matters
During the quarter ended June 30, 1995, Merrill Lynch Special Value
Fund, Inc. underperformed the unmanaged Russell 2000 Index. The
Fund's Class A, Class B, Class C, and Class D Shares returned
+4.54%, +4.31%, +4.27%, and +4.51%, respectively, while the Russell
2000 Index total return was +9.37%. (Fund results do not include
sales charges; results would be lower if sales charges were
included. Complete performance information, including average annual
total returns, can be found on pages 3--5 of this report to
shareholders.) The Fund's cash position remained relatively stable
during the June quarter, standing at 26.6% of net assets on June 30,
1995, compared with 27.1% on March 31, 1995. Our cash reserves
dampened the Fund's performance in the June quarter, but moderated
its risk. Including cash reserves, at the end of the June quarter we
estimate that the Fund had approximately 90% of the volatility of
the Russell 2000 Index.
The Fund's performance in the second quarter was helped by holdings
in technology, financial services, and oil exploration and
production. Notable performers in order of their contributions to
the portfolio's total return were Charter One Financial, Inc. (up
21%), VLSI Technology, Inc. (up 67%), Cognos, Inc. (up 31%), Storage
Technology Corp. (up 25%), and TransTexas Gas Corp. (up 34%).
Charter One Financial, Inc.'s performance reflected both the
strengthening in financial services stocks in the declining interest
rate environment and its recently announced merger with FirstFed
Michigan Corp. Analysts expect the merger to increase Charter One
Financial's earnings per share during the first calendar year after
the merger. If regulatory approvals proceed on schedule, the merger
is expected to close during December 1995.
VLSI Technology, Inc., a manufacturer of application-specific
integrated circuits and application-specific standard products,
benefited from improved earnings and higher-than-expected demand.
Cognos, Inc., which develops client/server software and database
tools, appreciated sharply based on strong sales of its Impromptu
and PowerPlay products. Storage Technology Corp., a manufacturer of
computer information storage and retrieval systems, rebounded from
depressed valuation levels aided by expected new product
introductions. TransTexas Gas Corp., a natural gas exploration and
production company with properties in Texas, rose sharply despite
the lack of gains in gas prices. TransTexas Gas Corp.'s stock was
bolstered by higher natural gas reserves in the latest reserve
report, and the potential for further substantial increases in
reserves as recent discoveries are delineated.
<PAGE>
The Russell 2000 Index as well as the overall stock market generated
strong results during the second quarter of 1995, reflecting the
continued decline in interest rates. Despite mixed economic signals
regarding the economy's underlying strength, investors were
optimistic, expecting that the economy was slowing enough to permit
a further decline in interest rates without slowing enough to
jeopardize earnings expectations. The market took on a speculative
tone with technology stocks extending their first-quarter gains. In
addition, the quarter ended June 30, 1995 saw an increasing number
of initial public offerings, particularly in the technology sector,
many of which appreciated sharply on their first day of trading.
Several industry sectors extended their first-quarter share price
gains into the second quarter. Technology stocks benefited from
strong computer and telecommunications equipment sales and earnings,
as well as attendant demand for semiconductors and software.
Investor attention was also focused on biotechnology stocks, as
certain companies reported successful data from clinical trials.
Some biotechnology stocks rose substantially even in the absence of
company-specific news. Results in other segments of the healthcare
industry were mixed, with disappointments in many health maintenance
organizations and nursing home companies. Financial services stocks
continued to benefit from the further decline in short-term interest
rates, ongoing acquisition activity in a consolidating industry,
earnings growth and low valuations.
Industry sectors that outperformed the overall Russell 2000 Index
included technology, business equipment and services, capital goods,
energy, financial services and transportation. The Fund was aided by
its overweightings in energy, technology and financial services, but
performance results were hindered by the Fund's underweightings in
business equipment and services, capital goods and transportation.
