<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2000
SECURITIES ACT FILE NO. 333-73137
INVESTMENT COMPANY ACT FILE NO. 811-09229
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE
SECURITIES EXCHANGE ACT OF 1934)
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
(Name of Issuer)
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
59021MR 10 2
(CUSIP Number of Class of Securities)
TERRY K. GLENN
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
(609) 282-2800
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Person(s) Filing Statement)
COPIES TO:
<TABLE>
<S> <C>
FRANK P. BRUNO, ESQ. BRADLEY J. LUCIDO, ESQ.
BROWN & WOOD LLP MERRILL LYNCH ASSET MANAGEMENT, L.P.
ONE WORLD TRADE CENTER P.O. BOX 9011
NEW YORK, NEW YORK 10048-0557 PRINCETON, NEW JERSEY 08543-9011
JANUARY 19, 2000
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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<TABLE>
<S> <C> <C> <C>
Transaction Valuation: $44,910,000(a) Amount of Filing Fee: $8,982(b)
</TABLE>
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- --------------------------------------------------------------------------------
(a) Calculated as the aggregate maximum purchase price to be paid for 4,500,000
shares in the offer, based upon the net asset value per share ($9.98) on
January 14, 2000.
(b) Calculated as 1/50th of 1% of the Transaction Valuation.
/ / Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: ________________________________________________________
Form or Registration No.: ______________________________________________________
Filing Party: __________________________________________________________________
Date of Filing: ________________________________________________________________
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<PAGE>
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Merrill Lynch Senior Floating Rate Fund II,
Inc., a continuously offered, non-diversified, closed-end investment company
organized as a Maryland corporation (the "Fund"). The principal executive
offices of the Fund are located at 800 Scudders Mill Road, Plainsboro, New
Jersey 08536.
(b) The title of the securities being sought is shares of common stock, par
value $0.10 per share (the "Shares"). As of December 31, 1999 there were
approximately 32.3 million Shares issued and outstanding.
The Fund is seeking tenders for 4,500,000 Shares (the "Offer"), at net asset
value per Share (the "NAV") calculated on the day the tender offer terminates,
less any "Early Withdrawal Charge," upon the terms and subject to the conditions
set forth in the Offer to Purchase dated January 19, 2000 (the "Offer to
Purchase"). A copy of each of the Offer to Purchase and the related Letter of
Transmittal is attached hereto as Exhibit (a)(1)(ii) and Exhibit (a)(2),
respectively. Reference is hereby made to the Cover Page and Section 1 "Price;
Number of Shares" of the Offer to Purchase, which are incorporated herein by
reference. The Fund has been informed that no Directors, officers or affiliates
of the Fund intend to tender Shares pursuant to the Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 9 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Certain Effects of the Offer" and Section 9 "Source and Amount of Funds" of the
Offer to Purchase, which are incorporated herein by reference. The Fund is
currently engaged in a public offering, from time to time, of its Shares. The
Fund otherwise has no plans or proposals which relate to or would result in
(a) the acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund;
(d) any change in the present Board of Directors or management of the Fund,
including, but not limited to, any plans or proposals to change the number or
the term of Directors, or to fill any existing vacancy on the Board or to change
any material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its Shares the Fund has sold
approximately 4.3 million Shares at a price equal to the NAV of the Fund on the
date of each such sale.
i
<PAGE>
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE ISSUER'S SECURITIES.
The Fund does not know of any contract, arrangement, understanding or
relationship relating directly or indirectly, to the Offer (whether or not
legally enforceable) between the Fund, any of the Fund's executive officers or
Directors, any person controlling the Fund or any executive officer or director
of any corporation ultimately in control of the Fund and any person with respect
to any securities of the Fund (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guarantees of loans, guarantees against loss, or the giving or
withholding of proxies, consents or authorizations).
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
No persons have been employed, retained or are to be compensated by the Fund
to make solicitations or recommendations in connection with the Offer.
ITEM 7. FINANCIAL INFORMATION.
(a) Reference is hereby made to the financial statements included as Exhibit
(g)(1) hereto, which is incorporated herein by reference.
(b) None.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) Not Applicable.
(d) None.
(e) The Offer to Purchase, attached hereto as Exhibit (a)(1)(ii), is
incorporated herein by reference in its entirety.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
(a)(1) (i) Advertisement to be printed in THE WALL STREET JOURNAL.
(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(c) Not Applicable.
(d)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the period
March 26, 1999 (commencement of operations) to August 31,
1999.
</TABLE>
ii
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
MERRILL LYNCH SENIOR FLOATING RATE FUND
II, INC.
By /s/ TERRY K. GLENN
............................
(Terry K. Glenn,
President)
January 19, 2000
iii
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
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<S> <C>
(a)(1)(i) Advertisement to be printed in THE WALL STREET JOURNAL.
(a)(1)(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(g)(1) Audited Financial Statements of the Fund for the period
March 26, 1999 (commencement of operations) to August 31,
1999.
</TABLE>
iv
<PAGE>
EXHIBIT (a)(1)(i)
<PAGE>
THIS ANNOUNCEMENT IS NOT AN OFFER TO PURCHASE OR A SOLICITATION OF AN OFFER TO
SELL SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED JANUARY 19,
2000, AND THE RELATED LETTER OF TRANSMITTAL. THE OFFER IS NOT BEING MADE TO, NOR
WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF, HOLDERS OF SHARES IN ANY
JURISDICTION IN WHICH MAKING OR ACCEPTING THE OFFER WOULD VIOLATE THAT
JURISDICTION'S LAWS.
[LOGO]
NOTICE OF OFFER TO PURCHASE FOR CASH 4,500,000 OF ITS
ISSUED AND OUTSTANDING SHARES AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE ARE 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 15, 2000, UNLESS EXTENDED.
Merrill Lynch Senior Floating Rate Fund II, Inc. (the "Fund") is offering to
purchase 4,500,000 of its issued and outstanding shares of common stock par
value $.10 per share (the "Shares") at a price equal to their net asset value
("NAV") less any applicable early withdrawal charge as of the close of the New
York Stock Exchange on the Expiration Date, February 15, 2000, unless extended,
upon the terms and conditions set forth in the Offer to Purchase dated
January 19, 2000 (the "Offer"). The NAV on January 14, 2000, was $9.98 per
Share. The purpose of the Offer is to provide liquidity to stockholders since
the Fund is unaware of any secondary market which exists for the Shares. The
Offer is not conditioned upon the tender of any minimum number of Shares.
If more than 4,500,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either extend
the Offer period, if necessary, and increase the number of Shares that the Fund
is offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered, as well as any Shares tendered during
the extended Offer period, or purchase 4,500,000 Shares (or such larger number
of Shares sought) on a pro rata basis.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
12:00 midnight, New York City time, on February 15, 2000, unless the Offer is
extended, and, if not yet accepted for payment by the Fund, Shares may also be
withdrawn after March 15, 2000.
The information required to be disclosed by paragraph (d)(1) of Rule 13e-4
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is made
with respect to the Offer.
Questions and requests for assistance, for current NAV quotations or for
copies of the Offer to Purchase, Letter of Transmittal, and any other tender
offer documents, may be directed to the Merrill Lynch Response Center at the
address and telephone number below. Copies will be furnished promptly at no
expense to you and also may be obtained by completing and returning the coupon
below to the Merrill Lynch Response Center. Stockholders who do not own Shares
directly should effect a tender through their broker, dealer or nominee. For
example, stockholders who purchased Shares through Merrill Lynch, Pierce, Fenner
& Smith Incorporated should effect tenders through their Financial Consultant.
1-800-MERRILL, EXT. 4302
1-800-637-7455
<TABLE>
<S> <C>
- --------------------------------------------------
MAIL TO: MERRILL LYNCH RESPONSE CENTER,
P.O. BOX 30200, NEW BRUNSWICK, NJ
08989-0200
/ / PLEASE SEND ME MERRILL LYNCH SENIOR FLOATING
RATE FUND II, INC. TENDER OFFER MATERIALS
NAME ADDRESS
- ----------------------- -----------------------
BUSINESS PHONE CITY
- --------------------- -----------------------
HOME PHONE STATE ------------ ZIP
- ----------------------- ------------
MERRILL LYNCH CLIENTS, PLEASE GIVE THE NAME AND
OFFICE ADDRESS OF YOUR FINANCIAL CONSULTANT:
- --------------------------------------------------
4302
</TABLE>
January 19, 2000
[LOGO]
<PAGE>
EXHIBIT (a)(1)(ii)
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
OFFER TO PURCHASE FOR CASH 4,500,000
OF ITS ISSUED AND OUTSTANDING SHARES
AT NET ASSET VALUE PER SHARE
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FEBRUARY 15, 2000, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.:
The Fund is offering to purchase up to 4,500,000 of its shares of common
stock, par value $.10 per share (the "Shares"), for cash at a price equal to
their net asset value ("NAV"), less any applicable Early Withdrawal Charge, as
of the close of the New York Stock Exchange on February 15, 2000, the Expiration
Date, unless extended, upon the terms and conditions set forth in this Offer to
Purchase (the "Offer") and the related Letter of Transmittal. The Shares are not
currently traded on an established secondary market. The NAV on January 14, 2000
was $9.98 per Share. You can obtain current NAV quotations from your Merrill
Lynch Financial Consultant or the Merrill Lynch, Pierce, Fenner & Smith
Incorporated Response Center (the "Merrill Lynch Response Center") (See Section
1). The Fund presently intends each quarter to consider making a tender offer
for its Shares at a price equal to their current NAV.
