MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Quarterly Report
November 30, 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
During most of the quarter ended November 30, 1996, Merrill Lynch
Senior Floating Rate Fund, Inc. was invested in an environment of
moderate to strong economic growth with little sign of inflation.
The nation's economy appears to have accelerated in the fourth
quarter of 1996 after slowing in the previous period. A 1.9% jump in
the November construction spending report came on the heels of
surprisingly solid strength in other corners of the economy. A
rebound in consumer spending, the biggest increase in industrial
output in about nine months, and a surge in exports all indicated an
accelerating growth rate.
<PAGE>
At November 30, 1996, over 98% of the Fund's investments in
corporate loans were accruing interest at a spread above the London
Interbank Offered Rate (LIBOR), the rate that major international
banks charge each other for 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. A steady inflow of cash from new
subscriptions pushed down the Fund's yield in the first half of the
period. However, yields bounced back later in the quarter as the
primary deal flow improved and the Fund's cash position was
substantially reduced through primary and secondary purchases.
Meanwhile, the three-month LIBOR traded in a relatively narrow range
of 5.50%--5.65% during the second half of the year, even with long-
term interest rates exhibiting more volatility. The average LIBOR
reset on the Portfolio's investments was 55 days at the end of the
period. The yield typically reflects any sustained decrease, or
increase, up or down, in short-term interest rates within a one-
month to two-month period, depending on the Fund's cash position.
Portfolio Performance
With this interest rate environment and economic growth as a
backdrop, Merrill Lynch Senior Floating Rate Fund, Inc. ended the
quarter with approximately $2.8 billion out of $2.9 billion, or
96.5%, of its net assets committed for investment in corporate 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 $2.7 billion, or 93%, invested in corporate loan
interests.
The Fund's effective net annualized yield for the quarter ended
November 30, 1996 was 6.56%, compared to a yield of 7.15% for the
prior year. The Fund's net asset value continued to remain
relatively stable throughout the November quarter. During the three-
month period, the Fund earned $0.161 per share income dividends,
representing a net annualized yield of 6.56%, based on a month-end
per share net asset value of $9.98. The Fund's total investment
return was +1.52%, based on a change in net asset value from $9.99
to $9.98, and assuming reinvestment of $0.163 per share income
dividends. Since inception (November 3, 1989) through November 30,
1996, the Fund's total investment return was +62.81%, based on a
$0.02 change in per share net asset value from $10.00 to $9.98, and
assuming reinvestment of $4.899 per share income dividends.
Investment Activities
The Fund's investment strategy remained unchanged: to invest in
leveraged transactions in which the borrower has strong market
share, experienced management, consistent cashflows and appropriate
risk/reward in the form of its floating rate spread over the prime
rate or LIBOR. In addition, we look for companies with significant
underlying asset and franchise value, strong capital structures, and
equity sponsors that support their investments. The Fund's three
largest positions, Jefferson Smurfit Company/Container Corp. of
America, Federated Department Stores Inc. and Marcus Cable Operating
Co., are examples of this strategy. The advantages of adhering to
this strategy are borne out by both the relative stability of the
Fund's net asset value and the continued flexibility of our
borrowers as they access capital markets.
<PAGE>
In our opinion, a stable economy and relatively low cost of carry
for debt helped maintain reasonably strong credit fundamentals in
the bank loan market. In most industries, including cyclicals,
prices remained firm based on strong underlying collateral value, as
well as a dearth of sellers as investors were reluctant to part with
high-coupon senior secured paper that they could not replace. Paper
companies, particularly those involved in market pulp, newsprint and
fresh sheet ungrounded, saw prices slide slightly from earlier in
the year and volumes decline as customers continued to limit
purchases to immediate needs, leaving producers and intermediaries
with excess inventories. Cable television, another large sector
investment for the Fund, is maturing and experiencing increasing
competition from digital broadcast satellite systems and wireless
cable, which limits cable operators' ability to increase penetration
and raise rates. As a result, growth by acquisition has become more
the rule than the exception.
As evidenced by the number of investments in the Fund, it has become
more diversified by sector and by actual number of issuers. This is
in part by design to help lessen credit exposure to any one holding,
but it is also caused by the number of investors in the market
today. This resulted in smaller allocations in our market, continued
strong demand and improved liquidity. We expect these trends to
continue for the foreseeable future.
