MERRILL LYNCH
PHOENIX
FUND, INC.
[FUND LOGO]
STRATEGIC
Performance
Semi-Annual Report
January 31, 1998
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
Robert J. Martorelli, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
Robert Harris, Secretary
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 #10263 -- 1/98
[RECYCLE LOGO]
Printed on post-consumer recycled paper
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
Volatility continued to highlight stock and bond markets worldwide
during the quarter ended January 31, 1998. The initial focus of
investor concerns was the widening financial crisis in Asia. In the
wake of a series of currency devaluations, many emerging economies are
facing the challenges of higher interest rates, slowing economic
growth and declining corporate earnings. Although the announcement of
International Monetary Fund (IMF) loan packages to Thailand, Indonesia
and Korea initially reassured investors, the stringent terms of the
loans and their potential negative impact on these already beleaguered
economies are now being called into question. In Japan, the failure of
several major financial institutions has undermined the prospects for
economic recovery.
As developments in Asia continue to unfold, US equity investors are
trying to gauge the impact of poorer Asian economic prospects on
multinational corporations. Although there have been periods of rising
share prices, investor confidence has not been definitively restored.
The US bond market benefited from a "flight to quality" as investors
anticipated slower economic growth, but the release of stronger-than-
expected economic statistics also prompted periods of declining bond
prices.
As 1998 progresses, investors are likely to continue to focus on the
prospects for the US economy within the context of international
developments. The uncertainties created by the ongoing developments in
Asia -- combined with the absence of inflationary pressures and the
prospect of a balanced Federal budget -- have kept monetary policy "on
hold" for the present. It remains to be seen whether the trends of
moderate economic growth and low inflation will continue, which would
make it unlikely that the Federal Reserve Board would tighten monetary
policy early in the new year.
Portfolio Matters
In our last report to shareholders, we noted how periods of stock
market declines create investment opportunities for contrarian
investors such as Merrill Lynch Phoenix Fund, Inc. This trend
continued during the quarter ended January 31, 1998. Most of our
purchases were focused on existing holdings; we added only one new
common stock to the portfolio during the quarter, Union Pacific
Corporation.
Union Pacific (UNP) is the largest domestic railroad company operating
in the United States. The company was created through the 1996 merger
of the Union Pacific and Southern Pacific railroads. Integration
problems caused the combined company to experience severe congestion
on its rail systems, delaying customer shipments. Since August 1997,
UNP has been working to restore its service under regulatory
supervision. The service problem has resulted in lost revenues and
higher-than-normal operating costs. As of early February, the company
has restored virtually all of its services, with the exception of the
Texas Gulf coast. UNP management has indicated that it hopes to
resolve its remaining problem areas by the end of the first calendar
quarter of 1998. We believe that a return to normal operations would
allow UNP to benefit from the economies of scale that the combined
company provides and improve earnings. Further regulatory intervention
remains a risk if the company's recovery plan fails.
The Asian financial crisis caused a number of the Fund's holdings to
decline substantially, enabling us to add to our positions at
attractive valuations. Although we expect that earnings growth for
these companies will be negatively impacted by the developments in
Asia, we believe that the magnitude of price declines for these stocks
was overdone.
Shares of LTX Corp. -- a manufacturer of test equipment for the
semiconductor industry -- declined as investors became concerned that
there would be a slowdown in orders by Asian semiconductor
manufacturers. We believe LTX's move into "system-on-a-chip" testing,
a rapidly growing segment of the electronics market, will enable the
company to weather the near-term turbulence and eventually will
provide a source for high earnings growth in the future. In the
meantime, the company's good balance sheet and the low price/book
value ratio of its shares should support current stock price levels
during the product transition.
Another portfolio holding affected by the Asian crisis is IMC Global,
Inc., the world's largest miner of phosphate rock and potash. Although
Asia traditionally has been an area of strong export demand for
fertilizer manufacturers, we believe that food-related products will
be among the areas least affected by the slowdown. Additionally, the
market is becoming highly concentrated among a few companies, so
pricing should improve in the future. Finally, IMC is diversifying
into salt production and other specialty chemicals through its
acquisition of Harris Chemical Group, Inc., which will make the
company less susceptible to the vagaries of the fertilizer market.
As has been the case recently, the uncertain investment climate proved
difficult for many of our smaller-capitalization, turnaround
investments, even those with limited Asian exposure. Two of our
largest holdings, Novell Inc. and Borland International, Inc.,
declined to valuation levels that were so attractive, in our view,
that we added to our already substantial positions.
Frequently, a fund's largest holding is an equity that has had the
strongest price appreciation. However, Novell Inc. is Merrill Lynch
Phoenix Fund's top holding for the opposite reason. Novell has a
dominant market share in networking software, promising new products
that are being delivered on schedule and $1 billion in cash.