If more than 4,500,000 Shares are duly tendered prior to the expiration of
the Offer, assuming no changes in the factors originally considered by the Board
of Directors when it determined to make the Offer, the Fund will either
(1) extend the Offer period, if necessary, and increase the number of Shares
that the Fund is offering to purchase to an amount which it believes will be
sufficient to accommodate the excess Shares tendered as well as any Shares
tendered during the extended Offer period or (2) purchase 4,500,000 Shares (or
such greater number of Shares sought) on a pro rata basis.
THIS OFFER IS BEING MADE TO ALL STOCKHOLDERS OF THE FUND AND IS NOT
CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING TENDERED.
IMPORTANT
If you desire to tender all or any portion of your Shares, you should either
(1) request your broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for you or (2) if you own your Shares directly,
complete and sign the Letter of Transmittal and mail or deliver it along with
any Share certificate(s) and any other required documents to the Fund's transfer
agent, Financial Data Services, Inc. (the "Transfer Agent"). If your Shares are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee, you must contact such broker, dealer, commercial bank, trust
company or other nominee if you desire to tender your Shares. Shares held in
your Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
brokerage account are registered in the name of Merrill Lynch and are not held
by you directly. Merrill Lynch may charge its customers a $5.35 processing fee
to confirm a repurchase of Shares from such customers pursuant to the Offer.
NEITHER THE FUND NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. EACH
STOCKHOLDER MUST MAKE HIS OWN DECISION WHETHER TO TENDER SHARES, AND IF SO, HOW
MANY SHARES TO TENDER.
NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
FUND AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER. NO
PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND.
<PAGE>
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE
INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
Questions and requests for assistance may be directed to your Merrill Lynch
Financial Consultant or other nominee, or to the Transfer Agent at the address
and telephone number set forth below. Requests for additional copies of this
Offer to Purchase and the Letter of Transmittal should be directed to the
Merrill Lynch Response Center.
<TABLE>
<S> <C>
January 19, 2000 MERRILL LYNCH SENIOR FLOATING RATE
FUND II, INC.
Merrill Lynch Response Center Transfer Agent: Financial Data
P.O. Box 30200 Services, Inc.
New Brunswick, New Jersey 08989-0200 Attn: Merrill Lynch Senior Floating Rate
Attn: Merrill Lynch Senior Floating Rate Fund II, Inc.
Fund II, Inc. P.O. Box 45289
(800) 637-7455, ext. 4302 Jacksonville, Florida 32232-5289
(800) 637-3863
</TABLE>
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
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<C> <S> <C>
1. Price; Number of Shares..................................... 3
2. Procedure for Tendering Shares.............................. 3
3. Early Withdrawal Charge..................................... 4
4. Withdrawal Rights........................................... 5
5. Payment for Shares.......................................... 5
6. Certain Conditions of the Offer............................. 5
7. Purpose of the Offer........................................ 6
8. Certain Effects of the Offer................................ 6
9. Source and Amount of Funds.................................. 6
10. Summary of Selected Financial Information................... 7
11. Certain Information About the Fund.......................... 8
12. Additional Information...................................... 8
13. Certain Federal Income Tax Consequences..................... 8
14. Extension of Tender Period; Termination; Amendments......... 9
15. Miscellaneous............................................... 9
</TABLE>
2
<PAGE>
1. PRICE; NUMBER OF SHARES. The Fund will, upon the terms and subject to
the conditions of the Offer, purchase up to 4,500,000 of its issued and
outstanding Shares which are tendered and not withdrawn prior to 12:00 midnight,
New York City time, on February 15, 2000 (such time and date being hereinafter
called the "Initial Expiration Date"), unless it determines to accept none of
them. The Fund reserves the right to extend the Offer (See Section 14). The
later of the Initial Expiration Date or the latest time and date to which the
Offer is extended is hereinafter called the "Expiration Date." The purchase
price of the Shares will be their NAV as of the close of the New York Stock
Exchange on the Expiration Date. An Early Withdrawal Charge to recover
distribution expenses will be assessed on Shares accepted for purchase which
have been held for less than the applicable holding period (See Section 3).
The Offer is being made to all stockholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than 4,500,000
Shares are duly tendered prior to the expiration of the Offer, assuming no
changes in the factors originally considered by the Board of Directors when it
initially determined to make the Offer, the Fund will either (1) extend the
Offer period, if necessary, and increase the number of Shares that the Fund is
offering to purchase to an amount which it believes will be sufficient to
accommodate the excess Shares tendered as well as any Shares tendered during the
extended Offer period or (2) purchase 4,500,000 Shares (or such greater number
of Shares sought) on a pro rata basis.
As of December 31, 1999 there were approximately 32.3 million Shares issued
and outstanding and there were 22 holders of record of Shares (in addition,
Merrill Lynch maintains accounts for 6,858 beneficial owners of Shares). The
Fund has been informed that none of the Directors, officers or affiliates of the
Fund intends to tender any Shares pursuant to the Offer. The Shares currently
are not traded on any established secondary market. Current NAV quotations for
the Shares can be obtained from your Merrill Lynch Financial Consultant or from
the Merrill Lynch Response Center at (800) 637-7455, ext. 4302.
2. PROCEDURE FOR TENDERING SHARES. In order for you to tender any of your
Shares pursuant to the Offer, you may either: (a) request your broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
you, in which case a Letter of Transmittal is not required or (b) if the Shares
are registered in your name, send to the Transfer Agent, at the address set
forth on page 2, any certificates for such Shares, a properly completed and
executed Letter of Transmittal and any other documents required therein. Please
contact the Merrill Lynch Response Center at (800) 637-7455, ext. 4302 as to any
additional documents which may be required.
A. PROCEDURES FOR BENEFICIAL OWNERS HOLDING SHARES THROUGH MERRILL LYNCH OR
OTHER BROKERS OR NOMINEES.
If your Shares are registered in the name of a broker, dealer, commercial
bank, trust company or other nominee, you must contact such broker, dealer,
commercial bank, trust company or other nominee if you desire to tender your
Shares. You should contact such broker, dealer, commercial bank, trust company
or other nominee in sufficient time to permit notification of your desire to
tender to reach the Transfer Agent by the Expiration Date. No brokerage
commission will be charged on the purchase of Shares by the Fund pursuant to the
Offer. However, a broker or dealer may charge a fee for processing the
transaction on your behalf. Merrill Lynch may charge its customers a $5.35
processing fee to confirm a purchase of Shares pursuant to the Offer.
B. PROCEDURES FOR REGISTERED STOCKHOLDERS.
If you will be mailing or delivering the Letter of Transmittal and any other
required documents to the Transfer Agent in order to tender your Shares, they
must be received on or prior to the Expiration Date by the Transfer Agent at its
address set forth on page 2 of this Offer to Purchase.
Signatures on the Letter of Transmittal MUST be guaranteed by an "eligible
guarantor institution" as such is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, the existence and validity of which may be verified by the
Transfer Agent through the use of industry publications. Notarized signatures
are not sufficient.
3
<PAGE>
Payment for Shares tendered and purchased will be made only after receipt by
the Transfer Agent on or before the Expiration Date of a properly completed and
duly executed Letter of Transmittal and any other required documents. If your
Shares are evidenced by certificates, those certificates must also be received
by the Transfer Agent on or prior to the Expiration Date.
THE METHOD OF DELIVERY OF ANY DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE PARTY TENDERING THE SHARES. IF DOCUMENTS ARE
SENT BY MAIL, IT IS RECOMMENDED THAT THEY BE SENT BY REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED.
C. DETERMINATIONS OF VALIDITY.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tenders will be determined by the Fund, in its sole
discretion, whose determination shall be final and binding. The Fund reserves
the absolute right to reject any or all tenders determined by it not to be in
appropriate form or the acceptance of or payment for which would, in the opinion
of counsel for the Fund, be unlawful. The Fund also reserves the absolute right
to waive any of the conditions of the Offer or any defect in any tender with
respect to any particular Shares or any particular stockholder, and the Fund's
interpretations of the terms and conditions of the Offer will be final and
binding. Unless waived, any defects or irregularities in connection with tenders
must be cured within such times as the Fund shall determine. Tenders will not be
deemed to have been made until the defects or irregularities have been cured or
waived. Neither the Fund, its investment adviser and administrator, Merrill
Lynch Asset Management, L.P. ("MLAM"), nor the Transfer Agent, nor any other
person shall be obligated to give notice of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give such
notice.
D. TENDER CONSTITUTES AN AGREEMENT.
A tender of Shares made pursuant to any one of the procedures set forth
above will constitute an agreement between the tendering stockholder and the
Fund in accordance with the terms and subject to the conditions of the Offer.
