SENIRO HIGH
INCOME
PORTFOLIO II, INC.
FUND LOGO
Annual Report
August 31, 1995
This report, including the financial information herein, is
transmitted to the shareholders of Senior High Income Portfolio II,
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 the report. Past performance
results shown in this report should not be considered a
representation of future performance. The Fund has leveraged its
Common Stock to provide Common Stock shareholders with a potentially
higher rate of return. Leverage creates risk for Common Stock
shareholders, including the likelihood of greater volatility of net
asset value and market price of Common Stock shares, and the risk
that fluctuations in short-term interest rates may reduce the Common
Stock's yield.
<PAGE>
Senior High Income
Portfolio II, Inc.
Box 9011
Princeton, NJ
08543-9011
SENIOR HIGH INCOME PORTFOLIO II, INC.
The Benefits and
Risks of
Leveraging
Senior High Income Portfolio II, Inc. has the ability to utilize
leverage through borrowings or issuance of short-term debt
securities or shares of Preferred Stock. The concept of leveraging
is based on the premise that the cost of assets to be obtained from
leverage will be based on short-term interest rates, which normally
will be lower than the return earned by the fund on its longer-term
portfolio investments. Since the total assets of the fund (including
the assets obtained from leverage) are invested in higher-yielding
portfolio investments, the fund's Common Stock shareholders are the
beneficiaries of the incremental yield. Should the differential
between the underlying interest rates narrow, the incremental yield
"pick up" will be reduced. Furthermore, if long-term interest rates
rise, the Common Stock's net asset value will reflect the full
decline in the entire portfolio holdings therefrom since the assets
obtained from leverage do not fluctuate.
<PAGE>
Leverage creates risks for holders of Common Stock including the
likelihood of greater net asset value and market price volatility.
In addition, there is the risk that fluctuations in interest rates
on borrowings (or in the dividend rates on any Preferred Stock, if
the fund were to issue Preferred Stock) may reduce the Common
Stock's yield and negatively impact its market price. If the income
derived from securities purchased with assets received from leverage
exceeds the cost of leverage, the fund's net income will be greater
than if leverage had not been used. Conversely, if the income from
the securities purchased is not sufficient to cover the cost of
leverage, the fund's net income will be less than if leverage had
not been used, and therefore the amount available for distribution
to Common Stock shareholders will be reduced. In this case, the fund
may nevertheless decide to maintain its leveraged position in order
to avoid capital losses on securities purchased with leverage.
However, the fund will not generally utilize leverage if it
anticipates that its leveraged capital structure would result in a
lower rate of return for its Common Stock than would be obtained if
the Common Stock were unleveraged for any significant amount of
time.
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 and Transfer Agent
The Bank of New York
90 Washington Street, 12th Floor
New York, New York 10286
NYSE Symbol
SAL
<PAGE>
DEAR SHAREHOLDER
Senior High Income Portfolio II, Inc. seeks to provide shareholders
with high current income by investing primarily in senior debt
obligations of companies, including portions of corporate loans made
by banks and other financial institutions and both privately placed
and publicly offered corporate bonds and notes. These securities by
and large are rated in the lower rating categories of the
established agencies or are unrated, as is commonly the case with
bank loans.
For the year ended August 31, 1995, Senior High Income Portfolio II,
Inc.'s total investment return was +10.77%, based on a change in per
share net asset value from $9.25 to $9.27, and assuming reinvestment
of $0.886 per share income dividends. During the same period, the
net annualized yield of the Portfolio's Common Stock was 9.64%.
Since inception (September 24, 1993) through August 31, 1995, the
total investment return on the Portfolio's Common Stock was +16.39%,
based on a change in per share net asset value from $9.50 to $9.27,
and assuming reinvestment of $1.593 per share income dividends. At
the end of the August period, the Portfolio was 22.6% leveraged,
having borrowed $45 million of its $80 million line of credit
available at an average borrowing cost of 6.48%. (For a complete
explanation of the benefits and risks of leveraging, see page 1 of
this report to shareholders.)
As of August 31, 1995, the Portfolio paid out a regular monthly
dividend at an annualized rate of 9.25% so that the Portfolio could
maintain a more stable level of distributions. Monthly dividends are
limited to the lesser of the targeted monthly dividend rate in
effect and the amount of previously undistributed net investment
income held by the Portfolio. For Federal income tax purposes, the
Portfolio is required to distribute substantially all of its net
investment income for each calendar year. All net realized long-term
and short-term capital gains, if any, will be distributed to the
Portfolio's shareholders annually. The targeted monthly dividend
rate has increased from an annualized rate of 8.25% since March 1994.
<PAGE>
The Environment
The six months ended August 31, 1995 were characterized by an
interest rate environment that proved a mixed blessing for the
Portfolio's investments. The steady rise in interest rates, which
ended with the Federal Reserve Board's monetary tightening in
February, had a positive effect on the floating-rate portion of the
Portfolio while further eroding the values in the fixed-rate high-
yield market in line with intermediate-term and long-term US
Treasury securities. However, economic data released during the
second quarter of 1995 showed evidence of a slowing economy. Gross
domestic product growth for the first three months of 1995 was 2.7%,
the weakest showing in 18 months. Other signs of a sluggish economy
included slowing growth in the manufacturing sector in May and June
as well as three consecutive months of declines in the Index of
Leading Economic Indicators, an occurrence that has often, but not
always, forecast recessions. Therefore, by the end of the June
quarter concerns had arisen that the economic soft landing could
turn into an actual recession. With the financial markets trading
for most of the second quarter on the assumption that rates were
heading down, the Federal Reserve Board finally reduced the target
Federal Funds rate by 25 basis points (0.25%) to 5.75%. This caused
short-term interest rates, such as London Interbank Offered Rate
(LIBOR), to fall.