Furthermore, the company has a new chief executive officer, Eric
Schmidt, who was formerly chief technology officer at Sun
Microsystems, Inc. Novell's share price declined in the general
technology sell-off. At the current share price, we see limited
downside risk for Novell, given its strong market share and excess
cash. On the other hand, Novell's upside price potential may be
substantial if the company can execute its business plan and provide
an effective alternative to Microsoft Corp. networking software.
The share price of Borland International, Inc., a provider of products
for software application developers worldwide, declined recently along
with other technology stocks. The company's announced acquisition of
Visigenics Corp. should provide the company's relatively new
management team with the product portfolio needed to achieve double-
digit earnings growth rates. Borland's stock currently sells at a
modest premium to its net cash position. Borland also has reported
three consecutive fiscal quarters of improving profitability.
Among our high-yield/distressed investments, we added two new
positions in the wireless communications area: CS Wireless Systems
Inc. and CAI Wireless Systems Inc. Both bond issues were trading at
steep discounts following the failure of their respective companies to
market a competitive wireless cable television service successfully.
Nevertheless, we believe these bonds are undervalued based on the
companies' broadcast spectrums, which are well-suited to wireless
telephony and may be attractive for acquisition.
We sold our investments in Electronic Data Systems Corp. and General
Signal Corporation, both relatively small positions, since their share
prices had reached our target levels. We also sold our investment in
Laidlaw, Inc., since the stock price was fairly valued, in our view.
Digital Equipment Corp. was eliminated following the announcement of
its pending acquisition by Compaq Computer Corp. Finally, Hanson PLC
was removed from the portfolio.
In Conclusion
As long as the stock market volatility continues, we expect new
investment opportunities to emerge in attractively valued individual
issues. We plan to use periods of share price strength to realize
profits on holdings that have met or exceeded our expectations. This
strategy will afford us purchasing power should earnings
disappointments or other factors lead to price declines for those
issues we have targeted as potential portfolio investments.
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
/S/ARTHUR ZEIKEL
Arthur Zeikel
President
/S/ROBERT J. MARTORELLI
Robert J. Martorelli
Senior Vice President and Portfolio Manager
March 9, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select PricingSM System, which offers four pricing alternatives:
[bullet] 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.
[bullet] 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.)
[bullet] 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.
[bullet] 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. Figures shown in the "Average Annual Total
Return" tables as well as the total returns and cumulative total
returns in the "Performance Summary" tables assume reinvestment of all
dividends and capital gains distributions at net asset value on the
ex-dividend date. 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>
<CAPTION>
Recent Performance Results
12 Month 3 Month
1/31/98 10/31/97 1/31/97 % Change % Change
<S> <C> <C> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* $12.89 $13.29 $13.41 + 6.97%(1) -0.60%(2)
ML Phoenix Fund, Inc. Class B Shares* 12.42 12.83 13.04 + 6.38(1) -0.70(2)
ML Phoenix Fund, Inc. Class C Shares* 12.32 12.74 12.96 + 6.25(1) -0.79(2)
ML Phoenix Fund, Inc. Class D Shares* 12.87 13.27 13.41 + 6.82(1) -0.60(2)
Dow Jones Industrial Average** 7,906.50 7,442.08 6,813.09 +16.05 +6.24
Standard & Poor's 500 Index** 980.28 914.62 786.16 +24.69 +7.18
ML Phoenix Fund, Inc. Class A Shares -- Total Return* +21.15(3) +3.53(4)
ML Phoenix Fund, Inc. Class B Shares -- Total Return* +19.91(5) +3.28(6)
ML Phoenix Fund, Inc. Class C Shares -- Total Return* +19.86(7) +3.22(8)
ML Phoenix Fund, Inc. Class D Shares -- Total Return* +20.78(9) +3.46(10)
Dow Jones Industrial Average -- Total Return** +18.14 +6.70
Standard & Poor's 500 Index -- Total Return** +26.89 +7.62
* 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 $1.467 per share capital gains distributions.
(2) Percent change includes reinvestment of $0.309 per share capital gains distributions.
(3) Percent change includes reinvestment of $1.809 per share ordinary income dividends and $1.467 per share capital gains
distributions.
(4) Percent change includes reinvestment of $0.531 per share ordinary income dividends and $0.309 per share capital gains
distributions.
(5) Percent change includes reinvestment of $1.682 per share ordinary income dividends and $1.467 per share capital gains
distributions.
(6) Percent change includes reinvestment of $0.495 per share ordinary income dividends and $0.309 per share capital gains
distributions.
(7) Percent change includes reinvestment of $1.682 per share ordinary income dividends and $1.467 per share capital gains
distributions.
(8) Percent change includes reinvestment of $0.494 per share ordinary income dividends and $0.309 per share capital gains
distributions.
(9) Percent change includes reinvestment of $1.782 per share ordinary income dividends and $1.467 per share capital gains
distributions.
