MERRILL LYNCH
SENIOR FLOATING
RATE FUND, INC.
FUND LOGO
Quarterly Report
May 30, 1997
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
Joseph T. Monagle Jr., Senior Vice President
Donald C. Burke, 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, NY 10286
Transfer Agent
Merrill Lynch Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
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.
Merrill Lynch
Senior Floating
Rate Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Merrill Lynch Senior Floating Rate Fund, Inc.
DEAR SHAREHOLDER
During the majority of the three-month period ended May 31, 1997,
Merrill Lynch Senior Floating Rate Fund, Inc. was invested in an
environment of moderate-to-strong economic growth with little sign
of inflation. Strong fourth-quarter 1996 growth, which continued
into 1997, led the Federal Reserve Board to raise the target Federal
Funds rate for the first time in over a year. The 25 basis point
(0.25%) tightening led to a correction in the US equity and fixed-
income markets by the end of the three-month period ended May 31,
1997.
<PAGE>
At May 31, 1997, 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 was
offset by an increase in LIBOR after the last Federal Reserve Board
tightening and the reduction of the Fund's cash position as it
became more fully invested during the three-month period.
Three-month LIBOR traded in a relatively narrow range of 5.75%--
5.85% during the three months ended May 31, 1997. The average LIBOR
reset on the Fund's investments was 42 days at May 31, 1997. 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.
Fund Performance
With this interest rate environment and economic growth as a
backdrop, Merrill Lynch Senior Floating Rate Fund, Inc. finished the
three-month period ended May 31, 1997 with approximately 92.8%, or
$2.8 billion out of $2.9 billion, of its net assets committed for
investment in corporate loan interests. Unfunded closed commitments,
primarily revolving credits, were $290.9 million. Assets not
invested in loan interests were invested in high-quality, short-term
securities. Net of trades not yet closed, the Fund had $2.6 million
or 83.4% of its net assets, invested in corporate loan interests.
The Fund's effective net annualized yield for the quarter ended May
31, 1997 was 6.81%, compared to a yield of 6.24% for the same period
of the prior year. The positive effect on the Fund's yield of being
more fully invested during the May quarter was partially offset by
an increase in net assets during the period as new subscriptions
continued at a steady pace. The Fund's net asset value continued to
remain relatively stable throughout the May quarter. During the
three-month period ended May 31, 1997, the Fund earned $0.170 per
share income dividends, representing a net annualized yield of
6.81%, based on a month-end per share net asset value of $10.00. The
Fund's total investment return was +1.91%, based on a $0.02 change
in per share net asset value from $9.98 to $10.00, and assuming
reinvestment of $0.171 per share income dividends. Since inception
(November 3, 1989) through May 31, 1997, the Fund's total investment
return was +68.64%, based on an unchanged per share net asset value
of $10.00, and assuming reinvestment of $5.233 per share income
dividends.
<PAGE>
Investment Activities
The Fund's investment strategy during the three months ended May 31,
1997 remained unchanged: to invest in leveraged transactions in
which the borrowers have strong market shares, experienced
managements, 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,
Riverwood International Corp., Jefferson Smurfit Company/Container
Corp. of America and Federated Department Stores Inc. are examples
of this strategy. We believe the advantages of adhering to this
strategy are borne out by both the relative stability of Fund's net
asset value and the continued flexibility of our borrowers as they
access the capital markets.
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 an absence of sellers, as investors were reluctant to part
with high-coupon senior secured paper that they could not replace. A
strong economy and relatively low interest rates support solid
credit fundamentals among many issuers in the high-yield bond and
loan markets. US gross domestic product growth of 3.4% for 1996 and
expectations for over 3.0% in 1997 suggest most high-yield companies
may continue to report improving profitability as the year
progresses. Exceptions may be cyclical industries such as paper and
steel, which are experiencing ongoing product price pressures, and
discount and home improvement retailers, which are having trouble
against well-capitalized sectors. Supermarkets and drug retailers
are offsetting the benefits of upgraded service and operational
efficiencies against intense competition, leading to significant
tiering among issuers in these sectors. Media/communications
sectors, an increasingly important part of the high-yield and bank
loan markets, continues to grow as an overall percentage of the
portfolio as companies build out their systems.
The high-yield loan market experienced strong demand during the
three months ended May 31, 1997, resulting in limited supply and
lower yield spreads over LIBOR. Inflows continue unabated, attracted
by low volatility and attractive relative value compared to bonds.
Fueled primarily by high-profile refinancings, leveraged loans
totaled over $24 billion for the first quarter of 1997, approaching
levels generated in the first half of 1996 and slightly off the pace
set in the second half of 1996. With a relatively light forward
calendar of large new leveraged deals priced at LIBOR +2.5% or
better, outstanding paper was strongly bid in the secondary with
little offered by the end of May. With new investors, such as
selected high-yield mutual funds and collateralized loan
obligations, coming into the market as new buyers, there was heavy
pressure on upfront fees. In addition, there were many cases in
which the upfront fee was paid by the buyer of the loan. As new
transactions came to market, they were quickly over-subscribed with
allocations often ranging from 20%--30% of original commitments.