Broad industry sectors that underperformed the Russell 2000 Index
included most consumer areas such as consumer durables, nondurables
and services. Other underperforming sectors included healthcare,
retail, building and shelter, and utilities. The Fund was aided by
its underweightings in consumer durables, consumer services,
healthcare, and utilities, but it was hurt by its overweightings in
consumer nondurables (a category that includes apparel), retail, and
shelter and building-related stocks. The Fund was overweighted in
these sectors because of attractive fundamentals in selected stocks
that belong to groups currently out of favor with investors. The
Fund owns a number of investments in these categories in companies
having below market price/earnings ratios, and below market
price/book value ratios, low levels of debt relative to equity, and
other attractive fundamental characteristics in niches that have
good potential for growth over time.
The Fund initiated investments in 23 new holdings and added to
existing positions in 35 securities. Purchases were diversified and
covered a broad range of industries including healthcare,
technology, financial services, real estate investment trusts,
retail/apparel, oil and gas, manufacturing, and consumer-oriented
groups. No single security received a concentration of new
investment. The Fund benefited from gains in many of the new
holdings added during the quarter ended June 30, 1995.
<PAGE>
We eliminated holdings in 17 securities. Most sales were motivated
by stocks appreciating to the Fund's price objectives. Our concerns
over companies' operating results motivated us to sell a small
number of our holdings.
In Conclusion
We thank you for your continued investment in Merrill Lynch Special
Value Fund, Inc. Mainly as a result of new investors' purchases, net
assets increased over 23%, or nearly $85 million, in the June
quarter. 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
July 24, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
*Class A Shares incur a maximum initial sales charge (front-end load)
of 5.25% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
<PAGE>
*Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years.
*Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
*Class D Shares incur a maximum initial sales charge of 5.25% and an
account maintenance fee of 0.25% (but no distribution fee).
Performance data for the Fund's Class A and Class B Shares are
presented in the "Performance Summary" and "Average Annual Total
Return" tables on pages 4 and 5. The "Results of a $1,000 Investment
Since Inception--Class A Shares" chart on page 4 illustrates the
performance of a $1,000 investment in Class A Shares made at the
Fund's inception (assuming maximum sales charge of 5.25%) through
June 30, 1995."Aggregate Total Return" tables for Class C and Class
D Shares are presented on page 4. Data for all of the Fund's shares
are presented in the "Recent Performance Results" table below.
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for Class A and Class B
Shares for the 12-month and 3-month periods ended June 30, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended June 30, 1995. All data in this table assume
imposition of the actual total expenses incurred by each class of
shares during the relevant period.
None of the past results shown should 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. 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.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
6/30/95 3/31/95 6/30/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML Special Value Fund, Inc. Class A Shares* $15.84 $15.63 $15.71 + 5.73%(1) +2.31%(2)
ML Special Value Fund, Inc. Class B Shares* 15.38 15.16 15.28 + 5.69(1) +2.44(2)
ML Special Value Fund, Inc. Class C Shares* 15.29 15.10 15.06 + 3.97(3) +2.26(2)
ML Special Value Fund, Inc. Class D Shares* 15.83 15.61 15.52 + 4.37(3) +2.37(2)
Russell 2000 Index** 283.63 260.77 240.29 +18.04 +8.77
ML Special Value Fund, Inc. Class A Shares--Total Return* +15.02(4) +4.54(5)
ML Special Value Fund, Inc. Class B Shares--Total Return* +13.88(6) +4.31(7)
ML Special Value Fund, Inc. Class C Shares--Total Return* + 9.30(8) +4.27(9)
ML Special Value Fund, Inc. Class D Shares--Total Return* + 9.88(10) +4.51(11)
Russell 2000 Index**--Total Return +20.07 +9.37
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included.
**An unmanaged broad-based index comprised of common stocks. Total
investment returns for unmanaged indexes are based on estimates.
++Investment results shown for Class C and Class D Shares are since
inception (10/21/94).
(1)Percent change includes reinvestment of $0.711 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.151 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.343 per share capital
gains distributions.
(4)Percent change includes reinvestment of $1.288 per share ordinary
income dividends and $0.711 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.349 per share ordinary
income dividends and $0.151 per share capital gains distributions.
