MERRILL LYNCH
PHOENIX
FUND, INC.
FUND LOGO
Semi-Annual Report
January 31, 1997
Officers and Directors
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
<PAGE>
Custodian
The Chase Manhattan Bank
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.
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.
Merrill Lynch
Phoenix Fund, Inc.
Box 9011
Princeton, NJ
08543
Printed on post-consumer recycled paper
MERRILL LYNCH PHOENIX FUND, INC.
<PAGE>
DEAR SHAREHOLDER
The relatively benign economic environment that prevailed throughout
1996 continued into the new year. Highlighting year-end economic
results were stronger industrial production and greater-than-
expected gross domestic product growth for the final quarter of the
year. Underscoring the moderating growth trend were some signs of
softening in the labor market, and initial indications suggested a
respectable but unremarkable holiday selling season.
On balance, US economic fundamentals appear to be the most positive
they have been for many years. However, as 1997 begins, the dilemma
facing investors is how long the economic expansion can continue at
a steady, noninflationary pace. At this late stage of the current
economic recovery, investor expectations can quickly change from
positive to negative with the release of surprising economic
results. Therefore, continued reassurance of steady, noninflationary
economic growth would be a very positive development for the stock
and bond markets in the new year.
On the international front, the US dollar continued its strong
advance relative to the yen and the Deutschemark, raising concerns
about the outlook for US trade. In early February, the leading
industrialized nations expressed apparent agreement that it was time
to seek a lower dollar and less volatility in the foreign exchange
markets. It remains to be seen whether these stated intentions will
be acted upon, or if the US dollar continues to rise relative to
other major currencies.
Portfolio Matters
Merrill Lynch Phoenix Fund, Inc.'s Class A, Class B, Class C and
Class D Shares had total returns of +9.39%, +9.12%, +9.08% and
+9.38%, respectively, for the three-month period ended January 31,
1997. (Results shown do not reflect sales charges, and would be
lower if sales charges were included. Complete performance
information, including average annual total returns, can be found on
pages 3--5 of this report to shareholders.)
As noted in our last quarterly report to shareholders, the current
advance in share prices has been confined to a relatively small
group of larger-capitalization growth stocks. As a result, we were
able to add a number of new investments to the Fund's portfolio at
attractive valuations during the quarter ended January 31, 1997.
Stocks of health maintenance organizations (HMOs) declined during
January as concerns over potential cuts in Medicare premium
payments, lower enrollment growth and pricing pressures raised
investor concerns. We initiated positions in two HMOs, Humana, Inc.
and Mid Atlantic Medical Services, Inc. Humana is the country's
fourth largest HMO, while Mid Atlantic Medical Services' operations
are focused in the Washington D.C./Maryland area. We believe that
the eventual cuts in Medicare premium payments will be manageable,
and that these two companies should benefit from an industry shift
toward higher pricing and longer-term membership growth.
<PAGE>
The share prices of a number of computer networking stocks declined
significantly because of investor concerns about slowing industry
order trends. We added the common stock of Bay Networks Inc., a
provider of a broad range of networking products, to the portfolio.
Recent earnings have proven disappointing, so the company's Board of
Directors has responded by procuring a strong management team, led
by a former senior executive from Intel Corp. With a very strong
balance sheet, Bay Networks is expected to make strategic
acquisitions and to implement a turnaround strategy predicated on
the introduction of new, higher-margin products to its very large
customer base.
Although large-capitalization growth stocks are very much in
investor favor, we were able to identify a number of larger-
capitalization issues that are currently out of favor because of
subpar performance. For example, AT&T Corp. is a global
telecommunications company whose most recent results have been
negatively impacted by escalating long-distance competition and a
lack of strategic focus on the part of senior management. We were
attracted to the opportunity of investing in this global franchise
at a historically low price/earnings ratio and above-average
dividend yield.
Another large-capitalization telecommunications investment was
Alcatel Alsthom Compagnie d'Electricite S.A., France's second-
largest company. After two years of poor earnings, new management
has rationalized the businesses, repaired the balance sheet and is
on target to return the company to profitability. We expect that a
greater focus on Alcatel's higher growth businesses will result in a
significantly better stock price.
Our final large-capitalization investment during the quarter was a
small position in Digital Equipment Corp. Although we are attracted
to the valuable technology owned by this company and its long-term
earnings potential, management has yet to show the ability to
execute its turnaround strategy. We will continue to monitor the
situation closely, awaiting a more opportune time to increase our
investment.
On the sell side, we eliminated two semiconductor companies,
National Semiconductor Corp. and VLSI Technology, Inc., since their
prices far exceeded our estimation of their fundamental valuations.
We sold our investment in ADT Ltd. in the wake of a takeover bid by
Western Resources Inc., and we eliminated long-time holding TETRA
Technologies, Inc. after its share price advanced four-fold. We also
continued to eliminate some of our smaller holdings by selling
investments in Unilab Corp., Allwaste Inc., Matrix Service Co. and
Tekelec Inc. We also sold our holdings in Dime Bancorp, Inc. and Cox
Communications, Inc., since they reached our price objectives.
