MERRILL LYNCH
PHOENIX
FUND, INC.
FUND LOGO
Quarterly Report
October 31, 1995
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
After losing momentum through the second calendar quarter of 1995,
it now appears that the US economic expansion has resumed. Gross
domestic product growth for the three months ended September 30 was
reported to be 4.2%, higher than generally expected. September
durable goods orders increased a surprisingly strong 3%, and
existing home sales rose to a near-record level. At the same time,
there is evidence that inflationary pressures remain subdued.
Reflecting the trend of renewed economic growth--and continued good
news on the inflation front--the Federal Reserve Board signaled no
near-term shift in monetary policy following its September meeting.
Thus, official interest rates may not be reduced further in the
immediate future.
One of the major developments during the October quarter was the
strengthening of the US dollar relative to the yen and the
Deutschemark. Improving interest rate differentials favoring the US
currency, combined with coordinated central bank intervention and
more positive investor sentiment, have helped to bolster the dollar
in foreign exchange markets. Other factors that appear to be
improving the US dollar's outlook in the near term are a pick-up in
capital flows to the United States and the prospect of increased
capital outflows from Japan. However, it remains to be seen if the
US dollar's strengthening trend can continue without significant
improvements in the US budget and trade deficits.
<PAGE>
In the weeks ahead, investor interest will continue to focus on US
economic activity. Clear signs of a moderate, noninflationary
expansion could further benefit the US stock and bond markets. In
addition, should the current Federal budget deficit reduction
efforts now underway in Washington prove successful, the
implications would likely be positive for the US financial markets.
Portfolio Matters
While the major US stock market indexes posted modest advances
during the October quarter, Merrill Lynch Phoenix Fund, Inc.'s net
asset value declined. This disparity between the Fund's performance
and the stock market in general largely reflects investor
uncertainty regarding the future direction of US economic growth as
well as the strongly positive investor sentiment regarding
technology growth stocks and non-cyclical consumer goods, two areas
in which we have little exposure. In contrast, three important
investment areas for the Fund--retail, cable television, and so-
called "broken" or "busted" technology issues--performed poorly.
As a fund that follows a contrarian investment approach, we expect
our holdings to experience periods of dramatic underperformance from
time to time. During such periods, we conduct a thorough review of
the underperforming issues to determine whether it is appropriate to
continue our current level of investment or increase holdings at
lower valuations. When we performed this analysis during the October
quarter, we concluded that current share prices presented an
opportunity to increase investments in the Fund's retail, cable
television, and "broken" technology holdings.
Retail stocks, which made up 12.4% of Fund assets at October quarter-
end, performed especially poorly during the period. Their out-of-
favor status is reminiscent of the sharp undervaluation of banking
and technology stocks that occurred in 1990. While we recognize that
continued lackluster consumer spending has brought the viability of
many retailers into question, current share valuations are very
depressed even for those companies who are likely to survive their
current challenges. Furthermore, we believe that most investors are
ignoring the current consolidation trend that will benefit the
surviving retailers over the longer term. As the number of retailers
is reduced through bankruptcy declarations and mergers, capacity
will shrink.
<PAGE>
As the consolidation process continues, a handful of companies will
emerge that possess dominant niches within the industry. We believe
that four of the Fund's investments--The Limited, Inc. (mall-based
retailing), Woolworth Corp. (athletic footwear, through its Foot
Locker subsidiary, the source of approximately 30% of the company's
revenues), Kmart Corp. (discount stores), and Price/Costco, Inc.
(wholesale club stores)--will be among those companies who will
survive the current environment. They all benefit from strong
managements to guide them through these turbulent times. Once the
outlook for the industry improves, we believe that these companies
will emerge with tempered growth expectations so that excess cash
flows are used not to open new stores but to repurchase shares,
increase dividends, or acquire other retailers. It is difficult to
foresee when industry consolidation will result in optimal capacity
levels, but when it does occur (as it did for the banking and
technology sectors), investor interest will again return to
retailers. Accordingly, we used this period of share price weakness
to further increase investments in our largest retailing holdings.
As of October month-end, the Fund's cable television holdings
accounted for 6.1% of net assets. Highly leveraged balance sheets
and the widely anticipated negative impact that slowing economic
growth will have on cable television operators led to broad share
price declines in this industry during the October quarter. The
regulatory outlook is also questionable, since the current political
climate suggests that there will not be easy passage of the proposed
telecommunications legislation that would benefit Fund holdings
Comcast Corporation, Cox Communications, Inc., and Century
Communications Corp.