(6)Percent change includes reinvestment of $1.111 per share ordinary
income dividends and $0.711 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.283 per share ordinary
income dividends and $0.151 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.734 per share ordinary
income dividends and $0.343 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.305 per share ordinary
income dividends and $0.151 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.780 per share
ordinary income dividends and $0.343 per share capital gains
distributions.
(11)Percent change includes reinvestment of $0.334 per share
ordinary income dividends and $0.151 per share capital gains
distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
Results of a $1,000 Investment Since Inception--Class A Shares
(5.25% sales charge--$947.50 net amount invested; assuming
reinvestment of all dividends and capital gains distributions)
A mountain chart depicting the growth of an investment in the Fund's
Class A Shares from $947.50 on May 5, 1978 to $3,951.33 on June 30,
1995.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/95 +15.02% + 8.98%
Five Years Ended 6/30/95 +11.77 +10.57
Ten Years Ended 6/30/95 + 6.43 + 5.86
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +13.88% + 9.88%
Five Years Ended 6/30/95 +10.63 +10.63
Inception (10/21/88) through 6/30/95 + 7.44 + 7.44
[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>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 6/30/95 +9.30% +8.30%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 6/30/95 +9.88% +4.11%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <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
1994 15.66 14.70 0.561 0.940 + 3.81
1/1/95--6/30/95 14.70 15.84 0.151 0.349 +11.15
------ ------
Total $6.679 Total $4.765
Cumulative total return as of 6/30/95: +317.03%**
<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>
<PAGE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $12.01 $11.82 $0.017 $0.095 - 0.62%
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
1994 15.31 14.30 0.561 0.828 + 2.79
1/1/95--6/30/95 14.30 15.38 0.151 0.283 +10.58
------ ------
Total $1.323 Total $2.107
Cumulative total return as of 6/30/95: +61.67%**
<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>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Percent of
Industries Shares Held Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Aerospace 86,800 Banner Aerospace, Inc. $ 592,640 $ 434,000 0.1%
257,800 UNC, Inc. 1,466,514 1,385,675 0.3
------------ ------------ ------
2,059,154 1,819,675 0.4
Apparel 775,000 Farah, Inc. 6,420,957 5,037,500 1.1
35,000 Jones Apparel Group, Inc. 790,325 1,045,625 0.2
233,000 Kellwood Co. 4,270,366 3,961,000 0.9
84,000 Marisa Christina, Inc. 862,660 1,207,500 0.3
450,100 Norton McNaughton, Inc. 6,700,106 6,976,550 1.5
75,000 The Warnaco Group, Inc. (Class A) 1,142,930 1,500,000 0.3
------------ ------------ ------
20,187,344 19,728,175 4.3
Automotive 107,000 Smith (A.O.) Corp. 2,356,275 2,514,500 0.6
<PAGE>
