MERRILL LYNCH
PHOENIX
FUND, INC.
[GRAPHIC OMITTED]
STRATEGIC
Performance
Quarterly Report
April 30, 1999
<PAGE>
MERRILL LYNCH PHOENIX FUND, INC.
DEAR SHAREHOLDER
There were some conflicting signals regarding the future direction of the US
economy during the quarter ended April 30, 1999. However, on balance the
economic outlook continued to be positive. The US economic expansion is ongoing,
especially in the consumer sector. Economic growth is not occurring at
inflationary rates, although the Organization for Petroleum Exporting Countries
(OPEC) successfully engineered a near-term increase in the price of crude oil.
Against this backdrop, the US Federal Reserve Board kept monetary policy on
hold. Outside of the United States, signs of growth are less apparent in other
major industrial economies. Although the crisis in Yugoslavia has raised serious
geopolitical concerns, it was not a significant factor in the economic or
investment outlook. In Japan, there are not yet clear signs that Japan's economy
is improving, and the emerging economies remain tentative.
In the US capital markets, long-term interest rates stabilized somewhat by April
quarter-end after rising thus far in 1999. Although the spread between yields on
Treasury securities and corporate issues of similar maturities has narrowed
somewhat, it remains wide by historic standards. However, the major news in the
US capital markets was again in the stock market. As the US stock market reached
new highs, the advance broadened beyond relatively few large-capitalization
technology stocks to the previously languishing cyclical sectors.
Portfolio Matters
The three-month period ended April 30, 1999 witnessed a broadening in the stock
market's advance as economically sensitive and energy stocks led the market
indexes higher. Renewed investor interest in cyclical issues was attributable to
historically low valuations, continued strength in domestic economic activity
and growing evidence that many emerging market economies have stabilized and are
on the path to recovery.
Given this favorable global economic backdrop, Merrill Lynch Phoenix Fund, Inc.
was able to outperform most of the major market indexes during the April
quarter. For example, the Fund's Class A, Class B, Class C and Class D Shares
had total returns of +9.26%, +8.93%, +8.92% and +9.19% for the period, compared
to a +4.67% total return for the unmanaged Standard & Poor's 500 Index. The
Fund's outperformance reflected its bias towards small/mid capitalization issues
whose prospects are more sensitive to economic activity. The Fund's quarterly
performance was also attributable to a narrowing in valuation measures between
small/mid and large capitalization issues from unprecedented wide levels. (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.)
Given the recovery in cyclical stocks during the quarter, the Fund's
best-performing holdings were within the economically sensitive and energy
areas, including Champion International Corporation, Birmingham Steel
Corporation, Burlington Resources Inc. and EEX Corporation. In addition to the
portfolio's economically sensitive issues, several holdings with improving
prospects also contributed to the strong April quarter performance. LTX
Corporation, a semiconductor-test equipment manufacturer, benefited from several
contract wins and improving cost structure. Columbia/HCA Healthcare
Corporation's share price appreciation reflected improved operating prospects
pending its split into three distinct publicly traded companies and prudent use
of excess capital through its share buyback program. The Seagram Company Ltd.,
another of the Fund's top ten holdings, continued to build momentum through the
consolidation of its music business, new Orlando Florida theme park, and the
improving global prospects for its spirits business.
1
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 1999
During the April quarter, we closed out positions in LSI Logic Corporation,
Coca-Cola Amatil Limited and Diamond Offshore Drilling, Inc., since these stocks
met our price objective. We also sold out of our position in NeoRx Corporation,
which experienced several setbacks as its large pharmaceutical partners pulled
support for several promising projects. We also swapped out of Union Pacific
Corporation and Motorola, Inc. into shares of companies we believe should
provide the Fund with higher appreciation potential.
Also during the quarter, we added several new positions, including: Champion
International Corporation, Enron Oil & Gas Company, Republic Services, Inc.,
Sequent Computer Systems, Inc. and L.M. Ericsson Telephone Co.