This supply/demand imbalance was exacerbated by the loss of loan
product to the high-yield market.
<PAGE>
Existing loan investors are increasing allocations and/or attracting
new money. New issuance, despite growing over 30% to over $130.0
billion in 1996, cannot satisfy growing demand. Despite record
fundraising efforts in 1997, equity sponsors, a major source of
leveraged loan supply, are cautious because of lofty equity prices
and buyout multiples. In addition, it appears other potential high-
yield borrowers are turning to the bond market in order to lock in
attractively priced long-term money.
As evidenced by the number of investments in the Fund, we became
more diversified by sector and by actual number of issuers during
the three-month period ended May 31, 1997. This is in part by design
in order to lessen credit exposure to any one name. In addition, it
is also the result of the number of investors in the market today.
This resulted in smaller allocations in our market, continued strong
demand and liquidity. We expect these trends to continue for the
foreseeable future.
During the May 31, 1997 quarter, 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 three months, these included Marcus Cable
Operating Co., Dade International, Inc., Journal News Co., Smiths
Food & Drug Centers Inc., and UCAR International Inc. We continued
to be selective in the Fund's investment in new leveraged
transactions coming to the market during the course of the last
three months. Examples included Evergreen Media Corp., Rexene
Chemical Corporation, American Radio Systems Corp. and Von Hoffman
Press Inc. Merger and acquisition financings included CS Brooks,
Huntsman Corp., Outdoor Systems, Inc. and Prime Succession
International Group. The Fund purchased over $517.8 million in loans
in the primary market and over $304.5 million in the secondary
market. This was offset by the sale of $67.5 million in investments
and the full or partial prepayment of over $359.4 million during the
quarter.
As of May 31, 1997, the Fund was invested in 173 different borrowers
representing 39 different industries. The largest industry
concentrations were: paper products, 10.9% of net assets; telephone
communications services, 6.2%; printing and publishing, 5.9%; health
services, 5.6%; broadcast--radio & TV, 5.4%; and cable television
services, 5.4%. The average loan size was $14.9 million, or 0.47% of
net assets. The largest individual credit exposures were Riverwood
International Corp., 3.2% of net assets; Jefferson Smurfit
Company/Container Corp. of America, 3.0%; Federated Department
Stores Inc., 2.9%; Sprint Spectrum, 2.7%; Marcus Cable Operating
Co., 2.6%; and Huntsman Chemical Corp., 2.5%.
The Fund completed its latest quarterly tender offer on April 15,
1997 with 115.3 million shares tendered and accepted for repurchase.
The next tender began on June 17, 1997 and will conclude July 15,
1997. The Fund remains open for new shareholder purchases.
<PAGE>
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
(R. Douglas Henderson)
R. Douglas Henderson
Vice President and Portfolio Manager
July 11, 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-- $ 893 Katz Media Corporation Reducing
0.5% Revolver NR++ Ba3 9/30/03 $ 892
2,143 Katz Media Corporation Term NR++ Ba3 9/30/03 2,145
6,667 Katz Media Corporation Term B NR++ Ba3 12/31/04 6,692
3,325 Outdoor Systems, Inc. Canadian
Term B NR++ Ba2 12/31/03 3,327
825 Outdoor Systems, Inc. Term B NR++ Ba2 12/31/03 826
Total Advertising (Cost--$13,748) 13,882
<PAGE>
Aircraft & Parts-- 5,060 Aerostructures Hamble Holdings PLC Term B NR++ NR++ 9/30/03 5,092
2.3% 1,840 Aerostructures Hamble Holdings PLC Term C NR++ NR++ 9/30/04 1,852
10,435 Alliant Techsystems, Inc. Term NR++ Ba2 3/15/01 10,435
4,975 Banner Industries, Inc. Term B NR++ NR++ 6/30/03 4,966