During the quarter ended November 30, 1996, we were faced with the
challenge of staying fully invested in a market characterized by
numerous refinancings driven by the extremely strong public debt and
equity markets. In the last quarter, these included names such as
Eller Industries, Inc., Metro Goldwyn Mayer Co., PrimeCo and
Gulfstream Aerospace Corp. Finally, the Fund continued to be
selective in its investment in new leveraged buyouts coming to the
market during the course of the November quarter. Examples include
our investments in Community HealthSystems Inc. and CSK Auto, Inc.
Merger and acquisition financings included such names as CS Brooks
Canada, Huntsman Corp., Outdoor Systems, Inc., and Prime Succession
International Group. The Fund purchased over $481.6 million in loans
in the primary market and over $97 million in the secondary market.
This was offset by the sale of $36 million in investments and the
full or partial prepayment of over $239.8 million during the three
months ended November 30, 1996.
<PAGE>
The leveraged bank loan market remained robust as continued strong
merger and acquisition activity drove transaction volume up.
However, the increasing popularity of senior secured bank loans as
an asset class among institutional investors has brought many new
issuers into the market, increasing the competition for favorable
allocations in new transactions. The positive side of the increased
demand, in tandem with the proliferation of dealers in the bank loan
market, resulted in the highest degree of liquidity that this market
has experienced. Secondary trading volume for 1996 is on track to
exceed the $34 billion generated in 1995, according to Loan Pricing
Corporation. This is up dramatically from the $4 billion of
secondary volume generated just five years ago.
As of November 30, 1996, the Fund was invested in 142 different
borrowers across 35 industries. The largest industry concentrations
were in paper (11.8% of net assets), food and kindred products
(6.7%), cable TV services (6.7%), telephone communications (5.0%),
and health services (4.9%). The average loan size equaled $19.9
million, or 1.0% of net assets. The largest individual credit
exposures were Jefferson Smurfit Company/Container Corp. of America
($94.5 million; 3.1% of net assets); Federated Department Stores
($93.7 million; 3.1%); Marcus Cable Operating Co. ($90.5 million;
3.0%); Riverwood International ($88 million; 2.9%); and Stone
Container Corp. ($81.8 million; 2.7%).
The Fund completed its latest quarterly tender offer on October 15,
1996 with 13.1 million shares tendered and accepted for repurchase.
The next tender began on December 23, 1996 and concluded on January
21, 1997. The Fund remains open for new shareholder purchases.
In Conclusion
We thank you for your 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
<PAGE>
(R. Douglas Henderson)
R. Douglas Henderson
Vice President and Portfolio Manager
January 17, 1997
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Advertising $ 8,571 Eller Industries, Inc. Term A NR++ NR++ 9/30/03 $ 8,574
- --1.6% 21,429 Eller Industries, Inc. Term B NR++ NR++ 12/31/04 21,449
12,500 Outdoor Systems, Inc. Term A NR++ NR++ 12/31/00 12,516
833 Outdoor Systems, Inc. Term B NR++ Ba2 12/31/02 836
3,333 Outdoor Systems, Inc. Canadian
Term B NR++ Ba2 12/31/03 3,346
Total Advertising
(Cost--$46,234) 46,721
Aircraft & 5,000 Banner Industries, Inc. Term B NR++ NR++ 6/30/03 4,991
Parts-- 25,000 Gulfstream Aerospace Corp. Term NR++ NR++ 9/30/02 24,937
