AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 15, 1994
SECURITIES ACT FILE NO. 33-42932
INVESTMENT COMPANY ACT FILE NO. 811-5870
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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, INC.
(Name of Issuer)
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
(Name of Person(s) Filing Statement)
SHARES OF COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
59019R 10 5
(CUSIP Number of Class of Securities)
ARTHUR ZEIKEL
MERRILL LYNCH SENIOR FLOATING RATE FUND, 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:
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THOMAS R. SMITH, JR., ESQ. PHILIP L. KIRSTEIN, ESQ.
BROWN & WOOD MERRILL LYNCH ASSET MANAGEMENT
ONE WORLD TRADE CENTER BOX 9011
NEW YORK, NEW YORK 10048 PRINCETON, N.J. 08543-9011
SEPTEMBER 16, 1994
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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Transaction Valuation: $75,150,000(a) Amount of Filing Fee:
$15,030(b)
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(a) Calculated as the aggregate maximum purchase price to be paid for 7,500,000
shares in the offer, based upon the net asset value per share ($10.02) at
September 13, 1994.
(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, Inc.,
a 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 August 31, 1994 there were
approximately 93.3 million Shares issued and outstanding.
The Fund is seeking tenders for 7,500,000 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 September 16, 1994 (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 or 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: (i) pursuant to the public offering of its Shares the Fund has
sold approximately 12.9 million Shares at a price equal to the NAV of the Fund
i
<PAGE>
on the date of each such sale and (ii) the Fund repurchased approximately 2.2
million Shares at NAV ($10.02) in connection with the Fund's previous tender
offer which terminated July 15, 1994.
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
Exhibits (g)(1), (g)(2) and (g)(3) hereto, which are 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.
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(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.
(b)(1) Credit Agreement, dated as of March 23, 1992, between the Fund and The
Bank of New York.(a)
(b)(2) Amendment No. 1 to the Credit Agreement between the Fund and The Bank of
New York, dated as of June 3, 1992.(a)
(b)(3) Amendment No. 2 to the Credit Agreement between the Fund and The Bank of
New York, dated as of September 11, 1992.(b)
(b)(4) Amendment No. 3 to the Credit Agreement between the Fund and The Bank of
New York, dated as of March 17, 1993.(c)
</TABLE>
ii
<PAGE>
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(b)(5) Amendment No. 4 to the Credit Agreement between the Fund and The Bank of
New York, dated as of December 16, 1993.(d)
(b)(6) Extension Request between the Fund and The Bank of New York, dated as of
March 16, 1994.(e)
(c)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1993.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1992.
(g)(3) Unaudited Financial Statements of the Fund for the six months ended
February 28, 1994.
</TABLE>
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(a) Incorporated by reference to Exhibit (b)(2) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on June 18, 1992.
(b) Incorporated by reference to Exhibit (b)(3) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on September 21, 1992.
(c) Incorporated by reference to Exhibit (b)(4) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 22, 1993.
(d) Incorporated by reference to Exhibit (b)(5) to Amendment No. 1 to the Fund's Schedule
13E-4 filed with the Securities and Exchange Commission on January 25, 1994.
(e) Incorporated by reference to Exhibit (b)(6) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 18, 1994.
</TABLE>
iii
<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,
INC.
By /s/ TERRY K.
GLENN
...........................
(Terry K. Glenn, Executive
Vice President)
September 15, 1994
iv
<PAGE>
EXHIBIT INDEX
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<CAPTION>
EXHIBIT
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(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.
(b)(1) Credit Agreement, dated as of March 23, 1992, between the Fund and The Bank of
New York.(a)
(b)(2) Amendment No. 1 to the Credit Agreement between the Fund and The Bank of New
York, dated as of June 3, 1992.(a)
(b)(3) Amendment No. 2 to the Credit Agreement between the Fund and The Bank of New
York, dated as of September 11, 1992.(b)
(b)(4) Amendment No. 3 to the Credit Agreement between the Fund and The Bank of New
York, dated as of March 17, 1993.(c)
(b)(5) Amendment No. 4 to the Credit Agreement between the Fund and The Bank of New
York, dated as of December 16, 1993.(d)
(b)(6) Extension Request between the Fund and The Bank of New York, dated as of March
16, 1994.(e)
(c)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1993.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1992.
(g)(3) Unaudited Financial Statements of the Fund for the six months ended February 28,
1994.
</TABLE>
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(a) Incorporated by reference to Exhibit (b)(2) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on June 18, 1992.
(b) Incorporated by reference to Exhibit (b)(3) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on September 21, 1992.
(c) Incorporated by reference to Exhibit (b)(4) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 22, 1993.
(d) Incorporated by reference to Exhibit (b)(5) to Amendment No. 1 to the Fund's Schedule
13E-4 filed with the Securities and Exchange Commission on January 25, 1994.
(e) Incorporated by reference to Exhibit (b)(6) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 18, 1994.
</TABLE>
v
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 September 16, 1994, 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.
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
NOTICE OF OFFER TO PURCHASE FOR CASH 7,500,000 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 FRIDAY, OCTOBER 14, 1994, UNLESS EXTENDED.
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is offering to
purchase 7,500,000 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, Octo-
ber 14, 1994, unless extended upon the terms and conditions set forth in the
Offer to Purchase dated September 16, 1994 (the "Offer"). The NAV on Septem-
ber 13, 1994, was $10.02 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 7,500,000 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 7,500,000 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 Friday, October 14, 1994, unless the
Offer is extended, and, if not yet accepted for payment by the Fund, Shares may
also be withdrawn after November 14, 1994.
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.
The difference is Merrill Lynch.
1-800-MERRILL, EXT. 7198
1-800-637-7455
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Mail to: Merrill Lynch
Response Center, P.O. Box 30200, New Brunswick, NJ 08989-0200
/ / Please send me Merrill Lynch Senior Floating Rate Fund, Inc. Tender
Offer Materials
Name Address
Business Phone () City
Home Phone () State Zip
Please give the name and office address of your Merrill Lynch Financial
Consultant:
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7198
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(C)Copyright 1994, Merrill Lynch, Pierce, Fenner & Smith Inc. Member SIPC.