7,500 Evergreen International Aviation, Inc. Term B NR++ NR++ 5/31/03 7,467
25,000 Gulfstream Aerospace Corp. Term NR++ NR++ 9/30/02 25,031
4,987 Mag Aerospace Term B NR++ NR++ 12/06/01 4,969
3,155 Technetics Term A NR++ NR++ 6/20/02 3,145
5,000 Tri Star Inc. Term NR++ NR++ 9/30/03 4,944
Total Aircraft & Parts (Cost--$67,704) 67,901
</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>
Amusement & $ 5,000 24 Hour Fitness Term B NR++ NR++ 12/31/00 $ 4,975
Recreational 31,254 AMF Group, Inc. Axel A NR++ Ba3 3/31/03 31,645
Services--4.7% 19,853 AMF Group, Inc. Axel B NR++ Ba3 3/31/04 20,151
4,041 AMF Group, Inc. Term NR++ Ba3 3/31/02 4,045
4,125 Amfac Parks, Inc. Term B NR++ NR++ 9/30/02 4,102
4,000 KSL Recreation Group, Inc. Term A NR++ NR++ 4/30/05 4,040
4,000 KSL Recreation Group, Inc. Term B NR++ NR++ 4/30/06 4,040
4,804 Kerastotes Revolving
Credit NR++ NR++ 12/31/03 4,768
3,686 Kerastotes Term NR++ NR++ 12/31/04 3,668
14,925 Metro Goldwyn Mayer Co. Term B NR++ B1 3/31/04 14,962
4,500 Moovies Inc. Term A NR++ NR++ 3/31/02 4,500
4,438 Orion Pictures Corp. Term NR++ Ba2 12/31/00 4,432
1,979 Six Flags Entertainment Corp. Revolving
Credit NR++ Ba3 10/28/01 1,981
5,496 Six Flags Entertainment Corp. Term A NR++ Ba3 10/28/01 5,500
17,473 Six Flags Entertainment Corp. Term B NR++ Ba3 6/23/03 17,605
7,500 Vail Corporation Term B NR++ NR++ 4/15/04 7,519
Total Amusement & Recreational Services (Cost--$136,843) 137,933
Apparel--1.2% 4,655 CS Brooks Canada Axel A NR++ NR++ 6/30/02 4,632
10,345 CS Brooks Canada Axel B NR++ NR++ 6/30/01 10,293
9,507 Humphreys Inc. Term B NR++ NR++ 1/15/03 9,507
5,000 Renfro Corp. Term B NR++ NR++ 1/15/03 4,994
6,300 William Carter Co. (The) Term BB- Ba3 10/31/03 6,300
Total Apparel (Cost--$35,687) 35,726
<PAGE>
Automotive 4,000 American Bumper Term B NR++ NR++ 10/31/02 4,015
Equipment--2.2% 24,048 Collins & Aikman Corp. Term B B+ B1 12/31/02 24,109
4,710 Hayes Wheels International, Inc. Term B BB- B1 7/31/03 4,734
3,768 Hayes Wheels International, Inc. Term C BB- B1 7/31/04 3,787
2,917 Johnstown America Industrial Inc. Term A NR++ B1 3/31/02 2,840
19,167 Johnstown America Industrial Inc. Term B NR++ B1 3/31/03 18,760
5,000 Safelite Glass Corp. Term B BB- Ba3 12/20/04 5,031
Total Automotive Equipment (Cost--$63,341) 63,276
Broadcast-- 5,707 American Radio Systems Corp. Revolving
Radio & TV-- Credit B+ Ba2 12/31/04 5,701
5.4% 4,070 Benedek Broadcasting Corp. Axel A B+ Ba3 5/01/01 4,060
4,220 Benedek Broadcasting Corp. Axel B B+ Ba3 11/01/02 4,209
4,823 Chancellor Broadcasting, Inc. Term A NR++ Ba2 1/31/03 4,823
1,153 Chancellor Broadcasting, Inc. Term B NR++ Ba2 1/31/03 1,153
5,000 Citicasters Inc. (Jacor) Term B BB- Ba2 9/17/04 4,994
5,614 Evergreen Media Corp. Revolving
Credit NR++ NR++ 6/30/05 5,593
53,571 Evergreen Media Corp. Term NR++ NR++ 6/30/05 53,488
8,261 Latin Communications Term NR++ NR++ 3/31/04 8,235
10,000 Sinclair Broadcasting Group Inc. Term B NR++ Ba3 12/31/04 10,000
9,336 Sullivan Broadcasting Term B NR++ Ba3 12/31/03 9,342
46,682 Viacom, Inc. Term NR++ NR++ 7/01/02 46,682
Total Broadcast--Radio & TV (Cost--$158,031) 158,280
Building & 4,487 Fenway Holdings, Inc. Term B NR++ NR++ 9/15/02 4,439
Construction--0.2%
Total Building & Construction (Cost--$4,460) 4,439
</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 $ 9,124 Dal Tile International Inc. Revolving
Materials--2.4% Credit NR++ NR++ 12/31/02 $ 9,114
10,190 Dal Tile International Inc. Term NR++ NR++ 12/31/02 10,187
9,950 Euramax Holdings Term B NR++ Ba3 9/30/03 9,932
29,900 National Gypsum Co. Term B NR++ Ba3 9/20/03 30,021
9,792 Walter Industrials, Inc. Term B NR++ NR++ 2/22/03 9,810
<PAGE>
Total Building Materials (Cost--$68,828) 69,064
Cable TV 6,000 Cablevision of Ohio Term NR++ NR++ 12/31/05 5,985
Services--5.4% 24,375 Chelsea Communications Term NR++ NR++ 9/30/04 24,398
17,081 Classic Cable Inc. Term B NR++ B1 6/30/05 16,568
