MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Quarterly Report
May 31, 1996
This report, including the financial information herein, is
transmitted to the shareholders of Merrill Lynch Senior Floating
Rate Fund, Inc. for their information. It is not a prospectus,
circular or representation intended for use in the purchase of
shares of the Fund or any securities mentioned in this report. Past
performance results shown in this report should not be considered a
representation of future performance. Statements and other
information herein are as dated and are subject to change.
<PAGE>
Merrill Lynch
Senior Floating
Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Senior Floating Rate Fund, Inc.
DEAR SHAREHOLDER
The three-month period ended May 31, 1996 was characterized by
increasing signs of an economy growing at a stronger-than-expected
pace and a resulting turnaround in investor sentiment. Despite wages
and prices that remained largely in check, continued investor
concerns about rising inflation and a possible increase in short-
term interest rates by the Federal Reserve Board drove both short-
term and long-term interest rates up during the latter half of the
reporting period.
<PAGE>
This uncertain interest rate environment put upward pressure on
short-term interest rates in the United States, and to a lesser
extent, increased the yield of Merrill Lynch Senior Floating Rate
Fund, Inc. All of the Fund's floating rate investments are currently
accruing interest at a spread above the London Interbank Offered
Rate (LIBOR), the rate that major international banks charge each
other for US dollar-denominated deposits outside the United States.
LIBOR has historically tracked very closely with other short-term
interest rates in the United States, particularly the Federal Funds
rate. Since the beginning of March, three-month LIBOR has risen from
5.25% to a high of over 5.60% at May 31, 1996. The average LIBOR
reset on the Fund's investments was 41 days at the end of the
period. The yield typically reflects any sustained decrease, or
increase, in short-term interest rates within a one-month--two-month
period, depending on the Fund's cash position.
Portfolio Performance
The Fund finished the quarter ended May 31, 1996 with approximately
81.8%, or $2.5 billion of its $2.9 billion of net assets committed
for investment in loan interests. Assets not invested in loan
interests were invested in high-quality short-term securities. Net
of trades not yet closed, the Fund had $2.1 billion, or 70.5% of its
net assets, closed and invested in corporate loan interests.
The Fund's effective yield for the May quarter was 6.24% compared to
6.76% during the quarter ended February 29, 1996. This slight
decline was caused primarily by the downward trend in short-term
interest rates during the early part of the May period, the steady
inflow of cash from new subscriptions and the early repayment of
loans in the portfolio. During the quarter ended May 31, 1996, the
Fund earned $0.160 per share income dividends, representing a net
annualized yield of 6.24% on a month-end per share net asset value
of $9.96. The Fund's total investment return was +1.11%, based on a
change in net asset value from $10.01 to $9.96, and assuming
reinvestment of $0.168 per share income dividends. Since inception
(November 3, 1989) through May 31, 1996, the Fund's total investment
return was +57.40%, based on a change in per share net asset value
from $10.00 to $9.96, and assuming reinvestment of $4.583 per share
income dividends.
<PAGE>
Investment Activities
The Fund invested over $599.5 million in loan interests during the
quarter ended May 31, 1996. These investments included $438.2
million directed to 27 new transactions and $161.3 million for
secondary market purchases. Our investment strategy remains
unchanged: to focus on leveraged transactions in which the borrowers
have strong market shares in the respective industries, experienced
managements and good cashflows. We also look for companies with
significant underlying asset and franchise value, strong capital
structures and equity sponsors with proven track records.
This strategy is reflected in new investments made during the
quarter ended May 31, 1996, such as Revlon Consumer Products Corp.,
one of the world's leading cosmetics companies, and Riverwood
International, one of the world's largest manufacturers of
paperboard used in beverage packaging. We also continued to broaden
the Fund's diversification into non-cyclicals such as Sinclair
Broadcasting Group Inc. (broadcast/media), Dade International, Inc.
