MERRILL LYNCH
PHOENIX
FUND, INC.
FUND LOGO
Quarterly Report
October 31, 1996
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.
Statements and other information herein are as dated and are subject
to change.
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
Printed on post-consumer recycled paper
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
Investor perceptions regarding the direction of the US economy
shifted over the course of the three-month period ended October 31,
1996. As the quarter began, concerns of an overheating economy and
spiraling inflation dominated the financial markets as investors
focused on the increasing possibility of monetary policy tightening
by the Federal Reserve Board. However, as it became apparent that
inflationary pressures were still under control--and when the
Federal Reserve Board did not tighten monetary policy at its
September 24 meeting--the investment outlook became more positive.
These developments, coupled with several economic data releases that
showed growth was at or below expectations, helped to assuage
investors' concerns about an overheating economy. Stock and bond
prices improved, with most broad-based stock market averages
reaching historic high levels. However, one factor potentially
overshadowing investor enthusiasm is the possibility that corporate
profits may have peaked for this economic cycle.
<PAGE>
The US economy clearly has slowed from its strong growth rate during
the first half of 1996. Gross domestic product growth is slowing,
labor cost pressures are subsiding, consumer confidence is easing,
and commodity prices are dropping. Investors are also anticipating
that President Clinton's re-election, combined with continued
Republican majorities in the House of Representatives and the
Senate, will prove positive for the nation's budget deficit. As 1996
draws to a close, investors are likely to continue to focus on the
economy. Evidence of continued growth at a non-inflationary pace
would be positive for the US capital markets.
Portfolio Matters
Merrill Lynch Phoenix Fund, Inc.'s Class A, Class B, Class C and
Class D Shares had total returns +3.85%, +3.61%, +3.63% and +3.79%,
respectively, for the three-month period ended October 31, 1996.
Historically, a late-cycle stock market advance has afforded few new
investment opportunities for the Fund, since it becomes difficult to
find stocks trading at depressed valuations. However, the current
advance has been limited to a narrow universe of larger-
capitalization growth stocks. Therefore, we were able to add a
number of new positions to the portfolio during the October quarter.
McDermott International, Inc. is a leading producer of generating
systems and marine construction platforms. However, to date the
company has been best known for its substantial dividend and anemic
earnings results. Although the company's common stock has been
attractively valued for some time, we were hesitant to establish a
position in the company prior to a cut in its excessive dividend.
During the quarter, the dividend was cut and McDermott's long-time
chief executive officer announced his retirement. We believe that
new management can now concentrate on increasing returns by
rationalizing businesses and leveraging the company's dominant
market shares.
It is rare that we find common stock as undervalued as that of
Scitex Corporation Ltd., an Israeli manufacturer of digital
information systems used in the printing and publishing industries.
The company's shares sell at one times book value per share. In
addition, Scitex has a significant net cash position, and turned
down a takeover bid this year at a per share price that was three
times greater than current levels. We expect the company will take
drastic actions to stop the losses at its graphic arts division.
Once these actions are taken, we believe that other investors will
come to recognize that the company's shares are undervalued, based
on the fast growth and high profitability of its digital printing
business.
<PAGE>
A number of corporate mergers and acquisitions that affected Fund
holdings were completed during the October quarter. One portfolio
holding, Automated Security Holdings PLC, was acquired for the stock
of ADT Ltd., another portfolio holding, creating the largest
electronic security company in the United States and the United
Kingdom. We continue to maintain a sizable position in the combined
company as we remain bullish on the future of the electronic
security industry. Fund holding Applied Bioscience International
Corp. merged into Pharmaceutical Product Development Inc. to become
the third-largest clinical research organization in the world. This
fast-growing industry, which provides research to drug companies on
potential new products, typically trades at very extended
price/earnings ratios. Since Pharmaceutical Product's valuation is
currently at a severe discount to its peer group, we anticipate
maintaining our current position.
On the sell side, we liquidated our holdings in Sensormatic
Electronics Corp., Storage Technology Corp. and Roosevelt Financial
Group Inc. Sensormatic Electronics and Storage Technology were
relatively small positions that appreciated significantly in a short
period of time. Roosevelt Financial was having such a difficult time
navigating through its turnaround that we decided to realize a small
profit now and reexamine the company at a later date.
