MERRILL LYNCH
PHOENIX
FUND, INC.
FUND LOGO
Quarterly Report
October 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 subsidiaries or affiliates, including
The Phoenix Series Fund.
Merrill Lynch
Phoenix Fund, Inc.
Box 9011
Princeton, NJ
08543
<PAGE>
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
Concerns of increasing inflationary pressures contin-
ued to prompt volatility in the US stock and bond
markets during the October quarter. In addition, the
weakness of the US dollar in foreign exchange markets
prolonged stock and bond market declines. Early in
the period, the possibility of continued monetary
policy tightening by the Federal Reserve Board was
predominant in the minds of investors. However, a
lower-than-expected rate of growth reported for the
US economy during the second calendar quarter
allayed inflationary concerns to some degree, despite
the fifth increase this year in short-term interest
rates made by the central bank in mid-August.
Inflationary expectations surfaced again with the
announcement of significant upward revisions in
industrial production and capacity utilization for the
May--July period. When the central bank did not raise
short-term interest rates at the late September Federal
Open Market Committee meeting, financial markets
rallied on the expectation that the US economy was
not overheating and therefore significant further
monetary policy tightening would not be necessary.
Also encouraging were reports that consumer spend-
ing is increasing at a lower rate than has been the
case in recent economic recoveries. Nevertheless,
shortly after the conclusion of the October quarter,
investor sentiment had again deteriorated. The report
of better-than-expected growth in gross domestic
product for the three months ended September 30,
combined with evidence of a still-robust manufactur-
ing sector and renewed US dollar weakness, all
rekindled concerns that short-term interest rates
would soon resume their upward trend.
In the weeks ahead, investors will continue to assess
economic data and inflationary trends in order to
gauge whether further increases in short-term inter-
est rates are imminent. Continued indications of
moderate and sustainable levels of economic growth
would be positive for the US capital markets.
<PAGE>
Portfolio Matters
During the October quarter, Merrill Lynch Phoenix
Fund, Inc. continued to sell its illiquid, smaller-
capitalization positions and added a number of
larger-capitalization companies whose shares are
currently deeply undervalued because of conditions
within their industries. For example, during the
quarter we closed out the Fund's holdings in UNC
Inc., Grossman's, Inc., Cliffs Drilling Co. and Zale
Corp. Among our new purchases were Service
Merchandise Company, Inc. and Price/Costco, Inc.,
two retailing companies whose share prices are
depressed because of lackluster growth in con-
sumer spending. In addition, we purchased shares of
Tambrands, Inc., the personal products company
that is adjusting to increased competition from
generic brands, as well as Niagara Mohawk Power
Corporation, whose shares have declined sharply
because of the less-favorable regulatory environ-
ment and increased competition within the electric
utility industry.
Service Merchandise Company, Inc. is a leading
catalog-showroom retailer. Since distributing a special
dividend in 1989, Service Merchandise has utilized its
substantial cash flow to pay down the debt incurred
to pay the dividend. During 1993, the company
realized that the catalog-showroom concept needed
revitalizing. This new strategy led to increased
advertising and store remodeling expenses, as well as
to higher labor costs through an expanded sales
force. As a result, Service Merchandise has had
lower earnings and a depressed stock price. We believe
that management's actions will provide positive
long-term benefits for the company and that its
current low stock valuation offers a very attractive
risk/return profile.
Price/Costco, Inc. is the nation's largest warehouse
retailer. In 1992, its common stock reached a high of
$43 per share and was afforded a price/earnings
multiple greater than 20. As the retailing industry's
growth slowed, Price/Costco's stock price came under
pressure. We believe the consolidation currently
occurring within the warehouse retailing industry
will ultimately help the company's margins as
competition is reduced. In addition, one of Price/
Costco's competitors has decided to slow its expansion
plans, which should also benefit the company. We
believe that the company's share price will appreciate
once its large earnings power is realized.
<PAGE>
Rarely does this Fund get the opportunity to acquire
shares of a well-run company with a dominant
franchise as is the case with Tambrands, Inc., a
leading producer of feminine hygiene products.
