MERRILL LYNCH
PHOENIX
FUND, INC.
STRATEGIC
Performance
[GRAPHIC OMITTED]
Quarterly Report
October 31, 1998
<PAGE>
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
The quarter ended October 31, 1998 was an extremely challenging period for
financial markets. In August, increased volatility resulted from widespread
concerns that economic weakness in emerging markets would spread to developed
nations. This was soon followed by a return of optimism in September, prompted
by preemptive Federal Reserve Board action and a more coordinated effort by the
Group of Seven (G-7) industrial nations to resolve the global financial crisis.
During the quarter, the unmanaged Standard & Poor's 500 Composite Index (S&P
500) and Dow Jones Industrial Average declined nearly 20% from their July high
points before rebounding in September. This period of extreme volatility
continued to place a premium on liquidity, as investors migrated toward
large-capitalization issues with records of earnings consistency. While
second-tier shares also bounced off their lows, their declines during the
quarter were more pronounced. These issues continue to lag the broad stock
market averages thus far in 1998.
Portfolio Matters
For the three months ended October 31, 1998, Merrill Lynch Phoenix Fund, Inc.'s
Class A, Class B, Class C and Class D Shares had total returns of -7.62%,
- -7.80%, -7.82% and -7.65%, respectively. (Complete performance information,
including average annual total returns, can be found on pages 3 and 4 of this
report to shareholders.)
The performance of two of the Fund's key technology holdings benefited late in
the quarter as a more stable economic outlook and relatively attractive
valuation levels led to a meaningful rebound in their share prices. Micron
Electronics, Inc. continued to make progress in enhancing the efficiency of its
direct sales model, and is currently focused on driving top-line revenue growth
with new marketing initiatives and a more price-competitive product offering.
Novell Inc. benefited from the timely release of Netware5, its core networking
product. In addition to the portfolio's technology holdings, Placer Dome Inc.
shares performed well in the quarter, since gold shares benefited from increased
financial market volatility and global economic fragility.
Fund performance was negatively impacted by our cyclical and energy holdings,
which accounted for 16.8% and 5.7% of net assets, respectively, at October
quarter-end. Deepening global economic concerns and declining commodity prices
led to share price declines for these sectors. Slowing demand and excess oil and
natural gas inventories adversely impacted EEX Corporation and KCS Energy, Inc.,
while Birmingham Steel Corp. experienced increased competitive pressures from a
flood of low-priced Asian imports.
During the October quarter, we closed out our position in AMP, Incorporated,
following an unsolicited tender offer from AlliedSignal Inc. The sale reflected
our uncertainty of the successful completion of the transaction. We also
recognized gains in MediaOne Group Inc., TCI Ventures Group and H & R Block,
Inc., since these issues were approaching our price objectives. We also sold
holdings that we believed to have limited upside potential, such as Gulfport
Energy Corporation and Mesa Air Group, Inc. We utilized proceeds from these
sales to invest in companies such as Aetna, Inc., Motorola, Inc., Corning
Incorporated, Crown Cork & Seal Company, Inc., Diamond Offshore Drilling, Inc.
and Fruit of the Loom, Inc. We believe that these companies possess leading
industry positions that should eventually provide superior total investment
returns.
Aetna, Inc. is a leading domestic healthcare and retirement service provider
with growing international operations. The company should benefit from the
improved commercial healthcare pricing environment, while its strong financial
position should enable the company to garner market share. Learning from U.S.
Healthcare's integration missteps, the consolidation of its recent NYLCare
Health Plans acquisition is proceeding according to plan. Aetna is
1
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
widely perceived as an industry consolidator, and we also expect the company to
use its free capital-generating capacity to repurchase its shares.
Motorola, Inc., a leading supplier of wireless communication equipment and
semiconductors, is restructuring its operations and rationalizing its product
line. These actions should improve the company's operating leverage and drive
its 1999 earnings recovery. In addition to reorganization efforts, Motorola's
new digital telephone handset product cycle should enhance its ability to defend
market share and mitigate sales declines in its analog products. The earnings
drag caused by the company's Iridium LLC (international satellite-based cellular
system) equity investment will be reduced as it is written down to zero. As
Iridium ramps up its operations, it should begin to contribute to Motorola's
earnings.