Portfolio Strategy
We continue to weigh the Portfolio just slightly toward senior
secured floating-rate bank loans. Currently, more than 97.7% of the
Portfolio's investments in corporate loans are accruing interest at
a yield spread above LIBOR. LIBOR has historically tracked very
closely with other short-term rates in the United States,
particularly the Federal Funds rate. Since the average reset on the
Portfolio's floating-rate investment is currently 45.5 days, the
potential impact of any sustained increase or decrease on the yield
of the Portfolio's floating-rate investments will not be fully
realized for at least a comparable time period following any rate
change. At August 31, 1995, floating-rate securities made up 57.1%
of the market value of the Portfolio's investments, with an
additional 43.5% invested in fixed-rate high-yield bonds.
Liquidity in the loan market continued to be extremely strong
throughout the reporting period. Demand for bank loans was strong,
as banks competed for the fees and high spreads and agenting and
investing in leveraged credits. Loan funds continued to see
substantial inflows, enhancing already solid demand for funded term
loans. In the loan market, both new and secondary issues continue to
be well bid, providing strong liquidity at attractive prices. With
the continued strength in stock prices and the amount of equity
sponsor money presently being raised or sitting on the sidelines, it
is likely that more buyout activity will be seen in the remainder of
1995 and into 1996.
<PAGE>
The August period, and July in particular, was good for the capital
markets, including high-yield bonds. During July, the Federal
Reserve Board eased monetary policy, recession fears disappeared
because of some stronger economic data releases, yield spreads
tightened, and the Standard & Poor's 500 stock index gained more
than 3.2%, boosted by another quarter of solid corporate earnings
results. Most sectors reported earnings strength, with technology
and banking particularly strong.
High-yield bonds rallied along with Treasury securities to close out
the August period well above first-quarter levels. The Merrill Lynch
Master High Yield Index has posted consecutive positive weekly
returns thus far in 1995. With 14 consecutive weeks of inflows of at
least $100 million per week into high-yield mutual funds and the
absence of any real forward calendar until late in the August
period, secondary market prices were bid up during the six months
ended August 31, 1995. As more new issues were registered in May,
secondary activity stalled and the rallying Treasury market left the
high-yield bond market behind. The spread between the Merrill Lynch
High Yield Master Index and ten-year Treasury securities widened to
as much as 362 basis points by the end of August. Intramarket risk
premiums also widened, with the BB/B spread increasing because of
crossover buyers' interest in higher-quality issues and uncertainty
about the direction of the economy. This tiering occurred as high-
yield investors increasingly focused on credit quality. Defensive or
solidly capitalized BB-rated credits were often several times over-
subscribed at new issue and traded well in the secondary market.
Cyclical and less well-capitalized B-rated credits often offered
premium coupons, equity "kickers" and tighter covenants to attract
some of the more aggressive buyers to new issues.
There was some flight to less cyclical industries that are perceived
to have healthier and more stable cash flows in a downturn. As a
result, the cable, supermarket and healthcare sectors all
experienced tightening of spreads. Carrying over a common theme from
1994, investors treated issuers reporting disappointing performance
harshly. This was particularly true of the retail segment where
disappointing numbers for companies such as Color Tile, Inc. sent
their bonds down sharply.
We continue to focus on buying higher-yielding, improving-quality
cyclical credits. Fundamental support for these bonds should
continue to be strong as long as there are signs of moderate growth
and little inflation. Our investments in the building products
companies such as NVR, Inc. reflect this philosophy as well as our
emphasis on the retail, shipping, steel, chemicals and paper
industries. These strategies benefited the total return of the
Portfolio for the August period. We continue to focus on those
issues with a maturity of ten years or fewer that generally have
five-year call protection.
<PAGE>
At August 31, 1995, cash equivalents totaled 0.2% of net assets. The
Portfolio's average stated maturity was 6.2 years but was expected
to have a much shorter real average life because of the typically
shorter average life of bank loans that are freely prepayable
without call pro-tection. The Portfolio is diversified in the
floating-rate portion in 23 investments across 12 industries, and in
the fixed-rate portion with 48 investments across 27 industries. The
largest industry concentrations are in paper (15.3% of total
assets), retail specialty (10.6%), food and beverage (9.6%),
diversified manufacturing (7.4%), and aerospace (7.3%).
Stronger companies are taking advantage of attractive public debt
and equity markets to improve their balance sheets. These trends
translated into continued low default rates in both the bank loan
and bond markets, although default rates have been higher than in
1994. Therefore, our primary strategy for the Portfolio was and will
continue to be focusing on those companies that we believe are
undervalued by the market or are generating improved earnings
trends. The industry focus is on companies that have leading market
shares, strong management and good cash flows. This strategy is
reflected in our holdings of such cyclicals as Jefferson
Smurfit/Container Corp. of America, Stone Container Corp., Algoma
Steel, Inc., Bruno's Supermarkets, Continental Cablevision, Inc.,
and Host Marriott Corp. Instead of looking for yield in the bank
loan market, we will consider lower-coupon issues that could become
investment grade in a relatively short time frame and provide
liquidity in the interim. When neither attractive bank loan nor high-
yield bond investment opportunities are available, the excess cash
was and will continue to be used to reduce the Portfolio's leverage
facility.