<PAGE>
In the high-yield/distressed portion of the portfolio, we added the
bonds of Merisel Inc., a distributor of computer products, and
Specialty Foods Corp., a provider of various food products. Although
both issues are currently paying interest, the companies remain
highly leveraged and we anticipate the need for restructuring in the
future. We believe that we are buying these securities at levels
that are distressed enough so that when restructurings occur, it
will result in higher bond prices.
In Conclusion
As noted in our last report to shareholders, a number of the Fund's
larger holdings are experiencing improved fundamental performance,
which has not yet been reflected in their share prices. We expect
that as these companies continue to demonstrate improved earnings,
investors will come to recognize the extent of the current
undervaluation of their shares.
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
February 28, 1997
PERFORMANCE DATA
<PAGE>
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.)
* 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
1/31/97 10/31/96 1/31/96 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $13.41 $12.38 $12.80 +11.59%(1) + 8.32%
ML Phoenix Fund, Inc. Class B Shares* 13.04 12.02 12.50 +11.31(1) + 8.49
ML Phoenix Fund, Inc. Class C Shares* 12.96 11.95 12.43 +11.29(1) + 8.45
ML Phoenix Fund, Inc. Class D Shares* 13.41 12.37 12.80 +11.59(1) + 8.41
Dow Jones Industrial Average** 6,813.09 6,029.38 5,395.30 +26.28 +13.00
Standard & Poor's 500 Index** 786.16 705.27 636.02 +23.61 +11.47
ML Phoenix Fund, Inc. Class A Shares--Total Return* +18.66(2) + 9.39(3)
ML Phoenix Fund, Inc. Class B Shares--Total Return* +17.48(4) + 9.12(5)
ML Phoenix Fund, Inc. Class C Shares--Total Return* +17.50(4) + 9.08(5)
ML Phoenix Fund, Inc. Class D Shares--Total Return* +18.40(6) + 9.38(7)
Dow Jones Industrial Average--Total Return** +29.15 +13.60
Standard & Poor's 500 Index--Total Return** +26.35 +12.03
<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 $0.794 per share capital
gains distributions.
(2)Percent change includes reinvestment of $0.819 per share ordinary
income dividends and $0.794 per share capital gains distributions.
(3)Percent change includes reinvestment of $0.132 per share ordinary
income dividends.
(4)Percent change includes reinvestment of $0.700 per share ordinary
income dividends and $0.794 per share capital gains distributions.
(5)Percent change includes reinvestment of $0.075 per share ordinary
income dividends.
(6)Percent change includes reinvestment of $0.789 per share ordinary
income dividends and $0.794 per share capital gains distributions.
(7)Percent change includes reinvestment of $0.119 per share ordinary
income dividends.
</TABLE>
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
1996 12.90 13.19 0.794 0.819 +15.81
1/1/97--1/31/97 13.19 13.41 -- -- + 1.67
------- ------
Total $12.600 Total $8.333
<PAGE>
Cumulative total return as of 1/31/97: +725.71%**
<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
1996 12.62 12.83 0.794 0.700 +14.49
1/1/97--1/31/97 12.83 13.04 -- -- + 1.64
------ ------
Total $5.365 Total $4.342
Cumulative total return as of 1/31/97: +151.84%**
<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
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
1996 12.55 12.75 0.794 0.700 +14.49
1/1/97--1/31/97 12.75 12.96 -- -- + 1.65
------ ------
Total $1.291 Total $1.326
<PAGE>
Cumulative total return as of 1/31/97: +30.10%**
<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
1996 12.91 13.18 0.794 0.789 +15.38
1/1/97--1/31/97 13.18 13.41 -- -- + 1.75
------ ------
Total $1.291 Total $1.477
Cumulative total return as of 1/31/97: +32.53%**
<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>
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 12/31/96 +15.81% + 9.73%
Five Years Ended 12/31/96 +16.72 +15.46
Ten Years Ended 12/31/96 +13.68 +13.07
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/96 +14.49% +10.49%
Five Years Ended 12/31/96 +15.52 +15.52
Inception (10/21/88)
through 12/31/96 +11.71 +11.71
