MERRILL LYNCH
PHOENIX FUND, INC.
FUND LOGO
Semi-Annual Report
January 31, 1995
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, NY 11245
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
<PAGE>
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
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
The combination of heightened inflationary concerns,
anticipation of further tightening of monetary policy
by the Federal Reserve Board and the turmoil of
the Mexican currency crisis all exerted negative
influences on the US financial markets during the
January quarter. On the positive side, increasing
signs that the US economy may be losing momentum
suggested that most of the interest rate increases for
this economic cycle may be behind us. As a result of
these economic crosscurrents, the US stock and bond
markets continued to be volatile during the period.
<PAGE>
The manufacturing sector proved to be the driving
force behind the US economy through the final
quarter of 1994, making an important contribution to
the substantial increase in corporate earnings. US
companies have been successful at containing labor
costs, which are an important component of the
inflation outlook. Growth in the economy has not
been translated into higher wages and benefits for US
workers. Consumer spending is growing at a slower
pace than in previous economic recoveries, but
households are nonetheless spending more than
saving, as the personal savings rate fell to an all-time
annual low in 1994.
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 likely as 1995 unfolds. Despite the
widespread concerns about rising prices for raw
materials and incipient inflationary pressures, 1994's
inflation results were as positive as those in 1993,
creating the best sustained inflation performance in
30 years. However, it is not likely that such positive
inflation results will be duplicated in 1995. Investors
will also focus on the progress that the new Congress
makes on both reducing spending and the Federal
budget deficit and passing tax cuts that promote
savings and investment. Legislative progress, com-
bined with continued indications of moderate and
sustainable levels of economic growth, would be
positive for the US capital markets. However, the
lagged effects of higher interest rates could slow
the economy sharply and with it, the growth of
corporate profits.
Portfolio Matters
The January quarter was a difficult period for Merrill
Lynch Phoenix Fund, Inc. As Federal Reserve Board
monetary policy tightening lowered economic
growth expectations, investor interest shifted away
from cyclical stocks and stocks of financially lever-
aged companies that primarily comprise our invest-
ment universe to more defensive issues, such as
those in the consumer staples area.
Despite the likelihood of slower economic growth in
1995, we continue to see positive trends emerging
within the environmental, retail and financial
services industries that we have emphasized in the
portfolio. Consolidations are taking place within
these industries, and a smaller number of competi-
tors should permit firmer pricing. In addition, a
number of companies are placing relatively less
emphasis on growth and expansion in favor of
generating free cash flow which, in turn, can be used
to enhance shareholder value through share repur-
chases and dividend increases. Therefore, we are
adding selectively to our holdings in these key
industries as valuations become more attractive.
<PAGE>
For example, during the January quarter we
established a position in the retailer Fingerhut
Companies, Inc. Fingerhut is the second-largest
catalog retailer in the United States. Higher
postal and paper costs along with an unsuccessful
expansion into telemarketing caused a dramatic
decline in the stock price. We believe that the
company has carved out a valuable market niche by
extending credit to its customers, and that its
proprietary database is an undervalued asset. Once
the current problems are solved, Fingerhut can
focus once again on growing its core business
through international expansion.
We increased investments in the financial sector
with the purchase of shares of Countrywide Credit
Industries, Inc. Countrywide is the nation's largest
residential mortgage lender and servicer. The dra-
matic rise in interest rates has caused loan produc-
tion to decline significantly, which has negatively
impacted Countrywide's earnings. We believe the
stock's price fully reflects the negative developments,
and the current value is supported by a large serv-
icing portfolio that provides a stable revenue stream.
Once interest rates begin to decline, and real estate
activity picks up, we believe Countrywide's earnings
and stock price are likely to improve materially.
Approximately one year ago Congress regulated cable
television rates. As a result, stocks of cable television
companies have been greatly out of favor. We believe
that the long-term potential of cable companies to
deliver multimedia and telephone services in addi-
tion to cable television channels, as well as the
prospect for a more lenient regulatory environment,
make current valuations very attractive. Accordingly,
during the quarter we established a position in
Comcast Corporation, a major telecommunications com-
pany with operations in the cable and cellular
industries. Comcast stock is down significantly from
the highs reached in 1993 because of the rate
regulation implemented by Congress last year. With
the regulatory environment in Washington, DC
improved following the November 1994 election,
Comcast can now concentrate its efforts on growing
its cellular operations and focusing on telephone
expansion, a market five times greater than cable
television. We expect double-digit cash flow
growth to resume as the company positions itself
to become a major telecommunications provider
into the next century.
<PAGE>
Redemptions experienced by many high-yield bond
funds over the last several months have created an
opportunity in this market. Since we believe that the
majority of the interest rate increases are behind us,
we decided to increase our exposure in debt securi-
ties with yields in the area of 15% that are selling at
discounts to their par values. During the January
quarter, we purchased a basket of high-yield securi-
ties in a variety of industries to spread credit risk. We
expect these bonds, such as Envirodyne Industries,
Inc. (food and beverage), MDC Holdings, Inc. (homebuilding),
and Bally's Health & Tennis Corporation (leisure) to
provide the Fund with both a high current yield as
well as capital appreciation potential once interest
rates begin to decline.