(health services), AMF Group, Inc. (leisure/entertainment) and
Western Wireless Corp. (broadcast/media). We also made additional
investments in existing portfolio holdings such as Berg Electronics
Inc., Huntsman Corp., Jefferson Smurfit Company/Container Corp. of
America, Stone Container Corp., Saks & Co. and Merit Behavioral Care
Corp.
These purchases were offset by the sale of portions of the Fund's
positions, including ADVO Corp., Charter Communications L.P. and
Ralph's Grocery Company. In addition, the Fund's cash position was
enhanced by the repayment of $280.3 million in loans including the
full repayment of $162.3 million from investments such as Labatt
Brewing Co., Sperry Marine, Inc., US Radio Inc. and Thrifty Payless
Inc.
We also continue to seek those investments that offer the
appropriate risk/reward balance in the form of the floating rate
spread over LIBOR or the prime rate. The advantages of adhering to
these strategies were supported by both the relative stability of
the Fund's net asset value and the continued flexibility of our
borrowers to access the capital markets and position themselves for
any economic downturn.
<PAGE>
The quarter ended May 31, 1996 saw a relatively light volume of
large new transactions announced in the leveraged loan market.
Leveraged loans for companies in relatively stronger financial
positions were oversubscribed, and allocations were the rule rather
than the exception as new investors continued to come into the bank
loan market. The positive side to this is that liquidity in the
leveraged bank loan market is the strongest it has ever been. As new
investors continue to enter the market both on the investor and
trading side, this trend should continue. We also continue to be
opportunistic in purchasing higher-quality lower-yielding leveraged
loans in an effort to invest our cash reserves.
At May 31, 1996, the Fund was comprised of 106 different borrowers
representing 30 different industries. The average loan size was
$20.2 million, or .7% of net assets, down from over 1% a year
earlier. We continued to reduce average exposure across the
portfolio as we diversify into different industry sectors. The
largest industry concentrations were in paper, 12.6% of net assets;
broadcast/media, 10.3%; retail specialty, 6.6%; food & beverage,
4.7%; and electrical instruments, 4.2%.
The Fund completed another quarterly tender offer on April 16, 1996,
with approximately 8.87 million shares tendered and accepted for
repurchase. The next tender began on June 18, 1996 and will conclude
on July 16, 1996. The Fund remains open for new shareholder
purchases.
Fund Begins Market Pricing
On Monday, June 17, 1996, the Fund began to price substantially all
of the items in the portfolio on the basis of daily quotes provided
by dealers in the secondary market for bank loans. This change in
daily pricing practices is the result of various developments in the
secondary market for bank loans which gave the Fund's investment
adviser greater confidence in the day-to-day reliability of dealer
quotes for bank loans. These developments include:
* The dramatic growth in secondary trading for bank loans since the
Fund's inception--over $34 billion in 1995 compared to $4 billion in
1990.
* The proliferation of dealers in the bank loan market making markets
in various names. These not only include numerous banks but also
investment banks such as Goldman Sachs, Lehman Brothers and Morgan
Stanley.
* The rating of bank loans by the Moody's Investors Service, Inc. and
Standard & Poor's Corp. rating agencies. Over 59.46% of the Fund's
investments have been rated by Moody's since early 1995.
We view this route as a very positive reflection of the growing
liquidity of the bank loan market and its evolution as an attractive
asset class to institutional as well as retail investors.