[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 12/31/96 +14.49% +13.49%
Inception (10/21/94)
through 12/31/96 +11.90 +11.90
[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*
Year Ended 12/31/96 +15.38% + 9.32%
Inception (10/21/94)
through 12/31/96 +12.80 +10.06
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
Discount to Assets
<S> <C> <C> <C> <C> <C>
Computer Services 589,700 Scitex Corporation Ltd. (Ordinary) $ 6,291,592 $ 6,339,275 0.9%
Conglomerates 2,000,000 Hanson PLC Sponsored (ADR)* 16,715,774 15,000,000 2.0
Energy Related 915,900 McDermott International, Inc. 16,866,840 16,715,175 2.2
Total Discount to Assets 39,874,206 38,054,450 5.1
Earning Turnarounds
Airlines 2,000,000 ++Mesa Air Group, Inc.++++ 14,822,949 13,000,000 1.8
Cable 2,600,000 ++Century Communications Corp.++++ 20,327,184 13,000,000 1.8
Computer Hardware 1,500,600 ++Tandem Computers, Inc. 16,690,567 20,820,825 2.8
Computer Software 1,000,000 ++Mentor Graphics Corporation 9,981,232 10,250,000 1.4
Consumer Products 2,040,000 ++The Topps Co., Inc. 12,537,256 8,415,000 1.1
Energy Related 450,000 ++Marine Drilling Co., Inc. 3,600,000 7,425,000 1.0
867,000 Total Petroleum (North America) Ltd. 9,146,819 9,211,875 1.2
Health Care 244,500 ++Beverly Enterprises, Inc. 3,140,603 3,545,250 0.5
600,000 ++Humana, Inc. 11,564,931 11,400,000 1.5
1,000,000 ++Mid Atlantic Medical Services, Inc. 12,365,498 12,750,000 1.7
1,300,000 ++NeoRx Corp.++++ 7,991,431 5,931,250 0.8
1,139,500 ++Perrigo Co. 11,750,968 11,964,750 1.6
Industrial Services 1,407,670 ++Anacomp, Inc.++++ 9,137,200 13,900,741 1.9
Leisure & Entertainment 900,000 ++CST Entertainment Imaging, Inc.+++ 675,000 90,000 0.0
Networking 490,900 ++Bay Networks Inc. 10,463,638 10,677,075 1.4
Restaurants 965,519 ++Houlihan's Restaurant Group, Inc.++++ 3,468,750 5,189,665 0.7
Retail 4,170,000 CML Group, Inc.++++ 23,882,945 13,552,500 1.8
1,300,000 ++Charming Shoppes, Inc. 7,125,415 6,093,750 0.8
400,000 ++Toys 'R' Us, Inc. 10,532,630 10,000,000 1.4
<PAGE>
Semiconductor 2,000,000 ++Integrated Device Technology, Inc. 21,862,741 20,750,000 2.8
Telecommunications 700,000 ++DSC Communications Corp. 13,610,646 15,662,500 2.1
Total Earning Turnarounds 234,678,403 223,630,181 30.1
Financial Restructuring
Retail 443,361 ++Zale Corp. Litigation Limited Partnership
Shares 0 0 0.0
Textiles 330,706 ++The Bibb Co. (c) 2,303,833 2,314,942 0.3
$ 9,000,000 ++JPS Textile Group Inc., Subordinated
Debentures, 7% due 5/15/2000 990,000 990,000 0.1
$14,000,000 ++JPS Textile Group Inc., Subordinated Notes,
10.25% due 6/01/1999 8,122,517 8,680,000 1.2
Total Financial Restructuring 11,416,350 11,984,942 1.6
High Yield
Cable $ 690,154 Scott Cable Pay-in-Kind Notes, 16%
due 7/18/2001 (b)(d) 273,696 265,709 0.1
$ 5,850,900 Scott Cable Trust Certificate, Pay-in-Kind
Notes, 15% due 3/18/2001 (b)(d) 4,256,447 4,212,648 0.6
Consumer Products $ 9,720,000 Specialty Foods Corp., Senior Subordinated
Notes, 11.25% due 8/15/2003 7,837,800 7,678,800 1.0
$ 2,500,000 Town & Country Corporation, Senior
Subordinated Notes, 13% due 5/31/1998 2,125,000 1,675,000 0.2
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
Face Amount/ Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
High Yield (concluded)
<S> <C> <C> <C> <C> <C>
Distribution $14,000,000 Merisel Inc., Senior Notes, 12.50% due
12/31/2004 $ 7,678,300 $ 9,100,000 1.2%
Energy $17,100,000 ++WRT Energy Corp., Senior Notes, 13.875%
due 3/01/2002 13,955,500 7,524,000 1.0
Home Builders $27,500,000 ++Baldwin Homes, Series B, 10.375% due
8/01/2003 12,495,500 11,825,000 1.6
<PAGE>
Leisure & $10,000,000 Bally's Health & Tennis Corporation,
Entertainment Senior Subordinated Notes, 13% due
1/15/2003 7,927,500 9,750,000 1.3
$ 4,000,000 Genmar Holdings, Inc., Senior Subordinated
Notes, 13.50% due 7/15/2001 4,000,000 3,880,000 0.5
377,854 Live Entertainment Inc., 5% Convertible
Preferred (Series B) 1,872,880 3,140,911 0.4
$ 7,500,000 Live Entertainment Inc., Senior
Subordinated Notes, 12% due 3/23/1999 5,643,750 7,200,000 1.0