In Conclusion
We appreciate your ongoing investment in Senior High Income
Portfolio II, Inc., and we look forward to reviewing our 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
<PAGE>
October 17, 1995
<TABLE>
Proxy
Results
<CAPTION>
During the six-month period ended August 31, 1995, Senior High
Income Portfolio II, Inc. shareholders voted on the following
proposals. The proposals were approved at a special shareholders'
meeting on May 12, 1995. The description of each proposal and
number of shares voted are as follows:
Shares Voted Shares Voted
For Without Authority
<S> <S> <C> <C>
1. To elect the Portfolio's Board of Directors: Ronald W. Forbes 15,919,078 489,200
Cynthia A. Montgomery 15,907,528 500,750
Charles C. Reilly 15,918,277 490,001
Kevin A. Ryan 15,918,576 489,702
Richard R. West 15,918,544 489,734
Arthur Zeikel 15,912,452 495,826
<CAPTION>
Shares Voted Shares Voted Shares Voted
For Against Abstain
<S> <C> <C> <C>
2. To select Deloitte & Touche LLP as the Portfolio's independent auditors. 15,849,516 184,338 374,424
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Debt Obligations Cost (Note 1b)
<S> <S> <S> <C> <S> <C> <C>
Aerospace--9.6% Aviall, Inc., Term Loan, Tranche B, due
11/30/2000:**
NR* NR* $ 176,471 9.13% to 9/07/1995 $ 176,471 $ 176,471
NR* NR* 1,266,653 9.75% to 9/07/1995 1,266,653 1,266,653
NR* NR* 3,529,412 9.25% to 10/10/1995 3,529,412 3,529,412
BB- Ba3 3,000,000 BE Aerospace, Senior Notes, 9.75%
due 3/01/2003 3,060,000 3,000,000
Gulfstream Delaware Corp., Term Loan A,
due 3/31/1997:**
NR* NR* 372,340 10% to 9/30/1995 372,340 372,340
NR* NR* 2,234,043 7.88% to 10/13/1995 2,234,043 2,234,043
NR* NR* 2,240,000 Gulfstream Delaware Corp., Term Loan B,
due 3/31/1998, 9% to 9/08/1995** 2,240,000 2,240,000
B B2 2,000,000 Talley Manufacturing & Technology, Inc.,
Senior Notes, 10.75% due 10/15/2003 2,000,000 2,020,000
------------ ------------
14,878,919 14,838,919
Automotive B+ B3 1,000,000 Harvard Industries, Inc., Senior Notes,
Products--2.0% 11.125% due 8/01/2005++ 1,000,000 1,012,500
B B2 1,000,000 JPS Automotive Products Corp., Senior
Notes, 11.125% due 6/15/2001 1,000,000 995,000
A A3 1,000,000 Walbro Corp., Senior Notes, 9.875%
due 7/15/2005++ 996,520 995,000
------------ ------------
2,996,520 3,002,500
Broadcast/ Continental Cablevision, Inc., Senior
Media--5.2% Notes:
BB Ba2 1,000,000 8.50% due 9/15/2001 1,052,500 1,005,000
BB- B1 2,500,000 9.125% due 11/01/2004++ 2,500,000 2,500,000
B- B3 1,000,000 Granite Broadcasting Corp., 10.375%
due 5/15/2005++ 1,000,000 1,013,750
NR* NR* 2,500,000 Marcus Cable Co., Term Loan B, due
4/30/2004, 10.25% to 9/30/1995** 2,500,000 2,500,000
NR* NR* 1,000,000 Young Broadcasting Corp., 10.125% due
2/15/2005++ 1,000,000 1,040,000
------------ ------------
8,052,500 8,058,750
Building & B B2 2,000,000 NVR, Inc., Senior Notes, 11% due
Construction 4/15/2003 2,082,500 1,945,000
- --1.8% A A3 1,000,000 The Presley Companies, Senior Notes,
12.50% due 7/01/2001 1,000,000 830,000
------------ ------------
3,082,500 2,775,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Debt Obligations Cost (Note 1b)
<S> <S> <S> <C> <S> <C> <C>
Building BB- Ba3 $1,000,000 Schuller International Group,
Products-- 10.875% due 12/15/2004 $ 1,000,000 $ 1,097,500
0.7%
Casinos--4.2% Harrah's Jazz Co., Term Loan B, due
9/30/1999:**
NR* NR* 2,166,667 9.125% to 10/23/1995 2,166,667 2,166,667
NR* NR* 4,333,333 9.1875% to 12/21/1995 4,333,333 4,333,333
------------ ------------
6,500,000 6,500,000
Chemicals--4.2% BB- B1 2,000,000 Huntsman Chemical Corp., Senior Notes,
11% due 4/15/2004 2,030,000 2,165,000
NR* NR* 4,311,326 Inspec Chemical Corp., Term Loan B,
due 12/02/2000, 8.50% to 9/29/1995** 4,311,326 4,311,326
------------ ------------
6,341,326 6,476,326
Computers--3.2% NR* NR* 4,500,000 Dell Computer Corp., Senior Notes, 11%
due 8/15/2000 4,516,219 4,938,750
Consumer B+ Ba3 1,000,000 Coty Inc., 10.25% due 5/01/2005 1,000,000 1,030,000
Products--0.8% B+ B2 565,000 Drypers Corp., Senior Notes, 12.50%
due 11/01/2002 572,063 254,250
------------ ------------
1,572,063 1,284,250
Diversified--9.6% NR* NR* 4,967,600 Desa International Inc., Term Loan B,
due 11/30/2000, 9.0625% to 12/27/1995** 4,967,600 4,967,600
NR* NR* 1,290,844 Figgie International, Term Loan, due
1/01/1996, 10.75% to 10/01/1995** 1,290,844 1,290,844