Banks & Finance 60,000 American Federal Bank, FSB 611,250 825,000 0.2
267,000 Bankers Corp. 2,164,922 4,338,750 1.0
20,000 Banknorth Group, Inc. 365,000 537,500 0.1
492,000 Charter One Financial, Inc. 9,416,987 12,054,000 2.7
170,000 Civic Bancorp, Inc. 926,250 1,232,500 0.3
53,000 Collective Bancorp., Inc. 912,234 1,073,250 0.2
83,000 The Co-Operative Bank of Concord 1,198,949 1,411,000 0.3
71,600 FirstFed Financial Corp. 876,159 1,047,150 0.2
40,000 ONBANCorp, Inc. 1,166,500 1,135,000 0.2
450,000 Roosevelt Financial Group, Inc. 5,107,251 7,509,375 1.7
------------ ------------ ------
22,745,502 31,163,525 6.9
Beverages 76,000 Celestial Seasonings, Inc. 1,159,395 1,368,000 0.3
Biotechnology 40,000 Alteon, Inc. 181,731 310,000 0.1
256,000 Applied Immune Sciences, Inc. 3,639,452 1,408,000 0.3
132,000 COR Therapeutics, Inc. 1,458,182 1,179,750 0.3
100,000 Cytel Corp. 440,000 600,000 0.1
173,500 CytoTherapeutics, Inc. 1,354,051 1,192,813 0.3
60,000 Genetic Therapy, Inc. 677,651 892,500 0.2
45,000 The Liposome Company, Inc. (Convertible
Preferred) 992,998 1,153,125 0.3
76,100 National Patent Development Corp. 208,155 166,469 0.0
225,000 Scios Nova, Inc. 1,110,350 914,063 0.2
------------ ------------ ------
10,062,570 7,816,720 1.8
Building & Building 70,000 American Homestar, Inc. 560,000 861,875 0.2
Materials 76,000 Blount, Inc. (Class A) 3,004,859 3,391,500 0.7
100,000 Giant Cement Holding, Inc. 1,146,880 1,225,000 0.3
413,000 Redman Industries, Inc. 7,241,169 8,982,750 2.0
125,300 Ryland Group, Inc. 1,724,018 2,020,463 0.4
150,200 Washington Homes, Inc. 872,781 675,900 0.1
------------ ------------ ------
14,549,707 17,157,488 3.7
Business Services 591,400 Applied Bioscience International, Inc. 3,226,002 3,030,925 0.7
76,500 Banta Corp. 2,333,080 2,543,625 0.6
------------ ------------ ------
5,559,082 5,574,550 1.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Percent of
Industries Shares Held Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Computer Services 240,500 Boole & Babbage, Inc. $ 3,101,038 $ 7,215,000 1.6%
35,000 Primark Corp. 593,975 634,375 0.1
------------ ------------ ------
3,695,013 7,849,375 1.7
<PAGE>
Computers 4,000 Cellnet Data Systems, 13%++ due 6/15/2005
(Units)(e) 2,141,923 2,154,000 0.5
25,000 DH Technology, Inc. 295,000 687,500 0.1
361,300 Radius, Inc. 3,234,120 3,974,300 0.9
200,000 Storage Technology Corp. 3,989,275 4,925,000 1.1
260,000 Stratus Computer, Inc. 7,760,717 8,060,000 1.8
------------ ------------ ------
17,421,035 19,800,800 4.4
Cosmetics 1,317 Alfin, Inc. (Preferred)(d) 0 0 0.0
Data Processing 135,000 Cognos, Inc. 1,052,875 3,881,250 0.9
78,800 Consilium, Inc. 575,018 778,150 0.2
36,500 Hyperion Software Corp. 1,335,624 1,651,625 0.4
150,000 Information Resources, Inc. 2,057,058 2,137,500 0.5
15,000 Landmark Graphics Corp. 285,000 382,500 0.1
80,000 Parcplace Systems, Inc. 675,593 640,000 0.1
275,000 SHL Systemhouse, Inc. 1,509,375 1,925,000 0.4
33,800 Software Spectrum, Inc. 566,111 701,350 0.2
130,000 Sterling Software, Inc. 4,532,014 5,005,000 1.1
55,000 Symantec Corp. 946,138 1,588,125 0.3