Printing & $ 8,255,400 San Jacinto Holdings Inc., Senior
Publishing Subordinated Notes, 12% due 12/31/2002 5,568,673 5,696,226 0.8
Supermarkets $10,500,000 Farm Fresh Inc., 12.25% Senior Notes
due 10/01/2000 8,473,750 8,820,000 1.2
Total High Yield 82,108,796 80,768,294 10.9
Operational Restructuring
Cable 900,000 ++Tele-Communications, Inc. (Class A) 12,007,693 11,925,000 1.6
1,500,000 ++US West Media Group 28,061,064 27,937,500 3.8
Chemicals 114,285 ++Millennium Chemicals Inc. 3,117,959 2,271,414 0.3
Computer Hardware 2,179,600 ++Amdahl Corp. 17,820,836 25,065,400 3.4
700,000 ++Apple Computer, Inc. 16,300,080 11,550,000 1.6
200,000 ++Digital Equipment Corp. 7,772,000 7,500,000 1.0
Computer Software 2,168,400 ++Borland International, Inc.++++ 28,502,324 13,823,550 1.9
653,900 ++CompuServe Corporation 6,839,455 7,111,163 1.0
4,084,100 ++Computervision Corp.++++ 25,879,429 30,630,750 4.1
1,500,000 ++Novell Inc. 18,031,773 18,937,500 2.5
Diversified 379,500 ++National Patent Development Corp.++++ 5,002,546 3,178,313 0.4
Energy Related 700,000 ++Oryx Energy Co. 8,857,893 16,975,000 2.3
Engineering 800,000 ++EMCOR Group, Inc. 6,875,703 12,800,000 1.7
Environmental 1,250,000 Laidlaw, Inc. (Non-Voting) (Class B)
(ADR)* 12,140,881 16,250,000 2.2
Health Care 1,032,999 ++Pharmaceutical Product Development Inc. 14,095,778 29,440,472 4.0
2,800,000 ++Transitional Hospitals Corp. (a)++++ 26,595,165 25,550,000 3.4
Insurance 1,060,600 Reliance Group Holdings, Inc. 5,718,745 9,677,975 1.3
Retail 700,000 The Limited, Inc. 12,226,004 11,987,500 1.6
1,000,000 ++Woolworth Corp. 11,562,787 20,375,000 2.7
<PAGE>
Steel 1,100,000 ++WHX Corp. 11,226,309 9,487,500 1.3
Telecommunications 300,000 AT&T Corp. 11,628,213 11,812,500 1.6
498,100 Alcatel Alsthom Compagnie d'Electricite
S.A. (ADR)* 8,578,385 10,273,312 1.4
Total Operational Restructuring 298,841,022 334,559,849 45.1
Total Investments 666,918,777 688,997,716 92.8
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
Value Percent of
Face Amount Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Commercial Paper** $ 5,000,000 Banc One Corp., 5.30% due 2/18/1997 $ 4,987,486 $ 4,987,486 0.6%
20,000,000 CXC Inc., 5.34% due 2/10/1997 19,973,300 19,973,300 2.7
20,000,000 Deer Park Refining L.P., 5.33%
due 2/25/1997 19,928,933 19,928,933 2.7
6,300,000 General Electric Capital Corp., 5.58% due
2/03/1997 6,298,047 6,298,047 0.8
5,000,000 Lehman Brothers Holdings, 5.52% due
2/06/1997 4,996,167 4,996,167 0.7
Total Short-Term Investments 56,183,933 56,183,933 7.5
Total Investments $723,102,710 745,181,649 100.3
============
Liabilities in Excess of Other Assets (2,503,944) (0.3)
------------ ------
Net Assets $742,677,705 100.0%
============ ======
<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)On December 2, 1996, Community Psychiatric Centers, Inc. changed
its name to Transitional Hospitals Corp.
(b)On December 19, 1996, the Fund received these notes in exchange
for Scott Cable, Subordinated Debentures, 12.25% due 04/15/2001.
(c)The security may be offered and sold to "qualified institutional
buyers" under Rule 144A of the Security Act of 1933.
(d)Represents a pay-in-kind security which may pay interest in
additional face.
++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:
<PAGE>
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <S> <C> <C> <C>
Airlines Mesa Air Group, Inc. 430,000 $ 3,351,332 --
Cable Century Communications Corp. 600,000 3,620,633 --
Computer Software Borland International, Inc. -- -- --
Computer Software Computervision Corp. 1,534,100 10,580,710 --
Diversified National Patent Development Corp. (28,000) (550,208) --
Health Care NeoRx Corp. 200,800 958,151 --
Health Care Transitional Hospital Corp. 249,800 2,147,965 --
Industrial-- Anacomp, Inc. -- -- --
Services
Restaurants Houlihan's Restaurant Group, Inc. -- -- --
Retail CML Group, Inc. 670,000 2,732,658 $35,000
Total $ 22,841,241
============
+++Restricted security as to resale. The value of the Fund's
investments in restricted securities was approximately $90,000,
representing 0.0% of net assets.