3. EARLY WITHDRAWAL CHARGE. The Fund will assess an Early Withdrawal
Charge of 1.0% on Shares accepted for purchase which have been held for less
than one year. The charge will be paid to Merrill Lynch Funds Distributor, Inc.
(the "Distributor"), a wholly owned subsidiary of MLAM and the distributor of
the Shares, to recover distribution expenses. The Early Withdrawal Charge will
be imposed on those Shares accepted for tender based on an amount equal to the
lesser of the then current NAV of the Shares or the cost of the Shares being
tendered. Accordingly, the Early Withdrawal Charge is not imposed on increases
in the NAV above the initial purchase price. In addition, the Early Withdrawal
Charge is not imposed on Shares derived from reinvestments of dividends or
capital gains distributions. In determining whether an Early Withdrawal Charge
is payable, it is assumed that the acceptance of an offer to purchase tendered
Shares will be made first from Shares acquired through dividend reinvestment and
then from the earliest outright purchase of Shares.
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, the calculation will be determined in the manner that results in the
lowest possible amount being charged. Therefore, it will be assumed that the
tender is first of Shares acquired through dividend reinvestment and of Shares
held for over one year and then of Shares held for less than one year. The Early
Withdrawal Charge will not be applied to dollar amounts representing an increase
in the NAV since the time of purchase. The Early Withdrawal Charge may be waived
on Shares tendered following the death of all beneficial owners of such Shares,
provided the Shares are tendered within one year of death (a death certificate
and other applicable documents may be required) or if later, reasonably promptly
following completion of probate, or in connection with involuntary termination
of an account in which Fund Shares are held. At the time of acceptance of the
Offer, the record or succeeding beneficial owner must notify the Transfer Agent
either directly or indirectly through the Distributor that the Early Withdrawal
Charge should be waived. Upon confirmation of the owner's entitlement, the
waiver will be granted; otherwise, the waiver will be lost.
4
<PAGE>
4. WITHDRAWAL RIGHTS. You may withdraw Shares tendered at any time prior
to the Expiration Date and, if the Shares have not yet been accepted for payment
by the Fund, at any time after March 15, 2000.
Stockholders whose accounts are maintained through Merrill Lynch should
notify their Financial Consultant prior to the Expiration Date if they wish to
withdraw Shares. Stockholders whose accounts are maintained through another
broker, dealer, commercial bank, trust company or other nominee should notify
such nominee prior to the Expiration Date. Shareholders whose accounts are
maintained directly through the Transfer Agent should submit written notice to
the Transfer Agent.
To be effective, any notice of withdrawal must be timely received by the
Transfer Agent at the address set forth on page 2 of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person having deposited the
Shares to be withdrawn, the number of Shares to be withdrawn, and, if the
certificates representing such Shares have been delivered or otherwise
identified to the Transfer Agent, the name of the registered holder(s) of such
Shares as set forth in such certificates and the number of Shares to be
withdrawn. If the certificates have been delivered to the Transfer Agent, then,
prior to the release of such certificate, you must also submit the certificate
numbers shown on the particular certificates evidencing such Shares and the
signature on the notice of the withdrawal must be guaranteed by an Eligible
Institution. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Fund in its sole
discretion, whose determination shall be final and binding. Shares properly
withdrawn shall not thereafter be deemed to be tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by following one of the
procedures described in Section 2 prior to the Expiration Date.
5. PAYMENT FOR SHARES. For purposes of the Offer, the Fund will be deemed
to have accepted for payment (and thereby purchased) Shares which are tendered
as, if and when it gives oral or written notice to the Transfer Agent of its
election to purchase such Shares.
Payment for Shares will be made promptly by the Transfer Agent to tendering
stockholders as directed by the Fund. Certificates for Shares not purchased (see
Sections 1 and 6), or for Shares not tendered included in certificates forwarded
to the Transfer Agent, will be returned promptly following the termination,
expiration or withdrawal of the Offer, without expense to the tendering
stockholder.
The Fund will pay all transfer taxes, if any, payable on the transfer to it
of Shares purchased pursuant to the Offer. If tendered certificates are
registered in the name of any person other than the person signing the Letter of
Transmittal, the amount of any such transfer taxes (whether imposed on the
registered holder or such other person) payable on account of the transfer to
such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. The
Fund will not pay any interest on the purchase price under any circumstances.
As noted above, Merrill Lynch may charge its customers a $5.35 processing
fee to confirm a purchase of Shares from such customers pursuant to the Offer.
6. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to
accept for payment or pay for any Shares tendered, and may terminate or amend
the Offer or may postpone the acceptance for payment of or payment for Shares
tendered, if: (1) such purchases would impair the Fund's status as a regulated
investment company under the Internal Revenue Code (which would make the Fund a
taxable entity, causing the Fund's income to be taxed at the corporate level in
addition to the taxation of stockholders who receive dividends from the Fund);
(2) the Fund would not be able to liquidate portfolio securities in a manner
which is orderly and consistent with the Fund's investment objective and
policies in order to purchase Shares tendered pursuant to the Offer; or
(3) there is, in the Board's judgment, any (a) legal action or proceeding
instituted or threatened challenging the Offer or otherwise materially adversely
affecting the Fund, (b) declaration of a banking moratorium by Federal or state
authorities or any suspension of payment by banks in the United States or New
York State, which is material to the Fund, (c) limitation imposed by Federal or
state authorities on the extension of credit by lending institutions,
(d) commencement of war, armed hostilities or other international or national
calamity directly or indirectly involving the United States which is material to
the Fund, or (e) other event or condition which
5
<PAGE>
would have a material adverse effect on the Fund or its stockholders if Shares
tendered pursuant to the Offer were purchased.
If the Fund determines to amend the Offer or to postpone the acceptance for
payment of or payment for Shares tendered, it will, to the extent necessary,
extend the period of time during which the Offer is open as provided in
Section 14. Moreover, in the event any of the foregoing conditions are modified
or waived in whole or in part at any time, the Fund will promptly make a public
announcement of such waiver and may, depending on the materiality of the
modification or waiver, extend the Offer period as provided in Section 14.
7. PURPOSE OF THE OFFER. The Fund does not currently believe there will be
an active secondary market for its Shares. The Board of Directors has determined
that it would be in the best interest of stockholders for the Fund to take
action to attempt to provide liquidity to stockholders. To that end, the
Directors presently intend each quarter to consider the making of a tender offer
to purchase the Shares at NAV. The Fund will at no time be required to make any
such tender offer.
8. CERTAIN EFFECTS OF THE OFFER. The Purchase of Shares pursuant to the
Offer will have the effect of increasing the proportionate interest in the Fund
of stockholders who do not tender their Shares. If you retain your Shares,
however, you will be subject to any increased risks that may result from the
reduction in the Fund's aggregate assets resulting from payment for the Shares,
including, for example, the potential for greater volatility due to decreased
diversification and higher expenses. However, the Fund believes that those risks
will be reduced to the extent new Shares of the Fund are sold. All Shares
purchased by the Fund pursuant to the Offer will be retired by the Board of
Directors of the Fund.
9. SOURCE AND AMOUNT OF FUNDS. The aggregate purchase price if 4,500,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $44,910,000. The Fund anticipates that the purchase price for any
Shares acquired pursuant to the Offer may be derived from (i) cash on hand,
(ii) the proceeds of the sale of cash equivalents held by the Fund, (iii) the
proceeds of sales of portfolio investments held by the Fund and/or
(iv) borrowings by the Fund. If, in the judgment of the Directors, there is not
sufficient liquidity of the assets of the Fund, or availability of funds from
borrowings, to pay for tendered Shares, the Fund may terminate the Offer.
The Fund entered into an agreement with The Bank of New York ("BONY"),
providing for an unsecured revolving credit facility (the "Facility"). Unless
otherwise extended, the Facility will terminate on June 19, 2000. The proceeds
of the Facility may be used to finance the payment for Shares tendered in a
tender offer by the Fund and to pay fees and expenses incurred in connection
with the Facility. The Facility enables the Fund to borrow up to $25,000,000 at
a rate of interest equal to, at the Fund's option, the sum of the federal funds
rate (i.e., the rate at which BONY is offered overnight Federal funds by a
Federal funds broker selected by BONY) plus the Applicable Margin (defined
below) or the sum of the Eurodollar rate (based on the rates quoted by BONY to
leading banks in the London interbank eurodollar market as the rate at which
BONY is offering dollar deposits) plus the Applicable Margin (defined below).
The Applicable Margin means 0.50% per annum. Interest on borrowings is
calculated on the basis of a year of 360 days for the actual number of days
elapsed and is payable in arrears on the last day of each month in the case of
borrowings that bear interest at the Federal funds rate, and at the end of the
interest period selected by the Fund in the case of borrowings that bear
interest at the Eurodollar rate. The Fund agrees to pay to the Bank a fee (the
"commitment fee") for the period from and including the effective date to but
excluding the date of the expiration or other termination of the commitment,
equal to 0.08% per annum of the unused portion of the commitment, payable
quarterly in arrears on the last day of each June, September, December and March
of each year and on the date of the expiration or other termination of the
commitment. The commitment fee shall be calculated on the basis of a 360-day
year for the actual number of days elapsed. Each loan must be repaid at the
earlier of (i) 90 days from the borrowing date of such loan and (ii) one
business day prior to the date on which the Fund's next tender offer expires.