18,715 Coaxial Communications Term B NR++ NR++ 12/31/99 18,528
5,000 FrontierVision Operating Partners L.P. Term B NR++ Ba3 6/30/05 4,997
10,000 Intermedia Communications, Inc. Term NR++ Ba3 1/01/05 10,025
2,146 Marcus Cable Operating Co. Revolving
Credit NR++ NR++ 4/30/14 2,135
30,625 Marcus Cable Operating Co. Term A NR++ NR++ 12/31/02 30,644
35,750 Marcus Cable Operating Co. Term B NR++ NR++ 4/30/04 35,951
10,000 Triax Midwest Term B NR++ NR++ 6/30/05 9,997
Total Cable TV Services (Cost--$158,849) 159,228
Chemicals--5.2% 9,111 Cedar Chemical Term B NR++ NR++ 10/31/03 9,088
5,000 Exide Corporation Term B NR++ NR++ 6/15/01 5,000
3,148 HSC Holdings Revolving
Credit NR++ NR++ 12/31/99 3,141
3,379 HSC Holdings Term NR++ NR++ 12/31/99 3,363
2,911 Harris Specialty Chemicals Revolving
Credit NR++ NR++ 12/30/01 2,904
221 Harris Specialty Chemicals Term A NR++ NR++ 12/30/00 221
228 Harris Specialty Chemicals Term A NR++ NR++ 12/30/01 228
3,076 Harris Specialty Chemicals Term B NR++ NR++ 12/30/01 3,069
5,808 Huntsman Corp. Revolving
Credit NR++ NR++ 12/31/02 5,768
31,161 Huntsman Corp. Term NR++ NR++ 12/31/02 31,054
11,973 Huntsman Corp. Term A NR++ NR++ 12/31/02 11,946
5,000 Huntsman Corp. Term B NR++ NR++ 3/15/02 5,053
15,000 Huntsman Corp. Term B NR++ NR++ 9/30/03 15,000
5,000 Huntsman Corp. Term C NR++ NR++ 3/15/02 5,053
5,000 Hydrochem Term B NR++ NR++ 7/01/02 5,000
2,340 Rexene Chemical Corporation Revolving
Credit NR++ NR++ 3/31/04 2,347
10,660 Rexene Chemical Corporation Term B NR++ NR++ 3/31/04 10,713
24,183 Sterling Chemicals, Inc. Term B NR++ Ba3 9/30/04 24,168
6,883 Texas Petrochemicals Corp. Term B NR++ Ba3 6/30/04 6,866
1,056 Thoro World Systems, Inc. Term A NR++ NR++ 12/30/00 1,054
1,435 Thoro World Systems, Inc. Term B NR++ NR++ 12/30/01 1,431
Total Chemicals (Cost--$152,173) 152,467
Computer-Related 7,000 Anacomp, Inc. Term NR++ B2 3/31/01 7,053
Services & 7,458 Fairchild Semiconductors Corp. Term B NR++ NR++ 2/28/03 7,514
Products--1.1% 12,469 Phase Metrics Term B NR++ NR++ 11/12/01 12,406
5,000 Triad Systems Corp. Term NR++ NR++ 2/27/03 4,975
Total Computer-Related Services & Products (Cost--$31,788) 31,948
</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>
Consumer $ 1,300 E & S Holdings Corp. Revolving
Products--1.7% Credit NR++ B1 9/30/03 $ 1,300
2,059 E & S Holdings Corp. Term NR++ B1 9/30/03 2,066
32,065 Playtex Family Products Inc. Term A NR++ Ba2 6/30/02 32,005
7,232 RTI Funding Corp. (Ritvik Toys) Term B NR++ NR++ 2/07/03 7,259
7,232 RTI Funding Corp. (Ritvik Toys) Term C NR++ NR++ 2/07/04 7,259
Total Consumer Products (Cost--$49,638) 49,889
Diversified 7,117 Im Acquisition Term B NR++ NR++ 6/30/03 7,137
Manufacturing-- 5,535 Im Acquisition Term C NR++ NR++ 6/30/04 5,551
1.0% 3,669 IMO Industries, Inc. Revolving
Credit NR++ B1 4/30/01 3,628
2,308 IMO Industries, Inc. Term A NR++ B1 4/30/01 2,287
1,831 IMO Industries, Inc. Term B NR++ B1 4/30/01 1,816
7,560 Thermadyne Industries, Inc. Revolving
Credit NR++ Ba3 6/30/01 7,558
Total Diversified Manufacturing (Cost--$27,991) 27,977
Drilling--0.3% 4,713 IRI International Term A NR++ NR++ 3/31/02 4,727
4,862 Rigco North America Term NR++ NR++ 9/30/98 4,911
Total Drilling (Cost--$9,541) 9,638
Drug/Proprietary 205 Duane Reade Co. Term A NR++ NR++ 9/30/98 204
Stores--0.3% 10,000 Duane Reade Co. Term B NR++ NR++ 9/30/98 9,981
Total Drug/Proprietary Stores (Cost--$10,152) 10,185
Electronics/ 20,900 Berg Electronics Inc. Term NR++ Ba3 12/31/02 20,874
Electrical 3,000 Circo Craft Co. (Viasystems) Term B NR++ NR++ 6/30/04 3,011
Components--2.5% 3,000 Circo Craft Co. (Viasystems) Term C NR++ NR++ 6/30/05 3,011
5,567 Communications & Power Industries Inc. Term B NR++ NR++ 8/11/02 5,581
4,290 Details, Inc. Term A NR++ NR++ 1/31/01 4,277
1,725 Dictaphone Corp. Revolving
Credit B+ B1 3/31/01 1,688
2,996 Dictaphone Corp. Term A B+ B1 3/31/01 2,956
