-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ntrfu4C5HcErGvmiT3+JOIL2f7ZHcQW57d2xbXPLMnpzLU8tNy5Nw091xXLBeim+ SHIIFguodiz4FnjAnsmWsA== 0001005477-98-003547.txt : 19981214 0001005477-98-003547.hdr.sgml : 19981214 ACCESSION NUMBER: 0001005477-98-003547 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERRILL LYNCH PHOENIX FUND INC CENTRAL INDEX KEY: 0000701960 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 133114958 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-03450 FILM NUMBER: 98768294 BUSINESS ADDRESS: STREET 1: P O BOX 9066 CITY: PRINCETON STATE: NJ ZIP: 08543 BUSINESS PHONE: 6092823319 N-30B-2 1 QUARTERLY REPORT MERRILL LYNCH PHOENIX FUND, INC. STRATEGIC Performance [GRAPHIC OMITTED] Quarterly Report October 31, 1998 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 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 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
Ten Years/ 12 Month 3 Month Since Inception Total Return Total Return Total Return ====================================================================================================== 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 ======================================================================================================
* 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 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 Merrill Lynch Phoenix Fund, Inc. October 31, 1998 SCHEDULE OF INVESTMENTS
Face Amount/ Percent of Industry Shares Held Investments Cost Value Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Discount to Assets - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Total Earnings Turnarounds 276,684,989 240,674,922 42.4 - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------
5 Merrill Lynch Phoenix Fund, Inc. October 31, 1998 SCHEDULE OF INVESTMENTS (continued)
Face Amount/ Percent of Industry Shares Held Investments Cost Value Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Financial Restructuring (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------
6 Merrill Lynch Phoenix Fund, Inc. October 31, 1998 SCHEDULE OF INVESTMENTS (concluded)
Percent of Industry Shares Held Investments Cost Value Net Assets - ------------------------------------------------------------------------------------------------------------------------------------ Operational Restructuring (concluded) - ------------------------------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------------------------------ Face Amount Short-Term Investments - ------------------------------------------------------------------------------------------------------------------------------------ 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% ============ ===== - ------------------------------------------------------------------------------------------------------------------------------------ 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 ============ - ------------------------------------------------------------------------------------------------------------------------------------
* 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 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 [RECYCLE LOGO] Printed on post-consumer recycled paper -----END PRIVACY-ENHANCED MESSAGE-----