<PAGE>
In Conclusion
We thank you for your continued investment in Merrill Lynch Senior
Floating Rate Fund, Inc., and we look forward to reviewing our
outlook and strategy with you again in our next report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(R. Douglas Henderson)
R. Douglas Henderson
Vice President and Portfolio Manager
July 9, 1996
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Loan Moody's Stated
Industries Amount Borrower Type Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <C>
Aerospace-- $ 6,149 Gulfstream Aerospace Corp. Term NR++ 3/31/97 $ 6,149
0.53% 9,260 Gulfstream Aerospace Corp. Term NR++ 3/31/98 9,260
Total Aerospace (Cost--$15,409) 15,409
Apparel-- 9,950 Humphreys Inc. Term B NR++ 1/15/03 9,950
0.34%
Total Apparel (Cost--$9,950) 9,950
<PAGE>
Automobile 24,841 Collins & Aikman Corp. Term B NR++ 12/31/02 24,841
Products-- 3,383 Johnstown America Industrial Inc. Term A B1 3/31/02 3,383
1.64% 19,833 Johnstown America Industrial Inc. Term B B1 3/31/03 19,833
Total Automobile Products (Cost--$48,057) 48,057
Broadcast/ 21,423 American Media Term B Ba2 9/30/02 21,423
Media-- 6,000 Cablevision of Ohio Term NR++ 12/31/05 6,000
10.32% 4,000 Chancellor Broadcasting Inc. Term B Ba2 9/01/03 4,000
24,375 Chelsea Communications Term B NR++ 9/30/04 24,375
20,000 Classic Cable Inc. Term B B1 6/30/05 20,000
18,842 Coaxial Communications Term B NR++ 12/31/99 18,842
7,500 Eller Industries, Inc. Term A NR++ 6/30/02 7,500
14,327 Eller Industries, Inc. Term B NR++ 12/21/03 14,327
4,933 Ellis Communications Term B NR++ 3/31/03 4,933
5,000 Frontier Vision Term B NR++ 6/30/05 5,000
10,000 Heftel Broadcasting Corp. Term B NR++ 9/30/03 10,000
9,725 Journal News Co. Term NR++ 12/31/01 9,725
3,500 Marcus Cable Operating Co. Revolving
Credit NR++ 4/30/14 3,500
33,937 Marcus Cable Operating Co. Term A NR++ 12/31/02 33,937
43,000 Marcus Cable Operating Co. Term B NR++ 4/30/04 43,000
17,203 Silver King Communications, Inc. Term B NR++ 7/31/02 17,203
12,000 Sinclair Broadcasting Group Inc. Term B NR++ 11/30/03 12,000
10,000 Sullivan Broadcasting Term B NR++ 12/31/03 10,000
20,000 Western Wireless Corp. Term B NR++ 3/31/05 20,000
8,040 Westinghouse Electric Corp. Revolving
Credit Ba2 5/26/98 8,040
8,610 Westinghouse Electric Corp. Term II Ba1 11/25/02 8,610
Total Broadcast/Media (Cost--$302,415) 302,415
Building 4,506 Fenway Holdings, Inc. Term B NR++ 9/15/02 4,506
Products-- 24,474 MTF Acquisition Term B NR++ 12/31/02 24,474
2.98% 30,000 National Gypsum Co. Term B NR++ 9/20/03 30,000
2,659 Overhead Door Corp. Revolving
Credit NR++ 8/18/99 2,659
7,434 Overhead Door Corp. Term NR++ 8/18/99 7,434
8,333 RSI Home Products Term NR++ 11/30/99 8,333
9,958 Walter Industrials, Inc. Term B NR++ 2/22//03 9,958
Total Building Products (Cost--$87,364) 87,364
Carbon & 440 UCAR International Inc. Revolving
Graphite Credit Ba3 12/31/01 440
Products -- 1,429 UCAR International Inc. Term A Ba3 12/31/01 1,429
0.47% 12,000 UCAR International Inc. Term B Ba3 12/31/02 12,000