Corning Incorporated is a leading low-cost supplier of fiber optic products,
with a growing presence in photonic technology. The company also develops
specialty materials for environmental, life science and advanced optics.
Corning's communications division should benefit over the longer term from the
insatiable global demand for bandwidth. The growth of the company's premium LEAF
fiber enhances the product mix and should mitigate pricing pressures. LEAF is a
high-end fiber that is much more desirable than conventional fiber when
constructing high-capacity data networks. Finally, the pending Dow-Corning class
action settlement may make it easier for Corning to sell its interest in the
company.
Crown Cork & Seal Company, Inc. is a leading supplier of packaging products to
consumer companies. Following its ill-fated expansion strategy, the company is
in the process of rationalizing its asset base and changing its focus toward
maximizing cash flow. We believe that the recently announced restructuring
actions will improve operating efficiencies and asset turnover, in conjunction
with a stated commitment to reduce debt and repurchase shares, and should
enhance Crown's return on capital over time.
Diamond Offshore Drilling, Inc. is the world's largest provider of
semi-submersible oil rigs and is highly leveraged to growth in worldwide
deepwater drilling activities. We believe that Diamond's position in deepwater
drilling and its solid financial position should allow the company to ride out
the currently depressed price environment for energy.
Finally, we added shares of Fruit of the Loom, Inc., a leading domestic
manufacturer of active wear, casual wear and underwear. Recent sales shortfalls
have prevented the company from fully recognizing the expense leverage and tax
benefits associated with the move of its manufacturing to the Caribbean.
Management is keenly focused on driving top-line revenue growth with its new
retail programs and licensing agreement with the National Hockey League. The
company's free cash flow generating capacity should enable it to reduce its
outstanding debt.
In Conclusion
Although the October quarter was challenging for value investors such as Merrill
Lynch Phoenix Fund, Inc., we continue to find attractive opportunities among
small- to mid-capitalization issues trading at historically depressed valuations
relative to their large-capitalization counterparts. In the past, such periods
of wide valuation disparities between smaller and larger cap issues have been
followed by periods of outperformance. For example, when smaller cap issues
sharply underperformed larger cap issues in 1990, they achieved some of their
best relative performances in the three years that followed. Although we cannot
predict when investor confidence for smaller cap issues will be renewed, we
believe that the Fund is well-positioned to benefit when they outperform the
broader stock market averages.
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
December 3, 1998
2
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the Merrill
Lynch Select Pricing(SM) System, which offers four pricing alternatives:
o 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.
o 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.)
o 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.
o 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 "Recent Performance Results" and
"Average Annual Total Return" 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.
Recent Performance Results
<TABLE>
<CAPTION>
Ten Years/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
======================================================================================================
<S> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* + 0.10% -7.62% +223.98%
- ------------------------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class B Shares* - 0.87 -7.80 +192.54
- ------------------------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class C Shares* - 0.91 -7.82 + 49.69
- ------------------------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class D Shares* - 0.14 -7.65 + 54.49
- ------------------------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +21.99 -1.57 +418.25/+157.09
======================================================================================================
</TABLE>
* Investment results shown do not reflect sales charges; results would be
lower if a sales charge was included. Total investment returns are based
on changes in net asset values for the periods shown, and assume
reinvestment of all dividends and capital gains distributions at net asset
value on the ex-dividend date. The Fund's ten-year/inception periods are:
Class A & Class B Shares, for the ten years ended 10/31/98; and Class C &
Class D Shares, from 10/21/94 to 10/31/98.
** An unmanaged broad-based index comprised of common stocks. Ten years/since
inception total returns are for the ten years ended 10/31/98 and from
10/21/94 to 10/31/98, respectively.