September 16, 1994
EXHIBIT (A)(1)(II)
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
800 SCUDDERS MILL ROAD
PLAINSBORO, NEW JERSEY 08536
OFFER TO PURCHASE FOR CASH 7,500,000
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 OCTOBER 14, 1994, UNLESS EXTENDED.
To the Holders of Shares of
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.:
The Fund is offering to purchase up to 7,500,000 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 October 14, 1994, 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 September 13,
1994 was $10.02 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 7,500,000 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 7,500,000 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 $4.85 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 OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 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.
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September 16, 1994 MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
Merrill Lynch Response Center Transfer Agent: Financial Data Services, Inc.
P.O. Box 30200 Attn: Merrill Lynch Senior Floating Rate Fund, Inc.
New Brunswick, New Jersey 08989-0200 Transfer Agency Operations Department
Attn: Merrill Lynch Senior Floating Rate P.O. Box 45289
Fund, Inc. Jacksonville, Florida 32232-5289
(800) 637-7455 ext. 7198 (904) 928-5510
</TABLE>
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TABLE OF CONTENTS
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SECTIONS PAGE
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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 Selected Financial Information...................................... 7
11. Certain Information About the Fund.......................................... 7
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 7,500,000 of its issued and outstanding
Shares which are tendered and not withdrawn prior to 12:00 midnight, New York
City time, on October 14, 1994 (such time and date being hereinafter called the
"Initial Expiration Date"), unless it determines to accept none of them. 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
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 Offer is being made to all stockholders of the Fund and is not
conditioned upon any number of Shares being tendered. If more than 7,500,000
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 7,500,000 Shares (or greater number of
Shares sought) on a pro rata basis.
As of August 31, 1994 there were approximately 93.3 million Shares issued
and outstanding and there were 1,548 holders of record of Shares (in addition,
Merrill Lynch maintains accounts for 39,815 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. 7198.
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. 7198 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 $4.85
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
on Shares accepted for purchase which have been held for less than three years.*
The charge will be paid to Merrill Lynch Funds Distributor, Inc., 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 net asset
value of the Shares or the cost of the Shares being tendered. Accordingly, the
Early Withdrawal Charge is not imposed on increases in the net asset value 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. The Early Withdrawal Charge imposed will
vary depending on the length of time the Shares have been owned since purchase
(separate purchases shall not be aggregated for these purposes), as set forth in
the following table:
EARLY
YEAR OF TENDER AFTER PURCHASE WITHDRAWAL CHARGE*
- ------------------------------------------------------- ------------------
First.................................................. 3.0%
Second................................................. 2.0%
Third.................................................. 1.0%
Fourth and following................................... 0%
- ------------
* The schedule of charges set forth in the table applies to shares purchased on
or after May 22, 1992.
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.
4
<PAGE>
Therefore, it will be assumed that the tender is first of Shares acquired
through dividend reinvestment and of Shares held for over three years and then
of Shares held longest during the three-year period. The Early Withdrawal Charge
will not be applied to dollar amounts representing an increase in the net asset
value since the time of purchase.
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 November 14, 1994.
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 $4.85 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
5
<PAGE>
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 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 7,500,000
Shares are tendered and accepted for payment pursuant to the Offer will be
approximately $75,150,000. 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 senior collateralized corporate loans held by the Fund
and/or (iv) borrowings by the Fund as described below. 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 has entered into an agreement dated as of March 23, 1992, and as
amended through March 16, 1994, with The Bank of New York providing for an
unsecured revolving credit facility (the "Facility"), the proceeds of which may
be used to finance, in part, the payment for Shares tendered in the Offer. The
Facility provides for the borrowing by the Fund of up to $100,000,000 at a rate
of interest equal to the sum of the federal funds rate (as published by the
Federal Reserve Bank of New York) plus (i) 1% for the first 45 days that such
borrowing is outstanding, (ii) 2% for the next 15 days that such borrowing is
outstanding and (iii) 3% for the next 30 days that such borrowing is
outstanding. Interest on borrowings is computed on the basis of a year of 360
days for the actual number of days elapsed and is payable monthly in arrears.
Each borrowing under the Facility is required to be repaid on the earlier of (i)
90 days after the date of such borrowing or (ii) the last date prior to the
expiration of the next tender offer by the Fund for its shares. Borrowings under
the Facility, if any, are required to be
6
<PAGE>
repaid with the proceeds of portfolio investments sold by the Fund subsequent to
the Expiration Date. The Facility was renewed on March 16, 1994 for a term of
360 days unless terminated earlier as provided therein.
10. SUMMARY SELECTED FINANCIAL INFORMATION. Set forth below is a summary of
selected financial information for the Fund for the fiscal years ended August
31, 1992 and 1993 and for the six months ended February 28, 1994. This
information has been excerpted from the Fund's audited financial statements
contained in its Annual Reports to Stockholders for the years ended August 31,
1992 and 1993 and from the Fund's unaudited financial statements contained in
its Semi-Annual Report to Stockholders for the six months ended February 28,
1994. 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 ("SEC") 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>
SIX MONTHS
ENDED
YEAR ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, AUGUST 31, 1994
1992 1993 (UNAUDITED)
---------- ---------- ------------
<S> <C> <C> <C>
INCOME STATEMENT
Investment income...................................... $ 96,961 $ 51,076 $ 24,026
Expenses............................................... 16,952 11,141 5,014
---------- ---------- ------------
Investment income--net................................. $ 80,009 $ 39,935 $ 19,012
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on investments--net............... (29) 2 --
Change in unrealized appreciation on
investments--net......................................... 133 2,395 9
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets........................................... $841,259 $ 721,737 $728,119
Total liabilities...................................... 6,944 8,437 9,016
---------- ---------- ------------
Net assets............................................. $834,315 $ 713,300 $719,103
Net asset value per share.............................. $ 9.99 $ 10.02 $ 10.02
Shares of common stock outstanding..................... 83,551 71,213 71,792
PER SHARE
Investment income--net................................. $ .64 $ .53 $ .27
Realized and unrealized gain on investments--net....... -- .03 --
Dividends from net investment income to common
shareholders............................................. $ (.64) $ (.53) $ (.27)
RATIOS
Total expenses to average net assets................... 1.41% 1.47% 1.43%
Investment income--net, to average net assets.......... 6.58% 5.27% 5.43%
</TABLE>
11. CERTAIN INFORMATION ABOUT THE FUND. The Fund was incorporated under the
laws of the State of Maryland on July 17, 1989 and is a non-diversified,
closed-end, management investment company registered under the Investment
Company Act of 1940, as amended. 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
7
<PAGE>
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: (i) pursuant to the public offering of its Shares the Fund has
sold approximately 12.9 million Shares at a price equal to NAV on the date of
each such sale and (ii) the Fund repurchased approximately 2.2 million shares
at NAV ($10.02) in connection with the Fund's previous tender offer which
terminated July 15, 1994.