------------ ------------ ------
13,534,806 18,690,500 4.2
Electrical Equipment 60,000 Catalina Lighting, Inc. 471,291 345,000 0.1
138,000 Comptek Research, Inc. 2,204,043 2,484,000 0.5
26,300 WPI Group, Inc. 164,375 69,038 0.0
------------ ------------ ------
2,839,709 2,898,038 0.6
Electronics 100,000 Alden Electronics, Inc. 422,500 225,000 0.0
500,011 Automated Security Holdings PLC (ADR)* 1,774,832 750,017 0.2
20,100 Benchmark Electronics, Inc. 415,769 494,963 0.1
27,562 Maxwell Laboratories, Inc. 316,726 241,168 0.0
226,000 Micronics Computers, Inc. 1,198,238 932,250 0.2
110,000 VLSI Technology, Inc. 1,325,000 3,313,750 0.7
------------ ------------ ------
5,453,065 5,957,148 1.2
<PAGE>
Environmental & 390,250 NSC Corp. 2,062,737 878,063 0.2
Environmental Control 110,000 Rollins Environmental Services, Inc. 546,187 522,500 0.1
------------ ------------ ------
2,608,924 1,400,563 0.3
Foods/Food Processing 82,000 Riviana Foods, Inc. 992,000 1,091,625 0.2
Fragrance Distributor 205,000 Model Imperial, Inc. 1,349,000 1,306,875 0.3
Healthcare-- 215,000 Beverly Enterprises, Inc. 2,869,712 2,660,625 0.6
Products & Services 330,000 Charter Medical Corp. 5,885,321 5,362,500 1.2
429,100 Community Psychiatric Centers 4,994,019 4,827,375 1.1
135,000 Coram Healthcare Corporation 2,325,161 1,906,875 0.4
50,000 Healthcare Services Group, Inc. 468,500 537,500 0.1
504,500 Ramsey Health Care, Inc. 3,537,506 2,144,125 0.5
131,644 Ramsey Managed Care (a) 296,199 477,209 0.1
200,000 Unilab Corp. 1,106,250 950,000 0.2
------------ ------------ ------
21,482,668 18,866,209 4.2
</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>
Home Furnishings 208,000 Crown Crafts, Inc. $ 3,388,728 $ 3,432,000 0.8%
Household 83,000 Durcraft Corp. 2,406,080 2,220,250 0.5
Appliances/Products
Insurance 280,000 Ace, Ltd. 6,641,458 8,120,000 1.8
215,000 Capital Guaranty Corp. 3,254,364 3,870,000 0.9
194,700 Harleysville Group, Inc. 4,260,949 4,867,500 1.1
97,200 Omni Insurance Group, Inc. 570,398 607,500 0.1
610,300 PXRE Corp. 13,256,396 14,342,050 3.2
442,300 Security-Connecticut Corp. 9,510,154 11,389,225 2.5
57,700 Transnational Re Corp. (Class A) 1,110,547 1,157,606 0.3
------------ ------------ ------
38,604,266 44,353,881 9.9
Leasing 195,000 Sea Containers, Ltd. 3,371,021 3,266,250 0.7
<PAGE>
Medical 183,500 Analogic Corp. 3,250,002 3,073,625 0.7
32,600 Everest & Jennings International (Class A) 456,544 20,375 0.0
15,000 Fischer Imaging Corp. 288,440 84,375 0.0
------------ ------------ ------
3,994,986 3,178,375 0.7
Metals--Non-Ferrous 76,800 Handy & Harman 1,205,929 1,190,400 0.3
Miscellaneous 45,000 PHH Corp. 1,541,238 2,002,500 0.4
Natural Resources 145,000 Abraxas Petroleum Corp. 1,642,500 1,268,750 0.3
90,900 Atwood Oceanics, Inc. 763,563 1,460,081 0.3
115,000 Tom Brown, Inc. 1,386,652 1,710,625 0.4
29,000 Cliffs Drilling Co. (Convertible Preferred) 774,875 804,750 0.2
299,254 Coho Resources, Inc. 2,075,477 1,533,677 0.3
10,000 Energy Ventures, Inc. 180,000 180,000 0.0
153,500 Gerrity Oil & Gas Corp. 1,865,788 518,062 0.1
70,700 Grant Tensor Geophysical Corp.