3
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 9/30/98 - 9.50 -14.25%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 + 9.86 + 8.68
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/98 +11.91 +11.31
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/98 -10.44% -13.20%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/98 + 8.73 + 8.73
- --------------------------------------------------------------------------------
Inception (10/21/88)
through 9/30/98 +10.66 +10.66
- --------------------------------------------------------------------------------
* Maximum contingent deferred sales charge is 4% and is reduced to 0% after
4 years.
** Assuming payment of applicable contingent deferred sales charge.
================================================================================
% Return % Return
Without CDSC With CDSC**
================================================================================
Class C Shares*
================================================================================
Year Ended 9/30/98 -10.39% -11.08%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/98 + 9.19 + 9.19
- --------------------------------------------------------------------------------
* 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 9/30/98 - 9.70% -14.44%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/98 +10.06 + 8.56
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
PORTFOLIO INFORMATION
As of October 31, 1998
Percent of
Ten Largest Holdings Net Assets
Novell Inc. ...................................................... 8.4%
National Semiconductor Corporation ............................... 4.3
Union Pacific Corporation ........................................ 4.2
Columbia/HCA Healthcare Corporation .............................. 3.7
IVAX Corp. ....................................................... 3.7
Anacomp, Inc. .................................................... 3.4
Safety-Kleen Corp. ............................................... 3.2
Integrated Device Technology, Inc. ............................... 3.2
Seagram Company Ltd. (The) ....................................... 2.9
Inprise Corporation .............................................. 2.9
Percent of
Five Largest Industries Net Assets
Computer Software ................................................ 13.3%
Semiconductors ................................................... 11.3
Health Care ...................................................... 8.1
Pharmaceuticals .................................................. 6.0
Transportation ................................................... 5.8
Percent of
Asset Mix Net Assets
Stocks ........................................................... 88.0%
Bonds ............................................................ 7.9
Cash & Cash Equivalents .......................................... 4.1
Equity Investment Portfolio Changes
For the Quarter Ended October 31, 1998
Additions Deletions
Aetna, Inc. AMP, Incorporated
CAI Wireless Systems, Inc. *Cabletron Systems, Inc.
*Cabletron Systems, Inc. Coca-Cola Beverages PLC
Corning Incorporated Geneva Steel Company,
Crown Cork & Seal Series B, Preferred 14%
Company, Inc. Gulfport Energy Corporation
Diamond Offshore H & R Block, Inc.
Drilling, Inc. MediaOne Group Inc.
Fruit of the Loom, Inc. Mesa Air Group, Inc.
(Class A) TCC Holdings
Grand Union Co. TCI Ventures Group
Motorola, Inc. (Series A)
Raychem Corporation Viacom, Inc. (Class B)
(Non-Voting)
*Added and deleted in the same quarter.
4
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Discount to Assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Leisure & Entertainment 500,000 Seagram Company Ltd. (The) $ 17,224,320 $ 16,437,500 2.9%
- ------------------------------------------------------------------------------------------------------------------------------------
Printing & Publishing 1,670,000 Scitex Corporation Ltd. (Ordinary) 16,062,940 14,821,250 2.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Discount to Assets 33,287,260 31,258,750 5.5
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- ------------------------------------------------------------------------------------------------------------------------------------
Earnings Turnarounds
- ------------------------------------------------------------------------------------------------------------------------------------
Apparel 400,000 Fruit of the Loom, Inc. (Class A) 5,820,000 6,100,000 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Peripherals 1,150,000 Maxtor Corporation 8,295,316 12,146,875 2.1
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Computer Software 1,400,000 Mentor Graphics Corporation 14,049,847 11,287,500 2.0
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products 2,700,000 Topps Company, Inc. (The) 14,976,635 8,606,250 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Diversified 100,000 Raychem Corporation 2,796,000 3,056,250 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Energy 500,000 Diamond Offshore Drilling, Inc. 13,273,020 15,343,750 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Energy Related 2,300,000 EEX Corporation 16,880,791 8,912,500 1.6