Total Carbon & Graphite Products (Cost--$13,869) 13,869
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Moody's Stated
Industries Amount Borrower Type Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <C>
Chemicals-- $ 9,250 Cedar Chemical Term B NR++ 10/31/03 $ 9,250
2.97% 26,662 Freedom Chemical Company Term B NR++ 6/30/02 26,662
5,084 Harris Specialty Chemicals Revolving
Credit NR++ 12/30/01 5,084
232 Harris Specialty Chemicals Term A NR++ 12/30/99 232
370 Harris Specialty Chemicals Term A NR++ 12/30/01 370
1,037 Harris Specialty Chemicals Term B NR++ 12/30/99 1,037
1,794 Harris Specialty Chemicals Term B NR++ 12/30/01 1,794
3,121 Harris Specialty Chemicals Term B NR++ 12/30/01 3,121
1,418 Huntsman Corp. Revolving
Credit NR++ 12/31/02 1,418
22,919 Huntsman Corp. Term NR++ 12/31/02 22,919
5,000 Hydrochem Term B NR++ 7/01/02 5,000
3,245 Inspec Chemical Corp. Term B NR++ 12/02/00 3,245
2,181 Thoro World Systems, Inc. Term A NR++ 12/30/99 2,181
4,861 Thoro World Systems, Inc. Term B NR++ 12/30/01 4,861
Total Chemicals (Cost--$87,174) 87,174
Consumer 9,331 CHF/Ebel USA Inc. Term B NR++ 9/30/01 9,331
Products-- 3,300 Playtex Family Products Inc. Term A Ba2 6/30/02 3,300
2.49% 30,797 Playtex Family Products Inc. Term B Ba2 6/30/02 30,797
7,250 RTI Funding Corp. Term B NR++ 2/07/03 7,250
7,250 RTI Funding Corp. Term C NR++ 2/07/04 7,250
15,000 Revlon Consumer Products Corp. Term Ba3 9/30/00 15,000
Total Consumer Products (Cost--$72,928) 72,928
Containers-- 8,812 IPC, Inc. Term B1 9/30/01 8,812
0.87% 16,794 Silgan Corp. Term B Ba3 3/15/02 16,794
Total Containers (Cost--$25,606) 25,606
<PAGE>
Diversified 2,885 IMO Industries, Inc. Term A NR++ 4/30/01 2,885
Manufacturing 3,822 IMO Industries, Inc. Term B NR++ 4/30/01 3,822
- --2.27% 9,203 InterMetro Industries Term B NR++ 6/30/01 9,203
13,390 InterMetro Industries Term C NR++ 12/31/02 13,390
1,604 The Pullman Co., Inc. Revolving
Credit NR++ 12/31/99 1,604
6,194 The Pullman Co., Inc. Term A NR++ 12/31/99 6,194
429 The Pullman Co., Inc. Term B NR++ 12/31/99 429
3,081 Thermadyne Industries, Inc. Revolving
Credit B2 12/02/99 3,081
3,138 Thermadyne Industries, Inc. Term A B2 12/02/98 3,138
22,851 Thermadyne Industries, Inc. Term B B2 2/01/01 22,851
Total Diversified Manufacturing (Cost--$66,597) 66,597
Drug Stores-- 7,167 Duane Reade Co. Term A NR++ 9/30/97 7,167
1.44% 10,000 Duane Reade Co. Term B NR++ 9/30/99 10,000
8,333 Smith's Food & Drug Centers, Inc. Term B Ba3 11/30/03 8,333
8,333 Smith's Food & Drug Centers, Inc. Term C Ba3 11/30/04 8,333
8,333 Smith's Food & Drug Centers, Inc. Term D Ba3 8/31/05 8,333
Total Drug Stores (Cost--$42,166) 42,166
Electrical 15,000 Berg Electronics Inc. Term Ba3 12/31/02 15,000
Instruments-- 7,000 Berg Electronics Inc. Term B Ba3 12/31/02 7,000
4.21% 5,633 Communications & Power Industries Inc. Term B NR++ 8/11/02 5,633
5,000 Details, Inc. Term A NR++ 1/31/01 5,000
9,970 International Wire Corp. Term B NR++ 9/30/02 9,970
9,987 International Wire Corp. Term C NR++ 9/30/03 9,987
