MERRILL LYNCH
PHOENIX
FUND, INC.
FUND LOGO
Annual Report
July 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
<PAGE>
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th floor
Brooklyn, NY 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
This report is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Merrill Lynch 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.
<PAGE>
Merrill Lynch
Phoenix Fund, Inc.
Box 9011
Princeton, NJ
08543
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
In the July quarter, economic data generally showed evidence of
slowing activity. Gross domestic product growth for the first three
months of 1995 was reported at 2.7%, the weakest showing in the past
18 months. Other signs of a sluggish economy included lackluster
durable goods orders, slowing growth in the manufacturing sector,
and three consecutive months of declines in the Index of Leading
Economic Indicators, an occurrence which has often (but not always)
forecast recessions. As a result, concerns arose that the economic
"soft landing" could turn into an actual recession. However, at the
same time there were also expectations that a few months of very
slow or zero growth would be followed by a pickup in economic
activity later in the year. This view was supported by the stronger-
than-expected employment data for June and an upward revision in
May's employment figures, as well as improving housing activity
measures and consumer confidence surveys.
Thus far in 1995, economic developments have been very positive for
the US stock and bond markets, and most US stock market averages
recently have attained record levels. In contrast, the US dollar has
been persistently weak, especially relative to the yen. Following
the Federal Reserve Board's cut in short-term interest rates in
early July, continued signs of a moderating expansion and well-
contained inflationary pressures could provide further assurance
that the peak in US interest rates is behind us, creating a stronger
foundation for higher stock and bond prices. On the other hand,
indications of reaccelerating growth and increasing inflationary
pressures would likely suggest that higher interest rates are on the
horizon, a negative development for the US financial markets. The
outcome of the current deliberations on reducing the Federal budget
deficit will also play a role in the investment outlook for the US
capital markets.
<PAGE>
Portfolio Matters
Although US stock prices continued to climb to higher levels during
the July quarter, we were able to find new investment opportunities
for Merrill Lynch Phoenix Fund, Inc. As a result, during the quarter
the Fund's cash and cash equivalents decreased from 13.9% of net
assets to 8.5% as we invested in a variety of technology, financial
and electrical equipment companies.
Despite the sharp advance in share prices in the technology sector,
we identified and invested in two undervalued technology companies
during the July quarter: Tandem Computers, Inc. and Cyrix Corp.
Tandem's share price was driven down to very attractive levels when
the company announced its second-quarter earnings would be lower
than originally forecast. A manufacturer of fault-tolerant computer
systems and networking products, Tandem has reported poor results
primarily because of its inflated cost structure relative to its
peers. We believe current valuations for Tandem's shares are
attractive, given the company's recent attempts to bring these costs
in line, its dominant market position, good balance sheet and new
product introductions.
Cyrix Corp. is a leading manufacturer of microprocessors. Results
have been hurt recently by the company's transition from slower 486
chips to faster Pentium models. We were attracted to the company's
specialty business (only a handful of companies have the expertise
to manufacture microprocessors), good balance sheet and significant
earnings leverage relative to any increase in sales. While we expect
the next few quarters to be challenging, continuing strong computer
demand should lead to improved earnings results in subsequent
quarters.
Financial stocks in general also performed well in the July quarter.
However, we found an undervalued investment opportunity in the
shares of Roosevelt Financial Group Inc., a thrift holding company
headquartered in St. Louis, Missouri. The company has grown by
acquiring deposits inexpensively. A more competitive deposit
environment, as well as the announcement that Roosevelt Financial
had to restate first-quarter 1995 earnings to reflect unrealized
losses on its investment portfolio, led to share price weakness. We
were attracted to the company's historic growth rate, inexpensive
valuation relative to its earnings and high franchise value in
Missouri.
Corning Inc. shares have recently come under pressure following the
bankruptcy filing of its affiliate, Dow Corning, a manufacturer of
breast implants. The company has a dominant market share in a number
of businesses including optical fiber and clinical laboratory
services. We believe that Corning will eventually undertake a
restructuring that will focus on higher-growth businesses and divert
resources from its worst-performing areas, thereby enhancing
shareholder returns.
<PAGE>
In the past several reports to shareholders, we have discussed the
elimination of the Fund's smaller non-core holdings. This process
continued during the July quarter with the sales of our investments
in Telemundo Group, Inc., Storage Technology Corporation, Applied
Immune Sciences, Inc. and National Auto Credit, Inc. We used the
proceeds from these sales to add to existing undervalued positions.
Two major changes took place in the Fund's high-yield holdings
during the July quarter. We have held the common stock and bonds of
Computervision Corporation, a maker of CAD/CAM software, in the
portfolio for some time now. During the quarter it became evident to
us that the current management had done a good job in turning the
company around and a brighter future was ahead. We decided to sell
Computervision bond holdings, which provide limited upside
potential, and deploy the proceeds into the common stock. Subsequent
to this decision, the company has won a number of large contracts
and has posted good earnings results. We remain positive on the
outlook for Computervision.
Fiscal Year in Review
In our July 31, 1994 report to shareholders, we stated that
environmental stocks would be an area of focus for Merrill Lynch
Phoenix Fund, Inc. During the course of the fiscal year, this group
provided us with mixed results. Laidlaw, Inc. and TETRA
Technologies, Inc. were big contributors to Fund performance, while
gains in WMX Technologies, Inc., Attwoods PLC and Allwaste Inc. were
more modest. Since the economy is currently slowing, and
environmental stocks tend to perform cyclically, we have
dramatically cut back our exposure to this group. Even though the
slowing economy made it difficult to invest in operationally
troubled issuers and obtain significant returns, we did manage to
have a number of securities positively contribute to Fund
performance. Leaseway Transportation Corp. was the subject of a
takeover, and two technology stocks, Computervision Corporation and
Cognos, Inc., dramatically appreciated. On the negative side, we
established relatively large positions in the retail sector at the
beginning of the year but these holdings hurt our performance. We
continue to believe the consolidation occurring within this industry
has positive implications for the long term.