(10) Percent change includes reinvestment of $0.522 per share ordinary income dividends and $0.309 per share capital gains
distributions.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class A Shares
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
1997 13.19 12.54 1.467 1.809 +19.83
1/1/98 -- 1/31/98 12.54 12.89 -- -- + 2.79
Total $14.067 Total $10.142
Cumulative total return as of 1/31/98: +900.34%**
* Figures may include short-term capital gains distributions.
** Figures do not include sales charge; results would be lower if sales charge was included.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class B Shares
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
1997 12.83 12.09 1.467 1.682 +18.63
1/1/98 -- 1/31/98 12.09 12.42 -- -- + 2.73
Total $6.832 Total $6.024
Cumulative total return as of 1/31/98: +201.98%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class C Shares
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
1997 12.75 12.00 1.467 1.682 +18.67
1/1/98 -- 1/31/98 12.00 12.32 -- -- + 2.67
Total $2.758 Total $3.008
Cumulative total return as of 1/31/98: +55.93%**
* Figures may include short-term capital gains distributions.
** Figures do not reflect deduction of any sales charge; results would be lower if sales charge was deducted.
</TABLE>
<TABLE>
<CAPTION>
Performance Summary -- Class D Shares
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
1997 13.18 12.52 1.467 1.782 +19.54
1/1/98 -- 1/31/98 12.52 12.87 -- -- + 2.80
Total $2.758 Total $3.259
Cumulative total return as of 1/31/98: +60.07%**
* Figures may include short-term capital gains distributions.
** Figures 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 12/31/97 +19.83% +13.54%
Five Years Ended 12/31/97 +15.42 +14.18
Ten Years Ended 12/31/97 +15.65 +15.02
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/97 +18.63% +14.91%
Five Years Ended 12/31/97 +14.25 +14.25
Inception (10/21/88)
through 12/31/97 +12.44 +12.44
* 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 12/31/97 +18.67% +17.74%
Inception (10/21/94)
through 12/31/97 +13.98 +13.98
* 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 12/31/97 +19.54% +13.27%
Inception (10/21/94)
through 12/31/97 +14.87 +12.95
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
<TABLE>
<CAPTION>
Merrill Lynch Phoenix Fund, Inc. January 31, 1998
Schedule of investments
Face Amount/ Value Percent of
Industry Shares Held Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Discount to Assets
Cable 400,000 +TCI Ventures Group (Series A)(e) $6,317,459 $11,800,000 1.7%
Leisure & 472,700 The Seagram Co., Ltd. 16,151,157 16,130,888 2.4
Entertainment 663,100 +Viacom, Inc. (Class B)(Non-Voting) 19,213,823 27,684,425 4.0
Printing & 900,000 Scitex Corp. Ltd. 9,795,111 8,831,250 1.3
Publishing ------------ ------------ ------
Total Discount to Assets 51,477,550 64,446,563 9.4
============ ============ ======
Earning Turnarounds
Computer Software 1,400,000 +Mentor Graphics Corporation 14,049,847 12,775,000 1.9
Consumer Products 2,700,000 +The Topps Co., Inc. (d) 14,976,635 7,087,500 1.0
Energy Related 1,500,000 +EEX Corp. (a) 12,185,504 12,656,250 1.8
Environmental 400,000 Waste Management, Inc. 9,400,960 9,400,000 1.4
Gold 600,000 Placer Dome Inc. 9,886,838 7,725,000 1.1
Health Care 675,000 +Humana, Inc. 13,145,181 13,542,188 2.0
1,300,000 +NeoRx Corp. (d) 7,991,431 7,393,750 1.1
Industrial Services 1,407,670 +Anacomp, Inc. 9,137,200 22,170,803 3.2
Leisure & 900,000 +CST Entertainment Imaging, Inc. (c) 675,000 9,000 0.0
Entertainment
Pharmaceuticals 425,000 Pharmacia & Upjohn, Inc. 14,380,282 16,335,937 2.4
Retail 3,174,000 +CML Group, Inc. (d) 13,988,190 5,554,500 0.8
Semiconductor 1,792,200 +Integrated Device Technology, Inc. 18,036,606 24,194,700 3.5
2,350,000 +LTX Corp. (d) 14,351,697 12,043,750 1.8
Steel 790,700 Birmingham Steel Corp. 12,203,104 13,095,969 1.9
Telecommunications 800,000 +ANTEC Corporation 6,866,993 10,300,000 1.5
Equipment
Transportation 1,125,000 +Mesa Air Group, Inc. 7,188,261 7,593,750 1.1
200,000 Union Pacific Corporation 11,811,100 12,000,000 1.8
------------ ------------ ------