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.
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 Internal Revenue Code
of 1986, as amended (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
"complete redemption" of a stockholder's interest generally requires that the
stockholder dispose of all Shares directly owned or attributed to such
stockholder under Section 318 of the Code. 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 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 any of these three tests for "sale or exchange" treatment is met, 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.
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
8
<PAGE>
305(c) 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 for individuals (39.6%)
will exceed the maximum marginal tax rate on long-term capital gains (28%).
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 or Blue Sky 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
9
<PAGE>
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
or Blue Sky 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, INC.
September 16, 1994
10
EXHIBIT (A)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO BE USED TO TENDER SHARES OF
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 16, 1994
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, OCTOBER 14, 1994, UNLESS EXTENDED
-------------------
TRANSFER AGENT:
FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
TRANSFER AGENCY OPERATIONS DEPARTMENT
P.O. BOX 45289
JACKSONVILLE, FLORIDA 32232-5289
TELEPHONE INFORMATION NUMBER: (904) 928-5510
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 BY
TRANSMITTING THE NECESSARY DOCUMENTS TO THE FUND'S TRANSFER AGENT AND DOES NOT
INTEND TO REQUEST HIS BROKER OR DEALER TO EFFECT THE TRANSACTION FOR HIM. 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 FINANCIAL CONSULTANT OR SUCH OTHER NOMINEE
TO EFFECT THE TENDER ON HIS BEHALF.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
GENTLEMEN:
The undersigned hereby tenders to the Merrill Lynch Senior Floating Rate
Fund, 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 September 16, 1994,
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>
<CAPTION>
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 I have not been notified
that I am subject thereto as a result of failure to report all interest or
dividends, or the Internal Revenue Service ("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 ................ , 1994
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 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.
EXHIBIT (A)(3)
<PAGE>
MERRILL LYNCH, PIERCE,
FENNER & SMITH
INCORPORATED
RESPONSE CENTER
P.O. BOX 30200
NEW BRUNSWICK, NJ
08989-0200
Dear Stockholder:
As you requested, we are enclosing a copy of the Merrill Lynch Senior
Floating Rate Fund, Inc. (the "Fund") Offer to Purchase dated September 16, 1994
(the "Offer to Purchase") 7,500,000 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 July 26, 1994 through
August 22, 1994, based on the amounts actually distributed by the Fund, was
6.84%. The Fund's NAV on September 13, 1994 was $10.02 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. 7198.
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
(904) 928-5510. We appreciate your continued interest in Merrill Lynch Senior
Floating Rate Fund, Inc.
Yours truly,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
EXHIBIT (g)(1)
<PAGE>
EXHIBIT (g)(1)
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS,
MERRILL LYNCH PRIME FUND, INC.
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Merrill Lynch Prime Fund, Inc. as of August 31,
1993, the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for each of the years in the
two-year period then ended, and the financial highlights for each of the years
in the three-year period then ended and the period November 3, 1989
(commencement of operations) to August 31, 1990. These financial statements and
the financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance abour 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, 1993 by correspondence with the custodian and financial intermediaries. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Merrill Lynch Prime
Fund, Inc. at August 31, 1993, the results of its operations, its cash flows,
the changes in its net assets, and the financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
As discussed in Notes 1a and 1b, the financial statements include senior secured
floating rate loan interests ('Loan Interests') valued at $605,935,786 (84.95%
of all net assets of the Fund), whose values are fair values as determined by or
under the direction of the Board of Directors in the absence of actual market
values. Determination of fair value involves subjective judgment, as the actual
market value of a particular Loan Interest can be established only by
negotiation between the parties in a sales transaction. We have reviewed the
procedures established by the Board of Directors and used by the Fund's
investment adviser in determining the fair values of such Loan Interests and
have inspected underlying documentation, and under the circumstances, we believe
that the procedures are reasonable and the documentation appropriate.