During the course of the fiscal year, the Fund's bond exposure grew
from approximately 10% of net assets to 14.9% as of July 31, 1995.
Periodic price declines within this sector, which were caused by the
volatile economic environment, depressed prices to very attractive
levels. Currently, the interest rate spread between US Government
bonds and lower-tier high-yield issues is at a historically wide
level. Within this environment, we anticipate maintaining the Fund's
exposure at current, or slightly higher, levels.
<PAGE>
Finally, Fund assets grew by over 20% during the fiscal year. To
date, we have adjusted to the Fund's increased size by concentrating
our research efforts on larger-capitalization companies. As the Fund
expands, we expect to continue to find new investment opportunities
among larger-capitalization companies.
In Conclusion
We thank you for your investment in Merrill Lynch Phoenix Fund,
Inc., and we look forward to serving your investment needs
throughout the Fund's new fiscal year and beyond.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Martorelli)
Robert J. Martorelli
Vice President and Portfolio Manager
September 6, 1995
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
<PAGE>
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years.
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
Performance data for all of the Fund's shares are presented in the
"Total Return Based on a $10,000 Investment" graphs and the "Recent
Performance Results" table on pages 4 and 5. Performance data for
the Fund's Class A and Class B Shares are presented in the
"Performance Summary" and "Average Annual Total Return" tables on
pages 4 and 6. Data for Class C and Class D Shares are also
presented in the "Aggregate Total Return" tables on page 5.
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 July 31, 1995 and
for Class C and Class D Shares for the since inception and 3-month
periods ended July 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
Total Return Based on a $10,000 Investment--Class A Shares and Class B Shares
A line graph depicting the growth of an investment in the Fund's
Class A Shares compared to the growth of an investment in the
S&P 500 Index. Beginning and ending values are:
7/85 7/95
ML Phoenix Fund++--
Class A Shares* $ 9,475 $10,000
S&P 500 Index++++ $10,000 $40,816
A line graph depicting the growth of an investment in the Fund's
Class B Shares compared to the growth of an investment in the
S&P 500 Index. Beginning and ending values are:
10/21/88** 7/95
ML Phoenix Fund++--
Class B Shares* $10,000 $21,488
S&P 500 Index++++ $10,000 $24,452
[FN]
*Assuming maximum sales charge, transaction costs and other
operating expenses, including advisory fees.
**Commencement of Operations.
++ML Phoenix Fund, Inc. invests in a diversified 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.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
<PAGE>
Class A Shares*
Year Ended 6/30/95 +12.64% + 6.73%
Five Years Ended 6/30/95 +13.68 +12.46
Ten Years Ended 6/30/95 +14.70 +14.09
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/95 +11.52% + 7.52%
Five Years Ended 6/30/95 +12.50 +12.50
Inception (10/21/88) through 6/30/95 +11.47 +11.47
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
PERFORMANCE DATA (continued)
Total Return Based on a $10,000 Investment--Class C Shares and Class D Shares
A line graph depicting the growth of an investment in the Fund's
Class C Shares and Class D Shares compared to the growth of an
investment in the S&P 500 Index. Beginning and ending values are:
10/21/94** 7/95
ML Phoenix Fund++--
Class C Shares* $10,000 $10,999
ML Phoenix Fund++--
Class D Shares* $ 9,475 $10,585
S&P 500 Index++++ $10,000 $12,344
<PAGE>
[FN]
*Assuming transaction costs and other operating expenses,
including advisory fees.
**Commencement of Operations.
++ML Phoenix Fund, Inc. invests in a diversified 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.
++++This unmanaged broad-based Index is comprised of common stocks.
Past performance is not predictive of future performance.
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 6/30/95 +6.91% +5.91%
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Inception (10/21/94)
through 6/30/95 +7.56% +1.91%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
7/31/95 4/30/95 7/31/94++ % Change++ % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund Class A Shares* $13.44 $12.13 $13.31 + 7.25%(1) +10.80%
ML Phoenix Fund Class B Shares* 13.12 11.87 13.02 + 7.15(1) +10.53
ML Phoenix Fund Class C Shares* 13.07 11.83 12.31 + 9.28(2) +10.48
ML Phoenix Fund Class D Shares* 13.43 12.13 12.57 + 9.90(2) +10.72
Dow Jones Industrial Average** 4,708.47 4,321.27 3,764.50 +25.08 + 8.96
Standard & Poor's 500 Index** 562.06 514.71 458.26 +22.65 + 9.20
ML Phoenix Fund Class A Shares--Total Return* +13.91(3) +10.80
ML Phoenix Fund Class B Shares--Total Return* +12.83(4) +10.53
ML Phoenix Fund Class C Shares--Total Return* +10.99(5) +10.48
ML Phoenix Fund Class D Shares--Total Return* +11.72(6) +10.72
Dow Jones Industrial Average--Total Return** +28.54 + 9.65
Standard & Poor's 500 Index--Total Return** +26.06 + 9.94
<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 $0.657 per share ordinary
income dividends and $0.729 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.172 per share ordinary
income dividends and $0.314 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.186 per share ordinary
income dividends and $0.314 per share capital gains distributions.