During the January quarter, one of our ten largest
holdings, Attwoods PLC, was acquired by Browning-
Ferris Industries at a price per share equivalent
to our cost. We sold the long-term holding Peoples
Heritage Financial Group, Inc. at a significant
profit. In addition, we eliminated three disappoint-
ing investments during the quarter, the retailer
Charming Shoppes, Inc. and, in the energy sector,
Gerrity Oil & Gas Corp. and Nahama & Weagant
Energy Co. Continued poor store sales results led us
to sell the Charming Shoppes holding, while both
energy companies were encountering difficulties
caused by overleveraged balance sheets and
depressed energy prices.
In Conclusion
As our long-term shareholders will remember, peri-
ods of sharp underperformance for the Fund and its
investment universe often precede periods of better
relative performance. While we cannot predict when
changes in stock market trends will occur, we will
continue to establish and expand positions at attrac-
tive valuations so that the portfolio will be well-
positioned for the eventual improvement in its invest-
ment environment.
We thank you for your investment in Merrill Lynch
Phoenix Fund, Inc., and we look forward to reviewing
our outlook and strategy with you in our next report
to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
<PAGE>
(Robert J. Martorelli)
Robert J. Martorelli
Vice President and Portfolio Manager
March 8, 1995
<TABLE>
PROXY RESULTS
During the six-month period ended January 31, 1995, Merrill Lynch Phoenix Fund, Inc. shareholders voted on four proposals.
Proposals 1, 2 and 4 were approved at a special shareholders' meeting on September 27, 1994. Proposal 3 was passed at a special
shareholders' meeting on January 31, 1995. The description of each proposal and number of shares voted are as follows:
<CAPTION>
Shares Voted Shares Voted
For Withhold Authority
<S> <S> <C> <C>
1. To elect the Fund's Board of Directors: Joe Grills 43,557,276 1,126,284
Walter Mintz 43,580,142 1,103,418
Melvin R. Seiden 43,559,479 1,124,081
Stephen B. Swensrud 43,564,274 1,119,286
Harry Woolf 43,575,859 1,107,701
Arthur Zeikel 43,564,335 1,119,225
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Fund's independent auditors. 43,213,632 477,855 992,073
3. To approve certain changes to the Fund's fundamental investment restrictions. 24,032,422 1,425,927 1,473,079
4. To amend the Fund's articles of incorporation to implement the Merrill Lynch
Select Pricing SM System. 38,867,565 3,136,771 2,679,224
</TABLE>
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 distribu-
tion 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 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 "Recent Performance Results"
and "Average Annual Total Return" tables on page 4.
Data for Class C and Class D Shares are also presented
in the "Recent Performance Results" and "Aggregate
Total Return" tables on page 4.
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 January 31, 1995 and for
Class C and Class D Shares for the since inception
and 3-month periods ended January 31, 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>
PERFORMANCE DATA (concluded)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
1/31/95 10/31/94 1/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $11.23 $12.44 $14.00 -14.80%(1) -7.14%(2)
ML Phoenix Fund, Inc. Class B Shares* 11.01 12.19 13.77 -14.98(1) -7.04(2)
ML Phoenix Fund, Inc. Class C Shares* 10.98 12.19 12.31 - 8.19(2) -7.29(2)
ML Phoenix Fund, Inc. Class D Shares* 11.23 12.45 12.57 - 8.10(2) -7.22(2)
Dow Jones Industrial Average** 3,843.86 3,908.12 3,978.36 - 3.38 -1.64
Standard & Poor's 500 Index** 470.42 472.35 481.61 - 2.32 -0.41
ML Phoenix Fund, Inc. Class A Shares--Total Return* - 9.51(3) -5.57(4)
ML Phoenix Fund, Inc. Class B Shares--Total Return* -10.48(5) -5.90(6)
ML Phoenix Fund, Inc. Class C Shares--Total Return* - 6.76(7) -5.84(7)
ML Phoenix Fund, Inc. Class D Shares--Total Return* - 6.58(8) -5.68(8)
Dow Jones Industrial Average--Total Return** - 0.66 -0.94
Standard & Poor's 500 Index--Total Return** + 0.51 +0.31
<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 $0.729 per share capital gains distributions.
(2)Percent change includes reinvestment of $0.314 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.777 per share ordinary income dividends
and $0.729 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.190 per share ordinary income dividends
and $0.314 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.657 per share ordinary income dividends
and $0.729 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.136 per share ordinary income dividends
and $0.314 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.172 per share ordinary income dividends
and $0.314 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.186 per share ordinary income dividends
and $0.314 per share capital gains distributions.