1.5% 3,352 Howmet Corp. Term B NR++ Ba3 11/20/02 3,367
1,856 Howmet Corp. Term C NR++ Ba3 5/20/03 1,864
3,420 Technetics Term NR++ NR++ 6/20/02 3,425
5,000 Tri Star Inc. Term NR++ NR++ 9/30/03 4,950
Total Aircraft & Parts
(Cost--$43,464) 43,534
Amusement & 28,615 AMF Group, Inc. Axel A NR++ Ba3 3/31/03 28,856
Recreational 11,280 AMF Group, Inc. Axel B NR++ Ba3 3/31/04 11,389
Services-- 4,167 Amfac Parks, Inc. Term B NR++ NR++ 9/30/02 4,143
3.0% 15,000 Metro Goldwyn Mayer Co. Term NR++ NR++ 3/31/04 14,934
4,678 Orion Pictures Corp. Term NR++ Ba2 12/31/00 4,643
3,900 Panavision Inc. Term B NR++ NR++ 3/31/04 3,871
18,911 Six Flags Entertainment Corp. Term B NR++ Ba3 6/23/03 19,017
Total Amusement & Recreational
Services (Cost--$86,288) 86,853
<PAGE>
Apparel-- 9,900 Humphreys Inc. Term B NR++ NR++ 1/15/03 9,900
0.6% 6,300 William Carter Co. (The) Term BB- Ba3 10/31/03 6,296
Total Apparel (Cost--$16,169) 16,196
Automotive 8,500 CSK Auto Inc. Term NR++ Ba3 10/31/03 8,500
Equipment-- 24,524 Collins & Aikman Corp. Term B NR++ B1 12/31/02 24,539
2.2% 4,722 Hayes Wheels International, Inc. Term B NR++ B1 7/31/03 4,740
3,778 Hayes Wheels International, Inc. Term C NR++ B1 7/31/04 3,792
3,150 Johnstown America Industrial Inc. Term A NR++ B1 3/31/02 3,044
19,501 Johnstown America Industrial Inc. Term B NR++ B1 3/31/03 18,989
Total Automotive Equipment
(Cost--$63,853) 63,604
Broadcast-- 4,436 Benedek Broadcasting Corp. Axel A NR++ Ba3 5/01/01 4,425
Radio & 4,461 Benedek Broadcasting Corp. Axel B NR++ Ba3 11/01/02 4,450
TV--1.9% 3,977 Chancellor Broadcasting Inc. Term B NR++ Ba2 9/01/03 4,007
5,000 Citicasters Inc. (Jacor) Term B NR++ Ba2 9/17/04 4,988
16,680 Silver King Communications, Inc. Term B NR++ NR++ 7/31/02 16,534
12,000 Sinclair Broadcasting Group Inc. Term B NR++ Ba3 11/30/03 11,989
10,000 Sullivan Broadcasting Term B NR++ Ba3 12/31/03 10,006
Total Broadcast--Radio & TV
(Cost--$56,318) 56,399
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Building $ 6,895 Dal Tile International Inc. Revolving
Materials-- Credit NR++ NR++ 12/31/02 $ 6,878
3.5% 10,476 Dal Tile International Inc. Term NR++ NR++ 12/31/02 10,450
10,000 Euramax Holdings Term B NR++ Ba3 9/30/03 10,000
4,496 Fenway Holdings, Inc. Term B NR++ NR++ 9/15/02 4,485
23,094 MTF Acquisition Term B NR++ NR++ 12/31/02 22,978
29,950 National Gypsum Co. Term B NR++ Ba3 9/20/03 30,044
8,000 RSI Home Products Term NR++ NR++ 11/30/99 7,970
9,875 Walter Industrials, Inc. Term B NR++ NR++ 2/22/03 9,887
Total Building Materials
(Cost--$102,509) 102,692
<PAGE>
Cable TV 6,000 Cablevision of Ohio Term NR++ NR++ 12/31/05 5,985
Services-- 24,375 Chelsea Communications Term B NR++ NR++ 9/30/04 24,284
6.7% 17,459 Classic Cable Inc. Term B NR++ B1 6/30/05 16,979
18,778 Coaxial Communications Term B NR++ NR++ 12/31/99 18,637
5,000 Frontier Vision Term B NR++ NR++ 6/30/05 4,981
10,000 Intermedia Communications, Inc. Term NR++ Ba3 1/01/05 10,006
2,625 Marcus Cable Operating Co. Revolving
Credit NR++ NR++ 4/30/14 2,602
33,937 Marcus Cable Operating Co. Term A NR++ NR++ 12/31/02 33,831
43,000 Marcus Cable Operating Co. Term B NR++ NR++ 4/30/04 43,202
10,000 Triax Midwest Term B NR++ NR++ 6/30/05 9,997
24,070 Viacom, Inc. Term NR++ Ba2 7/01/02 24,017
Total Cable TV Services
(Cost--$194,308) 194,521
Chemicals-- 9,157 Cedar Chemical Term B NR++ NR++ 10/31/03 9,135
3.7% 5,064 Harris Specialty Chemicals Revolving
Credit NR++ NR++ 12/30/01 4,776
229 Harris Specialty Chemicals Term A NR++ NR++ 12/30/99 216