</TABLE>
PERFORMANCE DATA (concluded)
<PAGE>
<TABLE>
Performance Summary--Class A Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
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
1994 13.45 11.15 0.729 0.777 - 6.48
1/1/95--7/31/95 11.15 13.44 -- -- +20.54
------- ------
Total $11.623 Total $6.986
Cumulative total return as of 7/31/95: +593.69%**
<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**
<S> <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
1994 13.24 10.95 0.729 0.657 - 7.40
1/1/95--7/31/95 10.95 13.12 -- -- +19.82
------ ------
Total $4.388 Total $3.210
Cumulative total return as of 7/31/95: +114.88%**
<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>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Discount to Assets
Cable 700,000 Comcast Corporation--Special (Class A) $ 11,502,469 $ 14,087,500 1.9%
Day-Care Centers 700,000 ++Kinder-Care Learning Centers, Inc. 8,607,500 9,012,500 1.2
Total Discount to Assets 20,109,969 23,100,000 3.1
Earnings Turnarounds
Airlines 1,015,000 ++Mesa Airlines, Inc. 6,532,660 11,038,125 1.5
Apparel & Textile 657,600 ++Burlington Industries, Inc. 7,635,000 8,220,000 1.1
Auto & Truck 475,000 Federal--Mogul Corp. 8,405,076 10,153,125 1.4
Banking & Financial 900,000 ++California Federal Bank, FSB 8,884,347 12,487,500 1.7
130,000 ++California Federal Bank, FSB Goodwill
Certificates 500,634 650,000 0.1
120,000 Glendale Federal Savings Bank (8.75%
Convertible, Series E) 3,000,000 4,470,000 0.6
500,000 Roosevelt Financial Group Inc. 8,371,804 7,687,500 1.0
Communications 1,295,000 ++Century Communications Corp.++++ 10,337,093 11,331,250 1.5
Computer Related 260,000 ++Cyrix Corp. 6,033,128 5,947,500 0.8
<PAGE>
Computers & 1,700,000 ++Tandem Computers, Inc. 22,288,616 22,312,500 3.0
Peripherals 500,000 ++Western Digital Corp. 7,212,222 9,687,500 1.3
Consumer Products 1,500,000 The Topps Co., Inc. 10,330,067 9,187,500 1.2
Energy Related 361,000 Nowsco Well Service Ltd. 3,267,348 3,752,188 0.5
632,600 ++Total Petroleum (North America) Ltd. 6,615,780 7,353,975 1.0
Environmental 2,382,600 ++Allwaste Inc.++++ 12,367,136 13,402,125 1.8
930,000 ++Matrix Service Co.++++ 8,370,557 3,255,000 0.4
153,500 ++Rollins Environmental Services, Inc. 734,135 748,313 0.1
760,000 ++TETRA Technologies, Inc.++++ 5,271,282 9,120,000 1.2
Health Care 685,000 ++The Liposome Company Inc. 3,996,246 7,192,500 1.0
868,800 ++NeoRx Corp.++++ 5,703,790 4,669,800 0.6
Home Builders 1,326,800 ++NVR, Inc.++++ 8,912,598 9,287,600 1.2
53,828 NVR, Inc. (Warrants)(a) 235,498 40,371 0.0
Leisure & 1,625,000 ++CST Entertainment Imaging, Inc. ++++ 3,593,312 1,625,000 0.2
Entertainment 900,000 ++CST Entertainment Imaging, Inc. +++++++ 675,000 675,000 0.1
Manufacturing 879,400 ++Lamson & Sessions Co.++++ 4,853,150 5,826,025 0.8
Oil & Gas 253,300 ++Ranchmen's Resources Ltd. 1,034,460 1,085,439 0.1
Oil Services 239,025 ++Computalog Ltd. 1,962,718 1,133,233 0.1
500,000 ++Rowan Companies, Inc. 3,613,500 3,625,000 0.5
653,000 ++Weatherford International, Inc. 4,942,750 8,325,750 1.1
Paper & Packaging 106,562 ++Gaylord Container Corp. 226,434 1,238,783 0.2
233,428 Gaylord Container Corp. (Warrants)(a) 464,255 2,392,637 0.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Earnings Turnarounds (concluded)
<PAGE>
Precision 300,000 ++Esterline Technology Corp. $ 2,695,398 $ 7,012,500 0.9%
Instruments
Printing & 2,000,000 ++National Education Corp.++++ 9,816,118 10,750,000 1.4
Publishing
Restaurants 965,519 ++Houlihan's Restaurant Group,
Inc. (b)++++ 3,468,750 8,568,981 1.1
Retail 1,300,000 CML Group, Inc. 11,732,647 10,887,500 1.5
700,000 The Limited, Inc. 12,846,702 14,350,000 1.9
261,215 ++National Convenience Stores Inc. 4,217,295 3,461,099 0.5
90,000 National Convenience Stores Inc.