9,903 International Wire Group, Inc. Term B NR++ NR++ 9/30/02 9,956
9,930 International Wire Group, Inc. Term C NR++ NR++ 9/30/03 9,982
1,375 L-3 Communications Corp. Term A NR++ NR++ 3/31/03 1,396
2,500 L-3 Communications Corp. Term B NR++ NR++ 3/31/05 2,538
1,650 L-3 Communications Corp. Term C NR++ NR++ 3/31/06 1,675
7,000 Telex Communications, Inc. Term B NR++ NR++ 11/30/04 7,017
Total Electronics/Electrical Components (Cost--$73,576) 73,962
Financial 14,894 Outsourcing Solutions Inc. Term B NR++ B1 10/15/03 14,941
Services--0.5%
<PAGE>
Total Financial Services (Cost--$14,824) 14,941
Food & Kindred 7,369 American Italian Pasta Company Term C NR++ NR++ 2/28/04 7,382
Products--4.8% 1,244 Del Monte Corp. Revolving
Credit NR++ NR++ 3/31/03 1,244
3,273 Del Monte Corp. Term A NR++ NR++ 3/31/03 3,285
5,100 Del Monte Corp. Term B NR++ NR++ 3/31/05 5,145
25,543 Favorite Brands International Term B NR++ NR++ 8/30/04 25,607
8,098 International Homefoods, Inc. Term B BB- Ba3 9/30/04 8,149
6,882 International Homefoods, Inc. Term C BB- Ba3 9/30/05 6,938
4,622 President Baking Co., Inc. Term B NR++ NR++ 9/30/00 4,629
3,358 Rykoff-Sexton, Inc. Term B BB- Ba3 10/31/02 3,366
1,611 Rykoff-Sexton, Inc. Term C BB- Ba3 4/30/03 1,616
6,492 SC International Corp., Inc. Caterair 'B' NR++ B2 9/15/01 6,520
</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 & Kindred $ 2,260 SC International Corp., Inc. SCI 'A' NR++ B2 9/15/00 $ 2,258
Products 7,951 SC International Corp., Inc. SCI 'B' NR++ B2 9/15/02 7,986
(concluded) 2,990 SC International Corp., Inc. SCI 'C' NR++ B2 9/15/03 3,005
1,960 Select Beverages Inc. Term B NR++ NR++ 6/30/01 1,963
2,940 Select Beverages Inc. Term C NR++ NR++ 6/30/02 2,947
23,057 Specialty Foods Inc. Term B NR++ B2 4/30/01 23,013
7,062 Van De Kamps Inc. Term B NR++ Ba3 4/30/03 7,097
4,431 Van De Kamps Inc. Term C NR++ Ba3 9/30/03 4,453
6,631 Volume Services Term B NR++ B2 12/31/02 6,631
3,315 Volume Services Term C NR++ B2 12/31/03 3,315
4,875 Windsor Quality Food Term B NR++ NR++ 12/31/02 4,823
Total Food & Kindred Products (Cost--$140,438) 141,372
Funeral Homes & 23,617 Loewen Group Inc. Revolving
Parlors--1.6% Credit NR++ Ba1 5/29/01 23,557
14,917 Prime Succession International Group Axel A BB- NR++ 8/01/03 15,103
6,953 Rose Hills Acquisition Corp. Axel A BB NR++ 12/01/03 7,058
Total Funeral Homes & Parlors (Cost--$45,419) 45,718
Furniture & 11,928 Lifestyle Furnishings International Ltd. Term B NR++ Ba2 8/31/04 11,973
Fixtures--0.4%
<PAGE>
Total Furniture & Fixtures (Cost--$11,873) 11,973
General 8,500 CSK Auto Inc. Term NR++ Ba3 10/31/03 8,553
Merchandise 28,270 Federated Department Stores Inc. Term NR++ Ba1 3/31/00 28,252
Stores--1.6% 480 Kmart Corp. Revolving
Credit BB+ Ba1 1/06/00 480
1,938 Music Acquisition Term B NR++ NR++ 8/31/01 920
7,500 Music Acquisition Term C NR++ NR++ 8/31/02 3,562
5,000 Sneaker Stadium Term 2 NR++ NR++ 12/31/02 5,000
Total General Merchandise Stores (Cost--$51,405) 46,767
Grocery--2.3% 10,400 Big V Supermarkets Inc. Term B NR++ NR++ 3/15/00 10,192
9,265 Bruno's, Inc. Term B NR++ B1 2/18/02 9,274
4,521 Bruno's, Inc. Term C NR++ B1 2/18/03 4,523
4,454 Pathmark Stores Inc. Term B BB- B1 10/31/99 4,466
1,783 Ralph's Grocery Company Revolving
Credit NR++ Ba3 2/15/03 1,781
4,952 Ralph's Grocery Company Term A NR++ Ba3 2/15/03 4,969
7,000 Ralph's Grocery Company Term B NR++ Ba3 2/15/04 7,066
436 Smith's Food & Drug Centers, Inc. Revolving
Credit NR++ Ba3 3/31/05 436
8,727 Smith's Food & Drug Centers, Inc. Term A NR++ Ba3 3/31/05 8,738
10,000 Smith's Food & Drug Centers, Inc. Term B NR++ Ba3 3/31/05 10,019
4,184 Star Markets Co., Inc. Term B B Ba3 12/31/01 4,174
3,132 Star Markets Co., Inc. Term C B Ba3 12/31/02 3,120
Total Grocery (Cost--$68,732) 68,758
Health 16,212 Community Health Systems, Inc. Term B NR++ NR++ 12/31/03 16,263