366 Harris Specialty Chemicals Term A NR++ NR++ 12/30/01 345
1,035 Harris Specialty Chemicals Term B NR++ NR++ 12/30/99 976
4,902 Harris Specialty Chemicals Term B NR++ NR++ 12/30/01 4,623
4,790 Huntsman Corp. Revolving
Credit NR++ NR++ 12/31/02 4,754
22,258 Huntsman Corp. Term NR++ NR++ 12/31/02 22,182
7,180 Huntsman Corp. Term A NR++ NR++ 12/31/02 7,155
15,000 Huntsman Corp. Term B NR++ NR++ 9/30/03 15,038
5,000 Hydrochem Term B NR++ NR++ 7/01/02 5,000
20,000 Sterling Chemicals, Inc. Term B NR++ B3 9/30/04 19,963
7,000 Texas Petrochemicals Term B NR++ Ba3 6/30/04 6,983
2,154 Thoro World Systems, Inc. Term A NR++ NR++ 12/30/99 2,032
4,837 Thoro World Systems, Inc. Term B NR++ NR++ 12/30/01 4,561
Total Chemicals (Cost--$108,600) 107,739
Consumer 3,212 Playtex Family Products Inc. Term A NR++ Ba2 6/30/02 3,192
Products-- 29,981 Playtex Family Products Inc. Term B NR++ Ba2 6/30/02 29,794
2.1% 7,241 RTI Funding Corp. (Ritvik Toys) Term B NR++ NR++ 2/07/03 7,268
7,241 RTI Funding Corp. (Ritvik Toys) Term C NR++ NR++ 2/07/04 7,268
15,000 Revlon Consumer Products Corp. Term BB Ba3 9/30/00 14,972
Total Consumer Products
(Cost--$62,275) 62,494
Defense-- 20,000 Alliant Techsystems, Inc. Term NR++ NR++ 3/15/01 19,963
0.7%
Total Defense (Cost--$19,980) 19,963
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
<PAGE>
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Diversified $ 5,821 Im Acquisition Term NR++ NR++ 6/30/03 $ 7,498
Manufacturing 7,484 Im Acquisition Term NR++ NR++ 6/30/04 5,832
- --0.9% 1,385 IMO Industries, Inc. Revolving
Credit NR++ B1 4/30/01 1,366
2,596 IMO Industries, Inc. Term A NR++ B1 4/30/01 2,569
3,822 IMO Industries, Inc. Term B NR++ B1 4/30/01 3,793
6,060 Thermadyne Industries, Inc. Revolving
Credit NR++ B2 6/30/01 6,047
Total Diversified Manufacturing
(Cost--$27,133) 27,105
Drilling-- 4,900 Rigco North America Term NR++ B1 9/30/98 4,906
0.2%
Total Drilling (Cost--$4,877) 4,906
Drug/ 270 Duane Reade Co. Term A NR++ NR++ 9/30/97 268
Proprietary 10,000 Duane Reade Co. Term B NR++ NR++ 9/30/99 9,912
Stores--2.1% 33,820 Thrifty Payless Holdings, Inc. Revolving
Credit NR++ B1 12/31/02 33,751
6,132 Thrifty Payless Holdings, Inc. Term NR++ B1 12/31/02 6,131
9,747 Thrifty Payless Holdings, Inc. Term A NR++ B1 12/31/02 9,745
Total Drug/Proprietary Stores
(Cost--$59,689) 59,807
Electronics/ 21,450 Berg Electronics Inc. Term NR++ Ba3 12/31/02 21,423
Electrical 5,600 Communications & Power
Components-- Industries Inc.Term B NR++ NR++ 8/11/02 5,586
2.3% 4,661 Details, Inc. Term A NR++ NR++ 1/31/01 4,661
9,939 International Wire Corp. Term B NR++ NR++ 9/30/02 9,977
9,961 International Wire Corp. Term C NR++ NR++ 9/30/03 9,998
7,440 Tracor Inc. Term B NR++ Ba3 10/31/00 7,456
7,441 Tracor Inc. Term C NR++ Ba3 4/30/01 7,464
Total Electronics/Electrical
Components (Cost--$ 66,276) 66,565
Financial 15,000 Outsourcing Solutions Inc. Term B NR++ B1 10/15/03 15,009
Services--
0.5% Total Financial Services
(Cost--$ 14,926) 15,009
<PAGE>
Food & 7,481 American Italian Pasta Term C NR++ NR++ 2/28/04 7,392
Kindred 7,500 Amerifoods Term B NR++ NR++ 6/30/01 5,625
Products-- 7,500 Amerifoods Term C NR++ NR++ 6/30/02 5,625
6.7% 3,980 Ameriking Inc. Term B NR++ NR++ 1/31/04 3,982
15,000 Favorite Brands International Term B NR++ B1 8/30/04 15,019
8,108 International Homefoods Term B NR++ Ba3 9/30/04 8,164
6,892 International Homefoods Term C NR++ Ba3 9/30/05 6,939
8,611 MAFCO Worldwide Corp. Term B NR++ NR++ 6/30/01 8,546