(Warrants)(a) 342,873 168,750 0.0
2,000,000 ++Service Merchandise Company, Inc. 10,966,680 14,000,000 1.9
Ship Building 72,000 ++Bremer, Vulkan, Verbund AG 3,784,727 4,129,695 0.5
Total Earnings Turnarounds 236,241,786 271,249,764 36.1
Financial Restructuring
Aerospace & 2,360,000 ++Ladish Co., Inc. 2,864,038 708,000 0.1
Industrial Products
Airlines $ 18,475,000 ++Continental Airlines Holdings,
Inc., Secured Equipment Trust
Certificates, 12.125% due
4/15/1996 2,060,516 2,494,125 0.3
Chemicals 360,000 ++Specialty Chemical Resources, Inc.++++ 3,579,642 1,575,000 0.2
Computers & 424,800 ++Concurrent Computer Corp. 661,900 836,346 0.1
Peripherals
<PAGE>
Consumer Products $ 6,700,000 ++Polly Peck International Finance
N.V., Convertible Preferred
Shares, 7.25% due 1/04/2005 241,200 268,000 0.0
Energy 65,945 ++Great Bay Power Corp. (c) 2,215,547 511,074 0.1
Engineering 431,144 EMCOR Group, Inc. (d) 2,211,518 3,233,580 0.4
Financial 145,000 ++First City Financial Corp., Non-
Convertible Preferred Stock 3,653,768 3,045,000 0.4
Industrial Services 1,633,200 ++Anacomp, Inc. 4,395,647 1,326,975 0.2
$ 19,500,000 ++Anacomp, Inc., Senior Subordinated
Notes, 15.00% due 11/01/2000 13,727,813 15,112,500 2.0
60,337 Anacomp, Inc. (Warrants)(a) 131,233 26,397 0.0
Leisure & 3,600,000 ++TMM, Inc. 3,276,000 1,687,500 0.2
Entertainment
Real Estate $ 14,826,000 ++Olympia & York Maiden Lane Finance
Corp., Secured Notes, 10.375% due
12/31/1995 7,826,914 7,264,740 1.0
625,000 ++Resurgence Properties Inc.++++ 5,468,750 5,000,000 0.7
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Shares Held/ Value Percent of
Industry Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Financial Restructuring (concluded)
Retail 1,190,420 ++Lamonts Apparel, Inc.++++ $ 3,222,815 $ 446,408 0.1%
443,361 ++Zale Corp. Litigation Limited Partner-
ship Shares 0 0 0.0
Textiles $ 2,000,000 The Bibb Company, Senior Subordinated
Notes, 13.875% due 8/01/1999 745,000 760,000 0.1
$ 2,000,000 The Bibb Company, Senior Subordinated
Notes, 14.00% due 10/01/1999 798,750 800,000 0.1
Total Financial Restructuring 57,081,051 45,095,645 6.0
<PAGE>
High Yield
Energy $ 7,000,000 WRT Energy Corp., Senior Notes, 13.875%
due 3/01/2002 (e) 7,000,000 6,860,000 0.9
Engineering $ 4,764,800 EMCOR Group, Inc., A Notes, 7.00% due
12/15/1997(d) 4,576,876 4,514,648 0.6
$ 1,801,300 EMCOR Group, Inc., C Notes, 11.00% due
12/15/2001(d) 1,777,465 1,269,917 0.2
$ 1,387,500 Sellco Corp., 12.00% due 12/15/2004(d) 170,170 187,312 0.0
Home Builders $ 4,100,000 ++Baldwin Homes, 10.375% due 8/01/2003 2,624,000 2,378,000 0.3
$ 8,000,000 MDC Holdings, Inc., Senior Notes, 11.125%
due 12/15/2003 6,780,000 7,300,000 1.0
Leisure & $ 8,500,000 Bally's Health & Tennis Corporation,
Entertainment Senior Subordinated Notes, 13.00% due
1/15/2003 6,781,875 7,671,250 1.0
$ 12,000,000 Genmar Holdings, Inc., Senior
Subordinated Notes, 13.50% due
7/15/2001 12,000,000 11,910,000 1.6
330,000 Live Entertainment Inc., 5.00%
Convertible Preferred (Series B) 1,546,875 1,732,500 0.2
$ 7,500,000 Live Entertainment Inc., Senior
Subordinated Notes, 12.00% due 3/23/1999 5,643,750 5,475,000 0.7
$ 6,377,000 Riviera Holdings Corp., First Mortgage
Bonds, 11.00% due 12/31/2002 5,123,833 6,185,690 0.8
$ 5,000,000 Trump Castle Funding Inc., 11.75% due
11/15/2003 3,110,097 4,050,000 0.5
$ 7,605,000 U.S. Trails, Inc., Secured Notes,
12.00% due 7/15/1998 5,346,125 5,171,400 0.7
Printing & $ 4,112,000 San Jacinto Holdings Inc., Senior
Publishing Subordinated Notes, 8.00% due 12/31/2000 3,125,120 3,125,120 0.4
Real Estate $ 3,300,000 Granite Development Partners L.P., Senior
Notes (Series B), 10.83% due 11/15/2003 2,986,500 2,805,000 0.4
Telecommunications $ 5,910,000 Scott Cable, Subordinated Debentures,
12.25%due 4/15/2001 4,626,300 4,018,800 0.5
<PAGE>
Transportation $ 7,500,000 Tiphook Finance Corp., Unsecured
Guaranteed Notes, 10.75% due 11/01/2002 5,787,500 6,300,000 0.8
Total High Yield 79,006,486 80,954,637 10.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Operational Restructuring
Apparel & 717,000 ++Texfi Industries, Inc.++++ $ 3,857,425 $ 1,971,750 0.3%
Textile