Total Earning Turnarounds 190,274,829 193,878,097 28.3
============ ============ ======
Financial Restructuring
Automotive $3,000,000 +Harvard Industries Inc., Senior Notes,
11.125% due 8/01/2005 910,000 960,000 0.1
Energy Related 1,938,474 +WRT Energy Corp. -- Litigation Trust
Certificates 370,838 2 0.0
1,938,475 +WRT Energy Corp. -- New Common Stock 16,017,828 7,996,209 1.2
Home Builders 520,000 +New Millenium Homes, LLC 1,934,501 1,560,000 0.2
$10,250,000 New Millenium Homes, LLC, Senior Notes,
12% due 8/29/2004 9,037,726 10,045,000 1.5
Retail 443,361 +Zale Corp. Litigation Limited Partnership
Units 0 0 0.0
Telecommunications $11,000,000 CS Wireless Systems Inc., Senior Discount
Notes, 11.375% due 3/01/2006 2,642,084 2,420,000 0.4
Textiles 205,506 +The Bibb Co. 1,347,094 1,669,736 0.2
------------ ------------ ------
Total Financial Restructuring 32,260,071 24,650,947 3.6
============ ============ ======
High Yield
Consumer Products $2,470,000 Specialty Foods Corp., Senior Subordinated
Notes, 11.25% due 8/15/2003 $1,984,987 $2,321,800 0.3%
$3,000,000 Town & Country Corporation, Senior
Subordinated Notes, 13% due 5/31/1998 2,323,750 750,000 0.1
$8,190,000 U.S. Leather Inc., Senior Notes, 10.25%
due 7/31/2003 5,501,375 3,685,500 0.5
Gold $2,000,000 Royal Oak Mines Inc., 11% due 8/15/2006 1,520,000 1,420,000 0.2
Home Builders $20,500,000 +Baldwin Homes, Series B, 10.375% due
8/01/2003 8,541,125 8,815,000 1.3
Printing & $6,255,400 San Jacinto Holdings, Inc., Senior
Publishing Subordinated Notes, 12% due 12/31/2002 4,048,512 4,691,550 0.7
Supermarkets $25,000,000 Grand Union Co., Senior Notes, 12% due
9/01/2004 12,459,945 11,250,000 1.6
Telecommunications $6,400,000 CAI Wireless Systems Inc., Senior Notes,
12.25% due 9/15/2002 1,774,500 1,760,000 0.3
$23,700,000 +MobileMedia Corp., Senior Subordinated Notes,
9.375% due 11/01/2007 5,589,625 2,607,000 0.4
------------ ------------ ------
Total High Yield 43,743,819 37,300,850 5.4
============ ============ ======
Operational
Restructuring
Cable 300,000 +TCI Group (Series A)(e) 3,946,173 8,400,000 1.2
800,000 +U S West Media Group 14,582,956 23,750,000 3.5
Chemicals 500,000 IMC Global, Inc. 17,506,928 16,125,000 2.4
Computer Services 1,463,000 +CompuServe Corporation 15,091,544 21,122,062 3.1
Computer Software 2,940,000 +Borland International, Inc. (d) 33,987,400 22,233,750 3.2
4,500,000 +Novell Inc. 41,271,080 31,781,250 4.6
415,680 +Parametric Technology Corp. (b) 28,106,873 21,095,760 3.1
Consumer Products 300,000 Tupperware Corporation 8,336,593 7,668,750 1.1
Energy Related 400,000 +Oryx Energy Co. 4,930,951 9,600,000 1.4
Engineering 767,800 +EMCOR Group, Inc. 6,370,565 16,027,825 2.3
Financial Services 605,000 H & R Block, Inc. 22,957,126 26,544,375 3.9
Health Care 350,000 Columbia/HCA Healthcare Corp. 10,128,044 8,750,000 1.3
1,438,200 +Pharmaceutical Product Development, Inc. (d) 20,443,906 24,089,850 3.5
Pharmaceuticals 1,669,000 +IVAX Corp. 15,017,278 12,517,500 1.8
Steel 1,298,500 +WHX Corp. (d) 11,160,678 15,825,469 2.3
Telecommunications 300,000 AT&T Corp. 11,137,325 18,787,500 2.7
Telecommunications 103,600 +CommScope, Inc. 1,385,372 1,359,750 0.2
Equipment ------------ ------------ ------
Total Operational Restructuring 266,360,792 285,678,841 41.6
============ ============ ======
Total Investments 584,117,061 605,955,298 88.3
============ ============ ======
<CAPTION>
Value Percent of
Face Amount Short-Term Investments Cost (Note 1a) Net Assets
<S> <C> <C> <C> <C> <C>
Commercial Paper* $9,431,000 Allomon Funding Corp., 5.48% due 2/02/1998 $9,428,129 $9,428,129 1.4%
22,358,000 General Motors Acceptance Corp., 5.63%
due 2/02/1998 22,351,007 22,351,007 3.2
------------ ------------ ------
Total Short-Term Investments 31,779,136 31,779,136 4.6
============ ============ ======
Total Investments $615,896,197 637,734,434 92.9
============
Other Assets Less Liabilities 48,392,966 7.1
------------ ------
Net Assets $686,127,400 100.0%
============ ======
* 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.
+ Non-income producing security.
(a) On December 22, 1997, Enserch Exploration, Inc. changed its name to EEX Corp.