B+ B2 1,000,000 J.B. Poindexter & Co., 12.50% due
5/15/2004 973,963 940,000
NR* B2 4,813,625 Thermadyne Co., Term Loan B, due
2/01/2001, 8.875% to 9/07/1995** 4,813,625 4,813,625
B B1 3,000,000 Valcor Inc., Senior Notes, 9.625% due
11/01/2003 3,000,000 2,790,000
------------ ------------
15,046,032 14,802,069
<PAGE>
Drug Stores--5.2% NR* NR* 3,089,250 Duane Reade Co., Term Loan A, due
9/30/1997, 8.875% to 11/30/1995** 3,089,250 3,089,250
NR* Ba3 4,962,312 Thrifty Payless, Inc., Term Loan B,
due 9/30/2001, 9.0625% to 9/22/1995** 4,962,312 4,962,312
------------ ------------
8,051,562 8,051,562
Energy--1.2% BB- B1 2,000,000 Maxus Energy Corp., Senior Notes,
9.375% due 11/01/2003 1,917,703 1,880,000
Fertilizers BB- B1 3,750,000 Sherritt Gordon Ltd., Senior Notes,
- --2.5% 9.75% due 4/01/2003 3,762,500 3,787,500
Food & American Italian Pasta, Term Loan B,
Beverage-- due 3/31/1999:**
12.6% NR* NR* 1,300,000 9.125% to 1/29/1996 1,300,000 1,300,000
NR* NR* 1,300,000 9% to 6/28/1996 1,300,000 1,300,000
NR* NR* 4,000,000 G. Heilman Brewing Co., Term Loan B,
due 12/31/2000, 9.125% due 10/13/1995** 4,000,000 4,000,000
President Baking Company, Inc., Term
Loan B, due 9/30/2000:**
NR* NR* 8,532 10.25% to 9/30/1995 8,532 8,532
NR* NR* 4,948,806 8.625% to 12/29/1995 4,948,806 4,948,806
B+ B1 3,000,000 Royal Crown Corp., Senior Secured Notes,
9.75% due 8/01/2000 3,079,625 2,790,000
Specialty Foods Corp., Term Loan B, due
4/30/2001:**
NR* B2 1,666,667 8.1875% to 9/21/1995 1,666,667 1,666,667
NR* B2 1,666,667 8.125% to 10/20/1995 1,666,667 1,666,667
NR* B2 1,666,666 8.0625% to 1/22/1996 1,666,666 1,666,666
------------ ------------
19,636,963 19,347,338
Forest BB- Ba3 2,000,000 Rainy River Forest Products, 10.75% due
Products-- 10/15/2001 1,995,574 2,140,000
2.0% BB B1 1,000,000 Tembec Finance Corp., 9.875% due
9/30/2005 1,000,000 1,000,000
------------ ------------
2,995,574 3,140,000
Grocery--7.3% B- B3 4,000,000 Bruno's Supermarkets, 10.50% due
8/01/2005 4,000,000 3,890,000
B+ NR* 3,959,000 Homeland Stores, Inc., Floating Rate
Senior Secured Notes, 9.062% due
2/28/1997 (1) 3,959,000 3,919,410
AAA AAA 4,000,000 The Penn Traffic Company, Senior Notes,
8.625% due 12/15/2003 3,992,712 3,420,000
------------ ------------
11,951,712 11,229,410
<PAGE>
Health Services-- B B2 1,000,000 Charter Medical Corp., Senior Sub-
3.8% ordinated Notes, 11.25% due 4/15/2004 1,000,000 1,072,500
B- B2 1,000,000 Integrated Health Services, Senior
Subordinated Notes, 10.75% due 7/15/2004 1,000,000 1,065,000
B+ B1 4,040,000 MEDIQ/PRN Life Support Services Inc.,
Senior Secured Notes, 11.125% due
7/01/1999 4,103,860 3,757,200
------------ ------------
6,103,860 5,894,700
Leasing & Rental BB- B1 2,000,000 The Scotsman Group, Inc., Senior Secured
Services--1.3% Notes, 9.50% due 12/15/2000 2,000,000 1,965,000
Leisure & B- B3 1,000,000 Alliance Entertainment Corp., 11.25% due
Entertainment 7/15/2005++ 1,002,500 995,000
- --0.6%
Manufacturing-- B- B3 1,000,000 Crain Industries Inc., 13.50% due
0.7% 8/15/2005++ 1,000,000 1,005,000
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued)
<CAPTION>
S&P Moody's Face Value
INDUSTRIES Rating Rating Amount Corporate Debt Obligations Cost (Note 1b)
<S> <S> <S> <C> <S> <C> <C>
Marking B+ B2 $1,000,000 Monarch Acquisition Corp., 12.50% due
Devices-- 7/01/2003++ $ 1,000,000 $ 1,015,000
0.7%
Metals--5.1% B B1 2,000,000 Algoma Steel, Inc., 12.375% due 7/15/2005 1,804,335 1,840,000
NR* B1 1,000,000 Gulf States Steel Acquisition Corp.,
13.50% due 4/15/2003++ 989,286 970,000
B B2 2,000,000 Jorgensen (Earle M.) Co., New Senior
Notes, 10.75% due 3/01/2000 2,065,000 1,960,000
B+ B1 2,000,000 WCI Steel Inc., Senior Notes, 10.50%
due 3/01/2002 2,000,000 1,960,000
B B2 1,190,000 Weirton Steel Corp., Senior Notes, 10.75%
due 6/01/2005++ 1,172,371 1,094,800
------------ ------------
8,030,992 7,824,800
<PAGE>
Musical NR* B3 1,000,000 Selmer Co., Inc., 11% due 5/15/2005++ 1,000,000 960,000
Instruments--0.6%
Nautical Sperry Marine, Inc., Term Loan, due
Systems-- 11/15/2000:**
1.9% NR* NR* 1,212,906 9.6875% to 9/29/1995 1,212,906 1,212,906
NR* NR* 1,648,984 9.125% to 12/29/1995 1,648,984 1,648,984
------------ ------------
2,861,890 2,861,890
Paper--15.4% Fort Howard Corp., Term Loan B, due
12/31/2002:**
NR* Ba3 2,500,000 9% to 9/19/1995 2,500,000 2,500,000