We continued to add significantly to our existing positions that
were meeting our expected turnaround timetables but were not being
rewarded with higher valuations by the marketplace. Mesa Air Group,
Inc., Computervision Corp., Amdahl Corp. and Tandem Computers, Inc.
have all demonstrated substantial earnings improvements during the
course of the year, yet their stocks were at or below the levels at
which we initiated positions. We continue to believe that the
tangible improvements that are occurring within these companies
cannot be ignored indefinitely. Eventually, we believe that other
investors will recognize these companies for the earnings growth
they can deliver.
Since the high-yield/distressed securities markets continue to be
expensive relative to historic levels, we made no significant
changes in these holdings during the quarter. Given the high
valuations that persist in this area, we do not expect to add
substantially to our high-yield/distressed holdings in the near
future.
In Conclusion
Although year-end portfolio repositioning led to a difficult
environment for deeply out-of-favor stocks in the October quarter,
we are encouraged by the improved fundamental performance for a
number of our larger holdings. We expect that share valuations will
increase for many companies represented in the portfolio once their
improved earnings levels become more predictable.
<PAGE>
We thank you for your continued 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
December 2, 1996
PERFORMANCE DATA
About Fund Performance
Investors are 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 approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
<PAGE>
* 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).
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.
<TABLE>
Recent Performance Results
<CAPTION>
12 Month 3 Month
10/31/96 7/31/96 10/31/95 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $12.38 $13.37 $12.70 + 3.84%(1) - 1.38%(2)
ML Phoenix Fund, Inc. Class B Shares* 12.02 12.99 12.42 + 3.27(1) - 1.27(2)
ML Phoenix Fund, Inc. Class C Shares* 11.95 12.92 12.35 + 3.29(1) - 1.28(2)
ML Phoenix Fund, Inc. Class D Shares* 12.37 13.35 12.69 + 3.84(1) - 1.30(2)
Dow Jones Industrial Average** 6,029.38 5,528.91 4,755.48 +26.79 + 9.05
Standard & Poor's 500 Index** 705.27 639.95 581.50 +21.28 +10.21
ML Phoenix Fund, Inc. Class A Shares--Total Return* +11.11(3) + 3.85(4)
ML Phoenix Fund, Inc. Class B Shares--Total Return* + 9.95(5) + 3.61(6)
ML Phoenix Fund, Inc. Class C Shares--Total Return* +10.01(5) + 3.63(6)
ML Phoenix Fund, Inc. Class D Shares--Total Return* +10.86(7) + 3.79(8)
Dow Jones Industrial Average--Total Return** +29.75 + 9.69
Standard & Poor's 500 Index--Total Return** +24.07 +10.85
<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 $0.795 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.794 per share capital
gains distributions.
(3)Percent change includes reinvestment of $0.897 per share ordinary
income dividends and $0.795 per share capital gains distributions.
(4)Percent change includes reinvestment of $0.688 per share ordinary
income dividends and $0.794 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.808 per share ordinary
income dividends and $0.795 per share capital gains distributions.
(6)Percent change includes reinvestment of $0.625 per share ordinary
income dividends and $0.794 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.866 per share ordinary
income dividends and $0.795 per share capital gains distributions.
(8)Percent change includes reinvestment of $0.669 per share ordinary
income dividends and $0.794 per share capital gains distributions.
</TABLE>
<PAGE>
PERFORMANCE DATA (continued)
<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
1995 11.15 12.90 0.183 0.528 +21.86
1/1/96--10/31/96 12.90 12.38 0.794 0.688 + 7.63
------- ------
Total $12.600 Total $8.202
Cumulative total return as of 10/31/96: +654.84%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<TABLE>
Performance Summary--Class B Shares
<CAPTION>
Net Asset Value Capital Gains
Period Covered Beginning Ending Distributed Dividends Paid* % Change**
<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
1995 10.95 12.62 0.183 0.432 +20.68
1/1/96--10/31/96 12.62 12.02 0.794 0.625 + 6.65
------ ------
Total $5.365 Total $4.267
Cumulative total return as of 10/31/96: +130.80%**
<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.
