MERRILL
LYNCH
PHOENIX
FUND, INC.
Annual Report July 31, 1994
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 Phoenix Fund, Inc. is not related to Phoenix
Home Life Mutual Life Insurance Company or any of its sub-
sidiaries or affiliates, including The Phoenix Series Fund.
Merrill Lynch
Phoenix Fund, Inc.
Box 9011
Princeton, N.J.
08543
<PAGE>
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
The expectation of increasing inflationary pressures
and higher interest rates initially heightened investor
concerns and increased financial market volatility
during the July quarter. However, as the quarter
progressed, it was the weakness of the US dollar in
foreign exchange markets that dominated the finan-
cial news and prolonged stock and bond market
declines. Although the US dollar had strengthened
slightly by July quarter-end, which may have improved
investor confidence in the stock and bond markets,
the possibility of continued tightening by the Federal
Reserve Board resurfaced following Chairman Alan
Greenspan's recent Congressional testimony. Never-
theless, as the quarter drew to a close, a lower-than-
expected rate of growth reported for the US economy
during the second calendar quarter allayed investor
concerns and led to stock and bond market rallies.
During the July quarter, the US dollar's weakness
relative to other major currencies reflected the
deteriorating US trade deficit and widening net
long-term capital outflows. In 1993, an expanding
US economy and recession in other industrial coun-
tries led to a higher level of imports and weaker
export growth, widening the US trade deficit further.
In addition, global investors favored non-US dollar
denominated assets throughout 1993, which has
further depressed the dollar's value. This trend is not
improving significantly thus far in 1994 since foreign
inflows into US capital markets continue to decline,
although US investors are investing outside of the
United States to a lesser degree.
<PAGE>
Over the longer term, if the economies of the United
States' major trading partners expand (improving
the prospects for US export growth), the outlook for
the US dollar is likely to improve. In the near term,
central banks have attempted to reverse the dollar's
decline through currency market intervention. These
efforts have met with limited success thus far, giving
rise to the concern that the Federal Reserve Board
will be forced to continue to raise short-term interest
rates to attract investment capital back to the United
States and bolster the dollar's value. However, further
interest rate increases may jeopardize the US economic
expansion. Despite evidence of a moderating trend
in the US economy, Federal Reserve Board Chairman
Alan Greenspan indicated in his July Humphrey-
Hawkins testimony that the central bank would
prefer to err on the side of too much monetary
tightening rather than too little. In the weeks ahead,
investors will continue to assess economic data and
inflationary trends as they focus on the US dollar in
order to gauge whether further increases in short-
term interest rates are imminent. Continued indica-
tions of moderate and sustainable levels of economic
growth would be positive for the US capital markets.
Portfolio Matters
During the July quarter, many of the major holdings
in Merrill Lynch Phoenix Fund Inc.'s portfolio reported
earnings that either met or exceeded expectations.
However, this positive development was virtually
ignored by other investors. Furthermore, for those
portfolio holdings which announced earnings dis-
appointments, their share prices declined, which
created opportunities for us to add to existing posi-
tions at very attractive valuations. For example,
Matrix Service Co. indicated that its earnings recovery
would occur later than originally expected. Following
this announcement, its share price declined by 50%.
Given our belief that the company's earnings recovery
will eventually take place, we increased our invest-
ment in Matrix Service common stock.
The strongly negative investor reaction to earnings
disappointments also gave us the opportunity to
establish positions in former growth stocks at very
distressed prices, such as Computervision Corporation
and Mesa Airlines, Inc.
<PAGE>
Computervision is the largest supplier of computer-
aided design/computer-aided manufacturing
(CAD/CAM) software. The company has begun a major
restructuring that will allow it to cut costs dra-
matically by exiting the computer hardware resale
business and focus solely on its software products.
While the downsizing will consume cash throughout
the year, the company's new CADDS5 product is
being well-received in the marketplace and is likely
to drive future earnings growth.
Mesa Airlines is a group of airlines operating in
various regions across the United States. Throughout
the 1990s the company practiced the strategy of
"measured growth" and was rewarded with a very
high price/earnings multiple for its common stock.
Competition and higher maintenance expenses have
stalled earnings growth, and Mesa's share price has
fallen considerably. With a solid balance sheet, good
franchises and a management team well-respected in
the industry, we started buying Mesa Airlines' shares
at a fraction of their 1994 high. We are confident that
once management addresses these issues and the
company's earnings growth path is restored, its share
valuation should appreciate.
Merrill Lynch Phoenix Fund's net assets have grown
by more than half over the past fiscal year. As a result,
many of our positions have become such a small
percentage of the portfolio that they cannot make a
significant contribution to performance. Since their
market capitalizations are so small that we cannot
increase our investments substantially, we chose to
sell them and use the proceeds for larger positions.
For example, during the July quarter we closed out
our positions in Coho Energy, Inc. and Servam Corp.
In the months ahead, we plan to continue this
process, although positions in relatively illiquid
securities may take time to close out. During the
quarter we also sold our investments in Brunswick
Corp., Beverly Enterprises, Inc. and US Shoe Corp.,
since they had met our price objectives.
Within the high-yield sector, attractive values have
begun to emerge as bond prices declined because
of higher interest rates and net redemptions of
high-yield mutual funds. During the July quarter we
added two significant new high-yield holdings,
Genmar Holdings, Inc. and Riviera Holdings Corp.
<PAGE>
Genmar Holdings is a leading manufacturer of pleasure
boats. A highly cyclical industry, boat manufacturing
has only recently begun to emerge from a severe
downturn. Genmar utilized the downturn to make
astute acquisitions of other manufacturers in an
effort to strengthen itself for the recovery. Genmar's
coupon is 13.5%, with a potentially higher return
should the company complete an initial public equity
offering in the future and redeem the bonds.
Riviera Holdings operates a casino on a 29-acre site
in Las Vegas, Nevada. The property caters to middle-
market customers, a client base not targeted by the
larger, newer casinos. Riviera Holdings' bonds are
secured by the property and were purchased at a
nearly 14% yield.
