MERRILL LYNCH
PHOENIX
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
October 31, 1999
<PAGE>
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
The three-month period ended October 31, 1999 was characterized by financial
market volatility, as relatively strong domestic economic activity and a
weakening dollar increased investor anxiety over tightening Federal Reserve
Board monetary policy. Market breadth during the period remained negative, as
market leadership once again narrowed toward large-capitalization issues,
particularly within technology and communication sectors.
For the October quarter, Merrill Lynch Phoenix Fund, Inc.'s performance lagged
compared to most domestic large-capitalization market indexes. Total returns for
the Fund's Class A, Class B, Class C and Class D Shares for the three months
ended October 31, 1999 were -1.90%, -2.17%, -2.19% and -1.98%, respectively,
compared to a total return of +2.90% for the unmanaged Standard & Poor's 500
Index. (Fund results do not reflect sales charges and would be lower if sales
charges were included. Complete performance information can be found on pages 3
and 4 of this report to shareholders.) Fund performance during the quarter was
held back by our holdings in the cyclical and energy sectors. In addition, our
bias toward small-capitalization to mid-capitalization issues adversely impacted
the Fund's quarterly results, owing to the narrowing market focus.
The Fund's best-performing holdings for the October quarter were in the
technology sector, particularly our semiconductor positions. The technology
sector's market leadership reflects the growth in data communications, and the
resulting insatiable appetite for bandwidth. L.M. Ericsson Telephone Co., a
telecommunication equipment manufacturer, was among the Fund's top-performing
stocks in the quarter. Other notable holdings during the period included
National Semiconductor Corp., Integrated Device Technology, Inc. and LTX
Corporation. However, the strong performance of our technology holdings was
diluted by our investments in cyclical and energy shares. Despite the recent
pullback in our natural gas positions, reduced industry production and
exploration along with continuing economic strength should result in a more
favorable supply/demand environment. Furthermore, the continuing global recovery
also bodes well for our other cyclical positions such as Champion International
Corporation and Crown Cork & Seal Company, Inc.
During the October quarter, we added several new positions including Hillenbrand
Industries, Inc., Sunoco, Inc. and Tenet Healthcare Corporation, and eliminated
two holdings. Hillenbrand Industries, Inc., a leading manufacturer of hospital
beds and funeral caskets, was added based on the company's market leadership,
attractive valuation and strong free cash-flows. The company's earnings have
been adversely impacted by reduced hospital and long-term care facility capital
spending as they continue to deal with the negative effects of the Balanced
Budget Act of 1997 (BBA97) on Medicare payments. Tenet Healthcare is a leading
hospital management company, which should benefit from an improved managed care
pricing environment, and internal cost reduction efforts. Furthermore, with the
most radical cuts relating to the BBA97 behind the industry, the outlook is for
a more stable
1
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1999
legislative environment. The Federal Government is also looking to provide the
healthcare industry some relief, as the BBA97 overshot its intended savings.
Lastly, we added Sunoco based on our expectations for improving oil-refining
margins in 2000. On the sell side, we closed our positions in Corning
Incorporated and Tekelec, Inc., as they reached our price objectives.
In Conclusion
In our opinion, the Fund's performance during the October quarter held up
relatively well despite the challenging equity markets. Over the past year, we
have broadened our holdings and believe that the Fund's portfolio is well
positioned to benefit from the technology sector's continuing market leadership,
as well as the eventual recovery in our energy and cyclical holdings.
We thank you for your investment in Merrill Lynch Phoenix Fund, Inc., and we
look forward to serving your investment needs in the months and years ahead.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Robert J. Martorelli
Robert J. Martorelli
Senior Vice President and Portfolio Manager
December 8, 1999
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To reduce shareholder expenses, Merrill Lynch Phoenix Fund, Inc. will no longer
be printing and mailing quarterly reports to shareholders. We will continue to
provide you with reports on a semi-annual and annual basis.