Despite the industry's current problems, we believe that the long-
term prospects for the Fund's cable television holdings are
excellent, and therefore increased our investments during the
quarter. Cable companies will eventually compete successfully in
local telephone markets. Although local telephone companies will
also be allowed to provide video delivery, they have not yet shown
the willingness to make the capital expenditures and forego their
substantial dividend payouts, both of which will be needed to
establish the infrastructure required. The benefits of this
improving outlook will not accrue in the immediate future for our
cable television holdings, but we believe that they will be
substantial over the longer term.
<PAGE>
The "broken" technology stocks--primarily Fund holdings Amdahl Corp.
and Tandem Computers, Inc.--lagged behind their fast-growth
counterparts during the quarter. However, we believe that these two
issues are attractive values. Amdahl has a strong balance sheet,
with 65% of its market capitalization represented by its net cash
balances. In addition to its substantial mainframe operations, we
believe that the company will expand its growth businesses (system
consulting, software and storage) from 10% of sales in 1994 to 30%
in 1996. Tandem Computers has spent $5/share in research and
development over the last two years, which is nearly half of its
current share price. Although operations have suffered as the
company makes the transition toward selling its new products, 1996
should be the first year Tandem begins to realize a return on its
research and development investments. In addition, a new management
team will undoubtedly be charged with curbing what has historically
been an excessive cost structure. Once again, we do not expect that
our investment in these companies will be profitable in the near
term, but we believe that their current share prices are attractive
given our longer-term expectations. As a result, we increased our
investments in Amdahl and Tandem Computers during the October
quarter.
Most of our purchases during the quarter served to increase
positions in existing investments. We established two significant
new positions during the period in Oryx Energy Co. and Storage
Technology Corp.
The energy sector has fallen into investor disfavor primarily
because of declining energy prices. Oryx Energy has focused on
selling its non-strategic assets at attractive prices and has
utilized the proceeds to pay down debt. While the sales will lower
production levels in the near term, the company's remaining
operations will have lower costs and higher production from a very
attractive asset base in 1996 and beyond.
Storage Technology is another "busted" technology issue whose share
price is down substantially from its 1992 high. The company, a
manufacturer of disk storage systems for high-performance computers,
has had a very erratic earnings history. We believe the introduction
of its many proprietary products will lead to higher earnings in the
future. In the meantime, we are buying shares at very low valuation
levels relative to revenues and book value.
During the October quarter, we continued to divest a large number of
the Fund's smaller holdings and redeploy the proceeds in augmenting
existing investments. As a result, by October quarter-end the Fund's
top ten holdings represented 29.2% of its net assets. We anticipate
that we will continue this process in the months ahead.
<PAGE>
In Conclusion
We thank you for your investment in Merrill Lynch Phoenix Fund,
Inc., and we look forward to reviewing our outlook and strategy with
you again in our next report to shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Robert J. Martorelli)
Robert J. Martorelli
Vice President and Portfolio Manager
November 21, 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, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
PERFORMANCE DATA
About Fund Performance
Since October 21, 1994, investors have been able to purchase shares
of the Fund through the Merrill Lynch Select Pricing SM System,
which offers four pricing alternatives:
* Class A Shares incur a maximum initial sales charge (front-end load)
of 5.25% and bear no ongoing distribution or account maintenance
fees. Class A Shares are available only to eligible investors.
* 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 all of the Fund's shares are presented in the
"Performance Summary" and the "Recent Performance Results" tables on
pages 5 and 6. Performance data for the Fund's Class A and Class B
Shares are presented in the "Average Annual Total Return" tables
below. Data for Class C and Class D Shares are also presented in the
"Aggregate Total Return" tables below.
<PAGE>
The "Recent Performance Results" table shows investment results
before the deduction of any sales charges for all of the Fund's
shares for the 12-month and 3-month periods ended October 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.