Fiscal Year in Review
In our July 31, 1993 report to shareholders, we noted
that we were finding attractive values in large, well-
known cyclical companies. Our investments in this
area--most notably Scott Paper Co. and Brunswick
Corp.--made a significantly positive contribution
to the Fund's performance over the past fiscal year.
In addition, our holdings in companies undergoing
financial restructurings also performed well, such as
the chemical company, Rexene Products Corp. and
the paper and packaging manufacturer, Gaylord
Container Corp. While our investments in environ-
mental and pollution-control companies have not
yet made a positive contribution to the Fund's total
return, we believe that over the longer term this
area of investment will be profitable for the Fund.
In Conclusion
In the past, there have been periods during which
investors have largely ignored positive corporate
earnings results. However, in our experience,
investors in general have eventually come to
recognize good earnings performance, resulting in
stock price appreciation over the longer term. We
believe that this will also occur for our holdings
which underperformed during the July quarter. In
the meantime, we plan to continue to add to or
establish positions in companies whose fundamen-
tals are improving, but have yet to be recognized
by investors.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Martorelli)
Robert J. Martorelli
Vice President and Portfolio Manager
August 23, 1994
<PAGE>
PERFORMANCE DATA
None of the past results shown should be considered a representation
of future performance. Investment return and principal value of
Class A and Class B Shares will fluctuate so that shares, when redeemed,
may be worth more or less than their original cost.
Total Return Based on a $10,000 Investment
GRAPHIC MATERIAL APPEARS HERE.
SEE APPENDIX GRAPHIC AND IMAGE MATERIAL ITEM 1.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/94 + 7.49% + 0.51%
Five Years Ended 6/30/94 +12.14 +10.65
Ten Years Ended 6/30/94 +15.97 +15.19
[FN]
*Maximum sales charge is 6.5%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/94 + 6.33% + 2.53%
Five Years Ended 6/30/94 +11.00 +11.00
Inception (10/21/88)
through 6/30/94 +11.46 +11.46
[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>
PERFORMANCE DATA (continued)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
11/1/82--12/31/82 $ 9.35 $ 9.60 -- -- + 2.67%
1983 9.60 11.69 $0.470 $0.370 +31.05
1984 11.69 10.65 1.520 0.620 + 9.93
1985 10.65 12.00 0.980 0.710 +30.28
1986 12.00 12.39 1.010 0.610 +16.92
1987 12.39 10.50 1.551 0.676 + 0.95
1988 10.50 11.78 1.790 0.329 +33.18
1989 11.78 12.49 0.428 0.508 +13.87
1990 12.49 8.08 1.623 0.396 -20.66
1991 8.08 9.90 0.645 0.494 +37.01
1992 9.90 11.73 0.057 0.670 +26.69
1993 11.73 13.45 0.820 0.826 +29.54
1/1/94--7/31/94 13.45 13.31 -- -- - 1.04
------- ------
Total $10.894 Total $6.209
Cumulative total return as of 7/31/94: +508.95%**
<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**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $11.96 $11.77 $0.086 $0.144 + 0.35%
1989 11.77 12.45 0.428 0.409 +12.78
1990 12.45 8.06 1.623 0.271 -21.54
1991 8.06 9.83 0.645 0.429 +35.66
1992 9.83 11.55 0.057 0.639 +25.37
1993 11.55 13.24 0.820 0.661 +28.23
1/1/94--7/31/94 13.24 13.02 -- -- - 1.66
------ ------
Total $3.659 Total $2.553
Cumulative total return as of 7/31/94: +90.45%**
<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>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
7/31/94 4/30/94 7/31/93 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund Inc. Class A Shares $13.31 $13.18 $13.75 +2.96%(1) +0.99%
ML Phoenix Fund Inc. Class B Shares 13.02 12.93 13.46 +3.01(1) +0.70
Dow Jones Industrial Average** 3,764.50 3,681.69 3,539.47 +6.36 +2.25
Standard & Poor's 500 Index** 458.26 450.91 448.13 +2.26 +1.63
ML Phoenix Fund, Inc. Class A Shares--Total Return +9.36(2) +0.99
ML Phoenix Fund, Inc. Class B Shares--Total Return +8.21(3) +0.70
Dow Jones Industrial Average--Total Return** +9.28 +2.95
Standard & Poor's 500 Index--Total Return** +5.14 +2.39
<FN>
*Investment results shown for the 3-month and 12-month periods are before the deduction of any sales charge.
**An unmanaged broad-based index comprised of common stocks. Total investment returns for unmanaged
indexes are based on estimates.
(1)Percent change includes reinvestment of $0.820 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.826 per share ordinary income dividends and $0.820 per
share capital gains distributions.
(3)Percent change includes reinvestment of $0.661 per share ordinary income dividends and $0.820 per
share capital gains distributions.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
Percent of
Ten Largest Holdings Net Assets
ADT Ltd. 3.4%
WMX Technologies, Inc. 2.8
Burlington Industries, Inc. 2.7
Student Loan Marketing Association 2.7
Laidlaw, Inc. (Non-Voting) (Class B)
(ADR) 2.0
Automated Security (Holdings) PLC (ADR) 1.9
Genmar Holdings, Inc., Senior Subordinated
Notes, 13.50% due 7/15/2001 1.9
Scott Paper Co. 1.9
Reliance Group Holdings, Inc. 1.8
USX-Corp.--Marathon Group 1.7
Five Largest Industries
Environmental 10.8%
Retail 6.2
Diversified 4.9
Health Care 3.7
Leisure & Entertainment 3.6
Asset Mix
Stocks 78.9%
Bonds 10.3
Cash & Cash Equivalents* 10.8
[FN]
*Net of other assets less liabilities.
Additions
Stocks
Computervision Corporation
Freeport-McMoRan, Inc.