Banking & 500,000 Student Loan Marketing Association 19,895,502 26,937,500 3.6
Financial
Cable 637,000 ++Cox Communications Inc. (Class A) 10,553,796 12,899,250 1.7
Computer Software 835,000 ++Borland International, Inc. 7,615,421 10,333,125 1.4
& Services 2,000,000 ++Computervision Corporation 6,929,960 21,000,000 2.8
Computers & 1,400,000 ++Amdahl Corp. 14,218,668 13,912,500 1.9
Peripherals 700,000 ++Unisys Corp. 7,105,815 6,212,500 0.8
Diversified 1,600,000 ++ADT Limited (ADR)* 13,786,872 19,200,000 2.6
300,000 Corning Inc. 9,873,788 9,600,000 1.3
1,350,000 ++National Patent Development Corp.++++ 4,945,938 2,362,500 0.3
540,500 ++TPI Enterprises, Inc. 3,042,032 2,128,219 0.3
Electronics 4,813,587 ++Automated Security (Holdings)
PLC (ADR)* 16,190,133 6,016,984 0.8
<PAGE>
Health Care 1,861,900 ++Applied Bioscience International
Inc.++++ 9,584,260 8,844,025 1.2
469,200 Community Psychiatric Centers, Inc. 5,091,206 5,982,300 0.8
$ 5,850,000 ICN Pharmaceuticals, Inc., Convertible
Subordinated Notes, 8.50% due
11/15/1999 5,850,000 6,054,750 0.8
3,069,000 ++Unilab Corp++++ 14,047,518 13,618,687 1.8
Insurance 2,899,500 Reliance Group Holdings, Inc. 18,873,902 18,846,750 2.5
750,000 ++Southwestern Life Insurance Corp. 4,073,196 656,250 0.1
Metals & Mining 15,625 Freeport-McMoRan Copper & Gold, Inc 338,594 416,016 0.1
550,000 Freeport-McMoRan, Inc. 1,918,263 2,750,000 0.4
385,953 Freeport-McMoRan, Inc. (Class B) 7,157,545 10,420,731 1.4
Oil & Gas 950,000 USX Corp.--Marathon Group, Inc. 16,580,900 19,118,750 2.6
Retail 700,000 Kmart Corp. 10,392,960 11,025,000 1.5
1,000,000 ++Price/Costco, Inc. 14,896,053 17,875,000 2.4
1,100,000 Woolworth Corp. 16,832,486 17,187,500 2.3
Total Operational Restructuring 243,652,233 265,370,087 35.7
Total Investments 636,091,525 685,770,133 91.5
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Face Value Percent of
Amount Short-Term Investments Cost (Note 1a) Net Assets
<S> <C> <S> <C> <C> <C>
Commercial Paper** $ 13,495,000 General Electric Capital Corp., 5.80%
due 8/01/1995 $ 13,495,000 $ 13,495,000 1.8%
Total Commercial Paper 13,495,000 13,495,000 1.8
<PAGE>
US Government & 45,000,000 Federal National Mortgage Association,
Agency Obligations** 5.63% due 8/15/1995 44,901,475 44,901,475 6.0
Total US Government & Agency Obligations 44,901,475 44,901,475 6.0
Total Short-Term Investments 58,396,475 58,396,475 7.8
Total Investments $694,488,000 744,166,608 99.3
============
Other Assets Less Liabilities 5,139,773 0.7
------------ ------
Net Assets $749,306,381 100.0%
============ ======
<FN>
*American Depositary Receipts (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)Formerly Gilbert/Robinson Restaurants, Inc.
(c)Received in exchange for EUA Power Corp., Series B, 17.50% due
5/15/1993 and EUA Power Corp., Series C, 17.50% due 11/5/1992.
(d)Received in exchange for JWP Inc., 9.10% due 3/06/2002, JWP Inc.,
9.95% due 11/15/2004 and JWP Inc., 10.25% due 12/01/1998.
(e)Each $1,000 face amount contains 8 warrants of WRT Energy Corp.
++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)
Communications Century Communications Corp. 533,700 4,444,087 (1)
Diversified National Patent Development Corp. 0 0 (1)
Environmental Allwaste Inc. 1,455,100 7,732,376 (1)
Environmental Matrix Service Co. 0 0 (1)
Environmental TETRA Technologies, Inc. (40,000) (305,000) (1)
Health Care Applied Bioscience International Inc. 688,600 3,516,816 (1)
Health Care NeoRx Corp. 43,800 235,425 (1)
Health Care Unilab Corp. 2,094,000 8,718,529 (1)
Home Builders NVR, Inc. 1,326,800 8,912,598 (1)
Leisure & Entertainment CST Entertainment Imaging, Inc. 900,000 675,000 (1)
Manufacturing Lamson & Sessions Co. 179,400 958,820 (1)
Printing & Publishing National Education Corp. 875,500 3,256,078 (1)
Real Estate Resurgence Properties, Inc. 0 0 (1)
Restaurants Houlihan's Restaurant Group, Inc. 965,519 3,468,750 (1)
Retail Lamont's Apparel, Inc 0 0 (1)
Total $41,613,479
===========
<PAGE>
(1)Non-income producing security.
+++Restricted security as to resale. The value of the Fund's
investment in restricted securities was $675,000, representing .09%
of net assets.