Recent results have been negatively impacted by
inventory reductions at the retail level and competi-
tion from generic products. We believe the company's
response of new product introductions and increased
advertising is a good one, and will enable Tambrands
to recapture lost market share. In the meantime, the
company's share repurchase program and good divi-
dend yield provide some downside price support for
its shares.
Niagara Mohawk Power Corporation distributes
electricity and gas in upstate New York. A recent
regulatory commission staff recommendation, pro-
posing a significant cut in electric rates, as well as
competition from unregulated power producers have
caused Niagara Mohawk Power's stock to decline
50% from its recent high. We believe that this was an
overreaction, since we expect that the utility will
ultimately receive a more positive rate ruling and its
shares already sell at a large discount compared to its
peers relative to book value and earnings per share
as well as yield.
In addition to the smaller-capitalization investments
sold during the October quarter, we also eliminated
two long-term holdings that were very profitable for
the Fund: National Semiconductor Corp. and General
Motors Corp. National Semiconductor, a Fund hold-
ing since 1987, has finished its restructuring by
consolidating plants and rationalizing product lines.
These actions significantly enhanced earnings per
share, which was reflected in the excellent share
price appreciation. General Motors' prospects have
improved steadily along with the US economy. As the
company's earnings have appreciated, so has its share
price. While we are pleased with the progress
General Motors continues to make, we believe that
higher interest rates will eventually dampen new car
sales, so it was appropriate for us to take profits in
our investment at this time.
<PAGE>
We made no significant changes to our high-yield
investments during the quarter, although valuations
in the sector are rapidly becoming more attractive.
We anticipate that if this trend continues, the Fund
will be a more aggressive purchaser of high-yield
securities. During the October quarter our position
in the Trizec Corp. bonds was converted into com-
mon stock. We subsequently sold the shares of this
real estate company at a profit. Although attractive
investment opportunities exist in real estate, we did
not want to increase our equity holdings in this
sector given the possible impact that higher interest
rates will have on the real estate market.
In Conclusion
We continue to expand our investments in relatively
large-capitalization companies, as we believe that
their long-term capital appreciation potential is
excellent. As a result of this strategy, the portfolio's
composition has changed so that larger-capitalization
issues now dominate our common stock holdings.
However, shareholders should remember that it takes
some time for companies in our investment universe to
turn around and that interim periods of share price
weakness can occur. We plan to utilize such periods to
expand positions in holdings that we view as the most
attractive based on our long-term investment horizon.
We thank you for your investment in Merrill Lynch
Phoenix Fund, Inc., and we look forward to reviewing
our outlook and strategy with you again in our next
report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Martorelli)
Robert J. Martorelli
Vice President and Portfolio Manager
November 16, 1994
<PAGE>
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 dis-
tribution or account maintenance fees. Class A Shares
are available only to eligible investors.
* Class B Shares are subject to a maximum contingent
deferred sales charge of 4.00% if redeemed during the
first year, decreasing 1.00% each year thereafter to
0.00% after the fourth year. In addition, they 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 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 1.00%
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).
The performance data for the Fund's Class A Shares
and Class B Shares are presented in the "Performance
Summary" and "Average Annual Total Return" tables
on page 4. Data for all of the Fund's shares, including
Class C Shares and Class D Shares, are presented in
the "Recent Performance Results" table.
The "Recent Performance Results" table below 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 October 31, 1994
and for Class C and Class D Shares for the period
since inception through October 31, 1994. 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.
<PAGE>
<TABLE>
Recent Performance Results*
<CAPTION>
12 Month 3 Month
10/31/94 7/31/94++ 10/31/93 % Change % Change++
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $12.44 $13.31 $13.65 -2.72%(1) -3.50%(2)
ML Phoenix Fund, Inc. Class B Shares* 12.19 13.02 13.31 -2.13(1) -3.27(2)
ML Phoenix Fund, Inc. Class C Shares* 12.19 12.31 -- -- -0.97
ML Phoenix Fund, Inc. Class D Shares* 12.45 12.57 -- -- -0.95
Dow Jones Industrial Average** 3,908.12 3,764.50 3,680.59 +6.18 +3.82
Standard & Poor's 500 Index** 472.35 458.26 467.83 +0.97 +3.07
ML Phoenix Fund, Inc. Class A Shares--Total Return* +3.62(3) +0.80(4)
ML Phoenix Fund, Inc. Class B Shares--Total Return* +2.58(5) +0.61(6)
ML Phoenix Fund, Inc. Class C Shares--Total Return* -- -0.97
ML Phoenix Fund, Inc. Class D Shares--Total Return* -- -0.95
Dow Jones Industrial Average--Total Return** +9.13 +4.56
Standard & Poor's 500 Index--Total Return** +3.84 +3.82
<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.