================================================================================
2
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Merrill Lynch Phoenix Fund, Inc. October 31, 1999
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/
3 Month 12 Month Since Inception
As of October 31, 1999 Total Return Total Return Total Return
====================================================================================
<S> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* -1.90% +31.83% +283.31%
- ------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class B Shares* -2.17 +30.48 +246.02
- ------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class C Shares* -2.19 +30.45 + 95.28
- ------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class D Shares* -1.98 +31.47 +103.10
- ------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +2.90 +25.67 +415.25/+223.08
====================================================================================
</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/since inception total
return periods are ten years for Class A & Class B Shares and from
10/21/94 for Class C & Class D Shares.
** An unmanaged broad-based index comprised of common stocks. Ten years/since
inception total return periods are ten years and from 10/21/94,
respectively.
3
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Merrill Lynch Phoenix Fund, Inc. October 31, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
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Class A Shares*
================================================================================
Year Ended 9/30/99 +38.92% +31.62%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +15.48 +14.24
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Ten Years Ended 9/30/99 +13.61 +13.00
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 9/30/99 +37.48% +33.48%
- --------------------------------------------------------------------------------
Five Years Ended 9/30/99 +14.30 +14.30
- --------------------------------------------------------------------------------
Ten Years Ended 9/30/99 +12.45 +12.45
- --------------------------------------------------------------------------------
* 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 9/30/99 +37.36% +36.36%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/99 +14.38 +14.38
- --------------------------------------------------------------------------------
* 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 9/30/99 +38.51% +31.24%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 9/30/99 +15.30 +14.05
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
PORTFOLIO INFORMATION
As of October 31, 1999
Percent of
Ten Largest Holdings Net Assets
Anacomp, Inc. ..................................................... 5.3%
National Semiconductor Corporation ................................ 5.1
LTX Corporation ................................................... 4.4
IVAX Corporation .................................................. 4.2
The Seagram Company Ltd. .......................................... 4.0
Safety-Kleen Corp. ................................................ 3.8
The Grand Union Company ........................................... 3.4
Integrated Device Technology, Inc. ................................ 3.3
Inprise Corporation ............................................... 3.1
Columbia/HCA Healthcare Corporation ............................... 2.9
Percent of
Five Largest Industries Net Assets
Semiconductor ..................................................... 12.8%
Computer Software ................................................. 7.7
Energy Related .................................................... 6.9
Environmental ..................................................... 6.0
Consumer Products ................................................. 6.0
Percent of
Asset Mix Net Assets
Stocks ............................................................ 83.7%
Bonds ............................................................. 11.6
Cash & Cash Equivalents ........................................... 4.7
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Merrill Lynch Phoenix Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Percent
Shares Held/ of Net
Industry Face Amount Investments Value Assets
===================================================================================================================================
<S> <C> <C> <C> <C>
Discount to Assets
Leisure & Entertainment 400,000 The Seagram Company Ltd. $ 19,750,000 4.0%
===================================================================================================================================
Paper & Forest Products 201,000 Champion International Corporation 11,620,313 2.3
===================================================================================================================================
Pharmaceuticals 200,000 Elan Corporation PLC (ADR)(a) 5,150,000 1.0
===================================================================================================================================
Printing & Publishing 1,083,900 Scitex Corporation Ltd. (Ordinary) 13,751,981 2.8
===================================================================================================================================
Total Discount to Assets (Cost--$35,655,642) 50,272,294 10.1
===================================================================================================================================
Earnings Turnaround
Computer Software 1,000,000 Mentor Graphics Corporation 8,000,000 1.6
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Consumer Products 1,000,000 The Topps Company, Inc. 9,750,000 2.0
===================================================================================================================================