<CAPTION>
Acquisition Value
Issue Date Cost (Note 1a)
<S> <S> <C> <C>
CST Entertainment Imaging, Inc. 3/17/1995 $ 675,000 $ 90,000
Total $ 675,000 $ 90,000
============ ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of January 31, 1997
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$723,102,710) (Note 1a) $ 745,181,649
Foreign cash (Note 1c) 288
Receivables:
Securities sold $ 4,665,291
Interest 1,687,208
Capital shares sold 658,568
Dividends 39,527 7,050,594
-------------
Prepaid registration fees and other assets (Note 1f) 76,704
-------------
Total assets 752,309,235
-------------
<PAGE>
Liabilities: Payables:
Securities purchased 7,009,886
Capital shares redeemed 1,506,983
Investment adviser (Note 2) 625,421
Distributor (Note 2) 347,684 9,489,974
-------------
Accrued expenses and other liabilities 141,556
-------------
Total liabilities 9,631,530
-------------
Net Assets: Net assets $ 742,677,705
=============
Net Assets Class A Shares of Common Stock, $0.10 par value, 50,000,000
Consist of: shares authorized $ 2,167,947
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 2,854,880
Class C Shares of Common Stock, $0.10 par value, 50,000,000
shares authorized 119,615
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 478,410
Paid-in capital in excess of par 662,188,037
Undistributed investment income--net 404,919
Undistributed realized capital gains on investments and foreign
currency transactions--net 52,385,009
Unrealized appreciation on investments and foreign currency
transactions--net 22,078,888
-------------
Net assets $ 742,677,705
=============
Net Asset Value: Class A--Based on net assets of $290,759,407 and 21,679,466
shares outstanding $ 13.41
=============
Class B--Based on net assets of $372,280,031 and 28,548,795
shares outstanding $ 13.04
=============
Class C--Based on net assets of $15,502,609 and 1,196,150
shares outstanding $ 12.96
=============
Class D--Based on net assets of $64,135,658 and 4,784,101
shares outstanding $ 13.41
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations for the Six Months Ended January 31, 1997
<S> <S> <C> <C>
Investment Interest and discount earned $ 5,892,274
Income Dividends (net of $141,082 foreign withholding tax) 1,454,151
(Notes 1d & 1e): -------------
Total income 7,346,425
-------------
Expenses: Investment advisory fees (Note 2) $ 3,711,214
Account maintenance and distribution fees--Class B (Note 2) 1,954,036
Transfer agent fees--Class B (Note 2) 384,367
Transfer agent fees--Class A (Note 2) 248,169
Printing and shareholder reports 86,975
Account maintenance and distribution fees--Class C (Note 2) 80,170
Account maintenance fees--Class D (Note 2) 70,918
Accounting services (Note 2) 63,272
Transfer agent fees--Class D (Note 2) 49,486
Registration fees (Note 1f) 39,222
Professional fees 35,414
Directors' fees and expenses 33,577
Custodian fees 21,097
Transfer agent fees--Class C (Note 2) 16,632
Other 10,358
-------------
Total expenses 6,804,907
-------------
Investment income--net 541,518
-------------
Realized & Realized gain from investments--net 58,479,495
Unrealized Gain Change in unrealized appreciation/depreciation on:
(Loss) on Investments--net 33,822,092
Investments & Foreign currency transactions--net (31) 33,822,061
Foreign Currency ------------- -------------
Transactions--Net Net realized and unrealized gain on investments and foreign
(Notes 1b, 1c, currency transactions 92,301,556
1e & 3): -------------
Net Increase in Net Assets Resulting from Operations $ 92,843,074
=============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1997 1996
<S> <S> <C> <C>
Operations: Investment income--net $ 541,518 $ 2,504,634
Realized gain on investments and foreign currency
transactions--net 58,479,495 89,032,522
Change in unrealized appreciation/depreciation on investments
and foreign currency transactions--net 33,822,061 (61,421,781)
------------- -------------
Net increase in net assets resulting from operations 92,843,074 30,115,375
------------- -------------
Dividends & Investment income--net:
Distributions to Class A (1,322,009) (2,797,570)
Shareholders Class B -- (1,123,307)
(Note 1g): Class C -- (55,725)
Class D (167,329) (306,921)
Realized gain on investments--net:
Class A (32,459,002) (12,381,777)
Class B (43,674,101) (18,485,951)
Class C (1,814,737) (584,344)
Class D (5,849,564) (1,742,435)
------------- -------------
Net decrease in net assets resulting from dividends and
distributions to shareholders (85,286,742) (37,478,030)
------------- -------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions 9,268,569 (16,090,922)
(Note 4): ------------- -------------
Net Assets: Total increase (decrease) in net assets 16,824,901 (23,453,577)
Beginning of period 725,852,804 749,306,381
------------- -------------
End of period* $ 742,677,705 $ 725,852,804
============= =============
<FN>
*Undistributed investment income--net $ 404,919 $ 1,352,739
============= =============
<PAGE>
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights
<CAPTION>
Class A
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
January 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 13.37 $ 13.44 $ 13.31 $ 13.75 $ 11.40
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .05 .13 .17 .03 .02
Realized and unrealized gain on investments
and foreign currency transactions--net 1.60 .51 1.47 1.18 3.06
-------- -------- -------- -------- --------
Total from investment operations 1.65 .64 1.64 1.21 3.08
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net (.06) (.13) (.11) -- (.03)
Realized gain on investments--net (1.55) (.58) (1.40) (1.65) (.70)
-------- -------- -------- -------- --------
Total dividends and distributions (1.61) (.71) (1.51) (1.65) (.73)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.41 $ 13.37 $ 13.44 $ 13.31 $ 13.75