NR* Ba3 2,500,000 8.88% to 12/19/1995 2,500,000 2,500,000
B B3 1,000,000 Gaylord Container Corp., Senior Notes,
11.50% due 5/15/2001 985,583 1,052,500
Jefferson Smurfit/Container Corp. of
America, Term Loan B, due 5/10/2002:**
NR* B1 187,500 9.4375% to 9/25/1995 187,500 187,500
NR* NR* 816,666 8.9375% to 10/20/1995 816,666 816,666
NR* NR* 3,416,667 9.375% to 10/24/1995 3,416,667 3,416,667
BB- Ba3 1,000,000 Repap New Brunswick Inc., 9.875% due
7/15/2000 1,000,000 1,000,000
NR* Ba2 5,000,000 S.D. Warren Co., Term Loan B,
due 12/19/2002, 8.94% to 9/25/1995 ** 5,000,000 5,000,000
Stone Container Corp., Term Loan B,
due 4/01/2000:**
NR* Ba3 3,450,000 9% to 9/08/1995 3,450,000 3,450,000
NR* Ba3 3,712,500 9% to 10/16/1995 3,712,500 3,712,500
------------ ------------
23,568,916 23,635,833
Printing & NR* NR* 2,496,728 Ziff Davis Acquisition Corp., Term
Publishing--3.1% Loan B, due 12/31/2001, 9.4375% to
9/28/1995** 2,496,728 2,496,728
NR* NR* 2,351,725 Ziff Davis Acquisition Corp., Term
Loan C, due 12/31/2002, 9.9375% to
9/28/1995** 2,351,725 2,351,725
------------ ------------
4,848,453 4,848,453
Restaurants-- BB- NR* 3,000,000 Host Marriott Corp., 9.50% due
1.9% 5/15/2005++ 2,911,739 2,872,500
<PAGE>
Retail-- Camelot Music, Inc., Term Loan B,
Specialty-- due 2/28/2001:**
13.2% NR* NR* 1,812,500 8.375% to 9/18/1995 1,812,500 1,812,500
NR* NR* 3,062,500 8.9375% to 9/21/1995 3,062,500 3,062,500
B B2 2,000,000 Color Tile Inc., Senior Notes, 10.75%
due 12/15/2001 2,000,000 800,000
Federated Department Stores, Term Loan,
due 3/31/2000:**
NR* Ba1 3,125,000 7.4375% to 9/25/1995 3,125,000 3,125,000
NR* Ba1 1,875,000 7% to 9/29/1995 1,875,000 1,875,000
NR* NR* 7,682,343 Saks & Co., Term Loan Tranche B, due
6/30/2000, 9.25% to 11/09/1995** 7,682,343 7,682,343
B+ B1 2,000,000 Specialty Retailers, Inc., Series A,
Senior Notes, 10% due 8/15/2000 2,007,500 1,930,000
------------ ------------
21,564,843 20,287,343
Security NR* NR* 3,143,760 Alert Centre Inc., Term Loan, due
Systems-- 8/01/2001, 8.875% to 9/05/1995** 3,143,760 3,143,760
2.0%
Shipping--2.9% BB- Ba2 2,500,000 Eletson Holdings, Inc., First Preferred
Shipping Mortgage Notes, 9.25% due
11/15/2003 2,525,000 2,400,000
B+ Ba3 2,000,000 Viking Star Shipping, Inc., First
Preferred Shipping Mortgage Notes,
9.625% due 7/15/2003 2,012,500 2,045,000
------------ ------------
4,537,500 4,445,000
Utilities--1.0% BB Ba2 1,000,000 Cleveland Electric Illuminating Co.,
9.50% due 5/15/2005 998,114 1,001,400
B Ba3 460,000 Public Service Company of New Mexico,
10.30% due 1/15/2014 436,328 473,685
------------ ------------
1,434,442 1,475,085
Warehousing & D Caa 3,000,000 Americold Corp., First Mortgage Bonds,
Storage--1.9% Series B, 11.50% due 3/01/2005 3,067,500 2,910,000
Total Corporate Debt Obligations--128.2% 200,378,488 197,349,238
Shares
Held Warrants
Metals--0.0% NR* NR* 1,000 Gulf States Steel Acquisition Corp. (a) 11,000 1,500
Total Warrants--0.0% 11,000 1,500
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded)
<CAPTION>
SHORT-TERM Value
SECURITIES Face Amount Issue Cost (Note 1b)
<S> <C> <S> <C> <C>
Commercial $ 413,000 General Electric Capital Corp., 5.82%
Paper ***--0.2% due 9/01/1995 $ 413,000 $ 413,000
Total Short-Term Securities--0.2% 413,000 413,000
Total Investments--128.4% $200,802,488 197,763,738
============
Liabilities in Excess of Other
Assets--(28.4%) (43,793,233)
------------
Net Assets--100.0% $153,970,505
============
<FN>
*Not Rated.
**Floating or Variable Rate Corporate Loans--The interest rates on
floating or variable rate corporate loans 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
August 31, 1995.
***Commercial Paper is traded on a discount basis; the interest rate
shown is the discount rate paid at the time of purchase by the
Portfolio.
(1)Interest rate resets quarterly and is based on the three-month
LIBOR (London Interbank Offered Rate), plus an interest rate spread
of three hundred basis points.
(a)Warrants entitle the Portfolio to purchase a predetermined number
of shares of common stock. The purchase price and the number of
shares are subject to adjustment under certain conditions until the
expiration date.
++Restricted securities as to resale. The value of the Portfolio's
investment in restricted securities was approximately $15,474,000,
representing 10.05% of net assets.