<CAPTION>
Value
Issue Acquisition Date Cost (Note 1a)
<S> <C> <C> <C>
CST Entertainment
Imaging, Inc. 3/17/1995 $675,000 $675,000
Total $675,000 $675,000
======== ========
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of July 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$694,488,000)
(Note 1a) $ 744,166,608
Cash 1,091,925
Receivables:
Securities sold $ 10,083,916
Capital shares sold 1,745,927
Interest 1,891,795
Dividends 2,344 13,723,982
-------------
Prepaid registration fees and other assets (Note 1f) 153,024
-------------
Total assets 759,135,539
-------------
<PAGE>
Liabilities: Payables:
Securities purchased 7,318,390
Capital shares redeemed 1,106,211
Investment adviser (Note 2) 611,632
Distributor (Note 2) 361,635 9,397,868
-------------
Accrued expenses and other liabilities 431,290
-------------
Total liabilities 9,829,158
-------------
Net Assets: Net assets $ 749,306,381
=============
Net Assets Class A Shares of Common Stock, $0.10 par value, 50,000,000
Consist of: shares authorized $ 2,129,814
Class B Shares of Common Stock, $0.10 par value, 50,000,000
shares authorized 3,162,753
Class C Shares of Common Stock, $0.10 par value, 50,000,000
shares authorized 90,084
Class D Shares of Common Stock, $0.10 par value, 50,000,000
shares authorized 270,955
Paid-in capital in excess of par 669,670,896
Undistributed investment income--net 2,926,373
Undistributed realized capital gains on investments and foreign
currency transactions--net 21,376,898
Unrealized appreciation on investments and foreign currency
transactions--net 49,678,608
-------------
Net assets $ 749,306,381
=============
Net Asset Value: Class A--Based on net assets of $286,257,848 and 21,298,138
shares outstanding $ 13.44
=============
Class B--Based on net assets of $414,885,911 and 31,627,532
shares outstanding $ 13.12
=============
Class C--Based on net assets of $11,774,542 and 900,838
shares outstanding $ 13.07
=============
Class D--Based on net assets of $36,388,080 and 2,709,547
shares outstanding $ 13.43
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Year Ended July 31, 1995
<S> <S> <C> <C>
Investment Interest and discount earned $ 11,660,038
Income Dividends (net of $111,349 foreign withholding tax) 5,431,746
(Notes 1d & 1e): Other income 550,471
-------------
Total income 17,642,255
-------------
Expenses: Investment advisory fees (Note 2) $ 6,445,583
Account maintenance and distribution fees--Class B (Note 2) 3,712,868
Transfer agent fees--Class B (Note 2) 845,611
Transfer agent fees--Class A (Note 2) 502,200
Printing and shareholder reports 293,980
Accounting services (Note 2) 156,114
Registration fees (Note 1f) 121,884
Professional fees 105,427
Custodian fees 55,525
Directors' fees and expenses 53,498
Account maintenance and distribution fees--Class C (Note 2) 48,373
Account maintenance fees--Class D (Note 2) 42,023
Transfer agent fees--Class D (Note 2) 37,038
Transfer agent fees--Class C (Note 2) 12,721
Other 17,345
-------------
Total expenses 12,450,190
-------------
Investment income--net 5,192,065
-------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 44,288,326
(Loss) on Foreign currency transactions--net (21,399) 44,266,927
Investments & -------------
Foreign Currency Change in unrealized appreciation/depreciation on:
Transactions Investments--net 38,222,744
--Net (Notes 1b, Foreign currency transactions--net 434 38,223,178
1c, 1e & 3): ------------- -------------
Net realized and unrealized gain on investments and foreign
currency transactions 82,490,105
-------------
Net Increase in Net Assets Resulting from Operations $ 87,682,170
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Year Ended July 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income (loss)--net $ 5,192,065 $ (357,218)
Realized gain on investments and foreign currency
transactions--net 44,266,927 68,285,575
Change in unrealized appreciation/depreciation on
investments and foreign currency transactions--net 38,223,178 (32,799,450)
------------- -------------
Net increase in net assets resulting from operations 87,682,170 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)
------------- -------------
Capital Share Net increase in net assets derived from capital share
Transactions transactions 113,809,555 226,499,203
(Note 4): ------------- -------------
<PAGE>
Net Assets: Total increase in net assets 131,320,939 210,456,058
Beginning of year 617,985,442 407,529,384
------------- -------------
End of year* $ 749,306,381 $ 617,985,442
============= =============
<FN>
*Undistributed (accumulated) investment income
(loss)--net (Note 1h) $ 2,926,373 $ (39,695)
============= =============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class A
For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1995++ 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of year $ 13.31 $ 13.75 $ 11.40 $ 11.13 $ 12.37
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .17 .03 .02 .06 .23
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.47 1.18 3.06 1.34 .55
-------- -------- -------- -------- --------
Total from investment operations 1.64 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 year $ 13.44 $ 13.31 $ 13.75 $ 11.40 $ 11.13
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 13.91% 9.36% 28.96% 14.54% 10.35%
Return:* ======== ======== ======== ======== ========
Ratios to Expenses 1.31% 1.22% 1.25% 1.35% 1.42%
Average ======== ======== ======== ======== ========
Net Assets: Investment income--net 1.40% .48% .28% .60% 2.22%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $286,258 $255,856 $197,995 $140,323 $132,623
Data: ======== ======== ======== ======== ========
Portfolio turnover 70.36% 63.95% 67.57% 79.68% 72.12%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the year.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. Class B
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 year $ 13.02 $ 13.46 $ 11.25 $ 11.04 $ 12.26
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net .04 (.07) (.02) (.05) .11
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.45 1.11 2.93 1.33 .56
-------- -------- -------- -------- --------
Total from investment operations 1.49 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 year $ 13.12 $ 13.02 $ 13.46 $ 11.25 $ 11.04
======== ======== ======== ======== ========
<PAGE>
Total Investment Based on net asset value per share 12.83% 8.21% 27.66% 13.35% 9.14%
Return:* ======== ======== ======== ======== ========
Ratios to Average Expenses, excluding account maintenance and
Net Assets: distribution fees 1.34% 1.24% 1.27% 1.37% 1.45%
======== ======== ======== ======== ========
Expenses 2.34% 2.24% 2.27% 2.37% 2.45%
======== ======== ======== ======== ========
Investment income (loss)--net .37% (.51%) (.73%) (.46%) 1.19%
======== ======== ======== ======== ========
Supplemental Net assets, end of year (in thousands) $414,886 $362,129 $209,534 $104,313 $ 79,848
Data: ======== ======== ======== ======== ========
Portfolio turnover 70.36% 63.95% 67.57% 79.68% 72.12%
======== ======== ======== ======== ========
<FN>
*Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the year.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<PAGE>
<TABLE>
Financial Highlights (concluded)
<CAPTION>
The following per share data and ratios have been derived For the Period