Deloitte & Touche
Princeton, New Jersey
October 12, 1993
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1993 (in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Airlines--6.26% Northwest Airlines, Inc., Revolving Credit Loan, due 8/04/94:
8.00%(1) $ 3,275 $ 3,275
5.9375% to 9/27/93 1,116 1,116
6.125% to 10/14/93 1,116 1,116
Northwest Airlines, Inc., Term Loan, due 9/15/97:
6.0625% to 9/08/93 7,751 7,751
6.0625% to 10/20/93 21,195 21,195
6.1875% to 12/21/93 7,146 7,146
6.25% to 9/10/93 2,980 2,980
-------- --------
44,579 44,579
- ------------------------------------------------------------------------------------------------------------------------------------
Cellular
Communications--1.89% Lin Cellular Network, Inc., Term Loan, due 8/31/2000:
4.6875% to 9/21/93 5,000 5,000
4.4375% to 9/30/93 1,500 1,500
4.50% to 10/25/93 5,000 5,000
4.6875% to 11/29/93 1,000 1,000
4.6875% to 12/21/93 1,000 1,000
-------- --------
13,500 13,500
- ------------------------------------------------------------------------------------------------------------------------------------
Computer-Related Anacomp, Inc., Term Loan, due 3/31/96, 6.0625% to 10/26/93 15,313 15,313
Services--2.15%
- ------------------------------------------------------------------------------------------------------------------------------------
Computing Equipment Lexmark Holdings, Foreign, Term Loan, due 3/27/98, 5.8125% to 9/30/93 5,243 5,243
Manufacturing--3.03% Lexmark Holdings, U.S., Term Loan, due 3/27/98:
5.6875% to 9/30/93 8,483 8,483
5.9375% to 9/30/93 7,910 7,910
-------- --------
21,636 21,636
- ------------------------------------------------------------------------------------------------------------------------------------
Corporate Aircraft Gulfstream Corp., Revolving Credit Loan, due 3/31/98, 7.25%(1) 2,654 2,654
Manufacturing--2.43% Gulfstream Corp., Term Loan, due 3/31/97:
7.25%(1) 978 978
5.57% to 10/13/93 13,695 13,695
-------- --------
17,327 17,327
- ------------------------------------------------------------------------------------------------------------------------------------
Electrical Instruments Berg Electronics, Term Loan, due 3/31/1995, 5.875% to 9/29/93 4,937 4,937
& Controls--0.69%
- ------------------------------------------------------------------------------------------------------------------------------------
Grocery--5.98% Carr-Gottstein Foods Co., Term Loan B, due 12/31/2000, 5.44% to 9/09/93 10,000 10,000
Grand Union Company, Term Loan B, due 6/30/97:
8.00%(1) 48 48
6.875% to 9/09/93 6,667 6,667
6.75% to 11/15/93 6,333 6,333
Ralph's Grocery Company, Term Loan, due 6/30/98:
7.75%(1) 603 603
6.0625% to 11/05/93 7,715 7,715
6.0625% to 11/08/93 9,849 9,849
Supermarkets General Corp., Revolving Credit Loan, due 1/28/95:
7.50%(1) 56 56
5.6875% to 9/03/93 1,130 1,130
5.6875% to 9/23/93 282 282
-------- --------
42,683 42,683
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1993 (continued) (in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Home Furnishings--1.30% Color Tile, Inc., Tranche B Term Loan, due 12/10/98:
5.94% to 9/20/93 $ 769 $ 769
6.06% to 10/20/93 8,462 8,462
-------- --------
9,231 9,231
- ------------------------------------------------------------------------------------------------------------------------------------
Liquid Gas
Distribution--4.53% Petrolane, Inc., Term Loan, due 12/31/99:
5.3125% to 9/20/93 1,823 1,823
5.4375% to 10/28/93 6,184 6,184
5.6875% to 1/28/94 24,290 24,290
-------- --------
32,297 32,297
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing-- American Standard, Inc., Term Loan A, due 6/01/2000, 6.50% to 12/02/93 25,000 25,000
Diversified--9.22% Coltec Industries, Inc., Term Loan, due 4/01/99:
7.50%(1) 13 13
6.125% to 9/10/93 588 588
6.00% to 10/07/93 7,840 7,840
6.0625% to 11/05/93 3,626 3,626
6.3125% to 12/10/93 1,813 1,813
Joy Technologies, Inc., Term Loan B, due 12/31/98, 6.25% to 11/26/93 7,837 7,837
The Pullman Co., Inc., Term Loan, due 9/30/96:
7.25%(1) 20 20
7.50%(1) 48 48
5.5625% to 9/29/93 2,362 2,362
5.8125% to 9/29/93 5,620 5,620
5.625% to 10/14/93 886 886
5.875% to 10/14/93 2,108 2,108
5.5625% to 11/08/93 886 886
5.8125% to 11/08/93 2,108 2,108
5.8125% to 12/15/93 1,476 1,476
6.0625% to 12/15/93 3,513 3,513
-------- --------
65,744 65,744
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing Food--4.91% Specialty Foods Corp., Term Loan B, due 8/31/99, 6.44% to 9/16/93 35,000 35,000
- ------------------------------------------------------------------------------------------------------------------------------------
Manufacturing-- Dr. Pepper/Seven Up Inc., Term Loan A, due 6/30/98:
Soft Drinks--3.61% 7.875%(1) 2 2
6.0625% to 9/10/93 2,976 2,976
6.1875% to 10/06/93 4,676 4,676
Dr. Pepper/Seven Up Inc., Term Loan B, due 6/30/99:
8.50%(1) 51 51
6.6875% to 9/10/93 9,222 9,222
6.8125% to 10/06/93 8,800 8,800
-------- --------
25,727 25,727
- ------------------------------------------------------------------------------------------------------------------------------------
Packaging--1.39% Ivex Packaging Corp., Term Loan B, due 12/31/99:
8.25%(1) 93 93
6.82% to 9/24/93 7,143 7,143
6.94% to 2/24/94 2,714 2,714
-------- --------
9,950 9,950
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1993 (continued) (in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paper Products--14.60% ++Fort Howard Corp., Senior Secured Notes, due 9/11/98, 6.44% to 9/12/93 $ 5,000 $ 5,000
++Fort Howard Corp., Senior Secured Notes, due 9/11/2000, 6.94% to 9/12/93 30,000 30,000
Fort Howard Corp., Term Loan, due 12/31/96:
7.125%(1) 6 6
7.25%(1) 2 2
5.195% to 9/27/93 822 822
5.32% to 9/27/93 223 223
6.065% to 11/30/93 1,744 1,744
6.19% to 11/30/93 473 473
Fort Howard Corp., Term Loan, due 5/01/97, 6.32% to 10/21/93 9,125 9,125
++Jefferson Smurfit/Container Corp. of America, Senior Secured Notes, due
12/01/98, 6.07% to 9/01/93 23,988 23,988
Jefferson Smurfit/Container Corp. of America, Term Loan, due 12/31/97:
5.44% to 9/15/93 12,139 12,139
5.69% to 9/15/93 1,676 1,676
5.44% to 9/23/93 8 8
6.1875% to 9/27/93 18,903 18,903
-------- --------
104,109 104,109
- ------------------------------------------------------------------------------------------------------------------------------------
Rental Services--2.06% Cort Furniture Rental Corp., Revolving Credit Loan, due 9/30/93,8.00% (1) 1,895 1,895
Cort Furniture Rental Corp., Term Loan, due 9/30/93, 8.00%(1) 12,757 12,757
-------- --------
14,652 14,652
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurants--4.10% TW Services, Term Loan A, due 8/15/95:
5.9375% to 9/23/93 599 599
6.0625% to 10/19/93 4,841 4,841
6.00% to 10/21/93 9,222 9,222
TW Services, Term Loan B, due 8/15/95:
5.9375% to 9/23/93 597 597
6.0625% to 10/19/93 4,822 4,822
6.00% to 10/21/93 9,186 9,186
-------- --------
29,267 29,267
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-Apparel--2.80% Saks and Co., Term Loan B, due 6/30/2000, 6.50% to 2/09/94 20,000 20,000
- ------------------------------------------------------------------------------------------------------------------------------------
Retail-- Circle K Acquisitions Corp., Term Loan A, due 4/30/98, 6.1875% to 9/27/93 6,667 6,667
Convenience Stores--2.80% Circle K Acquisitions Corp., Term Loan B, due 4/30/2000, 6.6875% to 9/27/93 13,334 13,334
-------- --------
20,001 20,001
- ------------------------------------------------------------------------------------------------------------------------------------
Retail--Drug Stores--7.36% Duane Reade, Term Loan A, due 9/30/97:
6.1875% to 9/27/93 229 229
6.1875% to 9/27/93 123 123
6.375% to 11/26/93 13,956 13,956
Duane Reade, Term Loan B, due 9/30/99, 6.875% to 11/26/93 10,000 10,000
Hook-Super X, Inc., Term Loan Series C, due 7/31/2000, 6.065% to 9/30/93 14,000 14,000
Jack Eckerd Corp., Term Loan B, due 6/14/2000, 6.1875% to 9/23/93 14,175 14,175
-------- --------
52,483 52,483
- ------------------------------------------------------------------------------------------------------------------------------------
Specialty Chemicals--2.10% OSI Specialties, Inc., Term Loan, due 6/30/2000, 5.94% to 9/16/93 15,000 15,000
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1993 (continued) (in Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Warehousing--
Business Records--1.75% Pierce Leahy Corp., Term Loan A, due 10/31/99, 6.25% to 12/07/93 $ 5,000 $ 5,000
Pierce Leahy Corp., Term Loan B, due 7/31/2000:
6.3125% to 9/07/93 3,750 3,750
6.4375% to 12/07/93 3,750 3,750
-------- --------
12,500 12,500
- ------------------------------------------------------------------------------------------------------------------------------------
Total Senior Secured Floating Rate Loan Interests
(Cost--$605,936)--84.95% 605,936 605,936
- ------------------------------------------------------------------------------------------------------------------------------------
Short-Term Securities
- ------------------------------------------------------------------------------------------------------------------------------------
Commercial Paper**--15.13% Corporate Asset Funding Co., Inc., 3.10% due 9/23/93 10,000 9,981
CSW Credit, Inc., 3.11% due 9/13/93 14,000 13,985
Daimler-Benz North America Corp., 3.05% due 9/30/93 16,000 15,961
Federal Home Loan Mortgage Corp., 3.06% due 10/26/93 18,000 17,916
General Electric Capital Corp., 3.25% due 9/01/93 15,110 15,110
Matterhorn Capital Corp., 3.10% due 9/23/93 5,000 4,991
Paccar Financial Corp., 3.07% due 9/03/93 5,000 4,999
PHH Corporation, Inc., 3.07% due 9/14/93 15,000 14,983
Transamerica Financial Corp., 3.07% due 9/27/93 10,000 9,978
- ------------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Securities (Cost--$107,904)--15.13% 108,110 107,904
- ------------------------------------------------------------------------------------------------------------------------------------
Shares
Common Stock Held
- ------------------------------------------------------------------------------------------------------------------------------------
Restaurants--0.05% ++TW Services, Inc. 44 400
- ------------------------------------------------------------------------------------------------------------------------------------
Total Common Stock (Cost--$0)--0.05% 44 400
Total Investments (Cost--$713,840)--100.13% 714,240
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities in Excess of Other Assets--(0.13%) (940)
--------
Net Assets--100.00% $713,300
========
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Index is based on the prime rate of a US bank, which is subject to change
daily.
*The interest rates on senior secured floating rate loan interests are subject
to change periodically based on the change in the prime rate of a US Bank,
LIBOR (London Interbank Offered Rate), or, in some cases, another base lending
rate. The interest rates shown are those in effect at August 31, 1993.
**Commercial Paper is traded on a discount basis; the interest rates shown are
the discount rates paid at the time of purchase by the Fund.
++Restricted securities as to resale. The value of the Fund's investment in
restricted securities was approximately $59,388,000, representing 8.33% of net
assets.
- -----------------------------------------------------------------
Cost Acquisition
Senior Secured Notes (In Thousands) Date
- -----------------------------------------------------------------
Fort Howard Corp. $35,000 9/11/91
Jefferson Smurfit/Container
Corp. of America 23,988 4/24/91
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Cost Acquisition
Common Stock (In Thousands) Date
TW Services, Inc. $0 6/03/91
- -----------------------------------------------------------------
The closing bid price for TW Services, Inc. Common Stock on
8/31/93 was $11.25 per share.
See Notes to Financial Statements.
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Prime Fund, Inc.
Statement of Assets and Liabilities as of August 31, 1993
<S> <C> <C>
Assets:
Investments, at value (identified cost--$713,839,741) (Note 1b) $714,239,791
Receivables:
Interest $ 4,278,683
Capital shares sold 2,765,255
Commitment fees 57,522 7,101,460
------------
Deferred facility fees (Note 1d) 26,667
Deferred organization expenses (Note 1e) 209,384
Prepaid registration fees and other assets (Note 1e) 159,717
------------
Total assets 721,737,019
------------
Liabilities:
Payables:
Dividends to shareholders (Note 1f) 829,136
Investment adviser (Note 2) 550,611
Administrator (Note 2) 144,898 1,524,645
------------
Deferred income (Note 1d) 6,351,980
Accrued expenses and other liabilities 560,737
------------
Total liabilities 8,437,362
------------
Net assets $713,299,657
============
Net Assets Consist of:
Common Stock, par value $.10 per share; 1,000,000,000 shares authorized $ 7,121,333
Paid-in capital in excess of par 705,805,044
Accumulated realized capital losses--net (Note 7) (26,770)
Unrealized appreciation on investments--net (Note 3) 400,050
------------
Net Assets--Equivalent to $10.02 per share based on 71,213,326 capital shares outstanding $713,299,657
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
Merrill Lynch Prime Fund, Inc.