<CAPTION>
Acquisition Value
Issue Dates Cost (Note 1b)
<S> <C> <C> <C>
Alliance Entertainment Corp.,
11.25% due 7/15/2005 7/20/1995 $1,002,500 $ 995,000
<PAGE>
Continental Cablevision, Inc.,
Senior Notes, 9.125%
due 11/01/2004 7/17/1995 2,500,000 2,500,000
Crain Industries Inc.,
13.50% due 8/15/2005 8/15/2005 1,000,000 1,005,000
Granite Broadcasting Corp.,
10.375% due 5/15/2005 5/12/1995 1,000,000 1,013,750
Gulf States Steel
Acquisition Corp., 13.50%
due 4/15/2003 4/12/1995 989,286 970,000
Harvard Industries, Inc.,
Senior Notes,
11.125% due 8/01/2005 7/25/1995 1,000,000 1,012,500
Host Marriott Corp., 9.50% 5/18/1995-
due 5/15/2005 7/31/1995 2,911,739 2,872,500
Monarch Acquisition Corp.,
12.50% due 7/01/2003 6/23/1995 1,000,000 1,015,000
Selmer Co., Inc., 11%
due 5/15/2005 5/18/1995 1,000,000 960,000
Walbro Corp., Senior Notes,
9.875% due 7/15/2005 7/21/1995 996,520 995,000
Weirton Steel Corp., Senior
Notes, 10.75% due 6/01/2005 6/05/1995 1,172,371 1,094,800
Young Broadcasting Corp.,
10.125% due 2/15/2005 6/07/1995 1,000,000 1,040,000
Total $15,572,416 $15,473,550
=========== ===========
Ratings of issues shown have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
<CAPTION>
As of August 31, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$200,802,488)(Note 1b) $197,763,738
Cash 224,051
Interest receivable 3,410,741
Deferred facility expense (Note 6) 11,853
Deferred organization expenses (Note 1f) 48,500
Prepaid expenses and other assets 6,705
------------
Total assets 201,465,588
------------
Liabilities: Payables:
Loans (Note 6) $ 45,000,000
Dividends to shareholders (Note 1g) 412,976
Interest on loans (Note 6) 213,538
Investment adviser (Note 2) 82,817
Commitment fees 13,489 45,722,820
------------
Deferred income (Note 1e) 1,697,866
Accrued expenses and other liabilities 74,397
------------
Total liabilities 47,495,083
------------
Net Assets: Net assets $153,970,505
============
Capital: Common Stock, par value $.10 per share; 200,000,000 shares
authorized (16,610,527 shares issued and outstanding) $ 1,661,053
Paid-in capital in excess of par 155,927,256
Undistributed investment income--net 2,527,660
Accumulated realized capital losses on investments--net (Note 7) (3,106,714)
Unrealized depreciation on investments--net (3,038,750)
------------
Total capital--Equivalent to $9.27 net asset value per share of
Common Stock (market price--$9.00) $153,970,505
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Year Ended August 31, 1995
<S> <S> <C>
Investment Income Interest and discount earned $ 21,141,242
(Note 1e): Facility and other fees 225,084
------------
Total income 21,366,326
------------
Expenses: Loan interest expense (Note 6) 3,900,781
Investment advisory fees (Note 2) 1,056,899
Professional fees 101,510
Facility fee amortization (Note 6) 95,378
Accounting services (Note 2) 90,536
Borrowing costs (Note 6) 76,307
Printing and shareholder reports 53,707
Transfer agent fees (Note 2) 26,026
Directors' fees and expenses 24,544
Custodian fees 21,924
Amortization of organization expenses (Note 1f) 15,730
Pricing services 4,853
Listing fees 250
Other 86,317
------------
Total expenses 5,554,762
------------
Investment income--net 15,811,564
------------
Realized & Realized loss on investments--net (1,837,439)
Unrealized Gain Change in unrealized depreciation on investments--net 1,061,216
(Loss) on ------------
Investments Net Increase in Net Assets Resulting from Operations $ 15,035,341
- --Net (Notes 1c, ============
1e & 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
For the September 24,
Year Ended 1993++ to
August 31, August 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 15,811,564 $ 13,177,415
Realized loss on investments--net (1,837,439) (1,269,275)
Change in unrealized depreciation on investments--net 1,061,216 (4,099,966)
------------ ------------
Net increase in net assets resulting from operations 15,035,341 7,808,174
------------ ------------
Dividends to Investment income--net (14,716,379) (11,744,940)
Shareholders ------------ ------------
(Note 1g):
Net decrease in net assets resulting from dividends to
shareholders (14,716,379) (11,744,940)
------------ ------------
Capital Share Value of shares issued to Common Stock shareholders in
Transactions reinvestment of dividends -- 157,700,000
(Note 4): Offering costs resulting from the issuance of Common Stock -- (211,698)
------------ ------------
Net increase in net assets resulting from capital share
transactions -- 157,488,302
------------ ------------
Net Assets: Total increase in net assets 318,962 153,551,536
Beginning of period 153,651,543 100,007
------------ ------------
End of period* $153,970,505 $153,651,543
============ ============
<FN>
*Undistributed investment income--net $ 2,527,660 $ 1,432,475
============ ============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
For the Year Ended August 31, 1995
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 15,035,341
Operating Adjustments to reconcile net increase in net assets
Activities: resulting from operations to net cash provided by
operating activities:
Decrease in receivables 712,133
Decrease in other assets 162,281
Decrease in other liabilities (139,183)
Realized and unrealized loss on investments--net 776,223
Amortization of discount (215,463)
------------
Net cash provided by operating activities 16,331,332
------------
Cash Provided by Proceeds from sales of long-term investments 118,321,987
Investing Purchases of long-term investments (106,101,208)
Activities: Purchases of short-term investments (292,692,792)
Proceeds from sales and maturities of short-term investments 294,143,338
------------
Net cash provided by investing activities 13,671,325
------------
Cash Used for Short-term borrowings (15,000,000)
Financing Dividends paid to shareholders (14,778,606)
Activities: ------------
Net cash used for financing activities (29,778,606)
------------
Cash: Net increase in cash 224,051
Cash at beginning of year --
------------
Cash at end of year $ 224,051
============
Cash Flow Cash paid for interest $ 3,796,492
Information: ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the For the Period
Year Ended Sept. 24, 1993++
Increase (Decrease) in Net Asset Value: Aug. 31, 1995 to Aug. 31, 1994
<S> <S> <C> <C>
Per Share Net asset value, beginning of period $ 9.25 $ 9.50
Operating ------------ ------------
Performance: Investment income--net .95 .79
Realized and unrealized loss on investments--net (.04) (.32)
------------ ------------
Total from investment operations .91 .47
------------ ------------
Less dividends from investment income--net (.89) (.71)
------------ ------------
Capital charge resulting from the issuance of Common Stock -- (.01)
------------ ------------
Net asset value, end of period $ 9.27 $ 9.25
============ ============
Market price per share, end of period $ 9.00 $ 8.875
============ ============
Total Investment Based on net asset value per share 10.77% 5.08%+++
Return:** ============ ============
Based on market price per share 12.09% (4.22%)+++
============ ============
Ratios to Expenses, net of reimbursement and excluding interest expense 1.08% 1.51%*
Average Net ============ ============
Assets: Expenses, net of reimbursement 3.63% 2.17%*
============ ============
Expenses 3.63% 2.34%*
============ ============
Investment income--net 10.35% 7.14%*
============ ============
Supplemental Net assets, end of period (in thousands) $ 153,971 $ 153,652
Data: ============ ============
Portfolio turnover 51.51% 52.37%
============ ============
<PAGE>
<FN>
*Annualized.