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/95 +17.59% +11.42%
Five Years Ended 9/30/95 +20.51 +19.22
Ten Years Ended 9/30/95 +15.50 +14.88
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/95 +16.28% +12.28%
Five Years Ended 9/30/95 +19.25 +19.25
Inception (10/21/88)
through 9/30/95 +12.33 +12.33
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
<PAGE>
Aggregate Total Return
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Inception (10/21/94)
through 9/30/95 +15.88% +14.88%
[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 9/30/95 +16.79% +10.66%
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
PERFORMANCE DATA (continued)
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
10/31/95 7/31/95 10/31/94 % Change % Change
<S> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $12.70 $13.44 $12.44 + 6.40%(1) -4.26%(2)
ML Phoenix Fund, Inc. Class B Shares* 12.42 13.12 12.19 + 6.28(1) -4.06(2)
ML Phoenix Fund, Inc. Class C Shares* 12.35 13.07 12.19 + 5.69(1) -4.23(2)
ML Phoenix Fund, Inc. Class D Shares* 12.69 13.43 12.45 + 6.23(1) -4.26(2)
Dow Jones Industrial Average** 4,755.48 4,708.47 3,908.12 +21.68 +1.00
Standard & Poor's 500 Index** 581.50 562.06 472.35 +23.11 +3.46
ML Phoenix Fund, Inc. Class A Shares--Total Return* +10.67(3) -2.07(4)
ML Phoenix Fund, Inc. Class B Shares--Total Return* + 9.55(5) -2.31(6)
ML Phoenix Fund, Inc. Class C Shares--Total Return* + 9.48(7) -2.32(8)
ML Phoenix Fund, Inc. Class D Shares--Total Return* +10.35(9) -2.16(10)
Dow Jones Industrial Average--Total Return** +24.97 +1.65
Standard & Poor's 500 Index--Total Return** +26.39 +4.11
<PAGE>
<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.
(1)Percent change includes reinvestment of $0.496 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.182 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.509 per share ordinary
income dividends and $0.496 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.319 per share ordinary
income dividends and $0.182 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.385 per share ordinary
income dividends and $0.496 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.249 per share ordinary
income dividends and $0.182 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.443 per share ordinary
income dividends and $0.496 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.271 per share ordinary
income dividends and $0.182 per share capital gains distributions.
(9)Percent change includes reinvestment of $0.492 per share ordinary
income dividends and $0.496 per share capital gains distributions.
(10)Percent change includes reinvestment of $0.306 per share
ordinary income dividends and $0.182 per share capital gains
distributions.
</TABLE>
<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--10/31/95 11.15 12.70 0.182 0.319 +18.05
------- ------
Total $11.805 Total $7.305
Cumulative total return as of 10/31/95: +579.34%**
<PAGE>
<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>
PERFORMANCE DATA (concluded)
<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--10/31/95 10.95 12.42 0.182 0.249 +17.50
------ ------
Total $4.570 Total $3.459
Cumulative total return as of 10/31/95: +109.92%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
reflect deduction of any sales charge; results would be lower if
sales charge was deducted.
</TABLE>
<TABLE>
Performance Summary--Class C Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $12.31 $10.91 $0.314 $0.172 - 7.35%
1/1/95--10/31/95 10.91 12.35 0.182 0.271 +17.02
------ ------
Total $0.496 Total $0.443
Cumulative total return as of 10/31/95: +8.42%**
<PAGE>
<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.
</TABBLE>
</TABLE>
<TABLE>
Performance Summary--Class D Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<S> <C> <C> <C> <C> <C>