<TABLE><CAPTION>
Statement of Operations For the Year Ended
August 31, 1993
<S> <C> <C>
Investment Income (Note 1d):
Interest and discount earned $43,411,933
Facility and other fees 7,663,493
------------
Total income 51,075,426
Expenses:
Investment advisory fees (Note 2) $ 7,202,400
Administrative fees (Note 2) 1,895,368
Transfer agent fees (Note 2) 584,126
Borrowing costs (Note 6) 306,800
Professional fees 258,938
Amortization of organization expenses (Note 1e) 179,472
Accounting services (Note 2) 98,259
Printing and shareholder reports 95,822
Tender offer costs 87,894
Custodian fees 81,469
Registration fees (Note 1e) 55,112
Directors' fees and expenses 51,339
Other 243,785
------------
Total expenses 11,140,784
------------
Investment income--net 39,934,642
Realized Gain on Investments--Net (Notes 1d & 3) 2,039
Change in Unrealized Appreciation/Depreciation of Investments--Net (Note 3) 2,394,855
------------
Net Increase in Net Assets Resulting from Operations $42,331,536
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
<CAPTION>
For the Year Ended August 31,
Statements of Changes in Net Assets 1993 1992
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 39,934,642 $ 80,009,488
Realized gain (loss) on investments--net 2,039 (28,596)
Change in unrealized appreciation/depreciation on investments--net 2,394,855 133,330
------------ ------------
Net increase in net assets resulting from operations 42,331,536 80,114,222
------------ ------------
Dividends to Shareholders (Note 1f):
Investment income--net (39,934,642) (80,009,488)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (39,934,642) (80,009,488)
------------ ------------
Capital Share Transactions (Note 4):
Net decrease in net assets resulting from capital share transactions (123,412,312) (871,150,138)
------------ ------------
Net Assets:
Total decrease in net assets (121,015,418) (871,045,404)
Beginning of year 834,315,075 1,705,360,479
------------ ------------
End of year $713,299,657 $834,315,075
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Prime Fund, Inc.
<CAPTION>
Statement of Cash Flows For the Year Ended
August 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 42,331,536
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash
provided by operating activities:
Decrease in receivables 2,022,586
Decrease in other assets 254,552
Increase in other liabilities 1,863,244
Realized and unrealized gain (loss) on investments--net (2,394,856)
------------
Net cash provided by operating activities 44,077,062
------------
Cash Provided by Investing Activities:
Proceeds from principal payments and sales of loan interests 591,548,320
Purchases of loan interests (566,714,003)
Proceeds from sales and maturities of short-term investments--net 96,912,098
------------
Net cash provided by investment activities 121,746,415
------------
Cash Used in Financing Activities:
Capital share activity:
Cash receipts on capital shares sold 143,575,164
Cash payments on capital shares tendered (290,287,314)
Dividends paid to shareholders (19,180,470)
------------
Net cash used in financing activities (165,892,620)
------------
Cash:
Net decrease in cash (69,143)
Cash at beginning of year 69,143
------------
Cash at end of year $ --
============
Non-cash Financing Activities:
Capital shares issued in reinvestment of dividends paid to shareholders $ 21,124,039
============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
Merrill Lynch Prime Fund, Inc.
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived Nov. 3,
from information provided in the financial statements. For the Year Ended 1989+ to
August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value beginning of period $ 9.99 $ 9.99 $ 10.00 $ 10.00
------- ------- ------- -------
Investment income--net .53 .64 .85 .76
Realized and unrealized gain (loss) on investments--net .03 -- (.01) --
------- ------- ------- -------
Total from investment operations .56 .64 .84 .76
------- ------- ------- -------
Less Dividends:
Investment income--net (.53) (.64) (.85) (.76)
------- ------- ------- -------
Total dividends (.53) (.64) (.85) (.76)
------- ------- ------- -------
Net asset value, end of period $ 10.02 $ 9.99 $ 9.99 $ 10.00
======= ======= ======= =======
Total Investment Return*:
Based on net asset value per share 5.74% 6.58% 8.79% 7.63%++
======= ======= ======= =======
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.47% 1.39% 1.27% .79%**
======= ======= ======= =======
Expenses 1.47% 1.41% 1.33% 1.35%**
======= ======= ======= =======
Investment income--net 5.27% 6.58% 8.44% 9.06%**
======= ======= ======= =======
Supplemental Data:
Net assets, end of period (in millions) $ 713 $ 834 $ 1,705 $ 1,728
======= ======= ======= =======
Portfolio turnover 90.36% 46.48% 58.22% 29.61%
======= ======= ======= =======
<FN>
*Total investment returns exclude the effects of sales loads. The Fund is a continuously
offered closed-end fund, the shares of which are offered at net asset value. Therefore,
no separate market exists.
**Annualized.
+Commencement of Operations.
++Aggregate total investment return.
</TABLE>
See Notes to Financial Statements.
<PAGE>
Merrill Lynch Prime Fund, Inc.
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Prime Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a continuously offered non-
diversified, closed-end management investment company.
(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 for the
Fund's investment. Because agents and intermediaries are
primarily commercial banks, the Fund's investment in corporate
loans at August 31, 1993 could be considered to be concentrated
in commercial banking.
(b) Valuation of investments--Loan Interests and common stocks
are valued at fair value. Fair value is determined in good faith
by or under the direction of the Board of Directors of the Fund.
Since Loan Interests are purchased and sold primarily at par value,
the Fund values the Loan Interests at par, unless Merrill Lynch Asset
Management ("MLAM") determines par does not represent fair value.