*International Technology Corp.
IVAX Corporation
Mesa Airlines, Inc.
Morrison Knudsen Corporation
Read-Rite Corp.
Southwestern Life Corporation
SynOptics Communications, Inc.
<PAGE>
Bonds
Evergreen International Aviation,
Senior Notes, 13.50% due
8/15/2002
Genmar Holdings, Inc.,
Senior Subordinated Notes,
13.50% due 7/15/2001
Riviera Holdings Corp., 11.00%
due 12/31/2002
Scott Cable, Subordinated
Debentures, 12.25% due
4/15/2001
Deletions
Stocks
ALZA Corporation--Class A Shares
Beverly Enterprises, Inc.
Brunswick Corp.
City National Corp.
Coho Energy, Inc.
Glendale Federal Bank FSB
(Warrants)
*International Technology Corp.
Lone Star Industries, Inc.
Lone Star Industries, Inc.
(Warrants)
Margaretten Financial Corp.
Rowan Companies, Inc.
Servam Corp. (Class B)
U.S. Shoe Corp.
Western Digital Corp.
Bonds
DR Holdings, 15.50% Senior
Subordinated Debentures
due 1/30/2002
Rexene Products Corp., 10.00%
New Increasing Rate Second
Priority Notes due 11/15/2002
Stone Southwest Forest, Inc.,
12.125% Senior Subordinated
Debentures due 9/15/2001
[FN]
*Added and deleted in the
same quarter.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
Discount to Assets
<S> <C> <S> <C> <C> <C>
Agriculture 950,000 Terra Industries, Inc. $ 3,332,396 $ 6,412,500 1.0%
Diversified 2,000,000 ADT Ltd. 17,343,680 20,750,000 3.4
Metal Fabricating 400,000 Handy & Harman 5,546,990 6,100,000 1.0
Oil & Gas 464,700 ++Gerrity Oil & Gas Corp. 5,780,086 3,949,950 0.6
320,000 ++Nahama & Weagant Energy Co.++++ 1,446,250 560,000 0.1
Oil Services 92,700 ++Cliffs Drilling Co. 1,158,750 1,112,400 0.2
Total Discount to Assets 34,608,152 38,884,850 6.3
Earnings Turnarounds
Airlines 750,000 ++Mesa Airlines, Inc. 6,425,000 7,875,000 1.3
Communications 761,300 Century Communications Corp. 5,893,006 6,375,888 1.0
97,700 ++SynOptics Communications, Inc. 1,453,288 1,367,800 0.2
Computers & 50,000 ++Read-Rite Corp. 631,250 675,000 0.1
Peripherals
Consumer Products 1,083,100 The Topps Co., Inc. 7,734,088 6,904,762 1.1
Diversified 300,000 ++UNC Inc. 979,299 1,650,000 0.3
Electronics 200,000 ++National Semiconductor Corp. 674,031 3,375,000 0.5
Engineering & 160,500 Morrison Knudsen Corp. 2,450,564 2,608,125 0.4
Construction
Environmental 927,500 ++Allwaste Inc. 4,634,760 6,144,688 1.0
1,128,300 Attwoods PLC (ADR)* 12,039,432 10,295,738 1.7
930,000 ++Matrix Service Co.++++ 8,370,557 6,161,250 1.0
1,381,000 ++NaTec Resources, Inc.++++ 3,151,756 1,294,688 0.2
1,191,600 ++Rollins Environmental Services, Inc. 6,300,323 5,809,050 0.9
800,000 ++TETRA Technologies, Inc.++++ 5,576,282 7,400,000 1.2
600,000 WMX Technologies, Inc. 15,066,202 17,475,000 2.8
<PAGE>
Health Care 88,081 ++Applied Immune Sciences, Inc. 1,200,104 616,567 0.1
103,000 ++Gilead Sciences Inc. 1,399,404 952,750 0.2
110,000 IVAX Corp. 1,836,230 1,842,500 0.3
853,400 The Liposome Company Inc. 5,193,486 4,480,350 0.7
825,000 ++NeoRx Corp.++++ 5,468,365 2,578,125 0.4
Leisure & 1,625,000 ++CST Entertainment Imaging, Inc.++++ 3,593,312 1,929,688 0.3
Entertainment
Manufacturing 700,000 ++Lamson & Sessions Co.++++ 3,894,330 4,812,500 0.8
Office Equipment 400,000 Moore Corp. Ltd. (ADR)* 6,922,763 7,100,000 1.2
& Supplies
Oil & Gas 431,300 ++Ranchmen's Resources Ltd. 1,912,794 2,340,799 0.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
Earnings Turnarounds (concluded)
<S> <C> <S> <C> <C> <C>
Oil Services 239,025 ++Computalog Ltd. $ 1,962,717 $ 1,881,031 0.3%
671,900 ++Weatherford International, Inc. 2,283,255 8,482,738 1.4
Paper & 200,000 Scott Paper Co. 6,610,329 11,550,000 1.9
Packaging
Precision 350,600 ++Esterline Technology Corp.++++ 3,311,665 3,418,350 0.6
Instruments
Printing & 1,124,500 ++National Education Corp. 6,560,040 6,184,750 1.0
Publishing
Retail 2,450,000 Argyll Group PLC 8,896,770 10,090,264 1.6
600,000 Charming Shoppes, Inc. 7,458,748 5,475,000 0.9
202,700 ++Grossman's, Inc. 550,123 481,413 0.1
500,000 The Limited, Inc. 9,117,452 9,875,000 1.6
Ship Building 150,000 ++Bremer, Vulkan, Verbund AG 8,184,351 8,034,026 1.3
Total Earnings Turnarounds 167,736,076 177,537,840 28.8
<PAGE>
Financial Restructuring
Aerospace & 2,360,000 ++Ladish Co., Inc. 2,864,038 1,770,000 0.3
Industrial Products
Airlines $19,425,000 ++Continental Airlines Holdings, Inc., Secured
Equipment Trust Certificates, 12.125% due
4/15/1996 2,787,667 2,913,750 0.5
15,358 ++Continental Airlines, Inc.--Class A Shares 514,688 276,444 0.0
418,300 ++Continental Airlines, Inc.--Class B Shares 8,154,319 7,320,250 1.2
Apparel & Textile 1,100,000 Burlington Industries, Inc. 15,776,145 16,362,500 2.7
Banking & Financial 795,400 California Federal Bank, FSB 8,308,407 9,942,500 1.6
24,000 First City Bancorp., Non-Convertible
Preferred Stock--Series A 3,203,500 3,288,000 0.5
60,000 First City Bancorp., Non-Convertible
Preferred Stock--Series B 2,801,181 2,460,000 0.4
120,000 Glendale Federal Bank, 8.75% Non-Cumulative
Preferred Stock (Series E) (b) 3,000,000 3,930,000 0.6
590,000 Peoples Heritage Financial Group, Inc. 4,924,480 7,448,750 1.2
Chemicals 360,000 ++Specialty Chemical Resources, Inc.++++ 3,579,642 1,293,750 0.2
Computers & 1,350,000 ++Concurrent Computer Corp. 4,051,500 2,784,375 0.5
Peripherals
Consumer $ 6,700,000 ++Polly Peck International Finance N.V.