10/21/94--12/31/94 $12.57 $11.16 $0.314 $0.186 - 7.17%
1/1/95--10/31/95 11.16 12.69 0.182 0.306 +17.74
------ ------
Total $0.496 Total $0.492
Cumulative total return as of 10/31/95: +9.30%**
<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>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
Discount to Assets
<S> <C> <S> <C> <C> <C>
Cable 700,000 Comcast Corporation--Special (Class A) $ 11,502,469 $ 12,512,500 1.7%
Day-Care Centers 700,000 Kinder-Care Learning Centers, Inc. 8,607,500 9,362,500 1.3
Total Discount to Assets 20,109,969 21,875,000 3.0
<PAGE>
Earnings Turnarounds
Airlines 1,075,000 Mesa Airlines, Inc. 7,082,660 10,078,125 1.4
Apparel & Textile 657,600 Burlington Industries, Inc. 7,635,000 7,315,800 1.0
Auto & Truck 309,600 Federal--Mogul Corp. 5,423,254 5,534,100 0.8
Banking & Financial 900,000 California Federal Bank, FSB 8,884,347 13,275,000 1.8
130,000 California Federal Bank, FSB Goodwill
Certificates 500,634 568,750 0.1
120,000 Glendale Federal Savings Bank (8.75%
Convertible, Series E) 3,000,000 5,055,000 0.7
700,000 Roosevelt Financial Group Inc. 11,817,863 11,112,500 1.5
Cable 1,421,000 Century Communications Corp. 11,424,840 12,078,500 1.7
Computers & 2,200,000 Tandem Computers, Inc. 28,034,235 24,750,000 3.4
Peripherals
Consumer Products 1,500,000 The Topps Co., Inc. 10,330,067 9,187,500 1.3
Diversified 500,000 Specialty Equipment Companies Inc. 4,937,500 5,250,000 0.7
Energy Related 361,000 Nowsco Well Service Ltd. 3,267,348 4,305,628 0.6
700,000 Total Petroleum (North America) Ltd. 7,310,674 7,087,500 1.0
Environmental 2,554,000 Allwaste Inc. 13,246,956 12,450,750 1.7
930,000 Matrix Service Co. 8,370,557 3,720,000 0.5
1,087,600 TETRA Technologies, Inc. 9,042,170 14,138,800 2.0
Health Care 74,000 COR Therapeutics Inc. 798,995 749,250 0.1
400,000 The Liposome Company Inc. 2,184,932 6,050,000 0.8
884,200 NeoRx Corp. 5,788,067 4,642,050 0.6
Home Builders 937,000 NVR, Inc. 5,499,440 9,370,000 1.3
53,828 NVR, Inc. (Warrants)(a) 235,498 121,113 0.0
<PAGE>
Leisure & 1,625,000 CST Entertainment Imaging, Inc. 3,593,312 1,218,750 0.2
Entertainment 900,000 CST Entertainment Imaging, Inc.
(Restricted) 675,000 675,000 0.1
Manufacturing 879,400 Lamson & Sessions Co. 4,853,150 5,826,025 0.8
Oil Services 239,025 Computalog Ltd. 1,962,718 1,425,419 0.2
1,300,000 Rowan Companies, Inc. 9,340,442 8,612,500 1.2
250,000 Weatherford Enterra, Inc. (c) 3,653,725 6,031,250 0.8
Paper & Packaging 233,437 Gaylord Container Corp. (Warrants)(a) 464,274 1,677,828 0.2
Precision 250,000 Esterline Technology Corp. 2,130,398 5,781,250 0.8
Instruments
Printing & 2,300,000 National Education Corp. 12,092,434 18,687,500 2.6
Publishing
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
Earnings Turnarounds (concluded)
<S> <C> <S> <C> <C> <C>
Restaurants 965,519 Houlihan's Restaurant Group, Inc. $ 3,468,750 $ 5,551,734 0.8%
Retail 1,893,300 CML Group, Inc. 15,736,773 10,886,475 1.5
1,000,000 The Limited, Inc. 18,426,190 18,375,000 2.6
1,963,300 Service Merchandise Company, Inc. 10,726,295 10,552,738 1.5
Total Earnings Turnarounds 241,938,498 262,141,835 36.3
Financial Restructuring
Aerospace & 2,360,000 Ladish Co., Inc. 2,864,038 885,000 0.1
Industrial Products
<PAGE>
Airlines $18,475,000 Continental Airlines Holdings, Inc.,
Secured Equipment Trust Certificates,
12.125% due 4/15/1996 1,691,016 2,217,000 0.3
Beverages $ 5,000,000 Heileman Acquisition Co., Senior
Subordinated Notes, 9.625% due 1/31/2004 1,037,500 1,350,000 0.2
Chemicals 360,000 Specialty Chemical Resources, Inc. 3,579,642 1,282,500 0.2
Consumer $ 6,700,000 Polly Peck International Finance N.V.,
Products Convertible Preferred Shares, 7.25%
due 1/04/2005 241,200 234,500 0.0