++Performance results shown for Class C and Class D Shares are since inception (10/21/94).
(1)Percent change includes reinvestment of $0.858 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.415 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.855 per share ordinary income dividends and
$0.858 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.588 per share ordinary income dividends and
$0.415 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.622 per share ordinary income dividends and
$0.858 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.520 per share ordinary income dividends and
$0.415 per share capital gains distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (concluded)
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
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--10/31/94 13.45 12.44 0.415 0.588 - 0.25
------- ------
Total $11.309 Total $6.797
Cumulative total return as of 10/31/94: +513.84%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains distributions
at net asset value on the ex-dividend date, and do not include sales charge;
results would be lower if sales charge was included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<C> <C> <C> <C> <C> <C>
10/21/88--12/31/88 $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--10/31/94 13.24 12.19 0.415 0.520 - 1.06
------ ------
Total $4.074 Total $3.073
Cumulative total return as of 10/31/94: +91.62%**
<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>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/94 + 8.25% + 2.57%
Five Years Ended 9/30/94 +11.77 +10.57
Ten Years Ended 9/30/94 +15.83 +15.21
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/94 + 7.12% + 3.30%
Five Years Ended 9/30/94 +10.64 +10.64
Inception (10/21/88)
through 9/30/94 +11.68 +11.68
[FN]
*Maximum contingent deferred sales charge is 4% and is
reduced to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION> Percent of
Industry Shares Held Stocks & Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Discount to Assets
Agriculture 474,000 Terra Industries, Inc. $ 1,441,806 $ 5,036,250 0.8%
Diversified 2,000,000 ADT Ltd. 17,343,680 22,500,000 3.5
<PAGE>
Metal Fabricating 400,000 Handy & Harman 5,546,990 6,650,000 1.0
Oil & Gas 464,700 Gerrity Oil & Gas Corp. 5,780,086 2,730,113 0.4
320,000 Nahama & Weagant Energy Co. 1,446,250 100,000 0.0
Total Discount to Assets 31,558,812 37,016,363 5.7
Earnings Turnarounds
Airlines 1,800,000 Mesa Airlines, Inc. 13,433,445 14,625,000 2.3
Communications 1,100,000 Century Communications Corp. 8,847,379 9,350,000 1.5
Consumer Products 137,200 Tambrands, Inc. 5,059,607 5,625,200 0.9
1,240,000 The Topps Co., Inc. 8,723,701 7,130,000 1.1
Environmental 927,500 Allwaste Inc. 4,634,760 5,912,813 0.9
1,500,000 Attwoods PLC (ADR)* 15,263,780 13,687,500 2.1
930,000 Matrix Service Co. 8,370,557 6,161,250 1.0
1,381,000 NaTec Resources, Inc. 3,151,756 474,788 0.1
499,000 Rollins Environmental Services, Inc. 2,541,202 2,931,625 0.5
825,000 TETRA Technologies, Inc. 5,797,426 6,806,250 1.1
725,000 WMX Technologies, Inc. 18,657,327 21,296,875 3.3
Health Care 83,081 Applied Immune Sciences, Inc. 1,131,979 425,790 0.1
103,000 Gilead Sciences Inc. 1,399,404 875,500 0.1
20,000 IVAX Corp. 333,860 382,500 0.1