4,895 President Baking Co., Inc. Term B NR++ NR++ 9/30/00 4,887
3,372 Rykoff-Sexton, Inc. Term B NR++ Ba3 10/31/02 3,380
1,618 Rykoff-Sexton, Inc. Term C NR++ Ba3 4/30/03 1,623
12,800 SC International Corp., Inc. Caterair 'A' NR++ B2 9/15/00 12,784
8,759 SC International Corp., Inc. Caterair 'B' NR++ B2 9/15/01 8,786
13,655 SC International Corp., Inc. SCI 'A' NR++ B2 9/15/00 13,638
1,027 SC International Corp., Inc. SCI 'A2' NR++ B2 9/15/00 1,026
10,923 SC International Corp., Inc. SCI 'B' NR++ B2 9/15/02 10,958
3,010 SC International Corp., Inc. SCI 'C' NR++ B2 9/15/03 3,022
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Food & $ 1,980 Select Beverages Inc. Term B NR++ NR++ 6/30/01 $ 1,982
Kindred 2,970 Select Beverages Inc. Term C NR++ NR++ 6/30/01 2,977
Products 43,097 Specialty Foods Corp. Term B NR++ B2 4/30/01 42,830
(concluded) 7,303 Van De Kamps Inc. Term B NR++ Ba3 4/30/03 7,340
4,570 Van De Kamps Inc. Term C NR++ Ba3 9/30/03 4,593
6,645 Volume Services Term B NR++ NR++ 12/31/02 6,645
3,323 Volume Services Term C NR++ NR++ 12/31/03 3,323
4,937 Windsor Quality Food Term B NR++ NR++ 12/31/02 4,913
Total Food & Kindred Products
(Cost--$198,680) 195,999
Funeral Homes 5,925 Loewen Group Inc. Revolving
& Parlors-- Credit NR++ Ba1 5/29/01 5,910
1.0% 15,000 Prime Succession International
Group Axel BB- NR++ 8/01/03 15,188
7,000 Rose Hills Acquisition Corp. Axel A BB NR++ 12/01/03 7,105
Total Funeral Homes & Parlors
Cost--$27,853) 28,203
<PAGE>
Furniture & 10,915 Knoll, Inc. Term B B+ B1 8/31/03 10,956
Fixtures-- 12,800 Lifestyle Furnishings
0.8% International Term B NR++ Ba2 8/31/04 12,848
Total Furniture & Fixtures
(Cost--$23,577) 23,804
General 27,344 Federated Department Stores
Merchandise Inc. Revolving
Stores--3.4% Credit NR++ Ba1 3/31/00 26,882
29,885 Federated Department Stores
Inc. Term NR++ Ba1 3/31/00 29,801
2,574 Federated Department Stores
Inc. Term B NR++ Ba1 3/31/00 2,567
33,308 Kmart Corp. Term A BB+ Ba1 6/17/99 33,288
4,485 Music Acquisition Term B NR++ NR++ 8/31/01 1,570
4,952 Music Acquisition Term C NR++ NR++ 8/31/02 1,733
1,902 Saks & Co. Term A NR++ NR++ 6/30/98 1,898
Total General Merchandise
Stores (Cost--$103,594) 97,739
Grocery 10,400 Big V Supermarkets Inc. Term B NR++ NR++ 3/15/00 10,270
Stores-- 4,863 Bruno's, Inc. Term B NR++ B1 2/18/02 4,886
3.0% 4,521 Bruno's, Inc. Term C NR++ B1 2/18/03 4,542
10,000 MEDIQ, Inc. Term B NR++ NR++ 9/30/04 9,981
4,500 Pathmark Stores Inc. Term B BB- B1 10/31/99 4,512
3,850 Ralph's Grocery Company Revolving
Credit NR++ Ba3 6/15/01 3,795
1,616 Ralph's Grocery Company Term A NR++ Ba3 6/15/01 1,623
4,848 Ralph's Grocery Company Term B NR++ Ba3 6/15/02 4,875
4,847 Ralph's Grocery Company Term C NR++ Ba3 6/15/03 4,889
4,847 Ralph's Grocery Company Term D NR++ Ba3 2/15/04 4,889
3,000 Ralph's Grocery Company Term E NR++ Ba3 6/15/02 3,000
1,000 Ralph's Grocery Company Term F NR++ Ba3 6/15/03 1,000
1,000 Ralph's Grocery Company Term G NR++ Ba3 2/15/04 1,000
7,795 Smith's Food & Drug Centers,
Inc. Term B NR++ Ba3 11/30/03 7,869
7,795 Smith's Food & Drug Centers,
Inc. Term C NR++ Ba3 11/30/04 7,871
7,795 Smith's Food & Drug Centers,
Inc. Term D NR++ Ba3 8/31/05 7,871
4,197 Star Markets Co., Inc. Term B NR++ Ba3 12/31/01 4,184
3,145 Star Markets Co., Inc. Term C NR++ Ba3 12/31/02 3,135
Total Grocery Stores
(Cost--$89,430) 90,192
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
<PAGE>
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Health $16,336 Community Health Systems, Inc.