(b) On January 12, 1998, Parametric Technology Corp. merged with Computervision Corp. The Fund received .0866 shares of
Parametric Technology Corp. stock for each share of Computervision Corp. stock.
(c) The security may be offered and sold to "qualified institutional buyers" under Rule 144A of the Security Act of 1933.
(d) Investment in companies 5% or more of whose outstanding securities are held by the Fund (such companies are defined as
"Affiliated Companies" in Section 2(a)(3) of the Investment Company Act of 1940) are as follows:
<CAPTION>
Net Share Net Dividend
Industry Affiliate Activity Cost Income
<S> <C> <C> <C> <C>
Computer Software Borland International, Inc. 355,000 $2,684,694 --
Consumer Products The Topps Co., Inc. 200,000 541,250 --
Health Care NeoRx Corp. -- -- --
Health Care Pharmaceutical Product Development, Inc. 180,600 2,126,587 --
Retail CML Group, Inc. (996,000) (9,894,755) --
Semiconductor LTX Corp. 1,692,300 10,404,248 --
Steel WHX Corp. (300,000) (3,466,753) --
(e) Received in exchange offer for Tele-Communications, Inc.
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of January 31, 1998
<S> <C> <C> <C>
Assets: Investments, at value (identified cost -- $615,896,197) (Note 1a) $637,734,434
Cash 86
Foreign cash (Note 1c) 257
Receivables:
Securities sold $52,082,544
Interest 2,845,727
Dividends 369,726
Capital shares sold 329,580 55,627,577
--------------
Prepaid registration fees and other assets (Note 1f) 75,520
--------------
Total assets 693,437,874
--------------
Liabilities: Payables:
Securities purchased 4,451,913
Capital shares redeemed 1,594,884
Investment adviser (Note 2) 546,999
Distributor (Note 2) 273,033 6,866,829
--------------
Accrued expenses and other liabilities 443,645
--------------
Total liabilities 7,310,474
--------------
Net Assets: Net assets $686,127,400
==============
Net Assets Class A Shares of Common Stock, $0.10 par value, 50,000,000
Consist of: shares authorized $2,198,778
Class B Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 2,442,442
Class C Shares of Common Stock, $0.10 par value, 50,000,000
shares authorized 101,931
Class D Shares of Common Stock, $0.10 par value, 100,000,000
shares authorized 676,133
Paid-in capital in excess of par 633,087,626
Accumulated investment loss -- net (542,948)
Undistributed realized capital gains on investments and foreign
currency transactions -- net 26,325,284
Unrealized appreciation on investments and foreign currency
transactions -- net 21,838,154
--------------
Net assets $686,127,400
==============
Net Asset Class A -- Based on net assets of $283,326,499 and 21,987,781
Value: shares outstanding $12.89
==============
Class B -- Based on net assets of $303,240,673 and 24,424,420
shares outstanding $12.42
==============
Class C -- Based on net assets of $12,557,734 and 1,019,305
shares outstanding $12.32
==============
Class D -- Based on net assets of $87,002,494 and 6,761,325
shares outstanding $12.87
==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations for the Six Months Ended January 31, 1998
<S> <C> <C> <C>
Investment Interest and discount earned $5,357,725
Income Dividends (net of $50,714 foreign withholding tax) 1,689,647
(Notes 1d & 1e): --------------
Total income 7,047,372
--------------
Expenses: Investment advisory fees (Note 2) $3,553,883
Account maintenance and distribution fees -- Class B (Note 2) 1,615,715
Transfer agent fees -- Class B (Note 2) 343,885
Transfer agent fees -- Class A (Note 2) 283,275
Account maintenance fees -- Class D (Note 2) 109,019
Transfer agent fees -- Class D (Note 2) 82,953
Account maintenance and distribution fees -- Class C (Note 2) 67,288
Printing and shareholder reports 58,137
Accounting services (Note 2) 53,684
Registration fees (Note 1f) 47,723
Directors' fees and expenses 40,058
Professional fees 39,354
Custodian fees 25,616
Transfer agent fees -- Class C (Note 2) 15,109
Pricing fees 378
Other 11,979
--------------
Total expenses 6,348,056
--------------
Investment income -- net 699,316
--------------
Realized & Realized gain from investments -- net 71,682,629
Unrealized Gain Change in unrealized appreciation/depreciation on investments -- net (31,912,458)
(Loss) on --------------
Investments & Net realized and unrealized gain on investments and foreign
Foreign Currency currency transactions 39,770,171
Transactions -- Net --------------
(Notes 1b, 1c, Net Increase in Net Assets Resulting from Operations $40,469,487
1e & 3): ==============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Six For the
Months Ended Year Ended
January 31, July 31,
Increase (Decrease) in Net Assets: 1998 1997
<S> <C> <C> <C>
Operations: Investment income -- net $699,316 $1,568,152
Realized gain on investments and foreign currency transactions -- net 71,682,629 117,006,161
Change in unrealized appreciation/depreciation on investments and
foreign currency transactions -- net (31,912,458) 65,493,785
------------- -------------
Net increase in net assets resulting from operations 40,469,487 184,068,098
------------- -------------
Dividends & Investment income -- net:
Distributions to Class A (2,071,936) (1,322,009)
Shareholders Class B (331,618) --
(Note 1g): Class C (14,684) --
Class D (488,410) (167,328)
Realized gain on investments -- net:
Class A (63,710,745) (32,459,002)
Class B (70,993,494) (43,674,101)
Class C (2,997,794) (1,814,737)
Class D (18,334,157) (5,849,564)
------------- -------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (158,942,838) (85,286,741)
------------- -------------
Capital Share Net increase (decrease) in net assets derived from capital
Transactions share transactions 65,786,043 (85,819,453)
(Note 4): ------------- -------------
Net Assets: Total increase (decrease) in net assets (52,687,308) 12,961,904
Beginning of period 738,814,708 725,852,804
------------- -------------
End of period* $686,127,400 $738,814,708
============= =============
*Undistributed (accumulated) investment income (loss) -- net $(542,948) $1,664,384
============= =============
See Notes to Financial Statements.