In the event such a determination is made, fair value will be
determined in accordance with guidelines approved by the Fund's
Board of Directors. Short-term securities are valued at amortized
cost which approximates market.
(c) 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.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income is recognized on
the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
Facility fees are accreted into income over the term of the
related loan.
(e) Deferred organization expenses and prepaid registration fees--
Deferred organization expenses are amortized on a straight-line
basis over a five-year period. Prepaid registration fees are charged
to expense as the related shares are issued.
(f) 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. MLAM is the name under which Merrill Lynch Investment
Management, Inc. ("MLIM") does business. MLIM is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc.
MLAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
<PAGE>
certain other services necessary to perform this investment
advisory function.
For such services, the Fund pays a monthly fee at an annual rate
of 0.95% of the Fund's average daily net assets. The Fund also
has an Administrative Services Agreement with MLAM whereby MLAM
will receive a fee equal to an annual rate of 0.25% 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. The Investment Advisory Agreement
obligates MLAM to reimburse the Fund to the extent the Fund's
expenses (excluding interest, taxes, brokerage fees, commissions,
and extraordinary items) exceed the lesser of a) 2.0% of the
Fund's average daily net assets or b) 2.5% of the Fund's first
$30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of
<PAGE>
the average daily net assets in excess thereof.
For the year ended August 31, 1993, MLAM earned fees
of $9,097,768.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary
of Merrill Lynch & Co., Inc., 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 MLIM, MLFD, FDS, or Merrill Lynch, Pierce, Fenner &
Smith Incorporated, and/or Merrill Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1993 were $566,714,003 and $591,548,320,
respectively.
Net realized and unrealized gains as of August 31, 1993 were as
follows:
Realized Unrealized
Gains Gains
Short-term investments $ 2,039 $ --
Common stock -- 400,050
-------- --------
Total $ 2,039 $400,050
======== ========
As of August 31, 1993, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $400,050,
all of which related to appreciated securities. The aggregate cost
of investments at August 31, 1993 for Federal income tax purposes
was $713,839,741.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1993 Shares Amount
Shares sold 14,572,615 $ 145,750,963
Shares issued to share-
holders in reinvestment
of dividends 2,112,254 21,124,039
----------- --------------
Total issued 16,684,869 166,875,002
Shares tendered (29,022,869) (290,287,314)
----------- --------------
Net decrease (12,338,000) $ (123,412,312)
=========== ==============
<PAGE>
For the Year Ended Dollar
August 31, 1992 Shares Amount
Shares sold 10,536,024 $ 105,252,973
Shares issued to share-
holders in reinvestment
of dividends 3,958,371 39,541,885
----------- --------------
Total issued 14,494,395 144,794,858
Shares tendered (101,696,196) (1,015,944,996)
----------- --------------
Net decrease (87,201,801) $ (871,150,138)
=========== ==============
5. Unfunded Loan Interests:
As of August 31, 1993, the Fund had unfunded loan commitments of
$13,671,000, which would be extended at the option of the
borrower, pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Cort Furniture, Inc. $ 348
Gulfstream Corp. 7,538
Northwest Airlines, Inc. 1,152
Supermarkets General Corp. 4,633
6. Short-Term Borrowings:
On March 17, 1993, the Fund extended the loan commitment. The
commitment was reduced from $150,000,000 to $100,000,000, bearing
interest at the Federal Funds Rate plus 1%-3% on the outstanding
balance. For the year ended August 31, 1993, facility and commitment
fees aggregated approximately $306,800.
7. Capital Loss Carryforward:
At August 31, 1993, the Fund had a net capital loss carryforward
of approximately $34,000, all of which expires in 2001. These
will be available to offset like amounts of any future taxable gains.
8. Subsequent Events:
The Fund began a quarterly tender offer on September 17, 1993,
which will end on October 15, 1993.
EXHIBIT (g)(2)
<PAGE>
EXHIBIT (g)(2)
Merrill Lynch Prime Fund, Inc.
Independent Auditors' Report
The Board of Directors and Shareholders,
Merrill Lynch Prime Fund, Inc.:
We have audited the accompanying statement of assets and
liabilities, including the schedule of investments, of Merrill
Lynch Prime Fund, Inc. (the "Fund") as of August 31, 1992, the
related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for each of the
years in the two-year period then ended, and the supplementary
financial information for each of the years in the two-year
period then ended and the period November 3, 1989 (commencement
of operations) to August 31, 1990. These financial statements
and the supplementary financial information are the
responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and the
supplementary financial information based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and the supplementary financial
information 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, 1992 by
correspondence with the custodian and financial intermediaries.
An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and supplementary
financial information present fairly, in all material respects,
the financial position of Merrill Lynch Prime Fund, Inc. at
August 31, 1992, the results of its operations, its cash flows,
the changes in its net assets, and the supplementary financial
information for the respective stated periods in conformity with
generally accepted accounting principles.
As discussed in Notes 1a and 1b, the financial statements include
senior secured floating rate loan interests ("Loan Interests")
valued at $628,186,332 (75.29% of the net assets of the Fund),
whose values are fair values as determined by or under the
direction of the Board of Directors in the absence of actual
market values. Determination of fair value involves subjective
judgment, as the actual market value of a particular Loan
Interest can be established only by negotiation between the
parties in a sales transaction. We have reviewed the procedures
established by the Board of Directors and used by the Fund's
investment adviser in determining the fair values of such Loan
Interests and have inspected underlying documentation, and under
the circumstances, we believe that the procedures are reasonable
and the documentation appropriate.