Services--5.6% 16,212 Community Health Systems, Inc. Term C NR++ NR++ 12/31/04 16,263
12,205 Community Health Systems, Inc. Term D NR++ NR++ 12/31/05 12,259
5,001 Corning/Quest Term A NR++ NR++ 4/03/03 4,988
3,263 Dade International, Inc. Term B NR++ B1 12/31/02 3,271
3,263 Dade International, Inc. Term C NR++ B1 12/31/03 3,271
3,444 Dade International, Inc. Term D NR++ B1 12/31/04 3,454
</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 $ 8,020 Horizons/CMS Revolving
Services Credit NR++ NR++ 3/31/03 $ 8,018
(concluded) 2,453 Imed Corp. (Alaris) Term B BB- B1 11/30/03 2,479
2,453 Imed Corp. (Alaris) Term C BB- B1 11/30/04 2,479
2,308 Imed Corp. (Alaris) Term D BB- B1 5/01/05 2,333
9,879 MEDIQ, Inc. Term B B+ NR++ 9/30/04 9,873
13,091 Medical Specialties Axel NR++ NR++ 6/30/04 13,058
4,909 Medical Specialties Term NR++ NR++ 6/30/01 4,897
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 15,893
35,000 National Medical Care Inc. Term BB Ba1 9/30/03 35,000
5,000 Prime Medical Services, Inc. Term B NR++ NR++ 4/30/03 5,004
Total Health Services (Cost--$164,358) 165,288
Hotels & 5,510 Doubletree Corporation Term B NR++ NR++ 6/30/04 5,544
Motels--0.8% 2,424 Westin Hotels Ltd. Revolving
Credit NR++ NR++ 2/08/02 2,418
13,576 Westin Hotels Ltd. Term NR++ NR++ 2/08/02 13,576
Total Hotels & Motels (Cost--$21,457) 21,538
Industrial 9,000 Elis/Omni Axel NR++ NR++ 10/30/05 9,214
Services--0.3%
Total Industrial Services (Cost--$8,989) 9,214
Leasing & Rental 2,985 Brand Scaffold Term B NR++ NR++ 9/30/03 2,993
Services--1.3% 1,990 Brand Scaffold Term C NR++ NR++ 9/30/04 1,996
9,000 Coinmachine Corp. Term B NR++ NR++ 6/30/04 9,062
24,899 PrimeCo Term BB B1 12/31/00 24,948
Total Leasing & Rental Services (Cost--$38,707) 38,999
Manufacturing-- 10,466 Calmar Inc. Axel A NR++ B1 9/15/03 10,453
1.9% 7,849 Calmar Inc. Axel B NR++ B1 3/15/04 7,869
10,000 Polyfibron Technologies Term B NR++ NR++ 12/28/03 10,000
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
3,704 Trans Technology Corp. Revolving
Credit NR++ NR++ 12/31/00 3,690
776 Trans Technology Corp. Term A NR++ NR++ 12/31/00 776
14,700 Trans Technology Corp. Term B NR++ NR++ 6/30/02 14,718
1,277 Walls Industries Term B NR++ NR++ 2/28/05 1,277
1,723 Walls Industries Term C NR++ NR++ 2/28/06 1,723
Total Manufacturing (Cost--$55,834) 56,103
<PAGE>
Measuring, 9,331 CHF/Ebel USA Inc. Term B NR++ NR++ 9/30/01 9,331
Analyzing & 10,867 Graphic Controls Corp. Term B NR++ B1 9/28/03 10,894
Controlling 5,000 Packard Bioscience Co. Term NR++ Ba3 3/31/03 5,000
Instruments--0.9%
Total Measuring, Analyzing & Controlling Instruments (Cost--$25,132) 25,225
Metals & 4,797 Alliance Coal Term B NR++ B1 12/31/02 4,800
Mining--1.2% 4,963 Anker Coal Term B NR++ NR++ 6/30/04 4,950
2,308 Centennial Resources Term A NR++ NR++ 3/31/02 2,285
5,192 Centennial Resources Term B NR++ NR++ 12/31/03 5,140
7,200 Northwestern Steel & Mining Revolving
Credit B NR++ 12/31/00 7,200
10,171 UCAR International Inc. Term B NR++ Ba2 12/31/02 10,179
Total Metals & Mining (Cost--$34,523) 34,554
</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-- $ 8,063 IPC, Inc. Term NR++ B1 9/30/01 $ 8,078
1.3% 6,958 Mail-Well, Inc./Supremex Term A NR++ Ba3 3/31/03 6,948
1,223 Mail-Well, Inc./Supremex Term B NR++ Ba3 7/31/03 1,219
4,753 Silgan Corp. Revolving
Credit B Ba3 12/31/00 4,759
16,452 Silgan Corp. Term B B Ba3 3/15/02 16,571
Total Packaging (Cost--$37,368) 37,575
Paper--10.9% 4,776 Crown Paper Co. Term B BB Ba3 8/22/03 4,792
1,711 Fort Howard Corp. Revolving
Credit BB+ Ba3 3/16/02 1,710
25,937 Fort Howard Corp. Term A BB+ Ba3 3/08/02 26,018
9,283 Fort Howard Corp. Term B BB+ Ba3 12/31/02 9,355
560 Jefferson Smurfit Company/Container Corp.
of America Revolving
Credit BB Ba3 4/30/01 559
24,191 Jefferson Smurfit Company/Container Corp.
of America Term A BB Ba3 4/30/01 24,214
6,564 Jefferson Smurfit Company/Container Corp.