Borrowings under the Facility, if any, may be repaid with the proceeds of
portfolio investments sold by the Fund subsequent to the expiration date of a
tender offer.
The terms of the Facility may be modified by written agreement of the
parties thereto. The Facility requires the Fund to maintain a Borrowing Base
(defined as the sum of the value of all securities held by the Fund (less
liabilities) plus the debt outstanding under the Facility, less non-performing
assets) of not
6
<PAGE>
less than 300% of the outstanding principal balance of borrowings under the
Facility and accrued interest. During the term of the Facility, the Fund may not
incur indebtedness except for indebtedness incurred under the Facility, in
hedging transactions, for purchases of securities on short-term credit as may be
necessary for the clearance of sales or purchases of portfolio securities and
for overdrafts extended by the custodian. Additionally, during the term of the
Facility, the Fund is restricted with respect to the declaration or payment of
dividends and the repurchase of shares pursuant to tender offers. Pursuant to
such agreement, as long as certain defaults have not occurred and are not
continuing under the Facility, the Fund may (i) make its periodic dividend
payments to shareholders in an amount not in excess of its net investment income
(and net realized capital gains not previously distributed to shareholders) for
such period, (ii) distribute each year all of its net investment income
(including net realized capital gains) so that it will not be subject to tax
under the Federal tax laws and (iii) repurchase its shares pursuant to tender
offers.
Under the Investment Company Act of 1940, as amended, (the "1940 Act"), the
Fund is not permitted to incur indebtedness unless immediately after such
incurrence the Fund has an asset coverage of 300% of the aggregate outstanding
principal balance of indebtedness. Additionally, under the 1940 Act the Fund may
not declare any dividend or other distribution upon any class of its capital
stock, or purchase any such capital stock, unless the aggregate indebtedness of
the Fund has at the time of the declaration of any such dividend or distribution
or at the time of any such purchase an asset coverage of at least 300% after
deducting the amount of such dividend, distribution, or purchase price, as the
case may be.
10. SUMMARY OF SELECTED FINANCIAL INFORMATION. Set forth below is a
summary of selected audited financial information for the Fund for the period
March 26, 1999 (commencement of operations) to August 31, 1999. More
comprehensive financial information is included in such reports (copies of which
have been filed as exhibits to the Schedule 13E-4 filed with the Securities and
Exchange Commission (the "SEC") in connection with the Offer and may be obtained
from the Transfer Agent) and the summary of selected financial information set
forth below is qualified in its entirety by reference to such documents and the
financial information, the notes thereto and related matter contained therein.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 26, 1999*
TO
AUGUST 31, 1999
-----------------
<S> <C>
INCOME STATEMENT
Investment income......................................... $ 4,823
--------
Total expenses before reimbursement....................... 1,165
Reimbursement of expenses................................. 802
Total expenses after reimbursement........................ 363
--------
Investment income--net.................................... $ 4,460
========
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NET
Realized (loss) on investments--net....................... $ (5)
Unrealized appreciation on investments--net............... $ 50
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets.............................................. $230,187
Total liabilities......................................... 762
--------
Net assets................................................ $229,426
========
Net asset value per share................................. $ 10.01
========
Shares of common stock outstanding........................ 22,925
PER SHARE
Investment income--net.................................... $ .27
Dividends from net investment income to common
shareholders............................................ $ (.27)
RATIOS
Expenses, net of reimbursement, to average net assets..... .55%**
Total expenses to average net assets...................... 1.77%**
Investment income--net, to average net assets............. 6.77%**
</TABLE>
- ------------------------------
* Commencement of Operations.
** Annualized.
7
<PAGE>
11. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under
the laws of the State of Maryland on February 9, 1999 and is a non-diversified,
continuously offered, closed-end management investment company registered under
the 1940 Act. The Fund seeks as high a level of current income and such
preservation of capital as is consistent with investment in senior
collateralized corporate loans ("Corporate Loans") made by banks and other
financial institutions. The Corporate Loans pay interest at rates which float or
reset at a margin above a generally-recognized base lending rate such as the
prime rate of a designated U.S. bank, the Certificate of Deposit rate or the
London InterBank Offered Rate. MLAM, an affiliate of Merrill Lynch, acts as
investment adviser and administrator for the Fund.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its Shares the Fund has sold
approximately 4.3 million Shares at a price equal to NAV on the date of each
such sale.
The principal executive offices of the Fund are located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
12. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule
13E-4 with the SEC which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
SEC's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, New York, New York 10048; and
Room 3190, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained by mail at prescribed rates from the
Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC maintains a web site (http://www.sec.gov) that contains the
Schedule 13E-4 and other information regarding the Fund.
13. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following discussion is a
general summary of the Federal income tax consequences of a sale of Shares
pursuant to the Offer. You should consult your own tax adviser for a complete
description of the tax consequences to you of a sale of Shares pursuant to the
Offer.
The sale of Shares pursuant to the Offer will be a taxable transaction for
Federal income tax purposes, either as a "sale or exchange," or under certain
circumstances, as a "dividend." In general, the transaction should be treated as
a sale or exchange of the Shares under Section 302 of the Code, if the receipt
of cash (a) is "substantially disproportionate" with respect to the stockholder,
(b) results in a "complete redemption" of the stockholder's interest in the
Fund, or (c) is "not essentially equivalent to a dividend" with respect to the
stockholder. A "substantially disproportionate" distribution generally requires
a reduction of at least 20% in the stockholder's proportionate interest in the
Fund after all shares are tendered. A "complete redemption" of a stockholder's
interest generally requires that all Shares directly owned or attributed to such
stockholder under Section 318 of the Code be disposed of. A distribution "not
essentially equivalent to a dividend" requires that there be a "meaningful
reduction" in the stockholder's interest, which should be the case if the
stockholder has a minimal interest in the Fund, exercises no control over Fund
affairs and suffers a reduction in his proportionate interest in the Fund.
If the sale of your Shares meets any of these three tests for "sale or
exchange" treatment, you will recognize gain or loss equal to the difference
between the amount of cash received pursuant to the Offer and the adjusted tax
basis of the Shares sold. Such gain or loss will be a capital gain or loss if
the Shares sold have been held by you as a capital asset. In general, capital
gain or loss with respect to Shares sold will be long-term capital gain or loss
if the holding period for such Shares is more than one year. Under recent
legislation, the maximum capital gains rate applicable to such a sale of Shares
would be 20%.
If none of the Code Section 302 tests is met, you may be treated as having
received, in whole or in part, a dividend, return of capital or capital gain,
depending on (i) whether the Fund has sufficient earnings and profits to support
a dividend and (ii) your tax basis in the Shares. The tax basis in the Shares
tendered to the Fund will be transferred to any remaining Shares held by you. In
addition, if the sale of Shares pursuant to the Offer is treated as a "dividend"
to a tendering stockholder, a Code Section 305(c)
8
<PAGE>
constructive dividend may result to a non-tendering stockholder whose
proportionate interest in the earnings and assets of the Fund has been increased
as a result of such tender.
Accordingly, the differentiation between "dividend" and "sale or exchange"
treatment is important with respect to the amount and character of income that
tendering stockholders are deemed to receive. In addition, while the marginal
tax rates for dividends and capital gains remain the same for corporate
stockholders, under the Code the top income tax rate on ordinary income of
individuals (39.6%) will exceed the maximum tax rates on capital gains (20%).
In the event that the sale of Shares by a corporate stockholder pursuant to
the Offer is treated as a dividend, the corporate stockholder may be entitled to
claim a "dividends received deduction" on the cash received, which ordinarily
would be 70% of such dividend. However, corporate stockholders should consult
their tax advisers about certain provisions of the Code that may affect the
dividends received deduction.
The Transfer Agent will be required to withhold 31% of the gross proceeds
paid to a stockholder or other payee pursuant to the Offer unless either: (a)
the stockholder has provided the stockholder's taxpayer identification
number/social security number, and certifies under penalties of perjury: (i)
that such number is correct, and (ii) either that (A) the stockholder is exempt
from backup withholding, (B) the stockholder is not otherwise subject to backup
withholding as a result of a failure to report all interest or dividends, or (C)
the Internal Revenue Service has notified the stockholder that the stockholder
is no longer subject to backup withholding; or (b) an exception applies under
applicable law and Treasury regulations. Foreign stockholders may be required to
provide the Transfer Agent with a completed Form W-8, available from the
Transfer Agent, in order to avoid 31% backup withholding.