</TABLE>
PERFORMANCE DATA (concluded)
<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%
1995 10.91 12.55 0.183 0.454 +20.67
1/1/96--10/31/96 12.55 11.95 0.794 0.625 + 6.68
------ ------
Total $1.291 Total $1.251
Cumulative total return as of 10/31/96: +19.27%**
<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 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%
1995 11.16 12.91 0.183 0.502 +21.61
1/1/96--10/31/96 12.91 12.37 0.794 0.669 + 7.33
------ ------
Total $1.291 Total $1.357
Cumulative total return as of 10/31/96: +21.17%**
<FN>
*Figures may include short-term capital gains distributions.
**Figures assume reinvestment of all dividends and capital gains
distributions at net asset value on the ex-dividend date, and do not
include sales charge; results would be lower if sales charge was
included.
</TABLE>
<PAGE>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 9/30/96 + 5.59% + 0.04%
Five Years Ended 9/30/96 +15.41 +14.17
Ten Years Ended 9/30/96 +13.29 +12.68
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 9/30/96 + 4.53% + 0.84%
Five Years Ended 9/30/96 +14.22 +14.22
Inception (10/21/88)
through 9/30/96 +11.32 +11.32
[FN]
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 9/30/96 + 4.56% + 3.64%
Inception (10/21/94)
through 9/30/96 +10.37 +10.37
[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*
<PAGE>
Year Ended 9/30/96 + 5.34% -0.19%
Inception (10/21/94)
through 9/30/96 +11.24 +8.20
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Percent of
Industry Shares Held Investments Cost Value Net Assets
Discount to Assets
<S> <C> <S> <C> <C> <C>
Computer Services 577,500 Scitex Corporation Ltd. (Ordinary) $ 6,179,365 $ 5,702,813 0.8%
Conglomerates 1,600,000 Hanson PLC (ADR)* 13,997,014 10,200,000 1.4
Total Discount to Assets 20,176,379 15,902,813 2.2
Earning Turnarounds
Airlines 1,780,000 Mesa Air Group, Inc. 13,369,447 16,465,000 2.3
Banking & Financial 900,000 Dime Bancorp, Inc. 9,724,968 13,387,500 1.8
Cable 2,200,000 Century Communications Corp. 18,177,184 14,575,000 2.0
Computer Hardware 2,780,600 Tandem Computers, Inc. 33,761,818 35,105,075 4.9
Consumer Products 2,000,000 The Topps Co., Inc. 12,396,631 7,625,000 1.0
Diversified 500,000 Specialty Equipment Companies Inc. 4,937,500 6,187,500 0.9
Energy Related 1,162,500 Marine Drilling Co., Inc. 9,635,938 15,839,063 2.2
867,000 Total Petroleum (North America) Ltd. 9,146,819 8,344,875 1.2
Environmental 792,000 Matrix Service Co. 6,793,408 4,752,000 0.7
500,000 TETRA Technologies, Inc. 3,353,304 10,437,500 1.4
Health Care 1,140,400 NeoRx Corp. 7,231,038 5,488,175 0.8
500,000 Perrigo Co. 5,864,323 4,625,000 0.6
Home Builders 839,000 NVR, Inc. 4,764,596 7,918,063 1.1
Industrial Services 1,407,670 Anacomp, Inc. 9,137,200 11,613,278 1.6
<PAGE>
Leisure & 1,625,000 CST Entertainment Imaging, Inc. 3,593,312 304,687 0.0
Entertainment 900,000 CST Entertainment Imaging, Inc.