<PAGE> of America Term B BB Ba3 4/30/01 6,613
47,905 Jefferson Smurfit Company/Container Corp.
of America Term B BB Ba3 4/30/02 48,264
12,776 Jefferson Smurfit Company/Container Corp.
of America Term C BB Ba3 10/31/02 12,916
2,613 Riverwood International Corp. Revolving
Credit B+ B1 2/28/03 2,542
8,028 Riverwood International Corp. Term A B+ B1 2/28/03 8,001
63,571 Riverwood International Corp. Term B B+ B1 2/28/04 63,810
24,429 Riverwood International Corp. Term C B+ B1 8/28/04 24,520
1,810 S.D. Warren Co. Term A NR++ Ba2 6/30/02 1,813
27,907 S.D. Warren Co. Term B NR++ Ba2 6/30/02 28,011
2,423 St. Laurent Paperboard, Inc. Term B NR++ NR++ 5/31/03 2,453
2,577 St. Laurent Paperboard, Inc. Term C NR++ NR++ 5/31/04 2,610
8,409 Stone Container Corp. Revolving
Credit NR++ Ba3 4/01/00 8,220
14,125 Stone Container Corp. Term B NR++ Ba3 4/01/00 14,187
20,118 Stone Container Corp. Term C NR++ Ba3 4/01/03 20,136
9,451 Stronghaven Term B NR++ NR++ 5/15/04 9,463
Total Paper (Cost--$317,130) 320,207
Printing & 7,187 Advanstar Communications Term B NR++ NR++ 12/21/03 7,178
Publishing--5.9% 21,097 American Media Term B BB- Ba2 9/30/02 21,071
6,421 Garden State Newspapers, Inc. Revolving
Credit 'A' NR++ NR++ 6/30/03 6,409
29 Garden State Newspapers, Inc. Revolving
Credit 'B' NR++ NR++ 3/31/04 29
789 Garden State Newspapers, Inc. Term A NR++ NR++ 3/31/04 788
4,000 Garden State Newspapers, Inc. Term B NR++ NR++ 3/31/04 3,992
8,654 Journal News Co. Term NR++ NR++ 12/31/01 8,643
13,240 K-III Communications Corp. Revolving
Credit 'A' NR++ Ba3 12/31/00 13,174
5,000 K-III Communications Corp. Revolving
Credit 'C' NR++ Ba3 12/31/00 4,975
5,000 K-III Communications Corp. Term NR++ Ba3 6/30/04 4,981
10,000 Morris Communications Term B NR++ NR++ 6/30/05 10,000
14,000 Newsquest Capital PLC Term 2 NR++ NR++ 12/31/04 13,982
6,230 Petersen Publishing Co. Term B B+ B1 9/30/04 6,253
9,900 Treasure Chest Advertising Co. Term NR++ Ba3 12/31/02 9,908
</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>
Printing & $ 3,571 Von Hoffmann Press Inc. Term B NR++ NR++ 5/22/05 $ 3,563
Publishing 3,571 Von Hoffmann Press Inc. Term C NR++ NR++ 5/22/06 3,563
(concluded) 55,000 World Color Press, Inc. Term C NR++ B1 12/29/02 54,966
Total Printing & Publishing (Cost--$173,391) 173,475
Rendering--0.2% 4,967 CBP Resources Inc. Term B NR++ NR++ 9/30/03 4,955
Total Rendering (Cost--$4,935) 4,955
Restaurants--0.5% 14,000 AFC Enterprises Revolving
Credit NR++ NR++ 6/30/02 13,980
Total Restaurants (Cost--$13,980) 13,980
Retail--0.1% 2,500 Murray's Autos Term NR++ NR++ 6/30/03 2,500
Total Retail (Cost--$2,500) 2,500
Telephone 1,169 Arch Communications Group, Inc. Revolving
Communications-- Credit NR++ B1 12/31/02 1,153
6.2% 1,875 Arch Communications Group, Inc. Term A NR++ B1 12/31/02 1,854
8,000 Arch Communications Group, Inc. Term B NR++ B1 12/31/03 7,975
8,367 MobileMedia Corp. Term A NR++ Caa 6/30/02 6,485
1,667 MobileMedia Corp. Term B NR++ Caa 6/30/02 1,298
8,000 MobileMedia Corp. Term B2 NR++ Caa 6/30/03 6,230
3,536 Nextel Communications, Inc. Revolving
Credit NR++ NR++ 3/31/03 3,457
4,813 Nextel Communications, Inc. Revolving
Credit 'A' NR++ NR++ 3/31/03 4,706
8,876 Nextel Communications, Inc. Revolving
Credit 'B' NR++ NR++ 3/31/03 8,679
1,873 Nextel Communications, Inc. Term NR++ NR++ 3/31/03 1,855
4,682 Nextel Communications, Inc. Term C NR++ NR++ 3/31/03 4,578
35,000 Nextel Communications, Inc. Term D NR++ NR++ 6/30/03 35,087
15,827 Paging Network Inc. Revolving