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Class A
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended July 31,
Jan. 31, 1998+ 1997+ 1996+ 1995+ 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.32 $13.37 $13.44 $13.31 $13.75
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income -- net .05 .10 .13 .17 .03
Realized and unrealized gain on investments
and foreign currency transactions -- net .80 3.46 .51 1.47 1.18
---------- ---------- ---------- ---------- ----------
Total from investment operations .85 3.56 .64 1.64 1.21
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.11) (.06) (.13) (.11) --
Realized gain on investments -- net (3.17) (1.55) (.58) (1.40) (1.65)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.28) (1.61) (.71) (1.51) (1.65)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $12.89 $15.32 $13.37 $13.44 $13.31
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 6.05%++++ 29.78% 4.78% 13.91% 9.36%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 1.25%* 1.26% 1.24% 1.31% 1.22%
Net Assets: ========== ========== ========== ========== ==========
Investment income -- net .70%* .77% .92% 1.40% .48%
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $283,326 $301,936 $279,351 $286,258 $255,856
Data: ========== ========== ========== ========== ==========
Portfolio turnover 33.74% 81.46% 87.66% 70.36% 63.95%
========== ========== ========== ========== ==========
Average commission rate paid++ $.0556 $.0479 $.0481 -- --
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ 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 into 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>
<TABLE>
<CAPTION>
Class B+
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended For the Year Ended July 31,
Jan. 31, 1998+ 1997 1996 1995 1994
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $14.82 $12.99 $13.12 $13.02 $13.46
Operating ---------- ---------- ---------- ---------- ----------
Performance: Investment income (loss) -- net (.02) (.03) (.01) .04 (.07)
Realized and unrealized gain on investments
and foreign currency transactions -- net .76 3.35 .50 1.45 1.11
---------- ---------- ---------- ---------- ----------
Total from investment operations .74 3.32 .49 1.49 1.04
---------- ---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.01) -- (.04) (.02) --
Realized gain on investments -- net (3.13) (1.49) (.58) (1.37) (1.48)
---------- ---------- ---------- ---------- ----------
Total dividends and distributions (3.14) (1.49) (.62) (1.39) (1.48)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period $12.42 $14.82 $12.99 $13.12 $13.02
========== ========== ========== ========== ==========
Total Investment Based on net asset value per share 5.51%++++ 28.48% 3.67% 12.83% 8.21%
Return:** ========== ========== ========== ========== ==========
Ratios to Average Expenses 2.27%* 2.29% 2.26% 2.34% 2.24%
Net Assets: ========== ========== ========== ========== ==========
Investment income (loss) -- net (.32%)* (.26%) (.11%) .37% (.51%)
========== ========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $303,241 $337,022 $381,808 $414,886 $362,129
Data: ========== ========== ========== ========== ==========
Portfolio turnover 33.74% 81.46% 87.66% 70.36% 63.95%
========== ========== ========== ========== ==========
Average commission rate paid++ $.0556 $.0479 $.0481 -- --
========== ========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Based on average shares outstanding.