6,250 Northrop Grumman Corp. Term I NR++ 3/01/98 6,250
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Moody's Stated
Industries Amount Borrower Type Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <C>
Electrical $18,750 Northrop Grumman Corp. Term II NR++ 3/01/02 $ 18,750
Instruments 1,465 Reliance Communications Technology Revolving
(concluded) Credit NR++ 9/11/01 1,465
4,500 Reliance Communications Technology Term A NR++ 9/11/01 4,500
12,947 Reliance Communications Technology Term B NR++ 3/11/04 12,947
11,951 Reliance Communications Technology Term C NR++ 3/11/03 11,951
7,480 Tracor Inc. Term B Ba3 10/31/00 7,480
7,480 Tracor Inc. Term C Ba3 4/30/01 7,480
Total Electrical Instruments (Cost--$123,413) 123,413
<PAGE>
Food & 7,500 Amerifoods Term B NR++ 6/30/01 5,625
Beverage-- 7,500 Amerifoods Term C NR++ 6/30/02 5,625
4.69% 4,000 Ameriking Inc. Term B NR++ 1/31/04 4,000
8,711 MAFCO Worldwide Corp. Term B NR++ 6/30/01 8,711
4,919 President Baking Co., Inc. Term B NR++ 9/30/00 4,919
14,400 SC International Corp., Inc. Caterair
'A' NR++ 9/15/00 14,400
11,057 SC International Corp., Inc. Caterair
'B' NR++ 9/15/01 11,057
1,798 SC International Corp., Inc. SCI 'A' NR++ 9/15/00 1,798
14,284 SC International Corp., Inc. SCI 'A2' NR++ 9/15/00 14,284
13,784 SC International Corp., Inc. SCI 'B' NR++ 9/15/02 13,784
3,038 SC International Corp., Inc. SCI 'C' B2 9/15/03 3,038
2,000 Select Beverages Inc. Term B NR++ 6/30/01 2,000
3,000 Select Beverages Inc. Term C NR++ 6/30/01 3,000
35,089 Specialty Foods Corp. Term B B2 4/30/01 35,089
10,000 Van De Kamps Inc. Term B NR++ 5/06/02 10,000
Total Food & Beverage (Cost--$140,985) 137,330
Food 6,660 Volume Services Term B NR++ 12/31/02 6,660
Services-- 3,330 Volume Services Term C NR++ 12/31/03 3,330
0.34%
Total Food Services (Cost--$9,990) 9,990
Furniture-- 5,000 Furniture Brands International Term B Ba3 3/29/03 5,000
0.60% 12,500 Knoll, Inc. Term B B1 8/31/03 12,500
Total Furniture (Cost--$17,500) 17,500
Grocery-- 10,400 Big V Supermarkets Inc. Term B NR++ 3/15/00 10,400
2.51% 4,305 Dominick's Finer Foods Inc. Term B Ba2 3/31/02 4,305
4,664 Dominick's Finer Foods Inc. Term C Ba2 3/31/03 4,664
4,664 Dominick's Finer Foods Inc. Term D Ba2 9/30/03 4,664
4,530 Pathmark Stores Inc. Term B Ba3 10/31/99 4,530
8,561 Ralph's Grocery Company Revolving
Credit Ba3 6/15/01 8,561
13,314 Ralph's Grocery Company Term A Ba3 6/15/01 13,314
5,286 Ralph's Grocery Company Term B Ba3 6/15/02 5,286
5,285 Ralph's Grocery Company Term C Ba3 6/15/03 5,285
5,285 Ralph's Grocery Company Term D Ba3 2/15/04 5,285
4,197 Star Markets Co., Inc. Term B Ba3 12/31/01 4,197
3,145 Star Markets Co., Inc. Term C Ba3 12/31/02 3,145
Total Grocery (Cost--$73,636) 73,636
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Moody's Stated
Industries Amount Borrower Type Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <C>
Health $ 3,273 Dade International, Inc. Term B B1 12/31/02 $ 3,273
Services-- 3,273 Dade International, Inc. Term C B1 12/31/03 3,273