Diversified 250,000 Hillenbrand Industries, Inc. 8,281,250 1.7
===================================================================================================================================
Energy Related 350,000 Burlington Resources Inc. 12,206,250 2.4
1,100,000 EEX Corporation 4,056,250 0.8
550,000 EOG Resources, Inc.** 11,446,875 2.3
300,000 Sunoco, Inc. 7,237,500 1.4
===================================================================================================================================
Industrial Services 1,567,600 Anacomp, Inc. 26,747,175 5.3
===================================================================================================================================
Insurance 600,000 ACE Limited 11,662,500 2.3
===================================================================================================================================
Leisure & Entertainment 900,000 CST Entertainment, Inc. 900 0.0
===================================================================================================================================
Packaging 600,000 Crown Cork & Seal Company, Inc. 14,362,500 2.9
===================================================================================================================================
Retail 800,000 Borders Group, Inc. 10,400,000 2.1
===================================================================================================================================
Semiconductor 800,000 Integrated Device Technology, Inc. 16,400,000 3.3
1,400,000 LTX Corporation 22,137,500 4.4
849,000 National Semiconductor Corporation 25,416,938 5.1
===================================================================================================================================
Steel 706,200 Birmingham Steel Corporation 4,987,537 1.0
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Telecommunications 200,000 Telefonaktiebolaget LM Ericsson (ADR)(a) 8,537,500 1.7
===================================================================================================================================
Total Earnings Turnaround (Cost--$152,063,259) 201,630,675 40.3
===================================================================================================================================
Financial Restructuring
Consumer Products 611,100 United States Leather, Inc. 611,100 0.1
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Energy Related 1,981,437 Gulfport Energy Corporation--Litigation Trust Certificates 20 0.0
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Financial Services 300,000 Altiva Financial Corporation 1,031,250 0.2
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Home Builders 2,113,439 New Millennium Homes, LLC 5,283,597 1.1
$15,250,000 New Millennium Homes, LLC, Senior Notes, 13.50% due 9/03/2004 (c) 12,505,000 2.5
===================================================================================================================================
Industrial Equipment $10,000,000 Goss Graphic Systems Inc., Senior Subordinated Notes,
Manufacturing 12% due 10/15/2006 1,900,000 0.4
===================================================================================================================================
</TABLE>
5
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Merrill Lynch Phoenix Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Percent
Shares Held/ of Net
Industry Face Amount Investments Value Assets
===================================================================================================================================
<S> <C> <C> <C> <C>
Financial Restructuring (concluded)
Recreation $ 7,960,000 E & S Holdings Corp., Senior Subordinated Notes, 10.375% due
10/01/2006 $ 3,024,800 0.6%
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Supermarkets 1,400,000 The Grand Union Company 17,325,000 3.4
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Total Financial Restructuring (Cost--$55,290,994) 41,680,767 8.3
===================================================================================================================================
High Yield
Automotive $ 6,650,000 Safety Components International, Inc., Senior Subordinated Notes,
10.125% due 7/15/2007 4,788,000 0.9
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Computer Services $ 3,000,000 Federal Data Corp., 10.125% due 8/01/2005 2,370,000 0.5
===================================================================================================================================
Consumer Products $12,260,000 Diamond Brands Operating, 10.125% due 4/15/2008 9,440,200 1.9
$ 3,000,000 Sparkling Spring Water Group Ltd., Senior Subordinated Notes,
11.50% due 11/15/2007 2,340,000 0.4
$ 2,550,000 Spinnaker Industries Inc., Senior Notes, 10.75% due 10/15/2006 1,887,000 0.4
$42,475,000 Sunbeam Corporation, Senior Subordinated Debentures, 8.062% due
3/25/2018 (b) 5,893,406 1.2
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Diversified $ 1,000,000 Burns, Philp & Co., Ltd., Convertible, 5.50% due 4/30/2004 503,333 0.1
===================================================================================================================================
Health Care $ 6,500,000 Total Renal Care Holdings, Inc., 7% due 5/15/2009 4,119,375 0.8
===================================================================================================================================
Printing & Publishing $ 6,255,400 San Jacinto Holdings, Inc., Senior Subordinated Notes, 12% due
12/31/2002 2,189,390 0.4
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Steel $ 1,000,000 Sheffield Steel Corporation, 11.50% due 12/01/2005 822,500 0.2
===================================================================================================================================
Supermarkets $11,000,000 Jitney-Jungle Stores of America, Inc., Senior Notes, 12% due
3/01/2006 3,850,000 0.8