905,000 The Liposome Company Inc. 5,498,761 7,805,625 1.2
825,000 NeoRx Corp. 5,468,365 5,053,125 0.8
Leisure & 1,625,000 CST Entertainment Imaging, Inc. 3,593,312 2,031,250 0.3
Entertainment
Manufacturing 700,000 Lamson & Sessions Co. 3,894,330 4,725,000 0.7
Office Equipment 400,000 Moore Corp. Ltd. (ADR)* 6,922,763 7,250,000 1.1
& Supplies
<PAGE>
Oil & Gas 431,300 Ranchmen's Resources Ltd. 1,913,889 2,073,098 0.3
Oil Services 239,025 Computalog Ltd. 1,962,718 1,612,884 0.3
400,000 Weatherford International, Inc. 1,200,000 4,550,000 0.7
Paper & Packaging 150,000 Scott Paper Co. 4,902,149 9,918,750 1.5
Precision 350,600 Esterline Technology Corp. 3,311,665 4,338,675 0.7
Instruments
Printing & 1,124,500 National Education Corp. 6,560,040 5,481,938 0.9
Publishing
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION> Percent of
Face Amount/
Industry Shares Held Stocks & Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Earnings Turnarounds (concluded)
Retail 2,000,000 Argyll Group PLC $ 7,219,644 $ 8,553,776 1.3%
600,000 Charming Shoppes, Inc. 7,458,748 4,350,000 0.7
600,000 The Limited, Inc. 10,899,452 11,025,000 1.7
1,015,000 Service Merchandise Company, Inc. 5,940,613 6,090,000 1.0
Ship Building 159,900 Bremer, Vulkan, Verbund AG 8,738,823 10,929,067 1.7
Utilities 500,000 Niagara Mohawk Power Corporation 6,325,008 6,875,000 1.1
Total Earnings Turnarounds 189,156,463 198,348,279 31.1
Financial Restructuring
Aerospace & 2,360,000 Ladish Co., Inc. 2,864,038 1,180,000 0.2
Industrial Products
Airlines $18,475,000 Continental Airlines Holdings, Inc., Secured
Equipment Trust Certificates, 12.125% due 4/15/199 62,633,241 2,654,858 0.4
15,358 Continental Airlines, Inc.--Class A Shares 514,688 255,327 0.0
450,000 Continental Airlines, Inc.--Class B Shares 8,768,120 7,425,000 1.2
<PAGE>
Apparel & Textile 1,480,000 Burlington Industries, Inc. 19,887,215 13,875,000 2.2
Banking & Financial 1,000,000 California Federal Bank, FSB 10,833,257 11,500,000 1.8
24,000 First City Bancorp., Non-Convertible
Preferred Stock--Series A 3,203,500 3,264,000 0.5
95,000 First City Bancorp., Non-Convertible
Preferred Stock--Series B 4,414,931 4,275,000 0.7
120,000 Glendale Federal Bank, 8.75% Non-Cumulative
Preferred Stock (Series E) 3,000,000 3,765,000 0.6
12,600 Peoples Heritage Financial Group, Inc. 72,450 176,400 0.0
Chemicals 360,000 Specialty Chemical Resources, Inc. 3,579,642 1,282,500 0.2
Computers & 1,700,000 Concurrent Computer Corp. 4,489,000 2,868,750 0.4
Peripherals
Consumer $ 6,700,000 Polly Peck International Finance N.V.,
Products Convertible Preferred Shares, 7.25% due 1/04/2005 3,082,000 3,182,500 0.5
Day-Care Centers 700,000 Kinder-Care Learning Centers, Inc. 8,638,000 9,100,000 1.4
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 801,325 189,900 0.0
$ 3,613,700 Series C, 17.50% due 11/05/1992 1,346,117 216,822 0.0
Home Builders 1,325,000 NVR, Inc. 9,651,729 7,618,750 1.2
53,828 NVR, Inc. (Warrants) (a) 235,498 50,464 0.0
Paper & Packaging 719,109 Gaylord Container Corp. (Warrants) (a) 1,538,308 5,033,763 0.8
Real Estate $14,450,000 Olympia & York Maiden Lane Finance Corp., Secured
Notes, 10.375% due 12/31/1995 8,639,850 7,947,500 1.2
625,000 Resurgence Properties Inc. 5,468,750 4,609,375 0.7