1.28% 3,455 Dade International, Inc. Term D B1 12/31/04 3,455
6,491 Merit Behavioral Care Corp. Term A B2 6/01/03 6,491
16,009 Merit Behavioral Care Corp. Term B B2 4/06/02 16,009
464 OrNda Health Corp. Revolving
Credit NR++ 10/30/01 464
4,653 OrNda Health Corp. Term A NR++ 10/30/01 4,653
Total Health Services (Cost--$37,618) 37,618
Leasing & 19,840 Prime Acquisition Term B1 12/31/00 19,840
Rental
Services--
0.68% Total Leasing & Rental Services (Cost--$19,840) 19,840
Leisure/ 21,509 AMF Group, Inc. Term A NR++ 3/31/03 21,509
Entertainment-- 8,491 AMF Group, Inc. Term B NR++ 3/31/04 8,491
2.29% 4,167 Amfac Parks Term B NR++ 9/30/02 4,167
10,000 Metro Goldwyn Mayer Co. Term NR++ 4/15/97 10,000
3,956 Orion Pictures Corp. Term NR++ 12/31/00 3,956
18,948 Six Flags Entertainment Corp. Term B Ba3 6/23/03 18,948
Total Leisure/Entertainment (Cost--$67,071) 67,071
Manufacturing-- 10,519 Calmar Inc. Axel A B1 9/15/03 10,519
1.41% 7,889 Calmar Inc. Axel B B1 3/15/04 7,889
5,135 Howmet Corp. Term B NR++ 11/20/02 5,135
2,824 Howmet Corp. Term C NR++ 5/20/03 2,824
15,000 Trans Technology Corp. Term B NR++ 6/30/02 15,000
Total Manufacturing (Cost--$41,367) 41,367
Materials, 9,462 Pierce Leahy Corp. Term B NR++ 10/25/02 9,462
Handling & 5,538 Pierce Leahy Corp. Term C NR++ 10/25/03 5,538
Storage--
0.51% Total Materials, Handling & Storage (Cost--$15,000) 15,000
Medical 1,708 Deknatel Holdings Corp. Term A NR++ 4/20/99 1,708
Devices-- 15,000 Deknatel Holdings Corp. Term B NR++ 4/20/01 15,000
0.95% 10,991 Graphic Controls Corp. Term B B1 9/28/03 10,991
Total Medical Devices (Cost--$27,699) 27,699
Message 5,000 Dictaphone Co. Term B B1 6/30/02 5,000
Communications--
0.17%
<PAGE>
Total Message Communications (Cost--$5,000) 5,000
Paper--12.56% 4,333 Ampad/Williamhouse Regency, Inc. Term B B1 10/31/02 4,333
3,000 Ampad/Williamhouse Regency, Inc. Term C B1 10/31/03 3,000
2,667 Ampad/Williamhouse Regency, Inc. Term D B1 4/30/04 2,667
19,900 Crown Paper Co. Term B Ba3 8/22/03 19,900
135 Fort Howard Corp. Revolving
Credit Ba3 3/16/02 135
10,712 Fort Howard Corp. Term A Ba3 3/08/02 10,712
16,838 Fort Howard Corp. Term B Ba3 12/31/02 16,838
328 Jefferson Smurfit Company/Container
Corp. of America Revolving
Credit Ba3 4/30/01 328
27,792 Jefferson Smurfit Company/Container
Corp. of America Term A Ba3 4/30/01 27,792
6,970 Jefferson Smurfit Company/Container
Corp. of America Term B Ba3 4/30/01 6,970
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan Moody's Stated
Industries Amount Borrower Type Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <C>
Paper $51,077 Jefferson Smurfit Company/Container
(concluded) Corp. of America Term B Ba3 4/30/02 $ 51,077
13,560 Jefferson Smurfit Company/Container
Corp. of America Term C Ba2 4/30/02 13,560
2,256 Mail-Well, Inc./Supremex Revolving
Credit Ba2 7/31/03 2,256
13,198 Mail-Well, Inc./Supremex Term B Ba2 7/31/03 13,198
73,571 Riverwood International Corp. Term B Ba3 2/28/04 73,571
29,429 Riverwood International Corp. Term C Ba3 8/28/04 29,429