Services-- Term B NR++ NR++ 12/31/03 $ 16,376
4.9% 16,336 Community Health Systems, Inc. Term C NR++ NR++ 12/31/04 16,376
12,329 Community Health Systems, Inc. Term D NR++ NR++ 12/31/05 12,360
3,273 Dade International, Inc. Term B NR++ B1 12/31/02 3,297
3,273 Dade International, Inc. Term C NR++ B1 12/31/03 3,301
3,455 Dade International, Inc. Term D NR++ B1 12/31/04 3,489
2,465 Imed Corp. Term B NR++ B1 11/30/03 2,481
2,465 Imed Corp. Term C NR++ B1 11/30/04 2,481
2,320 Imed Corp. Term D NR++ B1 11/30/05 2,335
13,091 Medical Specialties Axel NR++ NR++ 6/30/04 13,042
4,909 Medical Specialties Term NR++ NR++ 6/30/01 4,891
6,491 Merit Behavioral Care Corp. Term A NR++ B2 6/01/03 6,485
15,849 Merit Behavioral Care Corp. Term B NR++ B2 4/06/02 15,888
35,000 National Medical Care Inc. Term NR++ Bal 9/30/03 34,956
2,740 OrNda Healthcare Corp. Revolving
Credit NR++ NR++ 10/30/01 2,738
3,425 OrNda Healthcare Corp. Term NR++ NR++ 10/30/01 3,424
Total Health Services
(Cost--$143,106) 143,920
Hotels & 5,646 Doubletree Corporation Term B NR++ NR++ 6/30/04 5,663
Motels--
0.2%
Total Hotels & Motels
(Cost--$5,625) 5,663
Leasing & 3,000 Brand Scaffold Term B NR++ NR++ 9/30/03 2,996
Rental 2,000 Brand Scaffold Term C NR++ NR++ 9/30/04 1,999
Services-- 25,000 PrimeCo Term NR++ B1 12/31/02 25,019
1.0%
Total Leasing & Rental
Services (Cost--$29,856) 30,014
Manufacturing 5,060 Aerostructures Hamble
- --1.6% Holdings PLC Term B NR++ NR++ 9/30/03 5,085
1,840 Aerostructures Hamble
Holdings PLC Term C NR++ NR++ 9/30/04 1,849
10,466 Calmar Inc. Term A NR++ B1 9/15/03 10,453
7,849 Calmar Inc. Term B NR++ B1 3/15/04 7,869
2,778 Rayovac Corp. Term B NR++ Ba3 9/30/03 2,797
2,778 Rayovac Corp. Term C NR++ Ba3 9/30/04 2,800
14,700 Trans Technology Corp. Term B NR++ NR++ 6/30/02 14,663
Total Manufacturing
(Cost--$45,207) 45,516
<PAGE>
Measuring, 9,331 CHF/Ebel USA Inc. Term B NR++ NR++ 9/30/01 9,331
Analyzing & 10,920 Graphic Controls Corp. Term B NR++ B1 9/28/03 10,947
Controlling
Instruments--
0.7%
Total Measuring, Analyzing &
Controlling Instruments
(Cost--$20,201) 20,278
Metals & 5,000 Alliance Coal Term B NR++ NR++ 12/31/02 4,994
Mining--0.7% 4,987 Anker Coal Term B NR++ NR++ 6/30/04 4,975
220 UCAR International Inc. Revolving
Credit NR++ Ba2 12/31/01 220
1,319 UCAR International Inc. Term A NR++ Ba2 12/31/01 1,321
10,286 UCAR International Inc. Term B NR++ Ba2 12/31/02 10,318
Total Metals & Mining
(Cost--$21,754) 21,828
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Packaging-- $ 8,438 IPC, Inc. Term B NR++ B1 9/30/01 $ 8,453
1.3% 7,210 Mail-Well, Inc./Supremex Term A NR++ Ba2 3/31/03 7,208
1,254 Mail-Well, Inc./Supremex Term B NR++ Ba2 7/31/03 1,254
2,788 Silgan Corp. Revolving
Credit NR++ Ba3 12/31/00 2,792
16,794 Silgan Corp. Term B NR++ Ba3 3/15/02 16,915
Total Packaging (Cost--$36,394) 36,622
<PAGE>
Paper--11.8% 19,850 Crown Paper Co. Term B BB Ba3 8/22/03 19,912
19,474 Fort Howard Corp. Term A BB+ Ba3 3/08/02 19,528
16,105 Fort Howard Corp. Term B BB+ Ba3 12/31/02 16,206
24,394 Jefferson Smurfit Company/
Container Corp. of America Revolving