1,614,200 KCS Energy, Inc. 19,383,544 8,171,888 1.4
- ------------------------------------------------------------------------------------------------------------------------------------
Gold 666,700 Placer Dome Inc. 9,446,479 10,500,525 1.9
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care 100,000 Aetna, Inc. 6,725,060 7,462,500 1.3
1,300,000 NeoRx Corp. 7,991,431 1,950,000 0.3
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial Services 1,500,000 Anacomp, Inc. 10,341,463 19,500,000 3.4
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment 900,000 CST Entertainment, Inc. 675,000 9 0.0
- ------------------------------------------------------------------------------------------------------------------------------------
Packaging 200,000 Crown Cork & Seal Company, Inc. 5,886,455 6,375,000 1.1
- ------------------------------------------------------------------------------------------------------------------------------------
Pharmaceuticals 250,000 Pharmacia & Upjohn, Inc. 8,291,840 13,234,375 2.3
- ------------------------------------------------------------------------------------------------------------------------------------
Semiconductors 2,600,000 Integrated Device Technology, Inc. 21,230,055 17,956,250 3.2
1,000,000 LSI Logic Corporation 17,286,122 15,125,000 2.7
3,120,000 LTX Corp. 16,462,854 6,240,000 1.1
1,900,000 National Semiconductor Corporation 24,206,662 24,106,250 4.3
- ------------------------------------------------------------------------------------------------------------------------------------
Steel 1,000,000 Birmingham Steel Corp. 13,773,691 5,187,500 0.9
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications 300,000 Motorola, Inc. 15,577,900 15,600,000 2.8
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation 500,000 Union Pacific Corporation 23,314,824 23,812,500 4.2
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Total Earnings Turnarounds 276,684,989 240,674,922 42.4
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Financial Restructuring
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products 611,100 U.S. Leather Inc. 5,679,677 1,222,200 0.2
- ------------------------------------------------------------------------------------------------------------------------------------
Energy 1,981,437 Gulfport Energy Corporation--Litigation
Trust Certificates 370,838 20 0.0
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Financial Services 3,000,000 Mego Mortgage Corporation 4,500,000 2,062,500 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care $16,500,000 Unison Healthcare Corp., 13.75% due
11/01/2006 9,962,500 4,125,000 0.7
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Face Amount/ Percent of
Industry Shares Held Investments Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Restructuring (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Home Builders 520,000 New Millennium Homes, LLC $ 1,934,501 $ 1,300,000 0.2%
$10,250,000 New Millennium Homes, LLC, Senior
Notes, 12% due 9/03/2004 9,157,403 8,815,000 1.6
- ------------------------------------------------------------------------------------------------------------------------------------
Supermarkets 1,293,857 Grand Union Co. (b) 12,725,378 15,445,418 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications $ 7,500,000 American Telecasting Inc., Senior
Discount Notes, Series B,
43.485% due 8/15/2005 (a) 1,719,434 1,650,000 0.3
148,909 CAI Wireless Systems, Inc. (c) 6,122 4,467 0.0
$ 2,322,640 CAI Wireless Systems, Inc., Senior
Notes, 13% due 10/14/2004 (c) 629,775 464,528 0.1
$14,000,000 CS Wireless Systems Inc., Senior
Discount Notes, Series B, 29.555%
due 3/01/2006 (a) 4,193,319 2,800,000 0.5
- ------------------------------------------------------------------------------------------------------------------------------------
Total Financial Restructuring 50,878,947 37,889,133 6.7
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
High Yield
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Products $42,475,000 Sunbeam Corporation, Senior Subordinated
Debentures, 8.062% due 3/25/2018 (a) 9,301,190 4,778,438 0.8
- ------------------------------------------------------------------------------------------------------------------------------------
Home Builders $20,000,000 Baldwin Homes, 10.375% due 8/01/2003 8,311,750 6,950,000 1.2
- ------------------------------------------------------------------------------------------------------------------------------------
Printing & Publishing $ 6,255,400 San Jacinto Holdings, Inc., Senior
Subordinated Notes, 12% due 12/31/2002 4,048,512 2,251,944 0.4
- ------------------------------------------------------------------------------------------------------------------------------------