Unless a reduced rate of withholding or a withholding exemption is available
under an applicable tax treaty, a stockholder who is a nonresident alien or a
foreign entity may be subject to a 30% United States withholding tax on the
gross proceeds received by such stockholder, if the proceeds are treated as a
"dividend" under the rules described above. Foreign stockholders should consult
their tax advisers regarding application of these withholding rules.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS. The Fund reserves
the right, at any time and from time to time, to extend the period of time
during which the Offer is pending by making a public announcement thereof. In
the event that the Fund so elects to extend the tender period, the NAV for the
Shares tendered will be determined as of the close of the New York Stock
Exchange on the Expiration Date, as extended. During any such extension, all
Shares previously tendered and not purchased or withdrawn will remain subject to
the Offer. The Fund also reserves the right, at any time and from time to time
up to and including the Expiration Date, to (a) terminate the Offer and not to
purchase or pay for any Shares, and (b) amend the Offer in any respect by making
a public announcement. Such public announcement will be issued no later than
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date and will disclose the approximate number of Shares
tendered as of that date. Without limiting the manner in which the Fund may
choose to make a public announcement of extension, termination or amendment,
except as provided by applicable law (including Rule 13e-4(e)(2)), the Fund
shall have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a release to the Dow Jones News
Service.
15. MISCELLANEOUS. The Offer is not being made to, nor will tenders be
accepted from, stockholders in any jurisdiction in which the Offer or its
acceptance would not comply with the securities laws of such jurisdiction. The
Fund is not aware of any jurisdiction in which the Offer or tenders pursuant
thereto would not be in compliance with the laws of such jurisdiction. However,
the Fund reserves the right to exclude stockholders from the Offer in any
jurisdiction in which it is asserted that the Offer cannot lawfully be made. The
Fund believes such exclusion is permissible under applicable tender offer rules,
provided the Fund makes a good faith effort to comply with any state law deemed
applicable to the Offer. In any jurisdiction the securities laws of which
require the Offer to be made by a licensed broker or dealer the Offer shall be
deemed to be made on the Fund's behalf by Merrill Lynch.
MERRILL LYNCH SENIOR FLOATING
RATE FUND II INC.
January 19, 2000
9
<PAGE>
EXHIBIT (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES OF
MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 19, 2000
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, FEBRUARY 15, 2000, UNLESS EXTENDED
-------------------
TRANSFER AGENT:
FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC.
P.O. BOX 45289
JACKSONVILLE, FLORIDA 32232-5289
TELEPHONE INFORMATION NUMBER: (800) 637-3863
DELIVERY TO AN ADDRESS OTHER THAN THAT SHOWN ABOVE DOES NOT CONSTITUTE VALID
DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY IF THE STOCKHOLDER IS A RECORD
OWNER OF SHARES WHO DESIRES TO EFFECT THE TENDER OFFER TRANSACTION HIMSELF OR
HERSELF BY TRANSMITTING THE NECESSARY DOCUMENTS TO THE FUND'S TRANSFER AGENT AND
DOES NOT INTEND TO REQUEST HIS OR HER BROKER OR DEALER TO EFFECT THE TRANSACTION
FOR HIM OR HER. A STOCKHOLDER WHO HOLDS SHARES IN A MERRILL LYNCH ACCOUNT OR
THROUGH ANOTHER BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE
IS NOT THE RECORD OWNER AND SHOULD INSTRUCT HIS OR HER MERRILL LYNCH FINANCIAL
CONSULTANT OR SUCH OTHER NOMINEE TO EFFECT THE TENDER ON HIS OR HER BEHALF.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to the Merrill Lynch Senior Floating Rate
Fund II, Inc., a closed-end investment company incorporated under the laws of
the State of Maryland (the "Fund"), the shares described below of its common
stock, par value $.10 per share (the "Shares"), at a price equal to the net
asset value per Share ("NAV") calculated on the Expiration Date (as defined in
the Offer to Purchase), in cash, less any applicable Early Withdrawal Charge,
upon the terms and conditions set forth in the Offer to Purchase dated
January 19, 2000, receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer").
The undersigned hereby sells to the Fund all Shares tendered hereby that are
purchased pursuant to the Offer and hereby irrevocably constitutes and appoints
the Transfer Agent as attorney in fact of the undersigned, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to present such Shares and any Share certificates for
cancellation of such Shares on the Fund's books. The undersigned hereby warrants
that the undersigned has full authority to sell the Shares tendered hereby and
that the Fund will acquire good title thereto, free and clear of all liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to the sale thereof, and not subject to any adverse claim, when and to
the extent the same are purchased by it. Upon request, the undersigned will
execute and deliver any additional documents necessary to complete the sale in
accordance with the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Fund may not be required to purchase any of the Shares
tendered hereby. In that event, the undersigned understands that, in the case of
Shares evidenced by certificates, certificate(s) for any Shares not purchased
will be returned to the undersigned at the address indicated above. In the case
of Shares not evidenced by certificates and held in an Investment Account, the
Transfer Agent will cancel the tender order and no Shares will be withdrawn from
the Account.
The check for the purchase price for the tendered Shares purchased will be
issued to the order of the undersigned and mailed to the address indicated in
the "Description of Shares Tendered" table below.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and the obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
<PAGE>
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY THE NAME(S) IN WHICH SHARES ARE SHARES TENDERED
REGISTERED) (ATTACH ADDITIONAL SCHEDULE IF NECESSARY)
NO. OF SHARES
CERTIFICATE LISTED NO. OF SHARES
NO.(S)* ON CERTIFICATE* TENDERED**
<S> <C> <C> <C>
Account No. Total Shares Tendered..........
</TABLE>
* Need not be completed by stockholders whose Shares are not evidenced by
certificates.
** To be completed by all tendering stockholders, whether or not your Shares
are evidenced by certificates. If you desire to tender fewer than all
Shares held in your account or evidenced by a certificate listed above,
please indicate in this column the number you wish to tender. Otherwise all
Shares evidenced by such certificate or held in your account will be deemed
to have been tendered.
SIGNATURE FORM
--SIGN HERE--
(SEE INSTRUCTIONS 1, 5 AND 8)
Social Security No.
or Taxpayer Identification No. ................
Under penalty of perjury, I certify (1) that the number set forth above is
my correct Social Security No. or Taxpayer Identification No. and (2) that I
am not subject to backup withholding either because (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject thereto as a result of failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject thereto. INSTRUCTION: You must strike out the language in
(2) above if you have been notified that you are subject to backup
withholding due to underreporting and you have not received a notice from
the IRS that backup withholding has been terminated.
...........................................................................
...........................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Date ................ , 2000
Name(s) ....................................................................
Address(es) ................................................................
(PLEASE PRINT)
Telephone Number ( ) ................
Signature(s) Guaranteed ....................................................
....................................................
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a member firm of a registered national securities
exchange, or a commercial bank or trust company having an office, branch or
agency in the United States. This Letter of Transmittal is to be used only if
you may effect the tender offer transaction yourself and do not intend to
request your broker or dealer to effect the transaction for you.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all
tendered Shares, together with a properly completed and duly executed Letter of
Transmittal, should be mailed or delivered to the Transfer Agent on or prior to
the Expiration Date at the appropriate address set forth herein and must be
received by the Transfer Agent prior to the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER.
3. INADEQUATE SPACE. If the space provided is inadequate, the certificate
numbers and number of Shares should be listed on a separate signed schedule
attached hereto.
4. PARTIAL TENDERS. If fewer than all of the Shares in your Investment
Account or evidenced by any certificate submitted are to be tendered, fill in
the number of Shares which are to be tendered in the column entitled "No. of
Shares Tendered." If applicable, a new certificate for the remainder of the
Shares evidenced by your old certificate(s) will be sent to you as soon as
practicable after the Expiration Date of the Offer. All Shares represented by
certificate(s) listed or in your Investment Account are deemed to have been
tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, AUTHORIZATION AND ENDORSEMENTS.
(a) If the Letter of Transmittal is signed by the registered holder of the
Shares tendered hereby, the signature(s) must correspond with the name(s) in
which the Shares are registered.
(b) If the Shares are held of record by two or more joint holders, all such
holders must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names it will be
necessary to complete, sign and submit as many separate Letters of Transmittal
as there are different registrations of Shares.
(d) When this Letter of Transmittal is signed by the registered holder(s) of
the Shares listed and, if applicable, of the certificates transmitted hereby, no
endorsements of certificates or separate authorizations are required.
(e) If this Letter of Transmittal or any certificates or authorizations are
signed by trustees, executors, administrators, guardians, attorneys in fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and must submit proper
evidence satisfactory to the Fund of their authority so to act.
6. TRANSFER TAXES. The Fund will pay all the taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer. If tendered
certificates are registered in the name of any person other than the person(s)
signing this Letter of Transmittal, the amount of any transfer taxes (whether
imposed on the registered holder or such other person) payable on account of the
transfer to such person will be deducted from the purchase price unless
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
submitted.
<PAGE>
7. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of any tender of Shares will be
determined by the Fund, whose determinations shall be final and binding. The
Fund reserves the absolute right to reject any or all tenders determined by it
not to be in appropriate form or the acceptance of or payment for which would,
in the opinion of counsel for the Fund, be unlawful. The Fund also reserves the
absolute right to waive any of the conditions of the Offer or any defect in any
tender with respect to any particular Shares or any particular stockholder, and
the Fund's interpretations of the terms and conditions of the Offer (including
these instructions) will be final and binding. Unless waived, any defects or
irregularities in connection with tenders must be cured within such time as the
Fund shall determine. Tenders will not be deemed to have been made until all
defects and irregularities have been cured or waived. Neither the Fund, Merrill
Lynch Asset Management, L.P. nor the Transfer Agent, nor any other person shall
be obligated to give notice of defects or irregularities in tenders, nor shall
any of them incur any liability for failure to give any such notice.