from information provided in the financial statements. October 21, 1994++ to
July 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--net .03 .11
Realized and unrealized gain on investments and
foreign currency transactions--net 1.21 1.25
------------- -------------
Total from investment operations 1.24 1.36
------------- -------------
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 $ 13.07 $ 13.43
============= =============
Total Investment Based on net asset value per share 10.99%+++ 11.72%+++
Return:** ============= =============
Ratios to Average Expenses, excluding account maintenance and distribution fees 1.39%* 1.35%*
Net Assets: ============= =============
Expenses 2.39%* 1.60%*
============= =============
Investment income--net .34%* 1.11%*
============= =============
Supplemental Net assets, end of period (in thousands) $ 11,775 $ 36,388
Data: ============= =============
Portfolio turnover 70.36% 70.36%
============= =============
<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>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Phoenix Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a diversified, open-end
management investment company. 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
distribution expenditures. The following is a summary of significant
accounting policies followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price on the exchange
on which such securities are traded, as of the close of business on
the day the securities are being valued or, lacking any sales, at
the last available bid price. Securities traded in the over-the-
counter market are valued at the last available bid price prior to
the time of valuation. In cases where securities are traded on more
than one exchange, the securities are valued on the exchange
designated by or under the authority of the Board of Directors as
the primary market. 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. Short-term securities are
valued at amortized cost, which approximates market value. Other
investments are stated at market value. Securities and assets for
which market value quotations are not available are valued at their
fair value as determined in good faith by or under the direction of
the Fund's Board of Directors.
(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 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.
<PAGE>
(c) Foreign currency transactions--Transactions denominated in
foreign currencies are recorded at the exchange rate prevailing when
recognized. Assets and liabilities denominated in foreign currencies
are valued at the exchange rate at the end of the period. Foreign
currency transactions are the result of settling (realized) or
valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized 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 shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax
may be imposed on interest, dividends, and capital gains at various
rates.
(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 date, 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.
(h) Reclassification--Generally accepted accounting principles
require that certain differences between undistributed net realized
capital gains for financial reporting purposes, if permanent, be
reclassified to undistributed net investment income. Accordingly,
current year's permanent book/tax differences of $631,366 have been
reclassified from undistributed net realized capital gains to
undistributed net investment income. These reclassifications have no
effect on net assets or net asset values per share.
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.
<PAGE>
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, 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 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
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 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 Distribution
Maintenance Fee 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 maintenance and distribution services to the
Fund. The ongoing account maintenance fee compensates the
Distributor and MLPF&S for providing account maintenance services to
Class 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.
<PAGE>
For the year ended July 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 $12,173 $196,223
Class D $ 9,543 $153,567
For the year ended July 31, 1995, MLPF&S received contingent
deferred sales charges of $594,796 and $3,586 relating to
transactions in Class B and Class C Shares, respectively.
In addition, MLPF&S received $27,831 in commissions on the execution
of portfolio security transactions for the Fund for the year ended
July 31, 1995.
NOTES TO FINANCIAL STATEMENTS (concluded)
Merrill Lynch Financial Data Services, Inc. ("MLFDS"), 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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended July 31, 1995 were $466,215,722 and $408,634,885,
respectively.
Net realized and unrealized gains (losses) as of July 31, 1995 were
as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $ 44,288,326 $ 49,678,608
Foreign currency
transactions (21,399) --
------------ ------------
Total $ 44,266,927 $ 49,678,608
============ ============
As of July 31, 1995, net unrealized appreciation for Federal income
tax purposes aggregated $48,906,031, of which $100,819,155 related
to appreciated securities and $51,913,124 related to depreciated
securities. At July 31, 1995, the aggregate cost of investments for
Federal income tax purposes was $695,260,577.
<PAGE>
4. Capital Share Transactions:
Net increase in net assets derived from capital share transactions
was $113,809,555 and $226,499,203 for the years ended July 31, 1995
and July 31, 1994, respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 4,773,327 $ 58,642,097
Shares issued to share-
holders in reinvestment
of dividends and
distributions 2,149,438 25,931,896
----------- ------------
Total issued 6,922,765 84,573,993
Shares redeemed (4,852,599) (59,460,110)
----------- ------------
Net increase 2,070,166 $ 25,113,883
=========== ============
Class A Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 6,651,189 $ 90,076,079
Shares issued to share-
holders 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
=========== ============
<PAGE>
Class B Shares for the Year Dollar
Ended July 31, 1995 Shares Amount
Shares sold 11,220,799 $134,103,392
Shares issued to share-
holders in reinvestment
of dividends and
distributions 3,047,645 36,160,407
----------- ------------
Total issued 14,268,444 170,263,799
Shares redeemed (9,792,351) (116,499,330)
Automatic conversion of
shares (653,362) (7,789,181)
----------- ------------
Net increase 3,822,731 $ 45,975,288
=========== ============
Class B Shares for the Year Dollar
Ended July 31, 1994 Shares Amount
Shares sold 14,799,015 $196,220,427
Shares issued to share-
holders 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 Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 1,061,529 $ 12,324,849
Shares issued to share-
holders in reinvestment
of dividends and
distributions 7,661 82,125
----------- ------------
Total issued 1,069,190 12,406,974
Shares redeemed (168,352) (1,968,329)
----------- ------------
Net increase 900,838 $ 10,438,645
=========== ============
[FN]
++Commencement of Operations.