29,957 S.D. Warren Co. Term B Ba2 6/30/02 29,957
36,820 Stone Container Corp. Term B Ba3 4/01/00 36,820
25,373 Stone Container Corp. Term C Ba3 4/01/00 25,373
Total Paper (Cost--$367,916) 367,916
Printing & 3,768 Print Tech International PLC Term B NR++ 12/28/01 3,768
Publishing-- 10,000 Treasure Chest Term NR++ 12/31/02 10,000
0.47%
Total Printing & Publishing (Cost--$13,768) 13,768
<PAGE>
Rendering-- 5,000 CBP Resources Inc. Term B NR++ 9/30/03 5,000
0.17%
Total Rendering (Cost--$5,000) 5,000
Retail-- 12,500 Federated Department Stores Inc. Revolving
Specialty-- Credit Ba1 3/31/00 12,500
2.41% 27,076 Federated Department Stores Inc. Term Ba1 3/31/00 27,076
2,653 Federated Department Stores Inc. Term B Ba1 3/31/00 2,653
21,937 Music Acquisition Term B NR++ 8/31/01 9,872
7,500 Music Acquisition Term C NR++ 8/31/02 3,375
3,750 Saks & Co. Term A NR++ 6/30/98 3,750
11,320 Saks & Co. Term B NR++ 6/30/00 11,320
Total Retail--Specialty (Cost--$86,347) 70,546
Telephone 18,316 Comcast Corp. Term Ba3 9/30/04 18,316
Communications-- 359 MobileMedia Corp. Revolving
3.44% Credit B1 6/30/02 359
13,034 MobileMedia Corp. Term A B1 6/30/02 13,034
9,667 MobileMedia Corp. Term B B1 6/30/03 9,667
29,333 Paging Network Inc. Term B Ba3 3/31/02 29,333
5,000 Shared Technologies Cellular, Inc. Term B B1 3/31/03 5,000
25,000 WorldCom/LDDS Communications Inc. Term Ba2 12/31/00 25,000
Total Telephone Communications (Cost--$100,709) 100,709
Textiles--0.34% 10,000 Polymer Group, Inc. Term A NR++ 3/31/02 10,000
Total Textiles (Cost--$10,000) 10,000
Transportation 8,462 Petro PSC Properties L.P. Term B NR++ 5/24/01 8,462
Services--0.29%
Total Transportation Services (Cost--$8,462) 8,462
Total Senior Secured Floating Rate Loan Interests
(Cost--$1,942,856)--65.64% 1,923,400
Shares
Held Equity Investments
Broadcast/ 1 Classic Cable, Inc. (Warrants) (a) --
Media--0.00%
Restaurants-- 44 Flagstar Companies, Inc. 124
0.00%
Total Equity Investments (Cost--$0)--0.00% 124
Total Long-Term Investments (Cost--$1,942,856)--65.64% 1,923,524
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Short-Term Investments Value
<S> <S> <C>
Commercial AT&T Lucent Technologies, Inc. ($31,000 par, maturing 6/03/1996,
Paper**--33.72% yielding 5.28%) $ 31,000
American Express Credit Corp. ($50,000 par, maturing 6/28/1996,
yielding 5.28%) 49,817
Associates Corp. of North America ($64,367 par, maturing 6/03/1996,
yielding 5.40%) 64,367
Ciesco L.P. ($3,000 par, maturing 6/03/1996, yielding 5.28%) 3,000
Ciesco L.P. ($50,000 par, maturing 6/19/1996, yielding 5.27%) 49,883
Ciesco L.P. ($40,000 par, maturing 7/09/1996, yielding 5.28%) 39,789
Commerzbank (US) Finance Corp. ($25,000 par, maturing 6/03/1996,
yielding 5.27%) 25,000
Corporate Asset Funding Co. ($25,000 par, maturing 7/11/1996, yielding 5.28%) 24,861
General Electric Capital Corp. ($41,169 par, maturing 6/03/1996,
yielding 5.40%) 41,169
Goldman Sachs Group L.P. ($55,000 par, maturing 6/07/1996, yielding 5.32%) 54,968