</TABLE>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/94 - 6.48% -11.39%
Five Years Ended 12/31/94 +10.78 + 9.59
Ten Years Ended 12/31/94 +14.55 +13.94
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/94 -7.40% -10.67%
Five Years Ended 12/31/94 +9.64 + 9.64
Inception (10/21/88)
through 12/31/94 +9.88 + 9.88
[FN]
*Maximum contingent deferred sales charge is 4% and is
reduced to 0% after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 12/31/94 -7.35% -8.24%
[FN]
*Maximum contingent deferred sales charge is 1% and is
reduced to 0% after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 12/31/94 -7.17% -12.04%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Value Percent of
Industry Shares Held Stocks & Bonds Cost (Note 1a) Net Assets
Discount to Assets
<S> <C> <S> <C> <C> <C>
Agriculture 274,000 Terra Industries, Inc. $ 820,652 $ 3,116,750 0.5%
Cable 480,000 Comcast Corporation--Special (Class A) 7,852,465 7,080,000 1.2
Day-Care Centers 715,000 ++Kinder-Care Learning Centers, Inc. 8,803,000 8,311,875 1.4
Diversified 1,700,000 ADT Ltd. 3,792,426 17,000,000 2.8
Metal Fabricating 400,000 Handy & Harman 5,546,990 6,200,000 1.0
Total Discount to Assets 36,815,533 41,708,625 6.9
Earnings Turnarounds
Airlines 1,640,000 ++Mesa Airlines, Inc. 11,691,195 10,455,000 1.7
Apparel & Textile 657,600 Burlington Industries, Inc. 7,635,000 7,069,200 1.2
Auto & Truck 225,000 Federal--Mogul Corp. 3,954,766 3,825,000 0.6
<PAGE>
Banking & Financial 1,200,000 California Federal Bank, FSB 12,847,635 11,850,000 1.9
400,000 Countrywide Credit Industries, Inc. 5,377,065 5,550,000 0.9
120,000 Glendale Federal Bank, 8.75% Non-Cumulative
Preferred Stock (Series E) 3,000,000 3,225,000 0.5
Communications 1,200,000 Century Communications Corp. 9,587,016 9,150,000 1.5
Consumer Products 200,000 Tambrands, Inc. 7,455,251 8,675,000 1.4
1,240,000 The Topps Co., Inc. 8,723,701 6,200,000 1.0
Environmental 1,225,000 Allwaste Inc. 6,192,472 6,431,250 1.1
930,000 ++Matrix Service Co.++++ 8,370,557 4,650,000 0.8
881,000 ++NaTec Resources, Inc. 826,756 165,188 0.0
499,000 ++Rollins Environmental Services, Inc. 2,541,202 2,432,625 0.4
825,000 ++TETRA Technologies, Inc.++++ 5,797,426 9,281,250 1.5
725,000 WMX Technologies, Inc. 18,657,327 20,571,875 3.4
Health Care 58,081 ++Applied Immune Sciences, Inc. 791,354 326,706 0.1
885,000 The Liposome Company Inc. 5,358,761 10,177,500 1.7
825,000 ++NeoRx Corp.++++ 5,468,365 4,073,438 0.7
Home Builders 1,500,000 ++NVR, Inc.++++ 10,593,083 8,250,000 1.4
53,828 ++NVR, Inc. (Warrants) (a) 235,498 43,735 0.0
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 4,025,000 0.7
Oil & Gas 431,300 ++Ranchmen's Resources Ltd. 1,913,889 1,517,798 0.2
Oil Services 239,025 ++Computalog Ltd. 1,962,718 1,210,759 0.2
187,500 ++Weatherford International, Inc. 562,500 1,687,500 0.3
Paper & Packaging 719,109 Gaylord Container Corp. (Warrants) (a) 1,538,308 4,943,874 0.8
</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>
Precision 350,600 ++Esterline Technology Corp.++++ $ 3,311,665 $ 4,996,050 0.8%
Instruments
Printing & 1,470,000 ++National Education Corp. 8,132,750 5,880,000 1.0
Publishing
<PAGE>
Restaurants 965,519 ++Gilbert/Robinson Restaurants, Inc. 3,468,750 8,931,051 1.5
Retail 1,500,000 Argyll Group PLC 5,351,283 6,470,100 1.1
60,000 CML Group, Inc. 612,350 637,500 0.1
700,000 The Limited, Inc. 12,846,702 11,812,500 1.9
261,215 ++National Convenience Stores Inc. 4,217,295 2,481,542 0.4
90,000 ++National Convenience Stores Inc. (Warrants) (a) 342,873 101,250 0.0
1,400,000 Service Merchandise Company, Inc. 7,815,863 6,125,000 1.0
Ship Building 159,900 ++Bremer, Vulkan, Verbund AG 8,738,823 9,944,578 1.6
Utilities 500,000 Niagara Mohawk Power Corporation 6,325,008 7,750,000 1.3
Total Earnings Turnarounds 209,732,849 212,948,519 35.0
Financial Restructuring
Aerospace & 2,360,000 ++Ladish Co., Inc. 2,864,038 944,000 0.2
Industrial
Products
Airlines $18,475,000 ++Continental Airlines Holdings, Inc., Secured
Equipment Trust Certificates, 12.125% due 4/15/1996 2,374,591 2,032,250 0.3
15,358 ++Continental Airlines, Inc.--Class A Shares 514,688 134,382 0.0
200,000 ++Continental Airlines, Inc.--Class B Shares 3,209,588 1,625,000 0.3
Banking & 34,000 First City Bancorp., Non-Convertible
Financial Preferred Stock--Series A 4,568,500 4,692,000 0.8
95,000 First City Bancorp., Non-Convertible
Preferred Stock--Series B 4,414,931 3,135,000 0.5
Chemicals 360,000 ++Specialty Chemical Resources, Inc.++++ 3,579,642 1,417,500 0.2
Computers & 1,700,000 ++Concurrent Computer Corp.++++ 4,489,000 2,337,500 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 3,115,500 0.5
Energy ++EUA Power Corp.:
$ 3,165,000 Series B, 17.50% due 5/15/1993 801,325 118,688 0.0
$ 3,613,700 Series C, 17.50% due 11/15/1992 1,346,117 135,514 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>
Industrial $ 2,000,000 EMCOR Group, Inc., A Notes, 7.00% due 10/30/1997 $ 1,820,000 $ 1,840,000 0.3
Services ++JWP Inc., Notes:
$ 3,000,000 10.25% due 12/01/1998 1,005,000 960,000 0.2
$ 6,000,000 9.10% due 3/06/2002 2,000,000 1,920,000 0.3