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.60%+++ 4.78% 13.91% 9.36% 28.96%
Return:** ======== ======== ======== ======== ========
Ratios to Average Expenses 1.23%* 1.24% 1.31% 1.22% 1.25%
Net Assets: ======== ======== ======== ======== ========
Investment income--net .72%* .92% 1.40% .48% .28%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $290,759 $279,351 $286,258 $255,856 $197,995
Data: ======== ======== ======== ======== ========
Portfolio turnover 37.95% 87.66% 70.36% 63.95% 67.57%
======== ======== ======== ======== ========
Average commission rate paid++++ $ .0533 $ .0481 -- -- --
======== ======== ======== ======== ========
<PAGE>
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission per share for
purchases and sales of equity securities. The "Average Commission
Rate Paid" includes commissions paid in foreign currencies, which
have been converted in US dollars using the prevailing exchange rate
on the date of the transaction. Such conversions may significantly
affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Financial Highlights (continued)
<CAPTION>
Class B
For the
Six
The following per share data and ratios have been derived Months
from information provided in the financial statements. Ended
January 31, For the Year Ended July 31,
Increase (Decrease) in Net Asset Value: 1997++ 1996++ 1995++ 1994 1993
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 12.99 $ 13.12 $ 13.02 $ 13.46 $ 11.25
Operating -------- -------- -------- -------- --------
Performance: Investment income (loss)--net (.02) (.01) .04 (.07) (.02)
Realized and unrealized gain on investments
and foreign currency transactions--net 1.56 .50 1.45 1.11 2.93
-------- -------- -------- -------- --------
Total from investment operations 1.54 .49 1.49 1.04 2.91
-------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.04) (.02) -- --
Realized gain on investments--net (1.49) (.58) (1.37) (1.48) (.70)
-------- -------- -------- -------- --------
Total dividends and distributions (1.49) (.62) (1.39) (1.48) (.70)
-------- -------- -------- -------- --------
Net asset value, end of period $ 13.04 $ 12.99 $ 13.12 $ 13.02 $ 13.46
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.05%+++ 3.67% 12.83% 8.21% 27.66%
Return:** ======== ======== ======== ======== ========
<PAGE>
Ratios to Average Expenses 2.26%* 2.26% 2.34% 2.24% 2.27%
Net Assets: ======== ======== ======== ======== ========
Investment income (loss)--net (.32%)* (.11%) .37% (.51%) (.73%)
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in thousands) $372,280 $381,808 $414,886 $362,129 $209,534
Data: ======== ======== ======== ======== ========
Portfolio turnover 37.95% 87.66% 70.36% 63.95% 67.57%
======== ======== ======== ======== ========
Average commission rate paid++++ $ .0533 $ .0481 -- -- --
======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effects of sales loads.
++Based on average shares outstanding during the period.
++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission per share for
purchases and sales of equity securities. The "Average Commission
Rate Paid" includes commissions paid in foreign currencies, which
have been converted in US dollars using the prevailing exchange rate
on the date of the transaction. Such conversions may significantly
affect the rate shown.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights (concluded)
<CAPTION>
Class C++++ Class D++++
For the For the For the For the
Six For the Period Six For the Period
The following per share data and ratios have been derived Months Year Oct. 21, Months Year Oct. 21,
from information provided in the financial statements. Ended Ended 1994++ to Ended Ended 1994++ to
Jan. 31, July 31, July 31, Jan. 31, July 31, July 31,
Increase (Decrease) in Net Asset Value: 1997 1996 1995 1997 1996 1995
<S> <S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of
Operating period $ 12.92 $ 13.07 $ 12.31 $ 13.35 $ 13.43 $ 12.57
Performance: -------- -------- -------- -------- -------- --------
<PAGE> Investment income (loss) net (.02) (.02) .03 .03 .09 .11
Realized and unrealized gain on
investments and foreign currency
transactions--net 1.55 .51 1.21 1.61 .51 1.25
-------- -------- -------- -------- -------- --------
Total from investment operations 1.53 .49 1.24 1.64 .60 1.36
-------- -------- -------- -------- -------- --------
Less dividends and distributions:
Investment income--net -- (.06) (.05) (.04) (.10) (.07)
Realized gain on investments--net (1.49) (.58) (.43) (1.54) (.58) (.43)
-------- -------- -------- -------- -------- --------
Total dividends and distributions (1.49) (.64) (.48) (1.58) (.68) (.50)
-------- -------- -------- -------- -------- --------
Net asset value, end of period $ 12.96 $ 12.92 $ 13.07 $ 13.41 $ 13.35 $ 13.43
======== ======== ======== ======== ======== ========
Total Investment Based on net asset value per share 13.04%+++ 3.69% 10.99%+++ 13.52%+++ 4.50% 11.72%+++
Return:** ======== ======== ======== ======== ======== ========
Ratios to Average Expenses 2.27%* 2.27% 2.39%* 1.49%* 1.48% 1.60%*
Net Assets: ======== ======== ======== ======== ======== ========
Investment income (loss)--net (.33%)* (.12%) .34%* .49%* .67% 1.11%*
======== ======== ======== ======== ======== ========
Supplemental Net assets, end of period
Data: (in thousands) $ 15,503 $ 15,821 $ 11,775 $ 64,136 $ 48,873 $ 36,388
======== ======== ======== ======== ======== ========
Portfolio turnover 37.95% 87.66% 70.36% 37.95% 87.66% 70.36%
======== ======== ======== ======== ======== ========
Average commission rate paid++++++ $ .0533 $ .0481 -- $ .0533 $ .0481 --
======== ======== ======== ======== ======== ========
<FN>
*Annualized.