Champion International Corp. is a leading paper producer, which is expected to
benefit from the favorable global economic climate as well as efforts to reduce
costs and rationalize non-core assets. We expect our position in Enron Oil & Gas
Company to benefit from a recovery in energy prices. More favorable supply/
demand balance, resulting from the industry's reduced production and exploration
and continuing economic strength, should drive this recovery. Republic Services,
Inc. is among the top five largest solid waste companies with significant
operations in the southern United States. We believe that the company will
experience improved results from favorable demographic trends in its operating
states, strategic acquisitions and improved waste internalization. Sequent
Computer Systems, Inc. develops mid-to high-end servers for use in commercial
applications. We expect the company to post improving operating results as it
works through its product and operating system transition. Finally, we
accumulated a position in L.M. Ericsson Telephone Co., a leading
telecommunications equipment vendor. We expect the company's prospects to
improve given its restructuring efforts to reduce costs, leadership position in
wireless infrastructure equipment and new wireless handset cycle. We also
believe the company should benefit from the improvement in emerging economies.
In Conclusion
Despite the recent recovery in the small and mid cap stocks, we continue to find
attractive investment opportunities. We believe that the Fund remains well
positioned to benefit from a recovery in smaller-capitalization stocks, which
are more sensitive to economic cycles.
We thank you for your investment in Merrill Lynch Phoenix Fund, Inc., and we
look forward to providing you with an update in our next report to shareholders.
Sincerely,
/s/ Terry K. Glenn
Terry K. Glenn
President and Director
/s/ Robert J. Martorelli
Robert J. Martorelli
Senior Vice President and Portfolio Manager
May 28, 1999
================================================================================
After more than 20 years of service, Arthur Zeikel recently retired as Chairman
of Merrill Lynch Asset Management, L.P. (MLAM). Mr. Zeikel served as President
of MLAM from 1977 to 1997 and as Chairman since December 1997. Mr. Zeikel is one
of the country's most respected leaders in asset management and presided over
the growth of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500 billion. Mr.
Zeikel will remain on Merrill Lynch Phoenix Fund, Inc.'s Board of Directors. We
are pleased to announce that Terry K. Glenn has been elected President and
Director of the Fund. Mr. Glenn has held the position of Executive Vice
President of MLAM since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors in wishing
him well in his retirement from Merrill Lynch and are pleased that he will
continue as a member of the Fund's Board of Directors.
================================================================================
2
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 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/
12 Month 3 Month Since Inception
Total Return Total Return Total Return
=====================================================================================
<S> <C> <C> <C>
ML Phoenix Fund, Inc. Class A Shares* + 0.66% +9.26% +256.18%
- -------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class B Shares* - 0.45 +8.93 +221.14
- -------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class C Shares* - 0.42 +8.92 + 78.98
- -------------------------------------------------------------------------------------
ML Phoenix Fund, Inc. Class D Shares* + 0.39 +9.19 + 85.53
- -------------------------------------------------------------------------------------
Standard & Poor's 500 Index** +21.82 +4.67 +461.10/+214.47
=====================================================================================
</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 periods
are Class A & Class B Shares, for the ten years ended 4/30/99 and Class C
& Class D Shares, from 10/21/94 to 4/30/99.
** An unmanaged broad-based index comprised of common stocks. Ten years/since
inception total returns are for the ten years ended 4/30/99 and from
10/21/94 to 4/30/99, respectively.
3
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 1999
PERFORMANCE DATA (concluded)
Average Annual Total Return
% Return Without % Return With
Sales Charge Sales Charge**
================================================================================
Class A Shares*
================================================================================
Year Ended 3/31/99 -10.11% -14.83%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +11.19 +10.00
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/99 +12.40 +11.80
- --------------------------------------------------------------------------------
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
================================================================================
Class B Shares*
================================================================================
Year Ended 3/31/99 -11.00% -14.01%
- --------------------------------------------------------------------------------
Five Years Ended 3/31/99 +10.07 +10.07
- --------------------------------------------------------------------------------
Ten Years Ended 3/31/99 +11.25 +11.25
================================================================================
* 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 3/31/99 -11.05% -11.80%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/99 +10.82 +10.82
- --------------------------------------------------------------------------------
* 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 3/31/99 -10.30% -15.01%
- --------------------------------------------------------------------------------
Inception (10/21/94)
through 3/31/99 +11.71 +10.37
================================================================================
* Maximum sales charge is 5.25%.