$10,000,000 9.95% due 11/15/2004 3,175,000 3,200,000 0.5
Real Estate $14,450,000 ++Olympia & York Maiden Lane Finance Corp., Secured
Notes, 10.375% due 12/31/1995 8,639,850 7,730,750 1.3
625,000 ++Resurgence Properties Inc. 5,468,750 5,000,000 0.8
Retail 1,190,420 ++Lamonts Apparel, Inc.++++ 3,222,815 148,803 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 3,290,000 0.5
159,997 Telemundo Group, Inc. (Class B) (b) 1,533,041 1,359,974 0.2
Transportation $ 5,500,000 ++Evergreen International Aviation,
Senior Notes, 13.50% due 8/15/2002 2,420,000 2,860,000 0.5
Total Financial Restructuring 64,273,876 47,996,861 7.8
High Yield
Food & Beverage $ 6,000,000 ++Envirodyne Industries, Inc., Senior Notes,
10.25% due 12/01/2001 4,465,000 4,530,000 0.7
Home Builders $ 4,000,000 MDC Holdings, Inc., Senior Notes, 11.125%
due 12/15/2003 3,330,000 3,300,000 0.5
Leisure & $ 3,750,000 ++Bally's Health & Tennis Corporation, Senior
Entertainment Subordinated Notes, 13.00% due 1/15/2003 2,955,938 2,887,500 0.5
$12,000,000 ++Genmar Holdings, Inc., Senior Subordinated
Notes, 13.50% due 7/15/2001 12,000,000 11,280,000 1.8
$ 6,377,000 ++Riviera Holdings Corp., First Mortgage Bonds, 11.00%
due 12/31/2002 5,123,833 5,245,082 0.9
$ 8,907,000 U.S. Trails, Inc., Secured Notes, 12.00% due 7/15/1998 6,305,948 5,522,340 0.9
Real Estate $ 3,300,000 Granite Development Partners L.P., Senior
Notes (Series B), 10.83% due 11/15/2003 2,986,500 3,019,500 0.5
<PAGE>
Telecommuni- $ 4,500,000 Scott Cable, Subordinated Debentures, 12.25% due
cations 4/15/2001 3,667,500 3,600,000 0.6
$ 2,522,000 Telemundo Group, Inc., Senior Notes,
10.25% due 12/30/2001 (b) 2,362,801 1,992,380 0.3
Transportation $ 5,500,000 Tiphook Finance Corp., Unsecured
Guaranteed Notes, 10.75% due 11/01/2002 4,272,500 4,097,500 0.7
Total High Yield 47,470,020 45,474,302 7.4
</TABLE>
<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 $ 1,882,125 0.3%
Auto & Truck 200,000 General Motors Corp. 7,584,001 7,750,000 1.3
Banking & Financial 575,000 Student Loan Marketing Association 23,523,777 21,490,625 3.5
Communications 615,000 ++Network Systems Corp. 6,098,025 3,151,875 0.5
Computer Software 430,000 Borland International, Inc. 4,728,607 3,010,000 0.5
& Services 500,000 ++Cognos, Inc. 3,173,430 8,125,000 1.3
1,700,000 Computervision Corporation 5,268,560 8,287,500 1.4
$ 8,000,000 Computervision Corporation, Senior Subordinated
Notes, 11.375% due 8/15/1999 6,225,125 7,000,000 1.1
Computers & 900,000 Unisys Corp. 9,317,815 8,100,000 1.3
Peripherals
Consumer Services 308,000 ++National Auto Credit, Inc. 3,246,275 3,311,000 0.5
Diversified 1,350,000 ++National Patent Development Corp.++++ 4,945,938 2,362,500 0.4
2,174 ++National Patent Development Corp. (Warrants) (a) 166,420 6,522 0.0
540,500 ++TPI Enterprises, Inc. 3,042,032 3,107,875 0.5
Electronics 4,613,587 ++Automated Security (Holdings) PLC (ADR)*++++ 15,755,133 10,380,571 1.7
Environmental 1,700,000 Laidlaw, Inc. (Non-Voting) (Class B) (ADR)* 10,421,992 13,387,500 2.2
Food & Beverage 8,000,000 Goodman Fielder Wattie, Ltd. 8,569,810 7,332,600 1.2
<PAGE>
Health Care 1,267,900 ++Applied Bioscience International Inc.++++ 6,516,794 7,131,937 1.2
293,000 Community Psychiatric Centers, Inc. 3,009,933 3,589,250 0.6
$ 7,500,000 ICN Pharmaceuticals, Inc., Convertible
Subordinated Notes, 8.50% due 11/15/1999 7,500,000 7,387,500 1.2
1,600,000 ++Unilab Corp. 7,795,041 6,000,000 1.0
Industrial Services 2,878,800 ++Anacomp, Inc.++++ 11,055,179 5,757,600 0.9
60,337 ++Anacomp, Inc. (Warrants) (a) 131,233 49,024 0.0
Insurance 2,300,000 Reliance Group Holdings, Inc. 15,541,700 12,362,500 2.0
750,000 ++Southwestern Life Corporation 4,073,196 656,250 0.1
Metals & Mining 9,375 Freeport-McMoRan Copper & Gold Co. Inc. (b) 127,969 192,187 0.0
500,000 Freeport-McMoRan, Inc. 8,393,433 8,562,500 1.4
Oil & Gas 900,000 USX Corp.--Marathon Group 15,765,400 14,400,000 2.4
Retail 200,000 Fingerhut Companies, Inc. 2,984,692 3,000,000 0.5
958,000 Kmart Corp. 15,891,728 13,052,750 2.1
1,000,000 Price/Costco, Inc. 14,896,053 13,750,000 2.3
Transportation 987,285 ++Leaseway Transportation Corp.++++ 7,056,433 11,477,188 1.9
Total Operational Restructuring 236,663,149 216,054,379 35.3
Total Stocks & Bonds 594,955,427 564,182,686 92.4
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Short-Term Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial $23,839,000 General Electric Capital Corp., 5.80% due 2/01/1995 $ 23,839,000 $ 23,839,000 3.9%
Paper**
Total Commercial Paper 23,839,000 23,839,000 3.9
US Government & 10,000,000 Federal Home Loan Mortgage Corp.,
Agency 5.88% due 3/17/1995 9,928,133 9,928,133 1.6
Obligations** 10,000,000 Federal National Mortgage Association,
5.84% due 2/28/1995 9,956,200 9,956,200 1.6
Total US Government & Agency Obligations 19,884,333 19,884,333 3.2
<PAGE>
Total Short-Term Investments 43,723,333 43,723,333 7.1
Total Investments $638,678,760 607,906,019 99.5
============
Other Assets Less Liabilities 2,805,208 0.5
------------ ------
Net Assets $610,711,227 100.0%
============ ======
<FN>
*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.