Products Convertible Preferred Shares, 7.25% due 1/04/2005 3,082,000 2,948,000 0.5
Day-Care Centers 500,000 ++Kinder-Care Learning Centers, Inc. 6,163,000 6,750,000 1.1
Energy 2,425 EUA Contingent Interest Certificates 2,425 2,425 0.0
++EUA Power Corp.:
$ 3,165,000 Series B, 17.50% due 5/15/1993 801,325 221,550 0.0
$ 3,613,700 Series C, 17.50% due 11/05/1992 1,346,117 252,959 0.0
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
Financial Restructuring (concluded)
<S> <C> <S> <C> <C> <C>
Home Builders 1,200,000 ++NVR, Inc.++++ $ 8,933,054 $ 7,500,000 1.2%
53,828 ++NVR, Inc. (Warrants) (a) 235,498 94,199 0.0
Insurance $ 1,000,000 ++Memphis Health, Education and Housing, Executive
Life Insurance Company, Municipal Guaranteed
Investment Certificates, 8.68% due 9/15/1996 378,408 252,500 0.0
$ 500,000 ++Southeast Texas Housing Finance Corp., Executive
Life Insurance Company, Municipal Guaranteed
Investment Certificates, 8.60% due 9/01/1996 190,308 126,250 0.0
Paper & Packaging 202,043 Gaylord Container Corp. 546,004 1,161,747 0.2
719,109 Gaylord Container Corp. (Warrants) (a) 1,538,308 3,325,879 0.5
Real Estate $12,172,188 ++Olympia & York Maiden Lane Finance Corp., Secured
Notes, 10.375% due 12/31/1995 7,977,156 8,001,000 1.3
625,000 Resurgence Properties Inc. (c) 5,468,750 4,687,500 0.8
$ 9,250,000 ++Trizec Corp., Ltd., Bonds, 10.25% due 6/22/1999 4,649,051 6,660,214 1.1
Restaurants 915,519 ++Gilbert/Robinson Restaurants, Inc. 3,051,250 9,155,190 1.5
Retail 1,190,420 ++Lamonts Apparel, Inc.++++ 3,222,815 892,815 0.1
261,215 ++National Convenience Stores Inc. 4,217,295 2,742,758 0.4
90,000 ++National Convenience Stores Inc. (Warrants) (a) 342,873 247,500 0.0
271,762 ++Zale Corp. 2,492,796 2,377,918 0.4
441,882 ++Zale Corp. Litigation Limited Partnership Units 0 0 0.0
Telecommuni- $ 7,000,000 ++Maryland Cable Corp., Senior Subordinated
cations Debentures, 15.375% due 11/15/1998 3,745,000 3,290,000 0.5
$ 4,500,000 Scott Cable, Subordinated Debentures, 12.25% due
4/15/2001 3,667,500 3,510,000 0.6
$ 5,470,000 ++Telemundo Group, Inc., Senior Notes, 0.00%
due 8/15/1992 4,787,025 6,099,050 1.0
Transportation $ 3,000,000 ++Evergreen International Aviation,
Senior Notes, 13.50% due 8/15/2002 1,546,250 1,110,000 0.2
$ 1,200,000 Greyhound Lines, Inc., Convertible
Subordinated Debentures, 8.50% due 3/31/2007 1,200,000 792,000 0.1
917,285 ++Leaseway Transportation Corp.++++ 6,317,058 9,631,492 1.6
Total Financial Restructuring 135,866,833 141,623,265 22.8
High Yield
Leisure & $12,000,000 ++Genmar Holdings, Inc., Senior Subordinated
Entertainment Notes, 13.50% due 7/15/2001 12,000,000 12,000,000 1.9
$ 2,127,000 ++Riviera Holdings Corp., First Mortgage Bonds, 11.00%
due 12/31/2002 1,749,458 1,669,695 0.3
$ 8,907,000 U.S. Trails, Inc., Secured Notes, 12.00% due 7/15/1998 6,305,948 6,680,250 1.1
Transportation $ 4,500,000 Tiphook Finance Corp., Unsecured
Guaranteed Notes, 10.75% due 11/01/2002 3,502,500 3,465,000 0.6
Total High Yield 23,557,906 23,814,945 3.9
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
Operational Restructuring
<S> <C> <S> <C> <C> <C>
Apparel & Textile 717,000 ++Texfi Industries, Inc.++++ $ 3,857,425 $ 2,419,875 0.4%
Auto & Truck 200,000 General Motors Corp. 7,413,250 10,275,000 1.7
Banking & Financial 475,000 Student Loan Marketing Association 19,930,265 16,565,625 2.7
Communications 750,000 ++Network Systems Corp. 7,715,373 5,062,500 0.8
Computer Software 475,000 Borland International, Inc. 5,762,490 5,462,500 0.9
& Services 652,500 ++Cognos, Inc.++++ 4,342,130 7,422,187 1.2
1,386,628 Computervision Corporation 4,460,095 3,639,898 0.6
$ 4,000,000 Computervision Corporation, Senior Subordinated
Notes, 11.375% due 8/15/1999 2,847,500 3,480,000 0.6
Computers & 1,000,000 Unisys Corp. 11,713,689 8,875,000 1.4
Peripherals
Diversified 1,350,000 ++National Patent Development Corp.++++ 4,945,938 4,050,000 0.7
2,174 ++National Patent Development Corp. (Warrants) (a) 166,420 135,331 0.0
540,500 ++TPI Enterprises, Inc. 3,042,032 3,378,125 0.5
Electronics 3,892,298 Automated Security (Holdings) PLC (ADR)* 13,596,897 11,676,894 1.9
Environmental 1,700,000 Laidlaw, Inc. (Non-Voting) (Class B) (ADR)* 10,421,992 12,537,500 2.0
Food & Beverage 8,000,000 Goodman Fielder Wattie, Ltd. 8,569,810 8,451,872 1.4
Health Care 1,173,300 ++Applied Bioscience International Inc. 6,067,444 6,893,137 1.1
975,000 ++Unilab Corp. 5,328,989 5,606,250 0.9
Industrial Services 2,780,400 ++Anacomp, Inc.++++ 10,872,043 7,646,100 1.2
60,337 ++Anacomp, Inc. (Warrants) (a) 131,233 82,963 0.0
Insurance 2,000,000 Reliance Group Holdings, Inc. 13,931,225 11,000,000 1.8
569,700 ++Southwestern Life Corporation 3,079,381 3,062,137 0.5
Metals & Mining 300,000 Alumax, Inc. 6,841,283 9,225,000 1.5
300,000 Freeport-McMoRan, Inc. 4,926,432 5,062,500 0.8
Oil & Gas 600,000 USX Corp.--Marathon Group 10,547,247 10,425,000 1.7
Retail 400,000 Kmart Corp. 7,110,880 6,550,000 1.1
Total Operational Restructuring 177,621,463 168,985,394 27.4