(Convertible Preferred) 1,175,940 1,060,500 0.2
50,900 Input/Output, Inc. 1,221,066 1,832,400 0.4
359,000 International Petroleum Corp. 990,247 1,211,625 0.3
120,000 Noble Drilling Corp. 735,714 885,000 0.2
105,000 Nuevo Energy Co. 2,023,100 2,113,125 0.5
308,391 Plains Resources, Inc. 1,806,983 2,698,421 0.6
$ 900,000 Swift Energy Corp., Convertible Bonds,
6.50% due 6/30/2003 924,000 864,000 0.2
192,100 Total Petroleum of North America, Ltd. 2,342,351 2,113,100 0.5
271,000 TransTexas Gas Corp. 3,131,375 4,098,875 0.9
2,876 Transamerican Refining Corp., 18.29%++
due 2/15/2002 (Units)(c) 1,806,852 2,057,922 0.5
52,000 Weatherford International, Inc. 449,600 663,000 0.1
20,000 The Wiser Oil Co. 360,000 272,500 0.1
------------ ------------ ------
25,656,083 27,346,413 6.1
Paper/Forest Products 100,000 Pope & Talbot, Inc. 1,662,200 1,625,000 0.4
Personal Care Products 50,000 Marietta Corp. 441,875 493,750 0.1
</TABLE>
<PAGE>
<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>
Pharmaceuticals 9,200 Agouron Pharmaceuticals, Inc. $ 187,818 $ 217,350 0.0%
19,025 American Drug Co. 2,377 5,351 0.0
19,025 American Drug Co. (Warrants)(b) 1,189 1,486 0.0
45,000 Regeneron Pharmaceuticals, Inc. 155,700 405,000 0.1
100,000 Sequus Pharmaceuticals, Inc. (f) 799,748 1,025,000 0.2
143,000 Vical, Inc. 1,154,202 1,394,250 0.3
------------ ------------ ------
2,301,034 3,048,437 0.6
Photo-Optical 80,000 Instron Corp. 1,010,849 950,000 0.2
Instruments
Real Estate & Real $ 1,000,000 Alexander Haagen Properties, Inc., 7.25%
Estate Investment due 12/27/2003 1,000,000 932,500 0.2
Trusts 105,000 Bay Apartment Communities, Inc. 1,901,462 2,047,500 0.5
23,000 Cali Realty Corp. 364,567 445,625 0.1
110,000 Carr Realty Corp. 2,223,480 1,897,500 0.4
88,000 Catellus Development Corp. (Convertible
Preferred) 3,200,250 3,652,000 0.8
315,000 Crown American Realty Trust 4,268,387 3,976,875 0.9
25,000 Developers Diversified Realty Corp. 701,563 718,750 0.2
23,200 Duke Realty Investments, Inc. 645,629 655,400 0.1
60,000 Manufactured Home Communities, Inc. 887,550 922,500 0.2
40,000 Merry Land & Investment Co., Inc. 772,400 815,000 0.2
40,000 Spieker Properties., Inc. 804,350 895,000 0.2
50,000 The Town & Country Trust 678,600 718,750 0.2
------------ ------------ ------
17,448,238 17,677,400 4.0
Restaurants 736,700 TPI Enterprises, Inc. 3,786,356 3,084,931 0.7
70,000 Taco Cabana, Inc. 401,850 385,000 0.1
------------ ------------ ------
4,188,206 3,469,931 0.8
<PAGE>
Retailing 368,500 J. Baker, Inc. 6,122,889 3,731,062 0.8
220,000 Bombay Company, Inc. (The) 1,738,500 1,732,500 0.4
236,200 Bon-Ton Stores, Inc. 2,471,959 2,465,337 0.5
313,800 Catherines Stores Corp. 3,404,710 3,491,025 0.8
58,000 Consolidated Stores Corporation 1,011,230 1,210,750 0.3
222,000 Filene's Basement Corp. 1,063,607 777,000 0.2
20,000 Gantos, Inc. 497,275 68,750 0.0
1,063,000 Grossman's, Inc. 3,251,812 2,591,062 0.6
300,000 Hancock Fabrics, Inc. 2,706,004 2,737,500 0.6
66,200 Lillian Vernon Corp. 972,147 1,216,425 0.3
2,000 Movie Gallery, Inc. 52,500 70,125 0.0
100,000 OfficeMax, Inc. 2,144,300 2,787,500 0.6
320,250 Pier 1 Imports, Inc. 2,687,712 2,962,312 0.7
102,000 REX Stores Corp. 1,315,670 1,428,000 0.3