(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 January 13, 1995, the Fund received Telemundo Group, Inc., 10.25% Senior Notes due 12/30/2001,
Telemundo Group, Inc.--Class B Shares and $891,183 cash in exchange for Telemundo Group, Inc.,
0% Senior Notes due 8/15/1992.
++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:
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <C>
Apparel & Textile Texfi Industries, Inc. 0 $ 0 (1)
Chemicals Specialty Chemical Resources, Inc. 0 0 (1)
Computers Concurrent Computer Corp. 350,000 437,500 (1)
Diversified National Patent Development Corp. 0 0 (1)
Electronics Automated Security (Holdings)
PLC (ADR) 721,289 2,158,236 (1)
Environmental Matrix Service Co. 0 0 (1)
Environmental TETRA Technologies, Inc. 25,000 221,144 (1)
Health Care Applied Bioscience International, Inc. 94,600 449,350 (1)
Health Care NeoRx Corp. 0 0 (1)
Home Builders NVR Inc. 300,000 1,660,029 (1)
Industrial Services Anacomp, Inc. 98,400 183,136 (1)
Leisure & Entertainment CST Entertainment Imaging, Inc. 0 0 (1)
Manufacturing Lamson & Sessions Co. 0 0 (1)
Precision Instruments Esterline Technology Corp. 0 0 (1)
Retail Lamonts Apparel, Inc. 0 0 (1)
Transportation Leaseway Transportation Corp. 70,000 739,375 (1)
Total $5,848,770
==========
<FN>
(1)Non-income producing security.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL INFORMATION
<CAPTION>
Statement of Assets and Liabilities as of January 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$638,678,760) (Note 1a) $607,906,019
Cash 984,328
Receivables:
Securities sold $ 7,162,546
Capital shares sold 2,464,680
Interest 1,341,095
Dividends 287,723 11,256,044
------------
Prepaid registration fees and other assets (Note 1f) 125,695
------------
Total assets 620,272,086
------------
Liabilities: Payables:
Securities purchased 6,641,285
Capital shares redeemed 1,910,236
Investment adviser (Note 2) 527,599
Distributor (Note 2) 310,428 9,389,548
------------
Accrued expenses and other liabilities 171,311
------------
Total liabilities 9,560,859
------------
Net Assets: Net assets $610,711,227
============
Net Assets Class A Shares of Common Stock, $0.10 par value, 50,000,000 shares
Consist of: authorized $ 2,129,773
Class B Shares of Common Stock, $0.10 par value, 50,000,000 shares
authorized 3,159,201
Class C Shares of Common Stock, $0.10 par value, 50,000,000 shares
authorized 41,936
Class D Shares of Common Stock, $0.10 par value, 50,000,000 shares
authorized 169,404
Paid-in capital in excess of par 651,596,718
Accumulated investment loss--net (955,655)
Accumulated realized capital losses on investments and foreign
currency transactions--net (14,658,509)
Unrealized depreciation on investments and foreign currency
transactions--net (30,771,641)
------------
Net assets $610,711,227
============
<PAGE>
Net Asset Value: Class A--Based on net assets of $239,120,628 and 21,297,737 shares
outstanding $ 11.23
============
Class B--Based on net assets of $347,960,609 and 31,592,010 shares
outstanding $ 11.01
============
Class C--Based on net assets of $4,602,506 and 419,359 shares
outstanding $ 10.98
============
Class D--Based on net assets of $19,027,484 and 1,694,038 shares
outstanding $ 11.23
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statement of Operations for the Six Months Ended January 31, 1995
<S> <S> <C> <C>
Investment Interest and discount earned (net of $21,447 foreign withholding tax) $ 4,165,047
Income Dividends (net of $70,560 foreign withholding tax) 3,157,685
(Notes 1d & 1e): Other income 549,183
------------
Total income 7,871,915
------------
Expenses: Investment advisory fees (Note 2) $ 3,150,198
Distribution fees--Class B (Note 2) 1,845,096
Transfer agent fees--Class B (Note 2) 355,287
Transfer agent fees--Class A (Note 2) 206,260
Printing and shareholder reports 110,288
Registration fees (Note 1f) 65,905
Accounting services (Note 2) 55,458
Custodian fees 42,950
Professional fees 41,120
Directors' fees and expenses 24,898
Account maintenance fees--Class D (Note 2) 7,731
Distribution fees--Class C (Note 2) 6,837
Transfer agent fees--Class D (Note 2) 5,885
Transfer agent fees--Class C (Note 2) 1,477
Other 11,122
------------
Total expenses 5,930,512
------------
Investment income--net 1,941,403
------------
<PAGE>
Realized & Realized gain from:
Unrealized Gain Investments--net 7,599,781
(Loss) on Foreign currency transactions--net 374 7,600,155
Investments & ------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions--Net Investments--net (42,228,605)
(Notes 1b, 1c, Foreign currency transactions--net 1,534 (42,227,071)
1e & 3): ------------ ------------
Net realized and unrealized loss on investments and
foreign currency transactions (34,626,916)
------------
Net Decrease in Net Assets Resulting from Operations $(32,685,513)
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Statements of Changes in Net Assets
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: January 31, 1995 July 31, 1994
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ 1,941,403 $ (357,218)
Realized gain on investments and foreign currency