**Total investment returns exclude the effect of sales loads.
++Commencement of Operations.
++++Based on average shares outstanding during the period.
++++++For fiscal years beginning on or after September 1, 1995, the
Fund is required to disclose its average commission rate per share
for purchases and sales of equity securities. The "Average
Commission Rate Paid" includes commissions paid in foreign
currencies, which have been converted in US dollars using the
prevailing exchange rate on the date of the transaction. Such
conversions may significantly affect the rate shown.
+++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. These unaudited financial statements
reflect all adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the interim period
presented. All such adjustments are of a normal recurring nature.
The Fund offers four classes of shares under the Merrill Lynch
Select Pricing SM System. Shares of Class A and Class D are sold with
a front-end sales charge. Shares of Class B and Class C may be
subject to a contingent deferred sales charge. All classes of shares
have identical voting, dividend, liquidation and other rights and
the same terms and conditions, except that Class B, Class C and
Class D Shares bear certain expenses related to the account
maintenance of such shares, and Class B and Class C Shares also bear
certain expenses related to the distribution of such shares. Each
class has exclusive voting rights with respect to matters relating
to its account maintenance and 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. Options written are valued
at the last sale price in the case of exchange-traded options or, in
the case of options traded in the over-the-counter market, the last
asked price. Options purchased are valued at the last sale price in
the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the last bid price. Short-
term securities are valued at amortized cost, which approximates
market value. Other investments, including futures contracts and
related options, 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.
<PAGE>
(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.
* Options--The Fund is authorized to write covered call options and
purchase put options. When the Fund writes an option, an amount
equal to the premium received by the Fund is reflected as an asset
and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current market value of
the option written. When a security is purchased or sold through an
exercise of an option, the related premium paid (or received) is
added to (or deducted from) the basis of the security acquired or
deducted from (or added to) the proceeds of the security sold. When
an option expires (or the Fund enters into a closing transaction),
the Fund realizes a gain or loss on the option to the extent of the
premiums received or paid (or gain or loss to the extent the cost of
the closing transaction exceeds the premium paid or received).
Written and purchased options are non-income producing investments.
(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.
NOTES TO FINANCIAL STATEMENTS (continued)
(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 re-
quired. Under the applicable foreign tax law, a withholding tax may
be imposed on interest, dividends, and capital gains at various
rates.
<PAGE>
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-
dividend dates. Dividends from foreign securities where the ex-
dividend date may have passed are subsequently recorded when the
Fund has determined the ex-dividend date. Interest income (including
amortization of discount) is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends and distributions paid by
the Fund are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with Fund
Asset Management, L.P. ("FAM"). The general partner of FAM is
Princeton Services, Inc. ("PSI"), an indirect wholly-owned
subsidiary of Merrill Lynch & Co., Inc. ("ML & Co."), which is the
limited partner. The Fund has also entered into a Distribution
Agreement and Distribution Plans with Merrill Lynch Funds
Distributor, Inc. ("MLFD" or "Distributor"), a wholly-owned
subsidiary of Merrill Lynch Group, Inc.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, 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.
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% --
<PAGE>
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.
For the six months ended January 31, 1997, MLFD earned underwriting
discounts and direct commissions 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 $1,245 $14,918
Class D $4,366 $47,860
For the six months ended January 31, 1997, MLPF&S received
contingent deferred sales charges of $291,033 and $2,977 relating to
transactions in Class B and Class C Shares, respectively.
During the six months ended January 31, 1997, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $26 for
security price quotations to compute the net asset value of the
Fund.
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, MLFDS, MLFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended January 31, 1997 were $255,339,283 and
$331,052,452, respectively.
Net realized and unrealized gains (losses) as of January 31, 1997
were as follows:
<PAGE>
Realized Unrealized
Gains (Losses) Gains (Losses)
Long-term investments $ 58,479,573 $ 22,078,939
Short-term investments (78) --
Foreign currency
transactions -- (51)
------------ ------------
Total $ 58,479,495 $ 22,078,888
============ ============
As of January 31, 1997, net unrealized appreciation for Federal
income tax purposes aggregated $22,078,939, of which $86,519,513
related to appreciated securities and $64,440,574 related to
depreciated securities. At January 31, 1997, the aggregate cost of
investments for Federal income tax purposes was $723,102,710.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $9,268,569 and $(16,090,922) for the six months
ended January 31, 1997 and the year ended July 31, 1996,
respectively.