** Assuming maximum sales charge.
PORTFOLIO INFORMATION
As of April 30, 1999
Percent of
Ten Largest Holdings Net Assets
Safety-Kleen Corp. ................................. 5.7%
Anacomp, Inc. ...................................... 4.9
The Seagram Company Ltd. ........................... 4.5
Integrated Device Technology, Inc. ................. 4.2
Novell, Inc. ....................................... 3.9
LTX Corporation .................................... 3.9
Columbia/HCA Healthcare Corporation ................ 3.9
The Topps Company, Inc. ............................ 3.7
Inprise Corporation ................................ 3.2
Raychem Corporation ................................ 3.1
Percent of
Five Largest Industries Net Assets
Semiconductors ..................................... 11.0%
Computer Software .................................. 10.1
Environmental ...................................... 6.7
Leisure & Entertainment ............................ 6.5
Energy Related ..................................... 5.8
Percent of
Asset Mix Net Assets
Stocks ............................................. 84.1%
Bonds .............................................. 6.8
Cash & Cash Equivalents ............................ 9.1
Stock Portfolio Changes for the Quarter
Ended April 30, 1999
Additions
Champion International Corporation
Enron Oil & Gas Company
L.M. Ericsson Telephone Co. (ADR)
Republic Services, Inc. (Class A)
SCI Systems, Inc.
Sequent Computer Systems, Inc.
Tekelec, Inc.
Deletions
Aetna Inc.
Coca-Cola Amatil Limited
Diamond Offshore Drilling, Inc.
LSI Logic Corporation
Motorola, Inc.
NeoRx Corporation
Placer Dome Inc.
Union Pacific Corporation
4
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 1999
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Discount to Assets
Leisure & Entertainment 400,000 The Seagram Company Ltd. $ 13,569,282 $ 22,950,000 4.5%
====================================================================================================================================
Paper & Forest Products 201,000 Champion International Corporation 7,425,897 10,992,187 2.2
====================================================================================================================================
Printing & Publishing 1,083,900 Scitex Corporation Ltd. (Ordinary) 9,614,243 10,432,537 2.0
====================================================================================================================================
Total Discount to Assets 30,609,422 44,374,724 8.7
====================================================================================================================================
Earnings Turnaround
Computer Software 1,000,000 Mentor Graphics Corporation 9,978,030 12,125,000 2.4
====================================================================================================================================
Computers & Peripherals 500,000 Sequent Computer Systems, Inc. 4,395,652 5,468,750 1.1
====================================================================================================================================
Consumer Products 2,692,800 The Topps Company, Inc. 14,919,935 18,681,300 3.7
====================================================================================================================================
Contract Manufacturers 100,000 SCI Systems, Inc. 3,382,570 3,806,250 0.7
====================================================================================================================================
Diversified 600,000 Raychem Corporation 15,764,928 15,862,500 3.1
====================================================================================================================================
Energy Related 200,000 Burlington Resources Inc. 7,213,863 9,212,500 1.8
1,500,000 EEX Corporation 21,186,159 9,750,000 1.9
450,000 Enron Oil & Gas Company 7,641,835 8,550,000 1.7
1,614,200 KCS Energy, Inc. 19,383,544 2,219,525 0.4
====================================================================================================================================
Industrial Services 1,567,600 Anacomp, Inc. 11,272,477 25,081,600 4.9
====================================================================================================================================
Leisure & Entertainment 900,000 CST Entertainment, Inc. 675,000 4,500 0.0
====================================================================================================================================
Packaging 446,700 Crown Cork & Seal Company, Inc. 13,868,315 14,517,750 2.8
====================================================================================================================================
Retail 700,000 Borders Group, Inc. 12,375,113 10,106,250 2.0
====================================================================================================================================
Semiconductors 2,950,000 Integrated Device Technology, Inc. 23,112,052 21,571,875 4.2
3,120,000 LTX Corporation 16,462,854 19,890,000 3.9