Total Stocks & Bonds 539,390,430 550,846,294 89.2
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Short-Term Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Commercial $ 10,000,000 Ciesco L.P., 4.35% due 8/18/1994 $ 9,977,042 $ 9,977,042 1.6%
Paper** 25,000,000 Du Pont (E.I.) de Nemours & Company, 4.38%
due 8/03/1994 24,987,833 24,987,833 4.0
23,186,000 General Electric Capital Corp., 4.20% due 8/01/1994 23,180,590 23,180,590 3.7
Total Short-Term Investments 58,145,465 58,145,465 9.3
Total Investments $597,535,895 608,991,759 98.5
============
Other Assets Less Liabilities 8,993,683 1.5
------------ ------
Net Assets $617,985,442 100.0%
============ ======
<FN>
*American Depositary Receipt (ADR).
**Commercial Paper is traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a) 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.
(b) After 9/30/1994, Glendale Federal Bank, 8.75% Non-Cumulative Preferred Stock, Series E
becomes convertible into Glendale Federal Bank FSB Common Stock.
(c) On April 20, 1994, Liberte Investors, 10.50% Subordinated Notes due 6/01/1993 were
converted into Resurgence Properties Inc. Common Stock.
++Non-income producing security.
++++Investment in companies 5% or more of whose outstanding securities are held by the
Fund (such companies are defined as "Affiliated Companies" in Section
2(a)(3) of the Investment Company Act of 1940) are as follows:
<PAGE>
<CAPTION>
Industry Affiliate Net Share Activity Net Cost Dividend Income
<S> <S> <C> <C> <C>
Apparel & Textile Texfi Industries, Inc. 129,600 $ 525,995 (1)
Chemicals Specialty Chemical Resources, Inc. 0 0 (1)
Computer Software & Services Cognos, Inc. (75,000) (590,625) (1)
Diversified National Patent Development Corp. 220,000 589,375 (1)
Environmental Matrix Service Co. 514,200 3,762,109 (1)
Environmental NaTec Resources, Inc. 700,000 437,500 (1)
Environmental TETRA Technologies, Inc. 93,000 627,750 (1)
Health Care NeoRx Corp. 825,000 5,468,365 (1)
Home Builders NVR Inc. 1,200,000 8,933,054 (1)
Industrial Services Anacomp, Inc. 200,000 795,750 (1)
Leisure & Entertainment CST Entertainment Imaging, Inc. 25,000 1,924,241 (1)
Manufacturing Lamson & Sessions Co. 0 0 (1)
Oil & Gas Nahama & Weagant Energy Co. 50,000 231,250 (1)
Precision Instruments Esterline Technology Corp. 0 0 (1)
Retail Lamonts Apparel, Inc. 595,210 892,815 (1)
Transportation Leaseway Transportation Corp. 917,285 6,317,058 (1)
Total $29,914,637
===========
<FN>
(1)Non-income producing security.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$597,535,895) (Note 1a) $608,991,759
Cash 2,806,572
Receivables:
Securities sold $ 9,710,286
Capital shares sold 4,119,634
Interest 631,531
Dividends 558,329 15,019,780
------------
Prepaid registration fees and other assets (Note 1d) 125,694
------------
Total assets 626,943,805
------------
<PAGE>
Liabilities: Payables:
Securities purchased 6,770,665
Capital shares redeemed 1,142,649
Investment adviser (Note 2) 479,459
Distributor (Note 2) 280,271 8,673,044
------------
Accrued expenses and other liabilities 285,319
------------
Total liabilities 8,958,363
------------
Net Assets: Net assets $617,985,442
============
Net Assets Class A Common Stock, $0.10 par value, 50,000,000 shares authorized $ 1,922,797
Consist of: Class B Common Stock, $0.10 par value, 50,000,000 shares authorized 2,780,480
Paid-in capital in excess of par 556,811,670
Accumulated investment loss--net (39,695)
Undistributed realized capital gains and foreign currency
transactions--net 45,054,760
Unrealized appreciation on investments and foreign currency
transactions--net 11,455,430
------------
Net assets $617,985,442
============
Net Asset Class A--Based on net assets of $255,856,104 and 19,227,972 shares
Value: outstanding $ 13.31
============
Class B--Based on net assets of $362,129,338 and 27,804,801 shares
outstanding $ 13.02
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended July 31, 1994
<S> <S> <C>
Investment Dividends $ 4,379,726
Income Interest and discount earned (net of $186,144 foreign withholding tax) 4,333,946
(Notes 1b & Other income 191,827
1c): ------------
Total income 8,905,499
Expenses: Investment advisory fees (Note 2) 5,188,122
Distribution fees--Class B (Note 2) 2,872,004
Transfer agent fees--Class B (Note 2) 378,188
Transfer agent fees--Class A (Note 2) 254,929
Printing and shareholder reports 166,779
Registration fees (Note 1d) 116,244
Accounting services (Note 2) 93,874
Custodian fees 73,253
Professional fees 51,600
Directors' fees and expenses 42,251
Amortization of organization expenses (Note 1d) 1,201
Other 24,272
------------
Total expenses 9,262,717
------------
Investment loss--net (357,218)
------------
Realized & Realized gain (loss) from:
Unrealized Investments--net 68,347,469
Gain(Loss) on Foreign currency transactions (61,894) 68,285,575
Investments & ------------ ------------
Foreign Change in unrealized appreciation/depreciation on:
Currency Investments--net (32,804,325)