Credit BB Ba3 4/30/01 24,391
6,564 Jefferson Smurfit Company/
Container Corp. of America Term B BB Ba3 4/30/01 6,621
47,905 Jefferson Smurfit Company/
Container Corp. of America Term B BB Ba3 4/30/02 48,324
12,776 Jefferson Smurfit Company/
Container Corp. of America Term C BB Ba3 10/31/02 12,888
63,571 Riverwood International Corp. Term B B+ B1 2/28/04 63,273
24,429 Riverwood International Corp. Term C B+ B1 8/28/04 24,314
29,744 S.D. Warren Co. Term B NR++ Ba2 6/30/02 29,837
933 Stone Container Corp. Revolving
Credit NR++ Ba3 4/01/00 933
36,625 Stone Container Corp. Term B NR++ Ba3 4/01/00 36,819
25,245 Stone Container Corp. Term C NR++ Ba3 4/01/00 25,419
4,975 Stone Container Corp. Term D NR++ Ba3 10/01/03 5,009
9,500 Stronghaven Term B NR++ NR++ 5/15/04 9,464
Total Paper (Cost--$339,644) 342,938
Printing & 7,500 Advanstar Communications Term B NR++ NR++ 12/21/03 7,463
Publishing-- 21,250 American Media Term B NR++ Ba2 9/30/02 21,197
3.2% 8,900 Journal News Co. Term NR++ NR++ 12/31/01 8,856
7,000 Marvel Entertainment Group,
Inc. Term B NR++ Caa 2/28/02 6,414
3,202 Print Tech International PLC Term B NR++ B1 12/28/01 3,202
10,000 Treasure Chest Term NR++ Ba3 12/31/02 10,016
35,000 World Color Press, Inc. Term C NR++ B1 12/29/02 34,902
Total Printing & Publishing
(Cost--$92,646) 92,050
Rendering-- 4,979 CBP Resources Inc. Term B NR++ NR++ 9/30/03 4,967
0.2%
Total Rendering
(Cost--$4,945) 4,967
Security 19,678 Borg-Warner Corp. Term BBB+ B1 12/31/98 19,623
Systems
Services--
0.7% Total Security Systems
Services (Cost--$19,530) 19,623
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Loan S&P Moody's Stated
Industries Amount Borrower Type Rating Rating Maturity* Value
Senior Secured Floating Rate Loan Interests*
<S> <C> <S> <S> <S> <S> <S> <C>
Telephone $ 8,000 Arch Communications Group, Inc. Term B NR++ B1 12/31/03 $ 8,010
Communi- 18,316 Comcast Corp. Term NR++ Ba3 9/30/04 18,156
cations-- 808 MobileMedia Corp. Revolving
5.0% Credit NR++ C 6/30/02 734
18,034 MobileMedia Corp. Term A NR++ C 6/30/02 16,251
5,000 MobileMedia Corp. Term B2 NR++ C 6/30/02 4,509
9,667 MobileMedia Corp. Term B NR++ C 6/30/03 8,718
65,000 Nextel Communications, Inc. Term D NR++ B1 6/30/03 64,309
755 Paging Network Inc. Revolving
Credit NR++ Ba2 12/31/04 751
4,929 Shared Technologies Cellular,
Inc. Term B NR++ B1 3/31/03 4,904
20,000 Western Wireless Corp. Term B NR++ B1 3/31/05 20,144
Total Telephone Communications
(Cost--$148,855) 146,486
Textiles/Mill 4,655 CS Brooks Canada Axel A NR++ NR++ 6/30/02 4,632
Products-- 10,345 CS Brooks Canada Axel B NR++ NR++ 6/30/01 10,293
0.8% 10,000 Polymer Group, Inc. Term A NR++ Ba3 3/31/02 9,900
Total Textiles/Mill Products
(Cost--$24,895) 24,825
Transport- 15,937 Atlas Air, Inc. Revolving
ation Credit NR++ NR++ 6/30/98 15,888
Services-- 25,000 Continental Micronesia Axel NR++ NR++ 7/31/03 24,969
2.5% 7,500 International Logistics Term B NR++ NR++ 12/31/03 7,519
8,284 Petro PSC Properties L.P. Term B NR++ NR++ 5/24/01 8,263
16,057 Ryder TRS Term NR++ Ba3 12/31/01 16,047
Total Transportation Services