(Restricted) 675,000 135,000 0.0
Restaurants 965,519 Houlihan's Restaurant Group, Inc. 3,468,750 5,310,354 0.7
Retail 3,720,000 CML Group, Inc. 22,218,662 18,135,000 2.5
900,000 Charming Shoppes, Inc. 5,132,127 4,106,250 0.6
Semiconductor 1,475,000 Integrated Device Technology, Inc. 16,188,438 11,984,375 1.7
644,200 VLSI Technology, Inc. 8,099,034 11,031,925 1.5
Telecommunications 900,000 DSC Communications Corp. 21,026,884 12,487,500 1.7
Telecommunications 195,000 Tekelec Inc. 1,794,293 2,851,875 0.4
Equipment
Total Earning Turnarounds 230,490,674 228,709,995 31.6
Financial Restructuring
Real Estate 625,000 Resurgence Properties Inc. 5,468,750 5,312,500 0.7
Retail 443,361 Zale Corp. Litigation Limited Partnership
Shares 0 0 0.0
Textiles 330,706 The Bibb Co. 2,303,833 2,811,001 0.4
Total Financial Restructuring 7,772,583 8,123,501 1.1
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
High Yield
<S> <C> <S> <C> <C> <C>
Cable $ 5,910,000 Scott Cable, Subordinated Debentures,
12.25% due 4/15/2001 $ 4,626,300 $ 4,018,800 0.6%
Consumer Products $ 2,500,000 Town & Country Corporation, Senior
Subordinated Notes, 13% due 5/31/1998 2,125,000 1,950,000 0.3
Energy $17,100,000 WRT Energy Corp., Senior Notes, 13.875%
due 3/01/2002 13,955,500 6,327,000 0.9
<PAGE>
Home Builders $27,500,000 Baldwin Homes, Series B, 10.375% due
8/01/2003 12,495,500 11,000,000 1.5
Leisure & $11,500,000 Bally's Health & Tennis Corporation,
Entertainment Senior Subordinated Notes, 13% due
1/15/2003 9,219,375 10,407,500 1.4
$ 5,000,000 Genmar Holdings, Inc., Senior
Subordinated Notes, 13.50% due 7/15/2001 5,000,000 4,850,000 0.7
377,854 Live Entertainment Inc., 5% Convertible
Preferred (Series B) 1,872,880 3,164,527 0.4
$ 7,500,000 Live Entertainment Inc., Senior
Subordinated Notes, 12% due 3/23/1999 5,643,750 7,125,000 1.0
Printing & $ 8,255,400 San Jacinto Holdings Inc., Senior
Publishing Subordinated Notes, 12% due 12/31/2002 5,568,673 6,439,212 0.9
Retail $ 2,250,000 Duane Reade Corporation, Senior Notes,
12% due 9/15/2002 1,980,000 2,182,500 0.3
Supermarkets $ 500,000 Farm Fresh Inc., 12.25% Senior Notes due
10/01/2000 400,000 400,000 0.1
Textiles $ 9,000,000 JPS Textile Group Inc., Subordinated
Debentures, 7% due 5/15/2000 990,000 922,500 0.1
$14,000,000 JPS Textile Group Inc., Subordinated
Notes, 10.25% due 6/01/1999 8,122,517 8,260,000 1.1
Total High Yield 71,999,495 67,047,039 9.3
Operational Restructuring
Cable 725,000 Cox Communications, Inc. (Class A) 12,227,083 13,412,500 1.9
1,200,000 US West Media Group 22,638,280 18,750,000 2.6
Chemicals 114,286 Millennium Chemicals Inc. 3,117,959 2,314,286 0.3
Computer Hardware 3,100,000 Amdahl Corp. 26,643,070 31,775,000 4.4
600,000 Apple Computer, Inc. 14,191,950 13,800,000 1.9
Computer Software 2,168,400 Borland International, Inc. 28,502,324 10,977,525 1.5
3,353,600 Computervision Corp. 21,122,993 30,182,400 4.2
1,525,000 Novell Inc. 19,015,471 14,106,250 2.0
Diversified 1,000,000 ADT Ltd. (ADR)* (a) 7,621,653 19,750,013 2.7
407,500 National Patent Development Corp. 5,552,754 3,209,062 0.4
Energy Related 600,000 McDermott International, Inc. 11,409,070 10,650,000 1.5
1,000,000 Oryx Energy Co. 12,925,893 19,250,000 2.7
<PAGE>
Engineering 699,598 EMCOR Group, Inc. 5,558,588 10,231,621 1.4
</TABLE>
<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>
Environmental 465,000 Allwaste Inc. $ 2,276,591 $ 2,150,625 0.3%
1,000,000 Laidlaw, Inc. (Non-Voting) (Class B)
(ADR)* 9,190,881 11,750,000 1.6
Health Care 2,800,000 Community Psychiatric Centers, Inc. 26,595,165 24,850,000 3.4
925,000 Pharmaceutical Product Development
Inc. (b) 12,420,546 17,690,620 2.5