Transactions-- Foreign currency transactions 4,875 (32,799,450)
Net (Notes ------------ ------------
1c & 3): Net realized and unrealized gain on investments and foreign
currency transactions 35,486,125
------------
Net Increase in Net Assets Resulting from Operations $ 35,128,907
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
1994 1993
Increase (Decrease) in Net Assets:
<S> <S> <C> <C>
Operations: Investment loss--net $ (357,218) $ (411,300)
Realized gain on investments and foreign currency transactions--net 68,285,575 36,700,787
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net (32,799,450) 38,824,539
------------ ------------
Net increase in net assets resulting from operations 35,128,907 75,114,026
------------ ------------
Dividends & Investment income--net:
Distributions Class A -- (381,712)
to Realized gain on investments--net:
Shareholders Class A (25,246,227) (8,633,980)
(Note 1e): Class B (25,925,825) (6,582,675)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (51,172,052) (15,598,367)
------------ ------------
Capital Share Net increase in net assets derived from capital share transactions 226,499,203 103,377,109
Transactions ------------ ------------
(Note 4):
Net Assets: Net increase in net assets 210,456,058 162,892,768
Beginning of year 407,529,384 244,636,616
------------ ------------
End of year* $617,985,442 $407,529,384
============ ============
<FN>
*Accumulated investment loss--net $ (39,695) $ (589,028)
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the Year Ended July 31,
1994 1993 1992 1991 1990
The following per share data and ratios have been derived
from information provided in the financial statements.
Increase (Decrease) in Net Asset Value:
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.75 $ 11.40 $ 11.13 $ 12.37 $ 13.41
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .03 .02 .06 .23 .37
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net(1) 1.18 3.06 1.34 .55 (.47)
-------- -------- -------- -------- --------
Total from investment operations 1.21 3.08 1.40 .78 (.10)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.03) (.09) (.40) (.51)
Realized gain on investments--net (1.65) (.70) (1.04) (1.62) (.43)
-------- -------- -------- -------- --------
Total dividends and distributions (1.65) (.73) (1.13) (2.02) (.94)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.31 $ 13.75 $ 11.40 $ 11.13 $ 12.37
======== ======== ======== ======= ========
Total Based on net asset value per share 9.36% 28.96% 14.54% 10.35% (.93%)
Investment ======== ======== ======== ======= ========
Return:*
Ratios to Expenses 1.22% 1.25% 1.35% 1.42% 1.32%
Average ======== ======== ======== ======= ========
Net Assets: Investment income (loss)--net .48% .28% .60% 2.22% 2.77%
======== ======== ======== ======= ========
Supplemental Net assets, end of year (in thousands) $255,856 $197,995 $140,323 $132,62 $151,027
Data: ======== ======== ======== ======= ========
Portfolio turnover 63.95% 67.57% 79.68% 72.12% 54.98%
======== ======== ======== ======= ========
<FN>
*Total investment returns exclude the effects of sales loads.
(1)Foreign currency transaction amounts have been reclassified to conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class B
For the Year Ended July 31,
1994++ 1993++ 1992++ 1991 1990
The following per share data and ratios have been derived
from information provided in the financial statements.
Increase (Decrease) in Net Asset Value:
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.46 $ 11.25 $ 11.04 $ 12.26 $ 13.32
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.07) (.02) (.05) .11 .22
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net(1) 1.11 2.93 1.33 .56 (.44)
-------- -------- -------- -------- --------
Total from investment operations 1.04 2.91 1.28 .67 (.22)
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- -- (.03) (.27) (.41)
Realized gain on investments-net (1.48) (.70) (1.04) (1.62) (.43)
-------- -------- -------- -------- --------
Total dividends and distributions (1.48) (.70) (1.07) (1.89) (.84)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.02 $ 13.46 $ 11.25 $ 11.04 $ 12.26
======== ======== ======== ======== ========
Total Based on net asset value per share 8.21% 27.66% 13.35% 9.14% (1.86%)
Investment ======== ======== ======== ======== ========
Return:*
Ratios to Expenses, net of reimbursement and excluding
Average distribution fees 1.24% 1.27% 1.37% 1.45% 1.36%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.24% 2.27% 2.37% 2.45% 2.36%
======== ======== ======== ======== ========
Investment income (loss)--net (.51%) (.73%) (.46%) 1.19% 1.74%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $362,129 $209,534 $104,313 $ 79,848 $ 92,700
Data: ======== ======== ======== ======== ========
Portfolio turnover 63.95% 67.57% 79.68% 72.12% 54.98%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on the average number of shares outstanding during the period.