Goldman Sachs Group L.P. ($30,000 par, maturing 6/24/1996, yielding 5.27%) 29,908
IBM Credit Corp. ($60,000 par, maturing 6/07/1996, yielding 5.27%) 59,965
Motorola Inc. ($40,000 par, maturing 6/04/1996, yielding 5.29%) 39,994
National Australia Funding, Inc. ($45,000 par, maturing 7/01/1996,
yielding 5.29%) 44,815
National Fleet Fund, Inc. ($30,000 par, maturing 6/03/1996, yielding 5.30%) 30,000
PHH Corp. ($18,300 par, maturing 7/08/1996, yielding 5.28%) 18,206
PHH Corp. ($25,000 par, maturing 7/15/1996, yielding 5.28%) 24,846
Preferred Receivables Funding, Inc. ($40,100 par, maturing 6/05/1996,
yielding 5.30%) 40,088
Preferred Receivables Funding, Inc. ($9,975 par, maturing 6/06/1996,
yielding 5.30%) 9,971
Preferred Receivables Funding, Inc. ($20,000 par, maturing 7/08/1996,
yielding 5.30%) 19,897
Raytheon Co. ($37,000 par, maturing 6/04/1996, yielding 5.28%) 36,994
Riverwood Funding Corp. ($25,000 par, maturing 7/12/1996, yielding 5.28%) 24,857
Toyota Motor Credit Corp. ($25,000 par, maturing 6/03/1996, yielding 5.27%) 25,000
Wal-Mart Stores, Inc. ($25,000 par, maturing 6/20/1996, yielding 5.28%) 24,938
Walt Disney Co. ($25,000 par, maturing 6/26/1996, yielding 5.26%) 24,916
Xerox Corp. ($50,000 par, maturing 6/10/1996, yielding 5.30%) 49,948
Xerox Credit Corp. ($50,000 par, maturing 6/06/1996, yielding 5.30%) 49,977
Xerox Credit Corp. ($50,000 par, maturing 6/20/1996, yielding 5.28%) 49,875
Total Commercial Paper (Cost--$988,049) 988,049
<PAGE>
US Government Federal Home Loan Mortgage Corp. ($38,000 par, maturing 6/18/1996, yielding
& Agency 5.21%) 37,918
Obligations**--
1.30%
Total US Government & Agency Obligations (Cost--$37,918) 37,918
Total Short-Term Investments (Cost--$1,025,967)--35.02% 1,025,967
Total Investments (Cost--$2,968,823)--100.66% 2,949,491
Liabilities in Excess of Other Assets--(0.66%) (19,430)
----------
Net Assets (Equivalent to $9.96 per share based on 294,222 shares
outstanding)--100.00% $2,930,061
==========
<FN>
*The interest rates on senior secured floating rate loan interests
are subject to change periodically based on the change in the prime
rate of a US Bank, LIBOR (London Interbank Offered Rate), or, in
some cases, another base lending rate. The interest rates shown are
those in effect at May 31, 1996.
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(a)Warrants entitle the Fund to purchase a predetermined number of
common stock. The purchase price and numbers of shares are subject
to adjustment under certain conditions until the expiration date.
++Not Rated.
</TABLE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Ronald W. Forbes, Director
Cynthia A. Montgomery, Director
Charles C. Reilly, Director
Kevin A. Ryan, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
N. John Hewitt, Senior Vice President
Donald C. Burke, Vice President
John W. Fraser, Vice President
R. Douglas Henderson, Vice President
Gerald M. Richard, Treasurer
Patrick D. Sweeney, Secretary
<PAGE>
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