<PAGE>
Class D Shares for the Period Dollar
Oct. 21, 1994++ to July 31, 1995 Shares Amount
Shares sold 2,465,488 $ 29,295,539
Automatic conversion of
shares 639,176 7,789,181
Shares issued to share-
holders in reinvestment
of dividends and
distributions 47,191 517,217
----------- ------------
Total issued 3,151,855 37,601,937
Shares redeemed (442,308) (5,320,198)
----------- ------------
Net increase 2,709,547 $ 32,281,739
=========== ============
[FN]
++Commencement of Operations.
<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, 1995, 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 highlights for each of the years in the five-year period
then ended. These financial statements and the financial highlights
are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the
financial highlights based on our audits.
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
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at July 31,
1995 by correspondence 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.
<PAGE>
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, 1995, the results of
its operations, the changes in its net assets, and the financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
September 6, 1995
</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, 1995:
<TABLE>
<CAPTION>
Qualifying Non-Qualifying Total Long-Term
Record Payable Ordinary Ordinary Ordinary Capital
Date Date Income* Income Income Gains
<S> <C> <C> <C> <C> <C> <C>
Class A Shares: 9/06/94 9/14/94 $.053966 $.533572 $.587538 $.415182
12/14/94 12/22/94 $.038638 $.151175 $.189813 $.313832
Class B Shares: 9/06/94 9/14/94 $.047783 $.472444 $.520227 $.415182
12/14/94 12/22/94 $.027762 $.108620 $.136382 $.313832
Class C Shares: 12/14/94 12/22/94 $.035102 $.137338 $.172440 $.313832
Class D Shares: 12/14/94 12/22/94 $.037920 $.148365 $.186285 $.313832
<FN>
*Qualifies for the dividends received deduction for corporations.
Please retain this information for your records.
PORTFOLIO INFORMATION
<PAGE>
For the Quarter Ended July 31, 1995
Percent of
Ten Largest Holdings Net Assets
Student Loan Marketing Association 3.6%
Tandem Computers, Inc. 3.0
Computervision Corporation 2.8
ADT Limited (ADR)* 2.6
USX Corp.--Marathon Group, Inc. 2.6
Reliance Group Holdings, Inc. 2.5
Price/Costco, Inc. 2.4
Woolworth Corp. 2.3
Anacomp, Inc.* 2.2
The Limited, Inc. 1.9
Percent of
Five Largest Industries Net Assets
Retail 12.1%
Computers & Peripherals 7.1
Banking & Financial 7.0
Health Care 6.2
Leisure & Entertainment 6.0
Percent of
Asset Mix Net Assets
Stocks 76.6%
Bonds 14.9
Cash & Cash Equivalents 8.5
<FN>
*Includes common stock, notes and warrants.
<PAGE>
Additions
Stocks
California Federal Bank, FSB
Goodwill Certificates
Corning Inc.
Cyrix Corp.
First City Financial Corp., Non-
Convertible Preferred Stock
Freeport McMoRan, Inc.
(Class B)
Gaylord Container Corp.
Roosevelt Financial Group Inc.
Rowan Companies, Inc.
Tandem Computers, Inc.
Total Petroleum
(North America) Ltd.
Bonds
Anacomp, Inc., Senior Subordi-
nated Notes, 15.00% due
11/01/2000
The Bibb Company, Senior
Subordinated Notes, 13.875%
due 8/01/1999
The Bibb Company, Senior
Subordinated Notes, 14.00%
due 10/01/1999
Live Entertainment Inc.,
5.00% Convertible Preferred
(Series B)
Live Entertainment Inc.,
Senior Subordinated Notes,
12.00% due 3/23/1999
San Jacinto Holdings Inc.,
Senior Subordinated Notes,
8.00% due 12/31/2000
<PAGE>
Deletions
Stocks
Applied Immune Sciences, Inc.
Continental Airlines, Inc.
(Class A)
Continental Airlines, Inc.
(Class B)
Countrywide Credit
Industries, Inc.
Fingerhut Companies, Inc.
First City Bancorp., Convertible
Preferred Stock (Series B)
Goodman Fielder Wattie, Ltd.
Laidlaw, Inc. (Non-Voting)
(Class B) (ADR)
National Auto Credit, Inc.
Niagara Mohawk Power
Corporation
Storage Technology Corporation
Tambrands, Inc.
Telemundo Group, Inc.
(Class A)
Telemundo Group, Inc.
(Class B)
Bonds
Computervision Corporation,
Senior Subordinated Notes,
11.375% due 8/15/1999
Evergreen International Avia-
tion, Senior Notes, 13.50% due
8/15/2002
Telemundo Group, Inc., Senior
Notes, 10.25% due 12/30/2001
Trump Plaza Funding Inc.,
10.875% due 6/15/2001
</TABLE>