(1)Foreign currency transaction amounts have been reclassified to conform to the 1994 presentation.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Phoenix Fund, Inc. (the "Fund") is regis-
tered under the Investment Company Act of 1940 as a
diversified, open-end management investment company.
The Fund offers both Class A and Class B Shares. Class
A Shares are sold with a front-end sales charge. Class B
Shares may be subject to a contingent deferred sales
charge. Both classes of shares have identical voting,
dividend, liquidation and other rights and the same
terms and conditions, except that Class B Shares bear
certain expenses related to the distribution of such
shares and have exclusive voting rights with respect to
matters relating to such distribution expenditures. The
following is a summary of significant accounting poli-
cies followed by the Fund.
(a) Valuation of investments--Portfolio securities which
are traded on stock exchanges are valued at the last
sale price as of the close of business on the day the
securities are being valued or, lacking any sales, at the
mean between closing bid and asked prices. Securities
traded in the over-the-counter market are valued at the
most recent bid prices as obtained from one or more
dealers that make markets in the securities. Portfolio
securities which are traded both in the over-the-counter
market and on a stock exchange are valued according
to the broadest and most representative market.
Securities and assets for which market quotations are
not readily available are valued at fair value as deter-
mined in good faith by or under the direction of the
Board of Directors of the Fund. Any foreign securities
held by the Fund will be valued as described above, as
of the close of trading in the primary market where
such securities are traded which next precedes the time
the net asset value of the Fund is determined. Short-
term securities are valued at amortized cost which
approximates market.
(b) Income taxes--It is the Fund's policy to comply
with the requirements of the Internal Revenue Code
applicable to regulated investment companies and
to distribute all of its taxable income to its share-
holders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a with-
holding tax may be imposed on interest, dividends, and
capital gains at various rates.
<PAGE>
(c) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered in (the trade dates). Dividend
income is recorded on the ex-dividend dates, except that
if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the funds
are informed of the ex-dividend date. Interest income
(including amortization of discount) is recognized on the
accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
(d) Deferred organization expenses and prepaid
registration fees--Costs related to the organization of
the second class of shares are charged to expense over a
period not exceeding five years. Prepaid registration fees
are charged to expense as the related shares are issued.
(e) Dividends and distributions--Dividends and distribu-
tions paid by the Fund are recorded on the ex-dividend dates.
(f) Foreign currency transactions--Transactions denom-
inated 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 valu-
ing (unrealized) assets and liabilities expressed in
foreign currencies into US dollars. Realized and unreal-
ized gains or losses from investments include the effects
of foreign exchange rates on investments.
The Fund is authorized to enter into forward foreign
exchange contracts as a hedge against either specific
transactions or portfolio positions. Such contracts are
not entered on the Fund's records. However, the effect
on operations is recorded from the date the Fund enters
into such contracts. Premium or discount is amortized
over the life of the contracts.
(g) Reclassifications--Certain 1993 amounts have been
reclassified to conform to the 1994 presentation.
Undistributed realized capital gains of approximately
$1.6 million have been reclassified to paid in capital
and accumulated investment loss, as appropriate.
<PAGE>
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Fund Asset Management, L.P. ("FAM").
Effective January 1, 1994, the investment advisory busi-
ness of FAM was reorganized from a corporation to a
limited partnership. Both prior to and after the reorgan-
ization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co."). The general partner of
FAM is Princeton Services, Inc., an indirect wholly-owned
subsidiary of ML & Co. The limited partners are ML & Co.
and Fund Asset Management, Inc. ("FAMI"), which is also
an indirect wholly-owned subsidiary of ML & Co. The
Fund has also entered into Distribution Agreements and a
Distribution Plan with Merrill Lynch Funds Distributor, Inc.
("MLFD" or "Distributor"), a wholly-owned subsidiary of
Merrill Lynch Investment Management, Inc. ("MLIM").
FAM is responsible for the management of the Fund's
portfolio and provides the necessary personnel, facili-
ties, equipment and certain other services necessary to
the operations of the Fund. For such services, the Fund
pays a monthly fee of 1.0%, on an annual basis, of the
average daily value of the Fund's net assets. The Invest-
ment Advisory Agreement obligates FAM to reimburse
the Fund to the extent the Fund's expenses (excluding
interest, taxes, distribution fees, brokerage fees and
commissions, and extraordinary items) exceed 2.5% of
the Fund's first $30 million of average daily net assets,
2.0% of the Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess
thereof. No fee payment will be made to the Investment
Adviser during any fiscal year which will cause such
expenses to exceed the pro rata expense limitation at
the time of such payment.
Pursuant to a distribution plan (the "Distribution
Plan") adopted by the Fund in accordance with
Rule 12b-1 under the Investment Company Act of 1940,
the Fund pays the Distributor an ongoing account main-
tenance fee and distribution fee, which are accrued
daily and paid monthly at the annual rates of 0.25% and
0.75%, respectively, of the average daily net assets of the
Class B Shares of the Fund to compensate the Distribu-
tor for services provided and the expenses borne by it
under the Plan. As authorized by the Plan, the Distribu-
tor has entered into an agreement with Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), an affiliate of
MLIM, which provides for the compensation of MLPF&S
for providing distribution-related services to the Fund.
<PAGE>
During the year ended July 31, 1994, MLFD earned under-
writing discounts of $64,117, and MLPF&S earned dealer con-
cessions of $906,534 on sales of the Fund's Class A Shares.