transactions--net 7,600,155 68,285,575
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions--net (42,227,071) (32,799,450)
------------ ------------
Net increase (decrease) in net assets resulting from operations (32,685,513) 35,128,907
------------ ------------
Dividends & Investment income--net:
Distributions to Class A (2,215,404) --
Shareholders Class B (555,940) --
(Note 1g): Class C (10,793) --
Class D (75,226) --
Realized gain on investments--net:
Class A (27,461,298) (25,246,227)
Class B (39,292,892) (25,925,825)
Class C (85,233) --
Class D (474,000) --
------------ ------------
Net decrease in net assets resulting from dividends
and distributions to shareholders (70,170,786) (51,172,052)
------------ ------------
<PAGE>
Capital Share Net increase in net assets derived from capital share transactions 95,582,084 226,499,203
Transactions ------------ ------------
(Note 4):
Net Assets: Total increase (decrease) in net assets (7,274,215) 210,456,058
Beginning of period 617,985,442 407,529,384
------------ ------------
End of period* $610,711,227 $617,985,442
============ ============
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.31 $ 13.75 $ 11.40 $ 11.13 $ 12.37
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .08 .03 .02 .06 .23
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.65) 1.18 3.06 1.34 .55
-------- -------- -------- -------- --------
Total from investment operations (.57) 1.21 3.08 1.40 .78
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.11) -- (.03) (.09) (.40)
Realized gain on investments--net (1.40) (1.65) (.70) (1.04) (1.62)
-------- -------- -------- -------- --------
Total dividends and distributions (1.51) (1.65) (.73) (1.13) (2.02)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.23 $ 13.31 $ 13.75 $ 11.40 $ 11.13
======== ======== ======== ======== =======
Total Investment Based on net asset value per share (4.82%)+++ 9.36% 28.96% 14.54% 10.35%
Return:** ======== ======== ======== ======== =======
<PAGE>
Ratios to Expenses 1.27%* 1.22% 1.25% 1.35% 1.42%
Average ======== ======== ======== ======== =======
Net Assets: Investment income--net 1.23%* .48% .28% .60% 2.22%
======== ======== ======== ======== =======
Supplemental Net assets, end of period (in thousands) $239,121 $255,856 $197,995 $140,323 $132,623
Data: ======== ======== ======== ======== =======
Portfolio turnover 27.34% 63.95% 67.57% 79.68% 72.12%
======== ======== ======== ======== =======
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average number of shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (continued)
<CAPTION>
Financial Highlights (continued) Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
Jan. 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994++ 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.02 $ 13.46 $ 11.25 $ 11.04 $ 12.26
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .01 (.07) (.02) (.05) .11
Realized and unrealized gain (loss) on
investments and foreign currency
transactions--net (.63) 1.11 2.93 1.33 .56
-------- -------- -------- -------- --------
Total from investment operations (.62) 1.04 2.91 1.28 .67
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.02) -- -- (.03) (.27)
Realized gain on investments--net (1.37) (1.48) (.70) (1.04) (1.62)
-------- -------- -------- -------- --------
Total dividends and distributions (1.39) (1.48) (.70) (1.07) (1.89)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.01 $ 13.02 $ 13.46 $ 11.25 $ 11.04
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share (5.32%)+++ 8.21% 27.66% 13.35% 9.14%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding distribution fees 1.30%* 1.24% 1.27% 1.37% 1.45%
Net Assets: ======== ======== ======== ======== ========
Expenses 2.30%* 2.24% 2.27% 2.37% 2.45%
======== ======== ======== ======== ========
Investment income--net .19%* (.51%) (.73%) (.46%) 1.19%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $347,961 $362,129 $209,534 $104,313 $ 79,848
======== ======== ======== ======== ========
Portfolio turnover 27.34% 63.95% 67.57% 79.68% 72.12%
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<TABLE>
FINANCIAL INFORMATION (concluded)
<CAPTION>
Financial Highlights (concluded)
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
January 31, 1995++++
Increase (Decrease) in Net Asset Value: Class C Class D
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 12.31 $ 12.57
Operating -------- --------
Performance: Investment income (loss)--net (.01) .01
Realized and unrealized loss on investments and foreign currency
transactions--net (.84) (.85)
-------- --------
Total from investment operations (.85) (.84)
-------- --------
Less dividends and distributions:
Investment income--net (.05) (.07)
Realized gain on investments--net (.43) (.43)
-------- --------
Total dividends and distributions (.48) (.50)
-------- --------
Net asset value, end of period $ 10.98 $ 11.23
======== ========
<PAGE>
Total Investment Based on net asset value per share (6.76%)+++ (6.58%)+++
Return:** ======== ========
Ratios to Average Expenses, excluding distribution and account maintenance fees 1.34%* 1.31%*