Transactions in capital shares for each class were as follows:
Class A Shares for the Six Dollar
Months Ended January 31, 1997 Shares Amount
Shares sold 1,495,419 $ 19,583,845
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,408,271 29,567,961
------------ ------------
Total issued 3,903,690 49,151,806
Shares redeemed (3,120,623) (40,613,274)
------------ ------------
Net increase 783,067 $ 8,538,532
============ ============
Class A Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
<PAGE>
Shares sold 4,419,265 $ 59,891,082
Shares issued to shareholders
in reinvestment of dividends
and distributions 740,876 9,936,546
------------ ------------
Total issued 5,160,141 69,827,628
Shares redeemed (5,561,880) (74,905,949)
------------ ------------
Net decrease (401,739) $ (5,078,321)
============ ============
Class B Shares for the Six Dollar
Months Ended January 31, 1997 Shares Amount
Shares sold 2,055,284 $ 26,172,996
Shares issued to shareholders
in reinvestment of
distributions 3,291,225 39,178,069
------------ ------------
Total issued 5,346,509 65,351,065
Automatic conversion
of shares (933,269) (11,970,065)
Shares redeemed (5,254,593) (66,648,044)
------------ ------------
Net decrease (841,353) $(13,267,044)
============ ============
Class B Shares for the Year Dollar
Ended July 31, 1996 Shares Amount
Shares sold 7,242,432 $ 96,582,253
Shares issued to shareholders
in reinvestment of dividends
and distributions 946,032 12,394,778
------------ ------------
Total issued 8,188,464 108,977,031
Automatic conversion
of shares (342,861) (4,498,278)
Shares redeemed (10,082,987) (132,916,921)
------------ ------------
Net decrease (2,237,384) $(28,438,168)
============ ============
<PAGE>
NOTES TO FINANCIAL STATEMENTS (concluded)
Class C Shares for the
Six Months Ended Dollar
January 31, 1997 Shares Amount
Shares sold 147,494 $ 1,863,336
Shares issued to shareholders
in reinvestment of
distributions 136,318 1,613,090
------------ ------------
Total issued 283,812 3,476,426
Shares redeemed (312,141) (3,931,180)
------------ ------------
Net decrease (28,329) $ (454,754)
============ ============
Class C Shares for the
Year Ended Dollar
July 31, 1996 Shares Amount
Shares sold 692,164 $ 9,157,835
Shares issued to shareholders
in reinvestment of dividends
and distributions 32,179 419,140
------------ ------------
Total issued 724,343 9,576,975
Shares redeemed (400,702) (5,315,980)
------------ ------------
Net increase 323,641 $ 4,260,995
============ ============
Class D Shares for the Six Dollar
Months Ended January 31, 1997 Shares Amount
Shares sold 576,101 $ 7,586,948
Automatic conversion
of shares 906,930 11,970,065
Shares issued to shareholders
in reinvestment of dividends
and distributions 454,079 5,575,759
------------ ------------
Total issued 1,937,110 25,132,772
Shares redeemed (813,835) (10,680,937)
------------ ------------
Net increase 1,123,275 $ 14,451,835
============ ============
<PAGE>
Class D Shares for the Dollar
Year Ended July 31, 1996 Shares Amount
Shares sold 2,067,920 $ 28,313,198
Automatic conversion
of shares 334,895 4,498,278
Shares issued to shareholders
in reinvestment of dividends
and distributions 105,562 1,413,741
------------ ------------
Total issued 2,508,377 34,225,217
Shares redeemed (1,557,098) (21,060,645)
------------ ------------
Net increase 951,279 $ 13,164,572
============ ============
PORTFOLIO INFORMATION
For the Quarter Ended January 31, 1997
Percent of
Ten Largest Holdings Net Assets
Computervision Corp. 4.1%
Pharmaceutical Product
Development, Inc. 4.0
U S West Media Group 3.8
Transitional Hospitals Corp. 3.4
Amdahl Corp. 3.4
Tandem Computers, Inc. 2.8
Integrated Device Technology, Inc. 2.8
Woolworth Corp. 2.7
Novell Inc. 2.5
Oryx Energy Co. 2.3
Percent of
Five Largest Industries Net Assets
Health Care 13.5%
Computer Software 10.9
Computer Hardware 8.8
Retail 8.3
Cable 7.9
<PAGE>
Percent of
Asset Mix Net Assets
Stocks 81.0%
Bonds 11.8
Cash & Cash Equivalents 7.2
Additions (Equity Investments)
AT&T Corp.
Alcatel Alsthom Compagnie d'Electricite S.A. (ADR)
Bay Networks Inc.
Beverly Enterprises, Inc.
CompuServe Corporation
Digital Equipment Corp.
Humana, Inc.
Mentor Graphics Corporation
Mid Atlantic Medical Services, Inc.
Tele-Communications, Inc. (Class A)
Toys 'R' Us, Inc.
Deletions (Equity Investments)
ADT Ltd. (ADR)
Allwaste Inc.
Cox Communications, Inc. (Class A)
Dime Bancorp, Inc.
Matrix Service Co.
NVR, Inc.
National Semiconductor Corp.
Resurgence Properties Inc.
Specialty Equipment Companies Inc.
TETRA Technologies, Inc.
Tekelec Inc.
Unilab Corp.
VLSI Technology, Inc.