40,000 S&K Famous Brands, Inc. 511,650 360,000 0.1
910,000 Service Merchandise Co., Inc. 5,645,193 4,777,500 1.1
144,000 Venture Stores, Inc. 2,407,682 1,422,000 0.3
711,100 The Wet Seal, Inc. (Class A) 2,501,757 3,288,837 0.7
------------ ------------ ------
40,506,597 37,117,685 8.3
Semiconductors 35,000 Asyst Technologies, Inc. 1,120,000 1,299,375 0.3
Steel 145,000 National Steel Corp. 2,220,300 2,247,500 0.5
Telecommunications 130,000 General DataComm Industries, Inc. 1,614,738 1,625,000 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Percent of
Industries Shares Held Stocks & Convertible Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Textiles 300,000 Burlington Industries, Inc. $ 3,384,602 $ 3,450,000 0.8%
Toy Manufacturing 389,000 Just Toys, Inc. 1,738,722 632,125 0.1
Transportation 265,000 Kirby Corp. 4,256,386 4,206,875 0.9
Utilities 125,000 American Water Works Co., Inc. 1,921,197 3,968,750 0.9
60,000 Wicor, Inc. 1,668,650 1,687,500 0.4
------------ ------------ ------
3,589,847 5,656,250 1.3
Total Stocks & Convertible Bonds 313,707,174 335,493,163 74.5
<PAGE>
Face Amount Short-Term Securities
Commercial Paper** $ 15,000,000 ABN-AMRO North America Finance, Inc.,
5.91% due 7/11/1995 14,975,375 14,975,375 3.3
15,000,000 du Pont (E.I.) de Nemours & Co., 5.91% due
7/28/1995 14,933,513 14,933,513 3.3
17,700,000 General Electric Capital Corp., 6.20%
due 7/03/1995 17,693,903 17,693,903 3.9
15,000,000 Matterhorn Capital Corp., 5.95% due
7/20/1995 14,952,896 14,952,896 3.3
16,000,000 Nomura Holding America, Inc., 5.93% due
7/18/1995 15,955,196 15,955,196 3.5
------------ ------------ ------
78,510,883 78,510,883 17.3
US Government & 5,000,000 Federal Farm Credit Bank, 5.84% due 7/27/1995 4,978,911 4,978,911 1.1
Agency Obligations** 15,000,000 Federal Home Loan Bank, 5.84% due 7/25/1995 14,941,600 14,941,600 3.3
15,000,000 Federal Home Loan Mortgage Corp., 5.84% due
7/03/1995 14,995,133 14,995,133 3.3
Federal National Mortgage Association:
3,000,000 5.88% due 7/07/1995 2,997,060 2,997,060 0.7
4,000,000 5.89% due 7/17/1995 3,989,529 3,989,529 0.9
------------ ------------ ------
41,902,233 41,902,233 9.3
Total Short-Term Securities 120,413,116 120,413,116 26.6
Total Investments $434,120,290 455,906,279 101.1
============
Liabilities in Excess of Other Assets (4,792,036) (1.1)
------------ ------
Net Assets $451,114,243 100.0%
============ ======
Net Asset Class A--Based on net assets of $142,213,462
Value: and 8,979,664 shares outstanding $ 15.84
============
Class B--Based on net assets of $275,004,766
and 17,882,587 shares outstanding $ 15.38
============
Class C--Based on net assets of $18,103,690 and
1,184,057 shares outstanding $ 15.29
============
Class D--Based on net assets of $15,792,325 and
997,905 shares outstanding $ 15.83
============
<PAGE>
<FN>
(a)The Fund received shares of Ramsey Managed Care as a result of
the spinoff of Ramsey Health Care, Inc.
(b)Warrants entitle the Fund to purchase a predetermined number of
shares of Common Stock. The purchase price and number of shares are
subject to adjustment under certain conditions until the expiration
date.
(c)Each unit consists of a $1,000 bond plus 17.09 warrants.Each
warrant can be exercised for 1 share of common stock.