Restaurants 965,519 Gilbert/Robinson Restaurants, Inc. 3,468,750 9,413,810 1.5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Stocks & Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Financial Restructuring (concluded)
Retail 1,190,420 Lamonts Apparel, Inc. $ 3,222,815 $ 744,012 0.1%
261,215 National Convenience Stores Inc. 4,217,295 1,959,112 0.3
90,000 National Convenience Stores Inc. (Warrants) (a) 342,873 90,000 0.0
443,361 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 3,640,000 0.6
$ 4,500,000 Scott Cable, Subordinated Debentures, 12.25% due
4/15/2001 3,667,500 3,633,750 0.6
$ 5,470,000 Telemundo Group, Inc., Senior Notes, 0.00%
due 8/15/1992 4,787,025 5,497,350 0.9
Transportation $ 4,000,000 Evergreen International Aviation,
Senior Notes, 13.50% due 8/15/2002 1,861,250 1,400,000 0.2
$ 1,200,000 Greyhound Lines, Inc., Convertible
Subordinated Debentures, 8.50% due 3/31/2007 1,200,000 300,000 0.1
987,285 Leaseway Transportation Corp. 7,056,433 12,834,705 2.0
Total Financial Restructuring 137,233,025 129,986,073 20.3
High Yield
Leisure & $12,000,000 Genmar Holdings, Inc., Senior Subordinated
Entertainment Notes, 13.50% due 7/15/2001 12,000,000 11,700,000 1.8
$ 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 6,279,435 1.0
Transportation $ 5,500,000 Tiphook Finance Corp., Unsecured
Guaranteed Notes, 10.75% due 11/01/2002 4,272,500 3,850,000 0.6
Total High Yield 24,327,906 23,499,130 3.7
<PAGE>
Operational Restructuring
Apparel & Textile 717,000 Texfi Industries, Inc. 3,857,425 2,061,375 0.3
Banking & Financial 575,000 Student Loan Marketing Association 23,523,777 18,471,875 2.9
Communications 750,000 Network Systems Corp. 7,715,373 5,156,250 0.8
Computer Software 500,000 Borland International, Inc. 6,015,615 5,312,500 0.8
& Services 575,000 Cognos, Inc. 3,740,105 8,337,500 1.3
1,700,000 Computervision Corporation 5,268,560 5,950,000 0.9
$ 6,000,000 Computervision Corporation, Senior Subordinated
Notes, 11.375% due 8/15/1999 4,546,250 5,070,000 0.8
Computers & 1,500,000 Unisys Corp. 16,609,067 15,937,500 2.5
Peripherals
Diversified 1,350,000 National Patent Development Corp. 4,945,938 2,868,750 0.4
2,174 National Patent Development Corp. (Warrants) (a) 166,420 128,266 0.0
540,500 TPI Enterprises, Inc. 3,042,032 2,634,937 0.4
Electronics 4,613,587 Automated Security (Holdings) PLC (ADR)* 15,755,133 12,110,666 1.9
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION> Percent of
Industry Shares Held Stocks & Bonds Cost Value Net Assets
<S> <C> <S> <C> <C> <C>
Operational Restructuring (concluded)
Environmental 1,700,000 Laidlaw, Inc. (Non-Voting) (Class B) (ADR)* 10,421,992 13,387,500 2.1%
Food & Beverage 8,000,000 Goodman Fielder Wattie, Ltd. 8,569,810 7,536,688 1.2
Health Care 1,173,300 Applied Bioscience International Inc. 6,067,444 6,453,150 1.0
975,000 Unilab Corp. 5,328,989 4,753,125 0.7
Industrial Services 2,780,400 Anacomp, Inc. 10,872,043 7,298,550 1.1
60,337 Anacomp, Inc. (Warrants) (a) 131,233 82,963 0.0
<PAGE>
Insurance 2,000,000 Reliance Group Holdings, Inc. 13,931,225 12,250,000 1.9
750,000 Southwestern Life Corporation 4,073,196 3,281,250 0.5
Metals & Mining 3,750 Freeport-McMoRan Copper & Gold Co. Inc. (b) 0 85,312 0.0
450,000 Freeport-McMoRan, Inc. 7,522,932 8,268,750 1.3
Oil & Gas 825,000 USX Corp.--Marathon Group 14,510,747 15,468,750 2.4