1,200,000 National Semiconductor Corporation 11,311,608 15,000,000 2.9
====================================================================================================================================
Steel 1,000,000 Birmingham Steel Corporation 13,773,691 6,125,000 1.2
====================================================================================================================================
Telecommunications 250,000 L.M. Ericsson Telephone Co. (ADR)(a) 6,413,130 6,734,375 1.3
====================================================================================================================================
Telecommunications 500,000 Tekelec, Inc. 3,823,869 4,515,625 0.9
Equipment
====================================================================================================================================
Total Earnings Turnaround 216,954,625 209,222,800 40.9
====================================================================================================================================
Financial Restructuring
Consumer Products 611,100 United States Leather, Inc. 5,679,677 763,875 0.2
====================================================================================================================================
Energy Related 1,981,437 Gulfport Energy Corporation--
Litigation Trust Certificates 370,839 20 0.0
====================================================================================================================================
Financial Services 300,000 Altiva Financial Corporation (d)(e) 4,500,000 1,350,000 0.3
====================================================================================================================================
Health Care 1,151,324 Raintree Healthcare Corp. (c) 10,194,578 3,166,141 0.6
====================================================================================================================================
Home Builders 2,113,439 New Millennium Homes, LLC 10,246,251 4,226,878 0.8
$15,250,000 New Millennium Homes, LLC, Senior Notes,
13% due 9/03/2004 13,215,135 12,047,500 2.4
====================================================================================================================================
</TABLE>
5
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 1999
SCHEDULE OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
Shares Held/ Percent of
Industry Face Amount Investments Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Financial Restructuring (concluded)
Recreation $ 7,960,000 E & S Holdings Corp., Senior Subordinated
Notes, 10.375% due 10/01/2006 $ 3,745,650 $ 3,661,600 0.7%
====================================================================================================================================
Supermarkets 1,400,000 Grand Union Company 13,957,401 14,000,000 2.7
====================================================================================================================================
Telecommunications 148,909 CAI Wireless Systems, Inc. 6,122 4,188,066 0.8
====================================================================================================================================
Total Financial Restructuring 61,915,653 43,404,080 8.5
====================================================================================================================================
High Yield
Consumer Products $ 1,000,000 Sparkling Spring Water Group Ltd., Senior
Subordinated Notes, 11.50% due 11/15/2007 790,000 790,000 0.2
$ 2,000,000 Spinnaker Industries Inc., Senior Notes,
10.75% due 10/15/2006 1,410,000 1,880,000 0.4
$42,475,000 Sunbeam Corporation, Senior Subordinated
Debentures, 8.062% due 3/25/2018 (b) 9,709,433 4,778,438 0.9
====================================================================================================================================
Health Care $ 5,500,000 Graham-Field Products, Inc., Senior Subordinated
Notes, 9.75% due 8/15/2007 3,776,875 3,348,125 0.7
====================================================================================================================================
Printing & Publishing $ 6,255,400 San Jacinto Holdings, Inc., Senior Subordinated
Notes, 12% due 12/31/2002 4,048,512 2,189,390 0.4
====================================================================================================================================
Transportation $18,460,000 AmeriTruck Distribution Corp., Senior Subordinated
Notes, 12.25% due 11/15/2005 9,197,600 1,153,750 0.2
$10,019,000 Trism Inc., Senior Subordinated Notes, 10.75%
due 12/15/2000 8,327,965 4,859,215 0.9
====================================================================================================================================
Total High Yield 37,260,385 18,998,918 3.7
====================================================================================================================================
Operational Restructuring
Apparel 603,000 Fruit of the Loom, Ltd. (Class A) 8,818,591 6,444,563 1.3
====================================================================================================================================