(d)Security represents 14.5% Cumulative Preferred Stock. For each
share of Preferred Stock, the Fund will receive an annual dividend
of approximately 9.43 shares of Common Stock.
(e)Each unit consists of a $1,000 par senior discount note plus 4
warrants.
(f)Formerly Liposome Technology, Inc.
*American Depositary Receipt (ADR).
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
++Represents the yield to maturity on this zero coupon bond.
</TABLE>
PORTFOLIO INFORMATION
Percent of
Top Ten Equity Holdings Net Assets
PXRE Corp. 3.2%
Charter One Financial, Inc. 2.7
Security-Connecticut Corp. 2.5
Redman Industries, Inc. 2.0
Ace, Ltd. 1.8
Stratus Computer, Inc. 1.8
Roosevelt Financial Group, Inc. 1.7
Boole & Babbage, Inc. 1.6
Norton McNaughton, Inc. 1.5
Charter Medical Corp. 1.2
<PAGE>
Percent of
Ten Largest Industries Net Assets
Insurance 9.9%
Retailing 8.3
Banks & Finance 6.9
Natural Resources 6.1
Computers 4.4
Apparel 4.3
Healthcare--Products & Services 4.2
Data Processing 4.2
Real Estate & Real Estate
Investment Trusts 4.0
Building & Building Materials 3.7
Portfolio Changes for the Quarter
Ended June 30, 1995
<PAGE>
Additions
*APPS Dental, Inc.
Agouron Pharmaceuticals,
Inc.
*American Oncology
Resources, Inc.
*American Radio Systems
Corporation
*Anadigics, Inc.
*Arcsys, Inc.
Asyst Technologies, Inc.
Benchmark Electronics, Inc.
*Boise Cascade Office
Products Corp.
Bombay Company, Inc. (The)
*Borders Group, Inc.
*CBT Group, PLC
*CP Clare Corp.
Cellnet Data Systems, 13%
due 6/15/2005 (Units)
Consolidated Stores
Corporation
Coram Healthcare
Corporation
Cytel Corp.
*Datalogix International, Inc.
*Diamond Multimedia
Systems, Inc.
Duke Realty Investments, Inc.
Durcraft Corp.
*Expert Software, Inc.
*HNC Software, Inc.
Hyperion Software Corp.
Information Resources, Inc.
Landmark Graphics Corp.
Merry Land & Investment
Co., Inc.
Model Imperial, Inc.
Movie Gallery, Inc.
*Nexgen, Inc.
*Opal, Inc.
Parcplace Systems, Inc.
*Premisys Communications
Scios Nova, Inc.
Software Spectrum, Inc.
Spieker Properties, Inc.
Taco Cabana, Inc.
*UUNET Technologies, Inc.
Vical, Inc.
Wicor, Inc.
<PAGE>
Deletions
*APPS Dental, Inc.
Addington Resources, Inc.
American Oilfield Divers, Inc.
*American Oncology
Resources, Inc.
*American Radio Systems
Corporation
Anacomp, Inc.
*Anadigics, Inc.
*Arcsys, Inc.
AutoImmune, Inc.
BE Aerospace, Inc.
*Boise Cascade Office
Products Corp.
*Borders Group, Inc.
*CBT Group, PLC
*CP Clare Corp.
Cephelon, Inc.
Cliffs Drilling Co.
Computervision Corp.
*Datalogix International, Inc.
*Diamond Multimedia
Systems, Inc.
*Expert Software, Inc.
Fingerhut Companies, Inc.
*HNC Software, Inc.
The Immune Response Corp.
LDI Corp.
New York Bancorp, Inc.
*Nexgen, Inc.
*Opal, Inc.
Plains Resources, Inc. (Convertible Preferred),
Series C
*Premisys Communications
Sepracor, Inc.
Tetra Technologies, Inc.
*UUNET Technologies, Inc.
VTEL Corp.
WRT Energy Corp., 13.875%
due 3/01/2002 (Units)
<PAGE>
[FN]
*Added and deleted in the
same quarter.