++ 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 into 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>
<TABLE>
<CAPTION>
Class C++
For the
For the Period
The following per share data and ratios have been derived Six Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended 1994+ to
Jan. 31, Ended July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $14.72 $12.92 $13.07 $12.31
Operating ---------- ---------- ---------- ----------
Performance: Investment income (loss) -- net (.02) (.04) (.02) .03
Realized and unrealized gain on investments
and foreign currency transactions -- net .77 3.33 .51 1.21
---------- ---------- ---------- ----------
Total from investment operations .75 3.29 .49 1.24
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.02) -- (.06) (.05)
Realized gain on investments -- net (3.13) (1.49) (.58) (.43)
---------- ---------- ---------- ----------
Total dividends and distributions (3.15) (1.49) (.64) (.48)
---------- ---------- ---------- ----------
Net asset value, end of period $12.32 $14.72 $12.92 $13.07
========== ========== ========== ==========
Total Investment Based on net asset value per share 5.53%++++ 28.39% 3.69% 10.99%++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 2.29%* 2.30% 2.27% 2.39%*
Net Assets: ========== ========== ========== ==========
Investment income (loss) -- net (.33%)* (.27%) (.12%) .34%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $12,558 $14,448 $15,821 $11,775
Data: ========== ========== ========== ==========
Portfolio turnover 33.74% 81.46% 87.66% 70.36%
========== ========== ========== ==========
Average commission rate paid+++ $.0556 $.0479 $.0481 --
========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ 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
into 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>
<TABLE>
<CAPTION>
Class D++
For the
For the Period
The following per share data and ratios have been derived Six Months Oct. 21,
from information provided in the financial statements. Ended For the Year Ended 1994+ to
Jan. 31, Ended July 31, July 31,
1998 1997 1996 1995
Increase (Decrease) in Net Asset Value:
<S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $15.29 $13.35 $13.43 $12.57
Operating ---------- ---------- ---------- ----------
Performance: Investment income -- net .03 .07 .09 .11
Realized and unrealized gain on investments
and foreign currency transactions -- net .80 3.45 .51 1.25
---------- ---------- ---------- ----------
Total from investment operations .83 3.52 .60 1.36
---------- ---------- ---------- ----------
Less dividends and distributions:
Investment income -- net (.09) (.04) (.10) (.07)
Realized gain on investments -- net (3.16) (1.54) (.58) (.43)
---------- ---------- ---------- ----------
Total dividends and distributions (3.25) (1.58) (.68) (.50)
---------- ---------- ---------- ----------
Net asset value, end of period $12.87 $15.29 $13.35 $13.43
========== ========== ========== ==========
Total Investment Based on net asset value per share 5.93%++++ 29.44% 4.50% 11.72%++++
Return:** ========== ========== ========== ==========
Ratios to Average Expenses 1.50%* 1.52% 1.48% 1.60%*
Net Assets: ========== ========== ========== ==========
Investment income -- net .44%* .54% .67% 1.11%*
========== ========== ========== ==========
Supplemental Net assets, end of period (in thousands) $87,002 $85,409 $48,873 $36,388
Data: ========== ========== ========== ==========
Portfolio turnover 33.74% 81.46% 87.66% 70.36%
========== ========== ========== ==========
Average commission rate paid+++ $.0556 $.0479 $.0481 --
========== ========== ========== ==========
* Annualized.
** Total investment returns exclude the effects of sales loads.
+ Commencement of operations.
++ Based on average shares outstanding.
+++ 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
into 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>
Merrill Lynch Phoenix Fund, Inc. January 31, 1998
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 PricingSM
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.
(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.
[bullet] 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.
[bullet] 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.
(d) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to
its shareholders. Therefore, no Federal income tax provision is
required. Under the applicable foreign tax law, a withholding tax may
be imposed on interest, dividends, and capital gains at various rates.
(e) Security transactions and investment income -- Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Dividend income is recorded on the ex-dividend
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 adopted by the Fund in accordance
with Rule 12b-1 under the Investment Company Act of 1940, the Fund
pays the Distributor ongoing account maintenance and distribution
fees. The fees are accrued daily and paid monthly at annual rates
based upon the average daily net assets of the shares as follows:
Account Distribution
Maintenance Fee Fee
Class B 0.25% 0.75%
Class C 0.25% 0.75%
Class D 0.25% --
Pursuant to a sub-agreement with the Distributor, Merrill Lynch,
Pierce, Fenner & Smith Inc. ("MLPF&S"), a subsidiary of ML & Co., also
provides account maintenance and distribution services to the Fund.
The ongoing account maintenance fee compensates the Distributor and
MLPF&S for providing account maintenance services to Class B, Class C
and Class D shareholders. The ongoing distribution fee compensates the
Distributor and MLPF&S for providing shareholder and distribution-
related services to Class B and Class C shareholders.
For the six months ended January 31, 1998, 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 $877 $12,705
Class D $847 $13,105
For the six months ended January 31, 1998, MLPF&S received contingent
deferred sales charges of $169,062 and $569 relating to transactions
in Class B and Class C Shares, respectively. Furthermore, MLFP&S
received contingent deferred sales charges of $12,795 relating to
transactions in Class A Shares.
In addition, MLPF&S received $9,210 in commissions on the execution of
portfolio security transactions for the Fund for the six months ended
January 31, 1998.
During the six months ended January 31, 1998, the Fund paid Merrill
Lynch Security Pricing Service, an affiliate of MLPF&S, $107 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, 1998 were $221,605,472 and
$327,643,148, respectively.