Computer Software 4,100,000 Inprise Corporation 38,867,849 16,528,125 3.2
900,000 Novell, Inc. 6,342,665 19,968,750 3.9
1,019,200 Walker Interactive Systems, Inc. 5,010,371 3,216,850 0.6
====================================================================================================================================
Electrical Equipment 200,000 Corning Incorporated 5,652,000 11,450,000 2.2
====================================================================================================================================
Environmental 250,000 Republic Services, Inc. (Class A) 4,218,750 5,140,625 1.0
1,853,700 Safety-Kleen Corp. 25,180,956 29,427,487 5.7
====================================================================================================================================
Health Care 800,000 Columbia/HCA Healthcare Corporation 17,760,818 19,750,000 3.9
====================================================================================================================================
Leisure & Entertainment 800,000 Loews Cineplex Entertainment Corporation 8,129,765 10,100,000 2.0
====================================================================================================================================
Pharmaceuticals 1,200,000 IVAX Corporation 9,896,936 15,750,000 3.1
====================================================================================================================================
Steel 1,348,500 WHX Corporation 11,679,428 11,377,969 2.2
====================================================================================================================================
Total Operational Restructuring 141,558,129 149,154,369 29.1
====================================================================================================================================
Total Investments 488,298,214 465,154,891 90.9
====================================================================================================================================
</TABLE>
6
<PAGE>
Merrill Lynch Phoenix Fund, Inc. April 30, 1999
SCHEDULE OF INVESTMENTS (concluded)
<TABLE>
<CAPTION>
Percent of
Face Amount Short-Term Securities Cost Value Net Assets
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
Commercial Paper* $12,100,000 CSW Credit Inc., 4.79% due 5/17/1999 $ 12,074,240 $ 12,074,240 2.3%
20,330,000 Ford Motor Credit Company, 4.95% due 5/03/1999 20,324,409 20,324,409 4.0
5,000,000 Metropolitan Life Insurance Company,
4.77% due 5/27/1999 4,982,775 4,982,775 1.0
5,000,000 Xerox Capital (Europe) PLC, 4.78% due 5/10/1999 4,994,025 4,994,025 1.0
====================================================================================================================================
US Government Agency 8,000,000 Federal Home Loan Mortgage Corporation,
Obligations* 4.68% due 5/17/1999 7,983,360 7,983,360 1.5
====================================================================================================================================
Total Short-Term Securities 50,358,809 50,358,809 9.8
====================================================================================================================================
Total Investments $538,657,023 515,513,700 100.7
============
Liabilities in Excess of Other Assets (3,724,492) (0.7)
------------ -----
Net Assets $511,789,208 100.0%
============ =====
====================================================================================================================================
Net Asset Value: Class A--Based on net assets of $228,433,265 and 18,623,403 shares outstanding $ 12.27
============
Class B--Based on net assets of $197,771,896 and 16,891,109 shares outstanding $ 11.71
============
Class C--Based on net assets of $7,318,936 and 630,904 shares outstanding $ 11.60
============
Class D--Based on net assets of $78,265,111 and 6,394,491 shares outstanding $ 12.24
============
====================================================================================================================================
</TABLE>
(a) American Depositary Receipts (ADR).
(b) Represents a zero coupon or step bond; the interest rate on a step bond
represents the fixed rate of interest that will commence its accrual on a
predetermined date until maturity.
(c) This issue was received in exchange for Unison Healthcare Corp., 12.25%
due 11/01/2006 on April 30, 1999.
(d) Name changed from Mego Mortgage Corporation to Altiva Financial Corp. on
March 22, 1999.
(e) The shares of Altiva Financial Corp. were subject to a one-for-ten reverse
split on March 23, 1999.
* Commercial Paper and certain US Government Agency Obligations are traded
on a discount basis; the interest rates shown reflect the discount rates
paid at the time of purchase by the Fund.
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 J. Martorelli, Senior Vice President and Portfolio Manager
Donald C. Burke, Vice President and 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--4/99
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