Credit NR++ Ba3 12/31/04 15,570
4,857 Shared Technologies Cellular, Inc. Term B NR++ B1 3/31/03 4,851
15,000 Sprint Spectrum L.P./Nortel Term NR++ B1 5/29/04 14,925
17,775 Sprint Spectrum L.P. Term 1 NR++ B1 12/31/00 17,864
17,775 Sprint Spectrum L.P. Term 2 NR++ B1 12/31/01 17,864
2,470 Sprint Spectrum L.P. Term A NR++ B1 3/31/06 2,478
20,000 Western Wireless Corp. Term B B+ B1 3/31/05 20,144
4,095 World Communications Revolving
Credit NR++ Ba1 6/30/01 4,089
Total Telephone Communications (Cost--$184,425) 181,142
<PAGE>
Textiles/Mill 710 Ithaca Industries, Inc. Revolving
Products--0.4% Credit NR++ NR++ 8/31/99 710
1,678 Ithaca Industries, Inc. Term NR++ NR++ 8/31/99 1,680
9,750 Polymer Group, Inc. Term A BB- Ba3 3/31/02 9,725
Total Textiles/Mill Products (Cost--$12,109) 12,115
Transportation 25,814 Atlas Air, Inc. Revolving
Services--3.1% Credit NR++ NR++ 6/30/98 25,863
10,000 Atlas Freight Term NR++ NR++ 5/29/04 10,050
22,864 Continental Micronesia Axel NR++ NR++ 7/31/03 22,914
7,475 International Logistics Term B NR++ NR++ 12/31/03 7,461
3,333 Petro Stopping Centers Term B BB- Ba3 12/31/03 3,327
16,057 Ryder TRS, Inc. Term NR++ Ba3 12/31/01 16,082
4,000 Travel Centers Term B NR++ B2 3/27/05 4,023
Total Transportation Services (Cost--$89,340) 89,720
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (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>
Waste $ 2,538 Allied Waste Industries, Inc. Axel A BB+ Ba3 3/31/03 $ 2,591
Management-- 5,076 Allied Waste Industries, Inc. Axel B BB+ Ba3 3/31/04 5,184
1.0% 5,076 Allied Waste Industries, Inc. Axel C BB+ Ba3 3/31/05 5,184
11,000 American Disposal Services, Inc. Term B NR++ NR++ 5/31/04 11,007
2,500 Laidlaw Environmental Term B NR++ NR++ 5/15/04 2,547
2,500 Laidlaw Environmental Term C NR++ NR++ 5/15/05 2,547
Total Waste Management (Cost--$28,600) 29,060
Total Senior Secured Floating Rate Loan Interests
(Cost--$2,607,819)--89.2% 2,610,974
Shares
Held Equity Investments
Cable TV 1 Classic Cable, Inc. (Warrants) (a) 0
Services--0.0%
Drilling--0.0% 12 Rigco North America (Warrants) (a) 0
<PAGE>
General 18,408 Sneaker Stadium (Warrants) (a) 0
Merchandise
Stores--0.0%
Restaurants--0.0% 44 Flagstar Companies, Inc. 14
Total Equity Investments (Cost--$0)--0.0% 14
Total Long-Term Investments (Cost--$2,607,819)--89.2% 2,610,988
Short-Term Investments
Commercial Ciesco L.P. ($25,000 par, maturing 6/10/1997, yielding 5.54%) 24,969
Paper**--8.5% Countrywide Home Loans ($49,000 par, maturing 6/09/1997, yielding 5.58%) 48,947
Finova Capital Corp. ($30,000 par, maturing 6/05/1997, yielding 5.59%) 29,986
General Motors Acceptance Corp. ($72,332 par, maturing 6/02/1997,
yielding 5.62%) 72,332
NYNEX Corporation ($30,400 par, maturing 6/10/1997, yielding 5.60%) 30,362
NYNEX Corporation ($42,000 par, maturing 6/11/1997, yielding 5.54%) 41,942
Total Commercial Paper (Cost--$248,538) 248,538
US Government & Agency Federal National Mortgage Association ($50,000 par, maturing 6/12/1997,
Obligations**--1.7% yielding 5.44%) 49,924
Total US Government & Agency Obligations (Cost--$49,924) 49,924
Total Short-Term Investments (Cost--$298,462)--10.2% 298,462
Total Investments (Cost--$2,906,281)--99.4% 2,909,450
Other Assets Less Liabilities--0.6% 16,637
----------
Net Assets (Equivalent to $10.00 Per Share Based on 292,708 Shares
Outstanding)--100.0% $2,926,087
==========
<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 May 31, 1997.
**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>
<PAGE>