Net realized and unrealized gains (losses) as of
January 31, 1998 were as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $71,682,639 $21,838,237
Short-term investments (10) --
Foreign currency
transactions -- (83)
-------------- --------------
Total $71,682,629 $21,838,154
============== ==============
As of January 31, 1998, net unrealized appreciation for Federal income
tax purposes aggregated $21,838,237, of which $97,048,007 related to
appreciated securities and $75,209,770 related to depreciated
securities. At January 31, 1998, the aggregate cost of investments for
Federal income tax purposes was $615,896,197.
4. Capital Share Transactions:
Net increase (decrease) in net assets derived from capital share
transactions was $65,786,043 and $(85,819,453) for the six months
ended January 31, 1998 and for the year ended July 31, 1997,
respectively.
Transactions in capital shares for each class were
as follows:
Class A Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 1,580,193 $21,518,855
Shares issued to shareholders
in reinvestment of dividends
and distributions 4,281,696 56,397,472
------------- -------------
Total issued 5,861,889 77,916,327
Shares redeemed (3,588,516) (48,070,031)
------------- -------------
Net increase 2,273,373 $29,846,296
============= =============
Class A Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 3,245,516 $43,038,169
Shares issued to shareholders
in reinvestment of dividends
and distributions 2,408,271 29,567,961
------------- -------------
Total issued 5,653,787 72,606,130
Shares redeemed (6,835,778) (90,944,050)
------------- -------------
Net decrease (1,181,991) $(18,337,920)
============= =============
Class B Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 1,334,474 $17,693,221
Shares issued to shareholders
in reinvestment of dividends
and distributions 5,085,899 64,767,544
------------- -------------
Total issued 6,420,373 82,460,765
Automatic conversion
of shares (660,768) (8,684,927)
Shares redeemed (4,083,273) (53,694,632)
------------- -------------
Net increase 1,676,332 $20,081,206
============= =============
Class B Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 3,717,624 $47,733,794
Shares issued to shareholders
in reinvestment of
distributions 3,291,225 39,178,069
------------- -------------
Total issued 7,008,849 86,911,863
Automatic conversion
of shares (2,540,026) (32,669,108)
Shares redeemed (11,110,883) (143,277,186)
------------- -------------
Net decrease (6,642,060) $(89,034,431)
============= =============
Class C Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 214,106 $2,867,333
Shares issued to shareholders
in reinvestment of dividends
and distributions 210,620 2,664,763
------------- -------------
Total issued 424,726 5,532,096
Shares redeemed (386,639) (5,154,057)
------------- -------------
Net increase 38,087 $378,039
============= =============
Class C Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 240,282 $3,051,157
Shares issued to shareholders
in reinvestment of
distributions 136,318 1,613,090
------------- -------------
Total issued 376,600 4,664,247
Shares redeemed (619,861) (7,937,076)
------------- -------------
Net decrease (243,261) $(3,272,829)
============= =============
Class D Shares for the Six Months Dollar
Ended January 31, 1998 Shares Amount
Shares sold 539,582 $7,260,714
Automatic conversion
of shares 638,769 8,684,927
Shares issued to shareholders
in reinvestment of dividends
and distributions 1,281,377 16,844,867
------------- -------------
Total issued 2,459,728 32,790,508
Shares redeemed (1,284,535) (17,310,006)
------------- -------------
Net increase 1,175,193 $15,480,502
============= =============
Class D Shares for the Year Dollar
Ended July 31, 1997 Shares Amount
Shares sold 1,043,610 $13,805,556
Automatic conversion
of shares 2,467,989 32,669,108
Shares issued to shareholders
in reinvestment of dividends
and distributions 454,079 5,575,759
------------- -------------
Total issued 3,965,678 52,050,423
Shares redeemed (2,040,372) (27,224,696)
------------- -------------
Net increase 1,925,306 $24,825,727
============= =============
PORTFOLIO INFORMATION
For the Quarter Ended January 31, 1998
Percent of
Ten Largest Holdings Net Assets
Novell Inc. 4.6%
Viacom, Inc. (Class B)(Non-Voting) 4.0
H & R Block, Inc. 3.9
Integrated Device Technology, Inc. 3.5
Pharmaceutical Product
Development, Inc. 3.5
U S West Media Group 3.5
Borland International, Inc. 3.2
Anacomp, Inc. 3.2
CompuServe Corporation 3.1
Parametric Technology Corp. 3.1
Percent of
Five Largest Industries Net Assets
Computer Software 12.8%
Health Care 7.9
Cable 6.4
Leisure & Entertainment 6.4
Semiconductor 5.3
Percent of
Asset Mix Net Assets
Stocks 80.9%
Bonds 7.4
Cash & Cash Equivalents 11.7
Additions (Equity Investments)
Union Pacific Corporation
Deletions (Equity Investments)
Digital Equipment Corp.
Electronic Data Systems Corp.
General Signal Corporation
Hanson PLC Sponsored (ADR)
Laidlaw, Inc. (Non-Voting)(Class B)(ADR)