8. IMPORTANT TAX INFORMATION. Under Federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required by law to provide the
Transfer Agent (as payer) with his correct taxpayer identification number, which
is accomplished by completing and signing the Signature Form.
<PAGE>
EXHIBIT (a)(3)
<PAGE>
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
RESPONSE CENTER
P.O. BOX 30200
NEW BRUNSWICK, NJ
08989-0200
[LOGO]
Dear Stockholder:
As you requested, we are enclosing a copy of the Merrill Lynch Senior
Floating Rate Fund II, Inc. (the "Fund") Offer to Purchase dated January 19,
2000 (the "Offer to Purchase") 4,500,000 Issued and Outstanding Shares (the
"Shares"). The Offer to Purchase is for cash at Net Asset Value ("NAV") per
share as of the expiration date of the Offer, less any Early Withdrawal Charge.
Together with the Offer to Purchase we are sending you a Form Letter of
Transmittal (the "Letter") for use by holders of record of Shares which you
should read carefully. Certain selected financial information with respect to
the Fund is set forth in the Offer to Purchase.
If, after reviewing the information set forth in the Offer to Purchase and
Letter, you wish to tender Shares for purchase by the Fund, please either
contact your Merrill Lynch Financial Consultant or other broker, dealer or
nominee to effect the tender for you or, if you are the record owner of the
Shares, you may follow the instructions contained in the Offer to Purchase and
Letter.
Neither the Fund nor its Board of Directors is making any recommendation to
any holder of Shares as to whether to tender Shares. Each stockholder is urged
to consult his or her broker or tax adviser before deciding whether to tender
any Shares.
The Fund's annualized distribution rate for the period November 23, 1999
through December 31, 1999, based on the amounts actually distributed by the
Fund, was 7.63% based on the December 31, 1999 NAV of $9.97 per share. For the
quarter ended December 31, 1999, the Fund's highest NAV was $10.01 per share and
its lowest NAV was $9.96 per share. The Fund's NAV on January 14, 2000 was $9.98
per Share. The Fund publishes its NAV each week in BARRON'S. It appears in the
"Investment Company Institute List" under the sub-heading "Loan Participation
Funds" within the listings of mutual funds and closed-end funds.
Requests for current NAV quotations or for additional copies of the Offer to
Purchase, the Letter and any other tender offer documents may be directed to the
Merrill Lynch Response Center at (800) 637-7455, ext. 4302.
Should you have any other questions on the enclosed material, please do not
hesitate to contact your Merrill Lynch Financial Consultant or other broker or
dealer or call the Fund's Transfer Agent, Financial Data Services, Inc., at
(800) 637-3863. We appreciate your continued interest in Merrill Lynch Senior
Floating Rate Fund II, Inc.
Yours truly,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
EXHIBIT (g)(1)
<PAGE>
INDEPENDENT AUDITOR' REPORT
The Board of Directors and Shareholders,
Merrill Lynch Senior Floating Rate Fund II, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill Lynch
Senior Floating Rate Fund II, Inc. as of August 31, 1999, the
related statements of operations and changes in net assets, and the
financial highlights for the period March 26, 1999 (commencement of
operations) to August 31, 1999. 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
audit.
We conducted our audit 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, 1999 by correspondence with the custodian and financial
intermediaries or other alternative procedures. 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 audit provides
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
Merrill Lynch Senior Floating Rate Fund II, Inc. as of August 31,
1999, the results of its operations, the changes in its net assets,
and the financial highlights for the period March 26, 1999
(commencement of operations) to August 31, 1999 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Princeton, New Jersey
October 19, 1999
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C>
Aircraft & B+ Ba3 $ 875,141 Fairchild Semiconductors Corp., Term, due
Parts--0.4% 4/30/2006 $ 873,458 $ 877,876
Amusement NR++ NR++ 5,000,000 SFX Entertainment Inc., Term B, due
Recreational 6/30/2006 4,968,794 4,965,625
Services--2.2%
Automotive B+ Ba3 2,750,000 Accuride Corp., Term C, due 1/21/2007 2,743,370 2,749,175
Equipment--6.4% NR++ NR++ 500,000 Americanbump, Term B, due 10/31/2002 498,832 500,469
Collins & Aikman Corp.:
BB- Ba3 2,460,000 Term B, due 6/30/2005 2,466,150 2,448,212
BB- Ba3 1,500,000 Term C, due 12/31/2005 1,496,378 1,495,312
Mueller Industries Inc.:
NR++ NR++ 2,500,000 Term B, due 8/16/2006 2,496,879 2,504,687
NR++ NR++ 2,500,000 Term C, due 8/16/2007 2,496,879 2,504,687
Safelite Glass Corp.:
BB- B1 1,250,000 Term B, due 12/23/2003 1,250,000 1,243,750
BB- B1 1,250,000 Term C, due 12/23/2004 1,250,000 1,243,750
-------------- --------------
14,698,488 14,690,042
Broadcasting NR++ NR++ 4,000,000 Benedek Broadcasting, Term B, due 11/20/2007 3,994,099 3,995,000
Radio & Chancellor Media Corp.:
Television--4.1% BB- Ba1 1,061,798 Revolving Credit, due 1/31/2003 1,061,797 1,045,871
BB- Ba1 444,965 Term, due 6/26/2004 426,732 443,760
Cumulus Media:
NR++ B1 1,800,000 Term B, due 9/30/2007 1,795,500 1,795,500
NR++ B1 1,200,000 Term C, due 2/28/2008 1,197,000 1,197,000
NR++ NR++ 1,000,000 Quoram Broadcasting, Term B, due 9/30/2007 997,571 1,001,250
-------------- --------------
9,472,699 9,478,381
Building NR++ B1 2,400,000 Juno Lighting Inc., Term B, due 6/29/2006 2,394,105 2,403,000
Materials--1.9% NR++ B1 2,000,000 Trussway Industries, Term B, due 7/08/2005 1,990,148 2,000,000
-------------- --------------
4,384,253 4,403,000
Business NR++ NR++ 3,000,000 Muzak Audio, Term B, due 12/31/2006 2,992,594 3,007,500
Services--1.3%
Cable BB- Ba1 5,000,000 Charter Communications, Term B, due
Television 3/18/2008 5,000,000 4,993,125
Services--7.0% BB- B1 6,000,000 Classic Cable Inc., Term B, due 1/31/2008 5,992,554 5,996,250
NR++ NR++ 5,000,000 TW Fanch-One Co., Term B, due 12/31/2007 5,031,250 5,006,250
-------------- --------------
16,023,804 15,995,625
Chemicals--6.6% Huntsman ICI Chemicals LLC:
NR++ Ba3 5,000,000 Term B, due 6/30/2007 4,972,744 5,016,665
NR++ Ba3 5,000,000 Term C, due 6/30/2008 4,972,705 5,016,665
NR++ Ba3 4,987,500 Lyondell Petrochemical Co., Term E, due
5/17/2006 4,981,447 5,007,241
-------------- --------------
14,926,896 15,040,571
Computer Bridge Information:
Related NR++ NR++ 2,500,000 Term, due 7/07/2003 2,498,780 2,489,845
Products--3.3% NR++ NR++ 5,000,000 Term B, due 5/29/2005 5,008,769 5,003,126
-------------- --------------
7,507,549 7,492,971
Diversified BB Ba3 4,987,437 SPX Corporation, Term B, due 9/30/2006 5,024,843 5,018,609
- --2.2%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C>
Drilling--1.7% Key Energy Services Inc.:
NR++ B1 $2,100,000 Revolving Credit, due 9/14/2003 $ 2,100,000 $ 2,026,500
B- B1 2,000,000 Term B, due 9/14/2004 1,975,641 1,985,000
-------------- --------------
4,075,641 4,011,500
Drug/ B+ B1 2,462,500 Duane Reade Co., Term B, due 2/15/2005 2,458,111 2,463,012
Proprietary
Stores--1.1%
Electronics/ B+ B1 1,996,000 DD Inc. Term B, due 4/22/2005 1,967,966 1,916,160
Electrical NR++ NR++ 3,000,000 Intersil Corp., Term B, due 6/30/2005 2,988,815 3,000,000
Components Semiconductor:
- --6.9% BB- Ba3 1,444,444 Term B, due 8/04/2005 1,440,867 1,442,188
BB- Ba3 1,555,556 Term C, due 8/04/2007 1,551,691 1,553,126
B+ Ba3 4,839,175 Superior Telecom, Term A, due 5/27/2004 4,839,175 4,839,930
B+ B2 3,000,000 ViaSystems Inc., Term C, due 6/30/2005 2,977,704 2,988,750
-------------- --------------
15,766,218 15,740,154
Energy--0.2% NR++ NR++ 500,000 Plains Scurlock, Term B, due 5/12/2004 497,571 498,906
Environmental URS Corporation:
Services--0.9% BB Ba3 1,000,000 Term B, due 6/09/2006 999,018 1,005,000
BB Ba3 1,000,000 Term C, due 6/09/2007 999,014 1,005,000
-------------- --------------
1,998,032 2,010,000