(Cost--$72,486) 72,686
Waste 5,000 American Disposal Services,
Management Inc. Term NR++ NR++ 6/30/03 4,978
- --0.2%
Total Waste Management (Cost--$4,970) 4,978
Total Senior Secured Floating
Rate Loan Interests
(Cost--$2,426,147)--83.2% 2,422,439
<PAGE>
Shares
Held Equity Investments
Cable TV 1 Classic Cable, Inc. (Warrants) (a) --
Services--0.0%
Drilling--0.0% 12 Rigco North America (Warrants) (a) --
Restaurants-- 44 Flagstar Companies, Inc. 40
0.0%
Total Equity Investments (Cost--$0)--0.0% 40
Total Long Term Investments
(Cost--$2,426,147)--83.2% 2,422,479
Short-Term Investments
Commercial American Express Credit Corp. ($30,000 par, maturing 12/10/1996, yielding 5.26%) 29,965
Paper**--15.5% CSW Credit, Inc. ($16,200 par, maturing 12/16/1996, yielding 5.28%) 16,167
Caterpillar, Inc. ($25,000 par, maturing 12/06/1996, yielding 5.23%) 24,985
Ford Motor Credit Co. ($50,000 par, maturing 12/10/1996, yielding 5.26% 49,941
General Electric Capital Corp. ($78,626 par, maturing 12/02/1996, yielding 5.70%) 78,626
General Motors Acceptance Corp. ($30,000 par, maturing 1/21/1997, yielding 5.32%) 29,778
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (In Thousands)
<CAPTION>
Short-Term Investments Value
<S> <S> <C>
Commercial H.J. Heinz Company ($9,000 par, maturing 1/07/1997, yielding 5.30%) $ 8,952
Paper** Lucent Technologies, Inc. ($23,000 par, maturing 12/13/1996, yielding 5.26%) 22,963
(concluded) Monsanto Co. ($40,000 par, maturing 12/06/1996, yielding 5.25%) 39,977
Morgan (J.P.) & Co. ($50,000 par, maturing 12/02/1996, yielding 5.25%) 50,000
National Fleet Fund, Inc. ($15,000 par, maturing 12/06/1996, yielding 5.26%) 14,991
National Fleet Fund, Inc. ($19,100 par, maturing 1/03/1997, yielding 5.32%) 19,010
Riverwoods Funding Corp. ($17,500 par, maturing 1/24/1997, yielding 5.31%) 17,363
Transamerica Corporation ($25,000 par, maturing 12/05/1996, yielding 5.25%) 24,989
U.S. Central Credit ($23,000 par, maturing 1/24/1997, yielding 5.30%) 22,821
Total Commercial Paper (Cost--$ 450,528) 450,528
<PAGE>
US Government Federal Home Loan Mortgage Corp. ($30,000 par, maturing 12/09/1996,
& Agency yielding 5.19%) 29,970
Obligations**--
1.0%
Total US Government & Agency Obligations (Cost--$29,970) 29,970
Total Short-Term Investments (Cost--$480,498)--16.5% 480,498
Total Investments (Cost--$2,906,645)--99.7% 2,902,977
Other Assets Less Liabilities--0.3% 8,225
----------
Net Assets--Equivalent to $9.98 Per Share Based on 291,839 Shares of
Beneficial Interest Outstanding--100.0% $2,911,202
==========
<FN>
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock. The purchase price and numbers of shares
are subject to adjustment under certain conditions until expiration
date.
++Not Rated.
*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 November 30, 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.
</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
Custodian
The Bank of New York
90 Washington Street
New York, New York 10286
<PAGE>
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, Florida 32246-6484
(800) 637-3863