**Total investment returns based on market value, which can be
significantly greater or lesser than the net asset value, result in
substantially different returns. Total investment returns exclude
the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Senior High Income Portfolio II, Inc. (the "Fund") is registered
under the Investment Company Act of 1940 as a non-diversified,
closed-end management investment company. The Fund determines and
makes available for publication the net asset value of its Common
Stock on a weekly basis. The Fund's Common Stock is listed on the
New York Stock Exchange under the symbol SAL.
(a) Corporate debt obligations--The Fund invests principally in
senior debt obligations ("Senior Debt") of companies, including
corporate loans made by banks and other financial institutions and
both privately and publicly offered corporate bonds and notes.
Because agents and intermediaries are primarily commercial banks,
the Fund's investment in corporate loans could be considered
concentrated in financial institutions.
(b) Valuation of investments--Portfolio securities are valued on the
basis of prices furnished by one or more pricing services, which
determine prices for normal, institutional-size trading units. In
certain circumstances, portfolio securities are valued at the last
sale price on the exchange that is the primary market for such
securities, or the last quoted bid price for those securities for
which there were no sales during the day. The value of interest rate
swaps, caps, and floors is determined in accordance with a formula
and then confirmed periodically by obtaining a bank quotation.
Positions in options are valued at the last sale price on the market
where any such option is principally traded. Securities for which
there exist no price quotations or valuations and all other assets
are valued at fair value as determined in good faith by or on behalf
of the Board of Directors of the Fund. Since corporate loans are
purchased and sold primarily at par value, the Fund values the loans
at par, unless Fund Asset Management, L.P. ("FAM") determines par
does not represent fair value. In the event such a determination is
made, fair value will be determined in accordance with guidelines
approved by the Fund's Board of Directors. Obligations with
remaining maturities of sixty days or less are valued at amortized
cost unless this method no longer produces fair valuations.
<PAGE>
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures
contracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures contracts
are contracts for delayed delivery of securities at a specific
future date and at a specific price or yield. Upon entering into a
contract, the Fund deposits and maintains as collateral such initial
margin as required by the exchange on which the transaction is
effected. Pursuant to the contract, the Fund agrees to receive from
or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are
known as variation margin and are recorded by the Fund as unrealized
gains or losses. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
* Options--The Fund is authorized to write and purchase call and put
options. When the Fund writes an option, an amount equal to the
premium received by the Fund is reflected as an asset and an
equivalent liability. The amount of the liability is subsequently
marked to market to reflect the current market value of the option
written. When a security is purchased or sold through an exercise of
an option, the related premium paid (or received) is added to (or
deducted from) the basis of the security acquired or deducted from
(or added to) the proceeds of the security sold. When an option
expires (or the Fund enters into a closing transaction), the Fund
realizes a gain or loss on the option to the extent of the premiums
received or paid (or gain or loss to the extent the cost of the
closing transaction is less than or exceeds the premiums paid or
received).
Written and purchased options are non-income producing investments.
* Interest rate transactions--The Fund is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
<PAGE>
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accrual
basis. Realized gains and losses on security transactions are
determined on the identified cost basis. Facility fees are accreted
to income over the term of the related loan. For income tax purposes
as of September 1, 1994, the corporate loans are treated as discount
obligations.
(f) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates. The Fund may at times
pay out less than the entire amount of net investment income earned
in any particular period and may at times pay out such accumulated
undistributed income in other periods to permit the Fund to maintain
a more stable level of distributions.
2. Investment Advisory Agreement with Affiliates:
The Fund has entered into an Investment Advisory Agreement with FAM.
The general partner of FAM is Princeton Services, Inc. ("PSI"), an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. ("ML &
Co."), which is the limited partner.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to the operations of the Fund. For such
services, the Fund pays a monthly fee at an annual rate of 0.50% of
the Fund's average weekly net assets plus the proceeds of any
outstanding borrowings used for leverage.
Accounting services are provided to the Fund by FAM at cost.
During the year ended August 31, 1995, the Fund paid Merrill Lynch
Security Pricing Service, an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Inc. ("MLPF&S"), $2,724 for security price quotations
to compute the net asset value of the Fund.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, PSI, MLPF&S, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1995 were $106,101,208 and
$118,321,987, respectively.