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Transportation $10,019,000 Trism Inc., Senior Subordinated Notes, 10.75% due 12/15/2000 2,404,560 0.5
===================================================================================================================================
Total High Yield (Cost--$59,009,920) 40,607,764 8.1
===================================================================================================================================
Operational Restructuring
Aerospace & Defense 400,000 Lockheed Martin Corporation 8,000,000 1.6
===================================================================================================================================
Computer & Peripherals 350,000 Compaq Computer Corporation 6,650,000 1.3
===================================================================================================================================
Computer Software 4,100,000 Inprise Corporation 15,246,875 3.1
600,000 Novell, Inc. 12,000,000 2.4
1,019,200 Walker Interactive Systems, Inc. 2,802,800 0.6
===================================================================================================================================
Diversified 403,000 Engelhard Corporation 7,102,875 1.4
3,500,000 Pacific Dunlop Limited 4,925,648 1.0
===================================================================================================================================
Environmental 900,000 Republic Services, Inc. (Class A) 11,025,000 2.2
1,677,000 Safety-Kleen Corp. 19,180,688 3.8
===================================================================================================================================
Health Care 600,000 Columbia/HCA Healthcare Corporation 14,475,000 2.9
400,000 Tenet Healthcare Corporation 7,775,000 1.6
===================================================================================================================================
Leisure & Entertainment 741,600 Loews Cineplex Entertainment Corporation 5,052,150 1.0
===================================================================================================================================
</TABLE>
6
<PAGE>
Merrill Lynch Phoenix Fund, Inc. October 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Percent
of Net
Industry Shares Held Investments Value Assets
===================================================================================================================================
<S> <C> <C> <C> <C>
Operational Restructuring (concluded)
Pharmaceuticals 1,200,000 IVAX Corporation $ 21,075,000 4.2%
===================================================================================================================================
Steel 755,200 WHX Corporation 6,938,400 1.4
===================================================================================================================================
Total Operational Restructuring (Cost--$157,921,882) 142,249,436 28.5
===================================================================================================================================
Total Investments (Cost--$459,941,697) 476,440,936 95.3
===================================================================================================================================
<CAPTION>
Face
Amount Short-Term Securities
===================================================================================================================================
<S> <C> <C> <C> <C>
Commercial Paper* $11,602,000 General Electric Capital Corp., 5.31% due 11/01/1999 11,598,577 2.3
7,000,000 J.P. Morgan Securities Inc., 5.30% due 11/17/1999 6,981,450 1.4
8,000,000 Xerox Capital (Europe) PLC, 5.27% due 11/04/1999 7,994,145 1.6
===================================================================================================================================
Total Short-Term Securities (Cost--$26,574,172) 26,574,172 5.3
===================================================================================================================================
Total Investments (Cost--$486,515,869) 503,015,108 100.6
Liabilities in Excess of Other Assets (2,865,299) (0.6)
------------ -----
Net Assets $500,149,809 100.0%
============ =====
===================================================================================================================================
Net Asset Value: Class A--Based on net assets of $220,937,532 and 17,964,991 shares outstanding $ 12.30
============
Class B--Based on net assets of $186,320,905 and 15,836,380 shares outstanding $ 11.77
============
Class C--Based on net assets of $8,525,037 and 733,219 shares outstanding $ 11.63
============
Class D--Based on net assets of $84,366,335 and 6,868,544 shares outstanding $ 12.28
============
===================================================================================================================================
</TABLE>
* Commercial Paper is traded on a discount basis; the interest rates shown
reflect the discount rates paid at the time of purchase by the Fund.
** Name changed from Enron Oil & Gas Company to EOG Resources, Inc. on
September 15, 1999.
(a) American Depositary Receipts (ADR).
(b) Represents a zero coupon or step bond; the interest rate shown reflects
the effective yield at the time of purchase by the Fund.
(c) Represents a pay-in-kind security which may pay interest/dividends in
additional face amount/shares.
7
<PAGE>
Officers and Directors
Terry K. Glenn, President and Director
Joe Grills, Director
Walter Mintz, Director
Robert S. Salomon Jr., Director
Melvin R. Seiden, Director
Stephen B. Swensrud, Director
Arthur Zeikel, Director
Robert C. Doll, Senior Vice President
Robert J. Martorelli, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Barbara G. Fraser, 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--10/99
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