Retail 700,000 Kmart Corp. 12,417,998 11,462,500 1.8
700,000 Price/Costco, Inc. 10,867,600 10,937,500 1.7
Total Operational Restructuring 199,900,904 185,305,657 28.7
Total Stocks & Bonds 582,177,110 574,155,502 89.5
<CAPTION>
Face Amount Short-Term Investments
<S> <C> <S> <C> <C> <C>
Commercial $22,289,000 General Electric Capital Corp., 4.72% due 11/01/1994 22,289,000 22,289,000 3.4
Paper** 20,000,000 PepsiCo, Inc., 4.90% due 11/09/1994 19,978,222 19,978,222 3.1
20,000,000 Student Loan Marketing Association,
4.90% due 11/28/1994 19,926,500 19,926,500 3.1
Total Commercial Paper 62,193,722 62,193,722 9.6
Total Short-Term Investments 62,193,722 62,193,722 9.6
Total Investments $644,370,832 636,349,224 99.1
============
Other Assets Less Liabilities 5,935,692 0.9
------------ ------
Net Assets $642,284,916 100.0%
============ ======
<PAGE>
Net Asset
Value: Class A--Based on net assets of $259,622,398 and
20,862,107 shares outstanding $ 12.44
============
Class B--Based on net assets of $381,022,496 and
31,251,630 shares outstanding $ 12.19
============
Class C--Based on net assets of $631,665 and 51,829
shares outstanding $ 12.19
============
Class D--Based on net assets of $1,008,357 and 80,995
shares outstanding $ 12.45
============
<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)On August 9, 1994, the Fund received a stock dividend of one share of Freeport-McMoRan
Copper & Gold Co. Inc. Common Stock for every 80 shares of Freeport-McMoRan, Inc.
Common Stock owned.
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended October 31, 1994
Percent of
Ten Largest Holdings Net Assets
ADT Ltd. 3.5%
WMX Technologies, Inc. 3.3
Student Loan Marketing Association 2.9
Unisys Corp. 2.5
USX Corp.--Marathon Group 2.4
Mesa Airlines, Inc. 2.3
Burlington Industries, Inc. 2.2
Attwoods PLC (ADR) 2.1
Laidlaw, Inc. (Non-Voting) (Class B)
(ADR) 2.1
Leaseway Transportation Corp. 2.0
<PAGE>
Five Largest Industries
Environmental 11.1%
Retail 8.6
Banking & Financial 6.5
Diversified 4.3
Health Care 4.0
Asset Mix
Stocks 80.5%
Bonds 9.0
Cash & Cash Equivalents* 10.5
[FN]
*Net of other assets less liabilities.
Additions
Stocks
*American Drug Co.
*American Drug Co. (Warrants)
*Conner Peripherals, Inc.
Freeport-McMoRan Copper & Gold Inc.
Niagara Mohawk Power Corporation
Price/Costco, Inc.
Service Merchandise Company Inc.
Tambrands, Inc.
*Trizec Corp. Ltd.
Deletions
Stocks
Alumax, Inc.
*American Drug Co.
*American Drug Co. (Warrants)
Cliffs Drilling Co.
*Conner Peripherals, Inc.
Gaylord Container Corp.
General Motors Corp.
Grossman's, Inc.
Morrison Knudsen Corp.
National Semiconductor Corp.
Read-Rite Corp.
SynOptics Communications, Inc.
*Trizec Corp. Ltd.
UNC Inc.
Zale Corp.
<PAGE>
Bonds
Memphis Health, Education and Housing, Executive Life Insurance
Company, Municipal Guaranteed Investment Certificates,
8.68% due 9/15/1996
Southeast Texas Housing Finance Corp., Executive Life Insurance
Company, Municipal Guaranteed Investment Certificates, 8.60%
due 9/01/1996
Trizec Corp., Ltd., Bonds, 10.25% due 6/22/1999
[FN]
*Added and deleted in the same quarter.
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
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th floor
Brooklyn, New York 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