Food & Kindred Specialty Foods, Inc.:
Products--0.9% NR++ B3 734,114 Revolving Credit, due 1/31/2000 731,783 732,738
NR++ B3 1,259,365 Term, due 1/31/2000 1,255,358 1,257,003
-------------- --------------
1,987,141 1,989,741
Grocery--1.7% B B2 4,000,000 Grand Union Co., Term, due 8/17/2003 4,007,500 3,990,000
Hotels & NR++ Ba1 5,000,000 Starwood Hotels & Resorts Trust, Term, due
Motels--4.8% 2/23/2003 5,000,000 5,001,040
Wyndam International, Inc.:
B+ B3 2,000,000 Term, due 6/30/2004 1,990,271 1,988,126
B+ B3 4,000,000 Term, due 6/30/2006 3,990,175 3,979,376
-------------- --------------
10,980,446 10,968,542
Leasing & BB- B1 2,000,000 Anthony Crane, Term, due 7/30/2006 1,995,025 1,980,000
Rental Avis Rent A Car Inc.:
Services--4.3% BB+ Ba3 2,500,000 Term B, due 6/30/2006 2,493,861 2,481,250
BB+ B3 2,500,000 Term C, due 6/30/2007 2,493,842 2,482,813
NR++ Ba3 3,000,000 Nationsrent, Term B, due 7/20/2006 2,992,574 3,000,939
-------------- --------------
9,975,302 9,945,002
Manufacturing-- NR++ B1 4,180,000 Terex Corp., Term C, due 2/05/2006 4,175,747 4,182,612
3.1% Thermadyne:
NR++ B1 1,485,000 Term B, due 5/22/2005 1,488,713 1,480,824
NR++ B1 1,485,000 Term C, due 5/22/2006 1,488,713 1,480,824
-------------- --------------
7,153,173 7,144,260
Medical B+ B1 2,000,000 Hanger Orthopedic Group Inc., Term B, due
Equipment--0.9% 12/30/2006 1,995,079 2,005,626
Metals & Mining NR++ NR++ 1,000,000 AEI Resources Inc., Term B, due 12/31/2004 992,752 987,500
- --1.7% NR++ Ba3 2,989,907 UCAR Global Enterprises, Term B, due
12/31/2002 2,997,382 2,997,382
-------------- --------------
3,990,134 3,984,882
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
SCHEDULE OF INVESTMENTS (continued)
S&P Moody's Face Senior Secured Value
Industries Rating Rating Amount Floating Rate Loan Interests* Cost (Note 1a)
<S> <C> <C> <C> <C> <C> <C>
Packaging--2.0% Packaging Corp.:
BB Ba3 $ 2,324,380 Term B, due 4/12/2007 $ 2,310,497 $ 2,332,734
BB Ba3 2,324,380 Term C, due 4/12/2008 2,310,455 2,334,550
-------------- --------------
4,620,952 4,667,284
Paper--2.1% B+ Ba3 2,487,500 Jefferson Smurfit Company/Container Corp. of
America, Term B, due 3/24/2006 2,487,500 2,491,388
NR++ Ba3 2,396,930 Stone Container Corp., Term E, due 10/01/2003 2,396,930 2,399,927
-------------- --------------
4,884,430 4,891,315
Pharmaceuticals Dade Behring Inc.:
- --1.1% B+ Ba3 1,250,000 Term B, due 6/30/2006 1,243,862 1,254,166
B+ Ba3 1,250,000 Term C, due 6/30/2007 1,243,843 1,254,166
-------------- --------------
2,487,705 2,508,332
Printing & B+ Ba3 2,000,000 Advanstar Co., Term C, due 6/30/2007 1,997,025 2,000,000
Publishing NR++ Ba3 1,240,027 Penton Media, Term B, due 5/31/2006 1,238,520 1,240,544
- --1.8% B+ B1 1,000,000 Reiman Publications, Term, due 12/01/2005 1,005,000 1,002,292
-------------- --------------
4,240,545 4,242,836
Property NR++ Ba1 3,000,000 Prison Realty Trust Inc., Term C, due
Management 12/31/2002 2,981,655 2,987,499
- --1.3%
Transportation NR++ Ba2 2,000,000 Transport Manufacturing, Term B, due
- --Services 6/15/2006 1,995,144 2,000,000
- --2.2% NR++ Ba3 2,985,804 Travel Centers of America Inc., Term B,
due 3/27/2005 2,981,380 2,998,246
-------------- --------------
4,976,524 4,998,246
Waste Allied Waste:
Management-- BBB- Ba3 2,272,727 Term B, due 6/30/2006 2,259,851 2,256,984
2.2% BBB- Ba3 2,727,273 Term C, due 6/30/2007 2,711,796 2,708,806
-------------- --------------
4,971,647 4,965,790
Wired BB Ba2 1,500,000 Global Crossing Holding Ltd., Term B, due
Telecommunica- 7/02/2007 1,496,263 1,491,562
tions--0.6%
Wireless B B2 4,466,250 Centennial Cellular Operating Co., Term C,
Telecommunica- due 11/30/2007 4,459,602 4,482,418
tions--9.8% Dobson Sygnet:
NR++ NR++ 2,000,000 Term B, due 3/23/2007 2,000,000 2,001,666
NR++ NR++ 2,000,000 Term C, due 12/23/2007 2,000,000 2,005,416
B Ba3 2,000,000 Nextel Communications Inc., Term C, due
3/31/2007 2,000,000 1,998,750
NR++ B2 5,989,337 Omnipoint Communications Corp., Term C,
due 2/17/2006 5,928,233 5,931,941
NR++ NR++ 5,000,000 PowerTel PCS, Inc., Term B, due 2/06/2003 4,997,096 4,964,065
NR++ B2 1,000,000 Tritel Holdings, Term B, due 12/31/2007 987,886 998,958
-------------- --------------
22,372,817 22,383,214
Total Senior Secured Floating Rate
Loan Interests--86.7% 198,790,264 198,857,903
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
SCHEDULE OF INVESTMENTS (concluded)
Face Value
Amount Short-Term Securities Cost (Note 1a)
<S> <C> <C> <C> <C>
Commercial Paper**--5.2% $ 6,991,000 General Motors Acceptance Corp., 5.56% due
9/01/1999 $ 6,991,000 $ 6,991,000
5,000,000 Rank Xerox Capital, 5.20% due 9/09/1999 4,994,222 4,994,222
-------------- --------------
11,985,222 11,985,222
US Government Agency 6,000,000 Federal Home Loan Mortgage Corporation
Obligations**--5.9% Participation Certificates, 5.04% due 9/09/1999 5,993,280 5,993,280
Federal National Mortgage Association:
5,000,000 5.16% due 9/13/1999 4,991,400 4,991,400
2,500,000 5.20% due 9/17/1999 2,494,222 2,494,222
-------------- --------------
13,478,902 13,478,902
Total Short-Term Securities--11.1% 25,464,124 25,464,124
Total Investments--97.8% $ 224,254,388 224,322,027
==============
Other Assets Less Liabilities--2.2% 5,103,678
--------------
Net Assets--100.0% $ 229,425,705
==============
</TABLE>
++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.
**Commercial Paper and certain US Government Agency Obligations are
traded on a discount basis; the interest rates shown reflect the
discount rates paid at the time of purchase by the Fund.
Ratings of issues shown have not been audited by Deloitte & Touche
LLP.
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
FINANCIAL INFORMATION
Statement of Assets and Liabilities as of August 31, 1999
<S> <C> <C> <C>
Assets: Investments, at value (identified cost--$224,254,388) (Note 1b) $ 224,322,027
Cash 40,208
Receivables:
Capital shares sold $ 4,237,701
Interest 1,393,368
Principal paydowns 5,025
Commitment fees 1,698 5,637,792
---------------
Prepaid registration fees and other assets (Note 1f) 187,452
---------------
Total assets 230,187,479
---------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 363,942
Administrator (Note 2) 69,954
Investment adviser (Note 2) 25,403 459,299
---------------
Deferred income (Note 1e) 59,186
Accrued expenses and other liabilities 243,289
---------------
Total liabilities 761,774
---------------
Net Assets: Net assets $ 229,425,705
===============
Net Assets Common Stock, par value $.10 per share; 1,000,000,000 shares
Consist of: authorized $ 2,292,476
Paid-in capital in excess of par 227,088,500
Accumulated realized capital losses on investments--net (Note 6) (5,039)
Unrealized appreciation on investments--net 49,768
Net Assets--Equivalent to $10.01 per share based on shares of
22,924,759 capital stock outstanding $ 229,425,705
===============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Operations
For the Period
March 26, 1999++
to August 31, 1999
<S> <C> <C> <C>
Investment Income Interest and discount earned $ 4,815,971
(Note 1e): Facility and other fees 6,651
---------------
Total income 4,822,622
---------------
Expenses: Investment advisory fees (Note 2) $ 625,622
Administrative fees (Note 2) 263,423
Professional fees 48,457
Registration fees (Note 1f) 40,404
Assignment fees 38,942
Accounting services (Note 2) 28,048
Printing and shareholder reports 25,000
Directors' fees and expenses 23,639
Transfer agent fees (Note 2) 21,329
Tender offer costs (Note 7) 19,620
Custodian fees 10,600
Other 19,891
---------------
Total expenses before reimbursement 1,164,975
Reimbursement of expenses (Note 2) (802,357)
---------------
Total expenses after reimbursement 362,618
---------------
Investment income--net 4,460,004
---------------
Realized & Realized loss on investments--net (5,039)
Unrealized Gain Unrealized appreciation on investments--net 49,768
(Loss) on ---------------
Investments--Net Net Increase in Net Assets Resulting from Operations $ 4,504,733
(Notes 1c, ===============
1e & 3):
</TABLE>
++Commencement of operations.