Net Assets: ======== ========
Expenses 2.34%* 1.56%*
======== ========
Investment income--net (.29%)* .35%*
======== ========
Supplemental Net assets, end of period (in thousands) $ 4,603 $ 19,027
Data: ======== ========
Portfolio turnover 27.34% 27.34%
======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
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.
These unaudited financial statements reflect all
adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim
period presented. All such adjustments are of a normal
recurring nature. The Fund offers four classes of shares
under the Merrill Lynch Select Pricing SM System. Shares
of Class A and Class D are sold with a front-end sales
charge. Shares of Class B and Class C may be subject
to a contingent deferred sales charge. All classes of
shares have identical voting, dividend, liquidation and
other rights and the same terms and conditions, except
that Class B, Class C and Class D Shares bear certain
expenses related to the account maintenance of such
shares, and Class B and Class C Shares also bear certain
expenses related to the distribution of such shares.
Each class has exclusive voting rights with respect to
matters relating to its account maintenance and distri-
bution expenditures. The following is a summary of
significant accounting policies followed by the Fund.
<PAGE>
(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 value.
(b) Derivative financial instruments--The Fund may
engage in various portfolio strategies to seek to increase
its return by hedging its portfolio against adverse
movements in the equity, debt and currency markets.
Losses may arise due to changes in the value of the
contract or if the counterparty does not perform under
the contract.
*Forward foreign exchange contracts--The Fund enters
into forward foreign exchange contracts as a hedge
against either specific transactions or portfolio posi-
tions. 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.
(c) 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
valuing (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.
(d) 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.
(e) Security transactions and investment income--
Security transactions are recorded on the dates the
transactions are entered into (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 Fund
is 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.
(f) Prepaid registration fees--Prepaid registration fees
are charged to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and
distributions paid by the Fund are recorded on the
ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory
Agreement with Fund Asset Management, L.P. ("FAM").
The general partner of FAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill
Lynch & Co., Inc. ("ML & Co."), which is the limited
partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch
Funds Distributor, Inc. ("MLFD" or "Distributor"), a
wholly-owned subsidiary of Merrill Lynch Group, Inc.
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 based upon the average daily value of
the Fund's net assets at the following annual rates:
1.00% of average daily net assets not exceeding $500
million; 0.95% of average daily net assets in excess of
$500 million but not exceeding $1 billion; and 0.90% of
average daily net assets in excess of $1 billion. The
Investment Advisory Agreement obligates FAM to reim-
burse 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 the distribution plans (the "Distribution
Plans") adopted by the Fund in accordance with Rule
12b-1 under the Investment Company Act of 1940, the
Fund pays the Distributor ongoing account maintenance
and distribution fees. The fees are accrued daily and
paid monthly at annual rates based upon the average
daily net assets of the shares as follows:
Account
Maintenance Fee Distribution Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill
Lynch, Pierce, Fenner & Smith Inc. ("MLPF&S"), a
subsidiary of ML & Co., also provides account mainte-
nance and distribution services to the Fund. The ongoing
account maintenance fee compensates the Distributor
and MLPF&S for providing account maintenance serv-
ices to Class B, Class C and Class D shareholders. The
ongoing distribution fee compensates the Distributor
and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the six months ended January 31, 1995, MLFD
earned underwriting discounts and MLPF&S earned
dealer concessions on sales of the Fund's Class A and
Class D Shares as follows:
MLFD MLPF&S
Class A $9,256 $151,312
Class D $4,210 $ 69,139
<PAGE>
MLPF&S received contingent deferred sales charges of
$312,454 relating to transactions in Class B Shares and
$160 in commissions on the execution of portfolio
security transactions for the Fund for the six months
ended January 31, 1995.
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, PSI, MLPF&S, FDS, MLFD,
and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-
term securities, for the six months ended January 31,
1995 were $202,075,731 and $153,705,703, respectively.