2,500,000 Unilab Corp. 10,387,527 1,562,500 0.2
Insurance 1,060,600 Reliance Group Holdings, Inc. 5,718,745 8,749,950 1.2
Retail 600,000 The Limited, Inc. 10,445,004 11,025,000 1.5
1,000,000 Woolworth Corp. 11,562,786 21,000,000 2.9
Semiconductor 982,100 National Semiconductor Corp. 14,844,287 18,905,425 2.6
Steel 900,000 WHX Corp. 9,566,309 7,537,500 1.1
Total Operational Restructuring 303,534,929 323,630,277 44.8
Total Investments 633,974,060 643,413,625 89.0
Face Amount Short-Term Investments
Commercial Paper** $37,897,000 General Electric Capital Corp., 5.56%
due 11/01/1996 37,897,000 37,897,000 5.2
30,000,000 Goldman Sachs Group L.P., 5.25% due
11/08/1996 29,969,375 29,969,375 4.2
5,000,000 International Securitization Corp.,
5.26% due 11/20/1996 4,986,119 4,986,119 0.7
3,000,000 Three Rivers Funding Corp., 5.26% due
11/20/1996 2,991,672 2,991,672 0.4
5,500,000 Transamerica Corp., 5.26% due 12/03/1996 5,474,284 5,474,284 0.8
Total Short-Term Investments 81,318,450 81,318,450 11.3
Total Investments $715,292,510 724,732,075 100.3
============
Liabilities in Excess of Other Assets (2,178,317) (0.3)
------------ ------
Net Assets $722,553,758 100.0%
============ ======
<PAGE>
Net Asset Class A--Based on net assets of $277,642,726 and 22,422,322
Value: shares outstanding $ 12.38
============
Class B--Based on net assets of $377,941,987 and 31,437,594
shares outstanding $ 12.02
============
Class C--Based on net assets of $15,557,978 and 1,302,053
shares outstanding $ 11.95
============
Class D--Based on net assets of $51,411,067 and 4,154,820
shares outstanding $ 12.37
============
<FN>
*American Depositary Receipts (ADR).
**Commercial Paper is traded on a discount basis; the interest rates
shown are the discount rates paid at the time of purchase by the
Fund.
(a)Automated Security Holdings PLC was acquired by ADT Ltd.
(b)Applied Bioscience International Corp. was acquired by
Pharmaceutical Product Development Inc.
</TABLE>
PORTFOLIO INFORMATION
For the Quarter Ended October 31, 1996
Percent of
Ten Largest Holdings Net Assets
Tandem Computers, Inc. 4.9%
Amdahl Corp. 4.4
Computervision Corp. 4.2
Community Psychiatric Centers, Inc. 3.4
Woolworth Corp. 2.9
ADT Ltd. (ADR) 2.7
Oryx Energy Co. 2.7
National Semiconductor Corp. 2.6
US West Media Group 2.6
CML Group, Inc. 2.5
Percent of
Five Largest Industries Net Assets
Computer Hardware 11.2%
Retail 7.8
Computer Software 7.7
Energy Related 7.6
Health Care 7.5
<PAGE>
Percent of
Asset Mix Net Assets
Stocks 80.1%
Bonds 8.9
Cash & Cash Equivalents 11.0*
[FN]
*Net of liabilities in excess of other assets.
Additions (Equity Investments)
*Anacomp Inc. (Rights)
*Banyan Systems Inc.
The Bibb Co.
Charming Shoppes, Inc.
*Imperial Tobacco Group PLC (ADR)
McDermott International, Inc.
Millennium Chemicals Inc.
Scitex Corporation Ltd. (Ordinary)
Deletions (Equity Investments)
*Anacomp Inc. (Rights)
*Banyan Systems Inc.
*Imperial Tobacco Group PLC (ADR)
NVR, Inc. (Warrants)
Roosevelt Financial Group Inc.
Sensormatic Electronics Corp.
Signet Group PLC, Series C (Variable Term
Preferred Shares)
Signet Group PLC, Series D (Variable Term
Preferred Shares)
Storage Technology Corp.
Tyco Toys, Inc., Convertible Preferred (Series C)
U.S. Trails, Inc.
[FN]
*Added and deleted in the same quarter.
OFFICERS AND DIRECTORS
<PAGE>
Arthur Zeikel, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Donald C. Burke, Vice President
Robert J. Martorelli, Vice President and
Portfolio Manager
Gerald M. Richard, Treasurer
Robert Harris, Secretary
Custodian
The Chase Manhattan Bank, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, New York 11245
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