MLPF&S also received contingent deferred sales charges
for the sale of Class B Shares of $312,454, and $10,848
in commissions on the execution of portfolio security
transactions for the Fund during the period.
Financial Data Services, Inc. ("FDS"), a wholly-owned
subsidiary of ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by FAM
at cost.
Certain officers and/or directors of the Fund are officers
and/or directors of FAM, FAMI, MLIM, MLPF&S, FDS,
MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding
short-term securities, for the year ended July 31, 1994
were $463,424,697 and $291,211,473, respectively.
Net realized and unrealized gains (losses) as of July
31, 1994 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ 68,347,426 $11,455,864
Short-term investments 43 --
Foreign currency
transactions (61,894) (434)
------------ -----------
Total $ 68,285,575 $11,455,430
============ ===========
As of July 31, 1994, net unrealized appreciation
for Federal income tax purposes aggregated $11,455,864,
of which $67,678,274 related to appreciated securities
and $56,222,410 related to depreciated securities. The
aggregate cost of investments at July 31, 1994 for
Federal income tax purposes was $597,535,895.
<PAGE>
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions was $226,499,203 and $103,377,109 for
the years ended July 31, 1994 and July 31, 1993, respectively.
Transactions in capital shares for Class A and Class B
Shares were as follows:
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 6,651,189 $ 90,076,079
Shares issued to shareholders
in reinvestment of
distributions 1,642,482 21,483,664
----------- ------------
Total issued 8,293,671 111,559,743
Shares redeemed (3,468,349) (46,773,252)
----------- ------------
Net increase 4,825,322 $ 64,786,491
=========== ============
Class A Shares for the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 3,601,585 $ 44,967,222
Shares issued to shareholders
in reinvestment of dividends
and distributions 697,873 7,407,189
----------- ------------
Total issued 4,299,458 52,374,411
Shares redeemed (2,210,274) (27,004,447)
----------- ------------
Net increase 2,089,184 $ 25,369,964
=========== ============
NOTES TO FINANCIAL STATEMENTS (concluded)
Class B Shares for the Year Dollar
Ended July 31, 1993 Shares Amount
Shares sold 14,799,015 $196,220,427
Shares issued to shareholders
in reinvestment of
distributions 1,819,145 23,320,070
----------- ------------
Total issued 16,618,160 219,540,497
Shares redeemed (4,382,742) (57,827,785)
----------- ------------
Net increase 12,235,418 $161,712,712
=========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 8,405,778 $104,464,754
Shares issued to shareholders
in reinvestment of dividends
and distributions 544,753 5,718,365
----------- ------------
Total issued 8,950,531 110,183,119
Shares redeemed (2,654,138) (32,175,974)
----------- ------------
Net increase 6,296,393 $ 78,007,145
=========== ============
5. Commitments:
At July 31, 1994, the Fund had entered into foreign
exchange contracts under which it had agreed to
purchase various foreign currency with an approximate
value of $509,000.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Phoenix Fund, Inc.:
We have audited the accompanying statement of assets
and liabilities, including the schedule of investments, of
Merrill Lynch Phoenix Fund, Inc., as of July 31, 1994,
the related statements of operations for the year then
ended and changes in net assets for each of the years in
the two-year period then ended, and the financial high-
lights for each of the periods in the five-year period then
ended. These financial statements and the financial
highlights are the responsibility of the Fund's manage-
ment. Our responsibility is to express an opinion on
these financial statements and the financial highlights
based on our audits.
<PAGE>
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
the financial highlights are free of material misstate-
ment. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. Our procedures included confir-
mation of securities owned at July 31, 1994 by correspon-
dence with the custodian and brokers. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and financial
highlights present fairly, in all material respects, the
financial position of Merrill Lynch Phoenix Fund, Inc.
as of July 31, 1994, the results of its operations, the
changes in its net assets, and the financial highlights for
the respective stated periods in conformity with gener-
ally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
August 29, 1994
</AUDIT-REPORT>
IMPORTANT TAX INFORMATION (unaudited)
The following information summarizes all per share distributions paid by
Merrill Lynch Phoenix Fund, Inc. during the fiscal year ended July 31, 1994:
<PAGE>
<TABLE>
<CAPTION>
Record Payable Qualifying Domestic Non-Qualifying Total Long-Term
Date Date Ordinary Income* Ordinary Income Ordinary Income Capital Gains
Class A Shares:
<C> <C> <C> <C> <C> <C>
9/07/93 9/15/93 $ -- $.558793 $.558793 $.377572
12/15/93 12/23/93 $.023347 $.243720 $.267067 $.442621
Class B Shares:
<C> <C> <C> <C> <C> <C>
9/07/93 9/15/93 $ -- $.558793 $.558793 $.377572
12/15/93 12/23/93 $.008903 $.092941 $.101844 $.442621
<FN>
*Qualifies for the dividends received deduction for corporations.
Please retain this information for your records.
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Harry Woolf, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Robert J. Martorelli, Vice President
and Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
National Westminster Bank NJ
Exchange Place Centre
Jersey City, New Jersey 07302
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
<PAGE>
APPENDIX GRAPHIC AND IMAGE MATERIAL:
Total Return Based on a $10,000 Investment
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
7/84 7/94
ML Phoenix Fund++--
Class A Shares* $9,350 $42,960
S&P 500 Index++++ $10,000 $42,924
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to growth of an investment in the S&P 500
Index. Beginning and ending values are:
10/21/88** 7/94
ML Phoenix Fund++--
Class B Shares* $10,000 $19,045
S&P 500 Index++++ $10,000 $19,396
<FN>
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Phoenix Fund, Inc. invests in a divisified portfolio of
equity and fixed-income securities, including municipal
securities, of issues in weak financial condition or
experiencing poor operating results that management of the
Fund believes are undervalued relative to management's
assessment of the current or prospective condition of
such issuers.
++++The unmanaged broad-based Index is comprised of common stocks.
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