Energy 65,945 Great Bay Power Corp. 2,215,547 511,074 0.1
Engineering 524,446 EMCOR Group, Inc. 2,975,150 4,195,568 0.6
Financial 232,000 First City Financial Corp., Non-Con-
vertible Preferred Stock 5,480,768 5,046,000 0.7
Industrial $24,500,000 Anacomp, Inc., Senior Subordinated Notes,
Services 15.00% due 11/01/2000 17,565,312 17,640,000 2.5
Leisure & 3,600,000 TMM, Inc. 3,276,000 576,000 0.1
Entertainment
Real Estate $14,826,000 Olympia & York Maiden Lane Finance Corp.,
Secured Notes, 10.375% due 12/31/1995 7,210,428 6,968,220 1.0
625,000 Resurgence Properties Inc. 5,468,750 5,156,250 0.7
Retail 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 745,000 780,000 0.1
$ 2,000,000 The Bibb Company, Senior Subordinated
Notes, 14.00% due 10/01/1999 798,750 890,000 0.1
Total Financial Restructuring 55,149,101 47,732,112 6.7
<PAGE>
High Yield
Cable $ 5,910,000 Scott Cable, Subordinated Debentures,
12.25% due 4/15/2001 4,626,300 4,018,800 0.6
Energy $15,500,000 WRT Energy Corp., Senior Notes, 13.875%
due 3/01/2002 13,112,500 9,300,000 1.3
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
High Yield (concluded)
<S> <C> <S> <C> <C> <C>
Engineering $ 4,764,800 EMCOR Group, Inc., A Notes, 7.00% due
12/15/1997 $ 4,576,876 $ 4,621,856 0.6%
$ 128,200 Sellco Corp., 12.00% due 12/15/2004 (b) 15,401 25,640 0.0
Furniture $ 2,000,000 Levitz Furniture Inc., Senior Notes,
12.375% due 4/15/1997 1,797,500 1,760,000 0.2
Home Builders $ 4,100,000 Baldwin Homes, 10.375% due 8/01/2003 2,624,000 1,845,000 0.3
Leisure & $ 8,500,000 Bally's Health & Tennis Corporation,
Entertainment Senior Subordinated Notes, 13.00%
due 1/15/2003 6,781,875 7,458,750 1.0
$11,000,000 Genmar Holdings, Inc., Senior Sub-
ordinated Notes, 13.50% due 7/15/2001 11,000,000 10,780,000 1.5
330,000 Live Entertainment Inc., 5.00%
Convertible Preferred (Series B) 1,546,875 2,145,000 0.3
$ 7,500,000 Live Entertainment Inc., Senior
Subordinated Notes, 12.00% due
3/23/1999 5,643,750 5,737,500 0.8
$ 6,377,000 Riviera Holdings Corp., First Mortgage
Bonds, 11.00% due 12/31/2002 5,123,832 5,866,840 0.8
$ 5,000,000 Trump Castle Funding Inc., 11.75% due
11/15/2003 3,113,912 3,950,000 0.6
$ 7,605,000 U.S. Trails Inc., Secured Notes, 12.00%
due 7/15/1998 5,346,125 4,791,150 0.7
<PAGE>
Printing & $ 5,532,000 San Jacinto Holdings Inc., Senior
Publishing Subordinated Notes, 8.00% due
12/31/2000 4,246,920 4,342,620 0.6
Real Estate $ 3,300,000 Granite Development Partners L.P.,
Senior Notes (Series B), 10.83%
due 11/15/2003 2,986,500 2,475,000 0.3
Restaurants $ 3,600,000 Family Restaurants Inc., Senior Notes,
9.75% due 2/01/2002 1,920,937 1,800,000 0.3
Transportation $ 7,500,000 Tiphook Finance Corp., Unsecured
Guaranteed Notes, 10.75% due
11/01/2002 5,787,500 6,000,000 0.8
Total High Yield 80,250,803 76,918,156 10.7
Operational Restructuring
Apparel & Textile 717,000 Texfi Industries, Inc. 3,857,425 1,792,500 0.3
Banking & Financial 400,000 Student Loan Marketing Association 15,282,384 23,550,000 3.3
Cable 802,200 Cox Communications, Inc. (Class A) 13,940,647 15,041,250 2.1
Computer Software & 600,000 Borland International, Inc. 5,291,876 8,100,000 1.1
Services 1,500,000 Computervision Corporation 4,608,560 17,625,000 2.4
Computers & 2,487,000 Amdahl Corp. 24,291,197 23,004,750 3.2
Peripherals 300,000 Storage Technology Corp. 7,287,107 7,387,500 1.0
Diversified 1,600,000 ADT Limited (ADR)* 13,786,872 22,400,000 3.1
500,000 Corning Inc. 14,950,168 13,062,500 1.8
337,500 National Patent Development Corp. 4,945,938 3,164,063 0.4
1,000,000 Southcorp Holdings Limited 2,082,773 2,154,762 0.3
540,500 TPI Enterprises, Inc. 3,042,032 2,026,875 0.3
Electronics 4,813,587 Automated Security (Holdings) PLC (ADR)* 16,190,133 3,309,341 0.5
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Percent of