Net realized and unrealized losses as of August 31, 1995 were as
follows:
Realized Unrealized
Losses Losses
Long-term investments $(1,836,477) $(3,038,750)
Short-term investments (962) --
----------- -----------
Total $(1,837,439) $(3,038,750)
=========== ===========
As of August 31, 1995, net unrealized depreciation for financial
reporting and Federal income tax purposes aggregated $3,038,750, of
which $1,273,932 related to appreciated securities and $4,312,682
related to depreciated securities. The aggregate cost of investments
at August 31, 1995 for Federal income tax purposes was $200,802,488.
4. Capital Share Transaction:
The Fund is authorized to issue 200,000,000 shares of capital stock
par value $.10, all of which are initially classified as Common
Stock. The Board of Directors is authorized, however, to classify
and reclassify any unissued shares of capital stock without approval
of the holders of Common Stock.
For the year ended August 31, 1995, shares issued and outstanding
remained constant at 16,610,527. At August 31, 1995, total paid-in
capital amounted to $157,588,309.
5. Unfunded Loan Interests:
As of August 31, 1995, the Fund had unfunded loan commitments of
$2,500,000, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded Commitment
Borrower (in thousands)
Marcus Cable Co. $2,500
NOTES TO FINANCIAL STATEMENTS (concluded)
6. Short-Term Borrowings:
On October 26, 1993, the Fund entered into a credit facility with a
syndicate of banks led by The Bank of New York consisting of a one-
year $60,000,000 revolving credit facility bearing interest on
outstanding balances at an alternate base rate plus 0.20% and/or
LIBOR plus 1.20% and a two-year $20,000,000 term loan facility
bearing interest on outstanding balances at an alternate base rate
plus 0.45% and/or LIBOR plus 1.25%. On October 20, 1994, this credit
facility and all outstanding balances thereunder were refinanced by
a one-year $80,000,000 revolving credit facility extended by a
syndicate of banks led by The Bank of New York and bearing interest
on outstanding balances at the Federal Funds rate plus 1.00% and/or
an alternate base rate plus 0% and/or LIBOR plus 1.00%. For the year
ended August 31, 1995, the maximum amount borrowed was $77,000,000,
the average amount borrowed was approximately $58,512,000 and the
daily weighted average interest rate was 6.67%. For the year ended
August 31, 1995, facility and commitment fees aggregated
approximately $171,685.
7. Capital Loss Carryforward:
At August 31, 1995, the Fund had a net capital loss carryforward of
approximately $1,273,000, all of which expires in 2003. This amount
will be available to offset like amounts of any future taxable
gains.
<AUDIT-REPORT>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Senior High Income Portfolio II, Inc.:
We have audited the accompanying statement of assets, liabilities
and capital, including the schedule of investments, of Senior High
Income Portfolio II, Inc. as of August 31, 1995, the related
statements of operations and cash flows for the year then ended and
changes in net assets and the financial highlights for the year then
ended and the period September 24, 1993 (commencement of operations)
to August 31, 1994. These financial statements and the financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits.
<PAGE>
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and the financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at August
31, 1995 by correspondence with the custodian and financial
intermediaries. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Senior High Income Portfolio II, Inc. as of August 31, 1995, the
results of its operations, the changes in its net assets, its cash
flows, and the financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
As discussed in Notes 1a and 1b, the financial statements include
corporate loans valued at $108,805,993 (71% of total net assets and
55% of total investments of the Fund), whose values are fair values
as determined by or under the direction of the Board of Directors in
the absence of actual market values. Determination of fair value
involves subjective judgment, as the actual market value of
particular corporate loans can be established only by negotiation
between the parties in a sales transaction. We have reviewed the
procedures established by the Board of Directors and used by the
Fund's investment adviser in determining the fair values of such
corporate loans and have inspected underlying documentation, and
under the circumstances, we believe that the procedures are
reasonable and the documentation appropriate.
Deloitte & Touche LLP
Princeton, New Jersey
October 17, 1995
</AUDIT-REPORT>
<PAGE>
PER SHARE INFORMATION (unaudited)
<TABLE>
Per Share
Selected Quarterly
Financial Data*
<CAPTION>
Net Realized Unrealized Dividends
Investment Gains Gains Net Investment Income
For the Period Income (Losses) (Losses) Common
<S> <C> <C> <C> <C>
September 24, 1993++ to November 30, 1993 $.13 -- $ .03 --
December 1, 1993 to February 28, 1994 .23 $ .02 .12 $.30
March 1, 1994 to May 31, 1994 .21 (.03) (.37) .20
June 1, 1994 to August 31, 1994 .23 (.07) (.04) .21
September 1, 1994 to November 30, 1994 .22 --+++ (.19) .21
December 1, 1994 to February 28, 1995 .23 (.06) .16 .22
March 1, 1995 to May 31, 1995 .25 (.04) .17 .22
June 1, 1995 to August 31, 1995 .25 (.01) (.07) .24
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
September 24, 1993++ to November 30, 1993 $9.65 $9.50 $10.00 $9.00 652
December 1, 1993 to February 28, 1994 9.80 9.58 9.75 9.00 1,253
March 1, 1994 to May 31, 1994 9.71 9.27 9.75 8.625 1,422
June 1, 1994 to August 31, 1994 9.39 9.22 9.375 8.375 1,751
September 1, 1994 to November 30, 1994 9.27 9.06 9.00 7.875 2,205
December 1, 1994 to February 28, 1995 9.18 8.97 9.00 8.25 1,616
March 1, 1995 to May 31, 1995 9.34 9.17 8.875 8.25 2,067
June 1, 1995 to August 31, 1995 9.38 9.25 9.125 8.625 2,438
<FN>
*Calculations are based upon shares of Common Stock outstanding at
the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
++Commencement of Operations.
+++Amount is less than $.01 per share.
</TABLE>
<PAGE>