Telecommunications $30,500,000 MobileMedia Corp., Senior Subordinated
Notes, 9.375% due 11/01/2007 5,902,312 3,965,000 0.7
- ------------------------------------------------------------------------------------------------------------------------------------
Transportation $18,460,000 Ameritruck Distribution Corp., Senior
Subordinated Notes, Series B, 12.25%
due 11/15/2005 9,197,600 3,876,600 0.7
$ 9,500,000 Trism Inc., 10.75% due 12/15/2000 8,076,250 5,035,000 0.9
- ------------------------------------------------------------------------------------------------------------------------------------
Total High Yield 44,837,614 26,856,982 4.7
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Operational Restructuring
- ------------------------------------------------------------------------------------------------------------------------------------
Beverages 1,500,000 Coca-Cola Amatil, Limited 5,769,232 5,513,003 1.0
- ------------------------------------------------------------------------------------------------------------------------------------
Chemicals 340,000 IMC Global, Inc. 10,673,259 8,840,000 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Services 733,400 Micron Electronics, Inc. 9,221,613 15,309,725 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Computer Software 3,300,000 Inprise Corporation 34,980,037 16,293,750 2.9
3,200,000 Novell Inc. 26,595,858 47,600,000 8.4
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Equipment 200,000 Corning Incorporated 5,652,000 7,262,500 1.3
- ------------------------------------------------------------------------------------------------------------------------------------
Engineering 565,000 EMCOR Group, Inc. 3,502,853 8,898,750 1.6
- ------------------------------------------------------------------------------------------------------------------------------------
Environmental 4,000,000 Philip Services Corp. 20,545,348 2,000,000 0.3
6,000,000 Safety-Kleen Corp. 20,453,807 18,375,000 3.2
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care 1,000,000 Columbia/HCA Healthcare Corporation 27,351,521 21,000,000 3.7
450,000 Pharmaceutical Product Development, Inc. 5,322,320 12,150,000 2.1
- ------------------------------------------------------------------------------------------------------------------------------------
Leisure & Entertainment 800,000 Loews Cineplex Entertainment Corporation 8,129,765 8,400,000 1.5
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1998
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Percent of
Industry Shares Held Investments Cost Value Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Operational Restructuring (concluded)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pharmaceuticals 2,200,000 IVAX Corp. $ 19,686,434 $ 20,900,000 3.7%
Steel 1,298,500 WHX Corp. 11,160,678 15,419,687 2.7
- ------------------------------------------------------------------------------------------------------------------------------------
Total Operational Restructuring 209,044,725 207,962,415 36.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments 614,733,535 544,642,202 95.9
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face
Amount Short-Term Investments
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial Paper* $ 8,558,000 General Electric Capital Corporation,
5.69% due 11/02/1998 8,555,295 8,555,295 1.5
15,000,000 Variable Funding Capital Corp., 5.20%
due 11/13/1998 14,971,833 14,971,833 2.6
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments 23,527,128 23,527,128 4.1
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments $638,260,663 568,169,330 100.0
============
Liabilities in Excess of Other Assets (232,427) (0.0)
------------ -----
Net Assets $567,936,903 100.0%
============ =====
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value: Class A--Based on net assets of $241,892,845 and 23,529,571 shares outstanding $ 10.28
============
Class B--Based on net assets of $235,238,242 and 23,842,360 shares outstanding $ 9.87
============
Class C--Based on net assets of $8,672,857 and 887,014 shares outstanding $ 9.78
============
Class D--Based on net assets of $82,132,959 and 7,996,734 shares outstanding $ 10.27
============
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rate paid at the time of purchase by the Fund.
(a) Represents a zero coupon or step bond; the interest rate shown is the
effective yield at the time of purchase by the Fund.
(b) On August 18, 1998, received in exchange for Grand Union Co., 12% Senior
Notes due 9/01/2004.
(c) On October 21, 1998, received in exchange for CAI Wireless Systems, Inc.,
13% Senior Notes due 9/15/2002.
7
<PAGE>
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, N.A.
Global Securities Services
4 Chase MetroTech Center, 18th Floor
Brooklyn, NY 11245
Transfer Agent
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--10/98
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