Industry Shares Held Investments Cost Value Net Assets
Operational Restructuring (concluded)
<S> <C> <S> <C> <C> <C>
Energy Related 500,000 Oryx Energy Co. $ 6,224,451 $ 5,750,000 0.8%
Health Care 2,062,500 Applied Bioscience International Inc. 10,785,608 13,148,437 1.8
1,000,000 Community Psychiatric Centers, Inc. 10,758,143 10,875,000 1.5
3,300,000 Unilab Corp. 15,110,266 10,312,500 1.4
Insurance 3,000,000 Reliance Group Holdings, Inc. 19,528,165 22,125,000 3.1
Metals & Mining 15,625 Freeport-McMoRan Copper & Gold, Inc 338,594 357,422 0.1
91,666 Freeport-McMoRan, Inc. 1,918,263 3,426,017 0.5
385,953 Freeport-McMoRan, Inc. (Class B) 7,157,545 8,780,431 1.2
Retail 1,500,000 Kmart Corp. 19,352,712 12,187,500 1.7
890,000 Price/Costco, Inc. 13,149,803 15,130,000 2.1
1,500,000 Woolworth Corp. 22,306,573 21,937,500 3.0
Total Operational Restructuring 256,187,235 266,648,348 37.0
Total Investments 653,635,606 675,315,451 93.7
Face Amount Short-Term Investments
Commercial $ 6,117,000 General Electric Capital Corp., 5.85% due
Paper ** 11/01/1995 6,117,000 6,117,000 0.8
11,766,000 National Fleet Funding Corp., 5.70% due
11/03/1995 11,762,274 11,762,274 1.6
Total Commercial Paper 17,879,274 17,879,274 2.4
<PAGE>
US Government & Federal National Mortgage Association:
Agency Obligations ** 10,545,000 5.60% due 11/21/1995 10,512,193 10,512,193 1.5
20,000,000 5.60% due 11/30/1995 19,909,778 19,909,778 2.8
Total US Government & Agency Obligations 30,421,971 30,421,971 4.3
Total Short-Term Investments 48,301,245 48,301,245 6.7
Total Investments $701,936,851 723,616,696 100.4
============
Liabilities in Excess of Other Assets (2,971,765) (0.4)
------------ ------
Net Assets $720,644,931 100.0%
============ ======
Net Asset Class A--Based on net assets of $271,825,084 and
Value: 21,403,956 shares outstanding $ 12.70
============
Class B--Based on net assets of $396,235,217 and
31,913,953 shares outstanding $ 12.42
============
Class C--Based on net assets of $12,360,170 and
1,000,909 shares outstanding $ 12.35
============
Class D--Based on net assets of $40,224,460 and
3,168,827 shares outstanding $ 12.69
============
<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)Sold on August 2, 1995 and received as a pay-in-kind payment on
September 18, 1995.
(c)On October 5, 1995, Weatherford International Inc. and Enterra
Corp. announced completion of a merger of the two companies and a
name change to Weatherford Enterra, Inc. Weatherford shareholders
also approved a one-for-two reverse stock split.
</TABLE>
<PAGE>
PORTFOLIO INFORMATION
For the Quarter Ended October 31, 1995
Percent of
Ten Largest Holdings Net Assets
Tandem Computers, Inc. 3.4%
Student Loan Marketing Association 3.3
Amdahl Corp. 3.2
ADT Limited (ADR) 3.1
Reliance Group Holdings, Inc. 3.1
Woolworth Corp. 3.0
National Education Corp. 2.6
The Limited, Inc. 2.6
Anacomp, Inc., Senior Subordinated
Notes, 15.00% due 11/01/2000 2.5
Computervision Corporation 2.4
Five Largest Industries
Retail 12.4%
Computers & Peripherals 7.6
Banking & Financial 7.4
Diversified 6.6
Health Care 6.2
Asset Mix
Stocks 79.1%
Bonds 14.6
Cash & Cash Equivalents 6.3*
[FN]
*Net of liabilities in excess of other assets.
<PAGE>
Additions (Equity Investments)
COR Therapeutics Inc.
Oryx Energy Co.
Southcorp Holdings Limited
Specialty Equipment Companies Inc.
Storage Technology Corp.
Deletions (Equity Investments)
Anacomp, Inc.
Anacomp, Inc. (Warrants)
Bremer, Vulkan, Verbund AG
Concurrent Computer Corp.
Cyrix Corp.
Gaylord Container Corp.
Lamonts Apparel, Inc.
National Convenience Stores Inc.
National Convenience Stores Inc. (Warrants)
Ranchmen's Resources Ltd.
Rollins Environmental Services, Inc.
Southwestern Life Insurance Corp.
USX Corp.--Marathon Group, Inc.
Unisys Corp.
Western Digital Corp.