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
FINANCIAL INFORMATION (continued)
Statement of Changes in Net Assets
For the Period
March 26, 1999++
Increase (Decrease) in Net Assets: to August 31, 1999
<S> <C> <C>
Operations: Investment income--net $ 4,460,004
Realized loss on investments--net (5,039)
Unrealized appreciation on investments--net 49,768
---------------
Net increase in net assets resulting from operations 4,504,733
---------------
Dividends to Investment income--net (4,460,004)
Shareholders ---------------
(Note 1g): Net decrease in net assets resulting from dividends to shareholders (4,460,004)
---------------
Capital Share Net increase in net assets resulting from capital share transactions 229,280,976
Transactions ---------------
(Note 4):
Net Assets: Total increase in net assets 229,325,705
Beginning of period 100,000
---------------
End of period $ 229,425,705
===============
</TABLE>
++Commencement of operations.
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
FINANCIAL INFORMATION (concluded)
Financial Highlights
The following per share data and ratios have been derived
from information provided in the financial statements For the Period
March 26, 1999++
Increase (Decrease) in Net Assets: to August 31, 1999
<S> <C> <C>
Per Share Net asset value, beginning of period $ 10.00
Operating ---------------
Performance: Investment income--net .27
Realized and unrealized gain on investments--net .01
---------------
Total from investment operations .28
---------------
Less dividends from investment income--net (.27)
---------------
Net asset value, end of period $ 10.01
===============
Total Investment Based on net asset value per share 3.02%+++
Return:** ===============
Ratio to Average Expenses, net of reimbursement .55%*
Net Assets: ===============
Expenses 1.77%*
===============
Investment income--net 6.77%*
===============
Supplemental Net assets, end of period (in millions) $ 229
Data: ===============
Portfolio turnover 28.49%
===============
</TABLE>
*Annualized.
**Total investment returns exclude the early withdrawal charge, if
any. The Fund is a continuously offered closed-end fund, the shares
of which are offered at net asset value. Therefore, no separate
market exists.
++Commencement of operations.
+++Aggregrate total investment return.
See Notes to Financial Statements.
<PAGE>
Merrill Lynch Senior Floating Rate Fund II, Inc.
August 31, 1999
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund II, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered, non-diversified, closed-end management
investment company. The Fund's financial statements are prepared in
accordance with generally accepted accounting principles, which may
require the use of management accruals and estimates. Prior to
commencement of operations on March 26, 1999, the Fund had no
operation other than those relating to organizational matters and
the issuance of 10,000 shares of Common Stock to Merrill Lynch Asset
Management, L.P. ("MLAM") for $100,000 on March 19, 1999.
(a) Loan participation interests--The Fund invests in senior secured
floating rate loan interests ("Loan Interests") with collateral
having a market value, at time of acquisition by the Fund, which
Fund management believes equals or exceeds the principal amount of
the corporate loan. The Fund may invest up to 20% of its total
assets in loans made on an unsecured basis. Depending on how the
loan was acquired, the Fund will regard the issuer as including the
corporate borrower along with an agent bank for the syndicate of
lenders and any intermediary of the Fund's investment. Because
agents and intermediaries are primarily commercial banks, the Fund's
investment in corporate loans at August 31, 1999 could be considered
to be concentrated in commercial banking.
(b) Valuation of investments--Loan Interests will be valued in
accordance with guidelines established by the Board of Directors.
Until July 9, 1999, Loan Interests for which an active secondary
market exists and for which the Investment Adviser can obtain at
least two quotations from banks or dealers in Loan Interests were
valued by calculating the mean of the last available bid and asked
prices in the markets for such Loan Interests, and then using the
mean of those two means. If only one quote for a particular Loan
Interest was available, such Loan Interest were valued on the basis
of the mean of the last available bid and asked prices in the
market. As of July 12, 1999, pursuant to the approval of the Board
of Directors, the Loan Interests are valued at the mean between the
last available bid and asked prices from one or more brokers or
dealers as obtained from Loan Pricing Corporation. For Loan
Interests for which an active secondary market does not exist to a
reliable degree in the opinion of the Investment Adviser, such Loan
Interests will be valued by the Investment Adviser at fair value,
which is intended to approximate market value.
Other portfolio securities may be valued on the basis of prices
furnished by one or more pricing services, which determine prices
for normal, institutional-size trading units of such securities
using market information, transactions for comparable securities and
various relationships between securities that are generally
recognized by institutional traders. 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 the over-the-counter
market is the primary market or for listed securities in which there
were no sales during the day. Short-term securities with remaining
maturities of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund.
(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.
* 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).
(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.
NOTES TO FINANCIAL STATMENTS (concluded)
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis. Facility fees are accreted into income
over the term of the related loan.
(f) Prepaid registration fees--Prepaid registration fees are charged
to expense as the related shares are issued.
(g) Dividends and distributions--Dividends from net investment
income are declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory and Administrative
Services Agreement and Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
MLAM. The general partner of MLAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch & Co.,
Inc. ("ML & Co."), which is the limited partner.
MLAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and certain
other services necessary to perform this investment advisory
function. For such services, the Fund pays a monthly fee at an
annual rate of .95% of the Fund's average daily net assets. For the
period March 26, 1999 to August 31, 1999, MLAM earned fees of
$625,622, of which $600,717 was voluntarily waived. FAM also
reimbursed the Fund for additional expenses of $201,640.
The Fund also has an Administrative Services Agreement with MLAM
whereby MLAM will receive a fee equal to an annual rate of .40% of
the Fund's average daily net assets on a monthly basis, in return
for the performance of administrative services (other than
investment advice and related portfolio activities) necessary for
the operation of the Fund.
For the period March 26, 1999 to August 31, 1999, Merrill Lynch
Funds Distributor ("MLFD"), a division of Princeton Funds
Distributor, Inc. ("PFD"), a wholly-owned subsidiary of Merrill
Lynch Group, Inc. earned early withdrawal charges of $30,210
relating to the tender of the Fund's shares.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, FDS, PFD, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the period March 26, 1999 to August 31, 1999 were $226,865,887
and $28,087,975, respectively.
Net realized losses for the period March 26, 1999 to August 31, 1999
and net unrealized gains as of August 31, 1999 were as follows:
<TABLE>
<CAPTION>
Realized Unrealized
Losses Gains
<S> <C> <C>
Long-term investments $ (2,942) $ 67,639
Short-term investments (2,097) --
Unfunded loan interests -- (17,871)
----------- ------------
Total $ (5,039) $ 49,768
=========== ============
</TABLE>
As of August 31, 1999, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $67,639, of
which $484,540 is related to appreciated securities and $416,901 is
related to depreciated securities. The aggregate cost of investments
at August 31, 1999 for Federal income tax purposes was $224,254,388.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
For the Period March 26, 1999++ Dollar
to August 31, 1999 Shares Amount
<S> <C> <C>
Shares sold 23,185,920 $231,994,651
Shares issued to share-
holders in reinvestment
of dividends 204,831 2,051,012
------------ ------------
Total issued 23,390,751 234,045,663
Shares tendered (475,992) (4,764,687)
------------ ------------
Net increase 22,914,759 $229,280,976
============ ============
</TABLE>
++Prior to March 26, 1999 (commencement of operations), the Fund
issued 10,000 shares to MLAM for $100,000.
5. Unfunded Loan Interests:
As of August 31, 1999, the Fund had unfunded loan commitments of
$10,789,150, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
<TABLE>
<CAPTION>
Unfunded
Commitment
Borrower (in thousands)
<S> <C>
Chancellor Media Corp. $ 1,555
Key Energy Services Inc. 3,500
Speciality Foods, Inc. 734
Terex Corp. 5,000
</TABLE>
6. Capital Loss Carryforward:
At August 31, 1999, the Fund had a net capital loss carryforward of
approximately $5,000, all of which expires in 2007. This amount will
be available to offset like amounts of any future taxable gains.
7. Subsequent Event:
The Fund began a quarterly tender offer on September 21, 1999 which
concludes on October 19, 1999.