Net realized and unrealized gains (losses) as of January
31, 1995 were as follows:
Realized Unrealized
Gains Gains (Losses)
Long-term investments $7,599,781 $(30,772,741)
Foreign currency
transactions 374 1,100
---------- ------------
Total $7,600,155 $(30,771,641)
========== ============
As of January 31, 1995, net unrealized depreciation for
Federal income tax purposes aggregated $30,772,741,
of which $52,545,411 related to appreciated securities
and $83,318,152 related to depreciated securities. At
January 31, 1995, the aggregate cost of investments for
Federal income tax purposes was $638,678,760.
4. Capital Share Transactions:
Net increase in net assets derived from capital share
transactions for the six months ended January 31, 1995
and the year ended July 31, 1994 were $95,582,084 and
$226,499,203, respectively.
<PAGE>
Transactions in capital shares for each class were as
follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1995 Shares Amount
Shares sold 2,369,970 $ 29,423,509
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,149,438 25,931,896
---------- ------------
Total issued 4,519,408 55,355,405
Shares redeemed (2,449,643) (30,098,552)
---------- ------------
Net increase 2,069,765 $ 25,256,853
========== ============
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 B Shares for the Six Months Dollar
Ended January 31, 1995 Shares Amount
Shares sold 6,236,707 $ 74,882,042
Shares issued to shareholders
in reinvestment of dividends
and distributions 3,047,645 36,160,407
---------- ------------
Total issued 9,284,352 111,042,449
Shares redeemed (5,497,143) (65,537,032)
---------- ------------
Net increase 3,787,209 $ 45,505,417
========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1994 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
========== ============
Class C Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 472,443 $ 5,394,317
Shares issued to shareholders
in reinvestment of dividends
and distributions 7,661 82,125
---------- ------------
Total issued 480,104 5,476,442
Shares redeemed (60,745) (682,476)
---------- ------------
Net increase 419,359 $ 4,793,966
========== ============
[FN]
++Commencement of Operations.
Class D Shares for the
Period October 21, 1994++ to Dollar
January 31, 1995 Shares Amount
Shares sold 1,693,142 $ 20,039,089
Shares issued to shareholders
in reinvestment of dividends
and distributions 47,191 517,217
---------- ------------
Total issued 1,740,333 20,556,306
Shares redeemed (46,295) (530,458)
---------- ------------
Net increase 1,694,038 $ 20,025,848
========== ============
[FN]
++Commencement of Operations.
<PAGE>
PORTFOLIO INFORMATION
For the Quarter
Ended January 31, 1995
Ten Largest Holdings Percent of
Net Assets
Student Loan Marketing Association 3.5%
WMX Technologies, Inc. 3.4
ADT Ltd. 2.8
USX Corp.--Marathon Group 2.4
Price/Costco, Inc. 2.3
Laidlaw, Inc. (Non-Voting) (Class B) (ADR) 2.2
Kmart Corp. 2.1
Reliance Group Holdings, Inc. 2.0
California Federal Bank, FSB 1.9
The Limited, Inc. 1.9
Five Largest Industries
Retail 9.4%
Environmental 9.4
Banking & Financial 8.1
Health Care 6.5
Leisure & Entertainment 4.4
Asset Mix
Stocks 78.2%
Bonds 14.2
Cash & Cash Equivalents 7.6
Additions
Stocks
CML Group, Inc.
Comcast Corporation--Special (Class A)
Community Psychiatric Centers, Inc.
Countrywide Credit Industries, Inc.
Federal--Mogul Corp.
Fingerhut Companies, Inc.
General Motors Corp.
National Auto Credit, Inc.
*SHL Systemhouse, Inc.
*Structural Dynamics Research Corp.
<PAGE>
Bonds
Bally's Health & Tennis Corporation, Senior
Subordinated Notes, 13.00% due 1/15/2003
EMCOR Group, Inc., A Notes, 7.00% due 10/30/1997
Envirodyne Industries, Inc., Senior Notes,
10.25% due 12/01/2001
*The Grand Union Co., Senior Subordinated Notes,
12.25% due 7/15/2002
Granite Development Partners L.P.,
Senior Notes (Series B), 10.83% due 11/15/2003
ICN Pharmaceuticals, Inc., Convertible Subordinated Notes,
8.50% due 11/15/1999
JWP Inc., Notes:
10.25% due 12/01/1998
9.10% due 3/06/2002
9.95% due 11/15/2004
MDC Holdings, Inc., Senior Notes,
11.125% due 12/15/2003
Telemundo Group, Inc., Senior Notes,
10.25% due 12/30/2001
Deletions
Stocks
Attwoods PLC (ADR)
Charming Shoppes, Inc.
EUA Contingent Interest Certificates
Gerrity Oil & Gas Corp.
Gilead Sciences Inc.
IVAX Corp.
Moore Corp. Ltd. (ADR)
Nahama & Weagant Energy Co.
Peoples Heritage Financial Group, Inc.
Scott Paper Co.
*SHL Systemhouse, Inc.
*Structural Dynamics Research Corp.
<PAGE>
Bonds
*The Grand Union Co., Senior Subordinated Notes,
12.25% due 7/15/2002
Greyhound Lines, Inc. Convertible Subordinated
Debentures, 8.50% due 3/31/2007
Telemundo Group, Inc., Senior Notes,
0.00% due 8/15/1992 (a)
[FN]
*Added and deleted in the same quarter.