Deloitte & Touche
Princeton, New Jersey
October 16, 1992
2
<PAGE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1992 (In thousands)
<TABLE> <CAPTION>
Face Value
Industry Senior Secured Floating Amount (Note 1b)
Rate Loan Interests*
<S> <C> <C> <C>
Airlines-4.98% Northwest Airlines, Inc.,
Revolving Credit Loan,
due 12/15/96:
5.6875% to 9/21/92 . $ 279 $ 279
5.6875% to 9/24/92 . 279 279
5.75% to 9/30/92 . . 1,954 1,954
Northwest Airlines, Inc.,
Term Loan, due 12/15/96:
5.6875% to 9/14/92 . 2,980 2,980
5.6875% to 9/21/92 . 7,146 7,146
6.6875% to 10/06/92 . 7,751 7,751
5.6875% to 10/20/92 . 15,139 15,139
5.875% to 1/20/93 . . 6,056 6,056
------ ------
41,584 41,584
Apparel Union Underwear Co., Term
Manufacturing-- Loan, due 6/30/95:
1.97% 4.50% to 9/24/92 . . 1,614 1,614
4.625% to 9/24/92 . . 2,209 2,209
4.50% to 9/25/92 . . 2,351 2,351
4.625% to 9/25/92 . . 3,216 3,216
4.505% to 9/28/92 . . 2,970 2,970
4.63% to 9/28/92 . . 4,063 4,063
------ ------
16,423 16,423
Cellular Lin Cellular Network,
Communications- Inc., Term Loan, due
5.99% 8/31/2000:
5.00% to 9/21/92 . . 22,222 22,222
7.5625% to 9/21/92 . 18,519 18,519
5.00% to 9/24/92 . . 3,704 3,704
5.0625% to 9/24/92 . 1,852 1,852
5.065% to 9/28/92 . . 3,704 3,704
------ ------
50,001 50,001
Chemical Georgia Gulf Corp., Term
Manufacturing-- Loan, due 4/30/98:
0.73% 5.94% to 9/10/92 . . . .1,770 1,770
5.88% to 9/14/92 . . . . 1,770 1,770
5.94% to 9/28/92 . . . . 1,376 1,376
----- -----
6.00% to 10/13/92 . . . . 1,180 1,180
6,096 6,096
Computer-Related Anacomp, Inc., Term Loan, 19,760 19,760
Services--2.37% due 3/31/96, 6.1875% to
10/26/92 . . . . . . . .
Corporate Aircraft Gulfstream Corp., 1,154 1,154
Manufacturing-- Revolving Credit Loan,
2.32% due 3/31/98, 6.25% to
9/11/92 . . . . . . . . .
Gulfstream Corp., Term 18,194 18,194
Loan, due 3/31/97, 5.75% ------ ------
to 10/13/92 . . . . . . . 19,348 19,348
</TABLE>
3
<PAGE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1992 (continued) (In thousands)
<TABLE> <CAPTION>
Industry Senior Secured Floating Face Value
Rate Loan Interests*
Amount (Note 1b)
<S> <C> <C> <C>
Electrical General Instrument Corp.,
Instruments Term Loan, due 5/31/98:
& Controls-- 5.9375% to 9/28/92 . $ 9,710 $ 9,710
2.33% 6.00% to 11/27/92 . . 9,748 9,748
------ ------
19,458 19,458
Gaming & Marina Associates, Term
Hospitality Loan, due 2/21/97(1)
Services--2.95% 6.5625% to 9/08/92 . 11,217 11,217
5.9375% to 9/24/92 . 5,386 5,386
6.00% to 9/28/92 . . 4,006 4,006
6.50% to 9/30/92 . . 4,006 4,006
------ ------
24,615 24,615
Glass Sybron Acquisition Co.,
Manufacturing-- Term Loan, due 8/15/95:
1.30% 6.00% to 9/30/92 . . 3,032 3,032
6.75% to 10/15/92 . . 3,137 3,137
6.8125% to 10/26/92 . 4,705 4,705
------ ------
10,874 10,874
Grocery--2.52% Ralphs Grocery Company,
Term Loan, due 6/30/98,
6.1875% to 11/06/92 . . 20,000 20,000
Supermarkets General Corp.,
Revolving Credit Loan,
due 1/28/95:
7.50%(2) . . . . . . 424 424
5.9375% to 9/08/92 . 282 282
6.00% to 9/30/92 . . 282 282
------ -----
20,988 20,988
Health Services- American Medical
-2.18% International, Inc.,
Tranche B Term Loan, due
11/01/96:
6.1875% to 9/15/92 . 1,145 1,145
6.375% to 10/15/92 . 1,166 1,166
5.625% to 2/16/93 . . 695 695
American Medical
International, Inc.,
Tranche I Term Loan, due
11/01/96:
6.1875% to 9/15/92 . 2,519 2,519
6.375% to 10/15/92 . 2,088 2,088
5.625% to 2/16/93 . . 3,263 3,263
American Medical
International, Inc.,
Tranche
II Term Loan, due
11/01/96:
6.1875% to 9/15/92 . 1,992 1,992
6.375% to 10/15/92 . 2,529 2,529
5.625% to 2/16/93 . . 2,817 2,817
------ ------
18,214 18,214
</TABLE>
4
<PAGE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1992 (continued) (In thousands)
<TABLE> <CAPTION>
Industry Senior Secured Floating Face Value
Rate Loan Interests*
Amount (Note 1b)
<S> <C> <C> <C>
Liquid Gas +Petrolane Gas Services
Distribution-- Limited Partnership,
3.56% Revolving Credit Loan,
due 3/20/96:
5.5625% to 9/14/92 . $ 1,823 $ 1,677
5.5625% to 9/28/92 . 1,617 1,488
+Petrolane Gas Services
Limited Partnership,
Term Loan due 3/20/96:
5.5625% to 9/28/92 . 23,505 21,624
+QFB Partners, Term Loan,
due 9/20/96, 5.5625% to
9/28/92 . . . . . . . . . 5,351 4,923
------ -------
32,296 29,712
Manufacturing-- American Flat Glass,
Diversified-- Inc., Revolving Credit
8.75% Loan B, due 12/31/96:(3)
6.255% to 9/14/92 . . 1,832 1,832
6.315% to 9/28/92 . . 3,663 3,663
American Flat Glass,
Inc., Term Loan, due
12/31/96:
6.315% to 9/28/92 . .
Coltec Industries, Inc.,
Term Loan, due 4/01/99: 29,467 29,467
7.50%(2) . . . . . .
6.8125% to 9/08/92 . 12 12
6.375% to 10/07/92 . 2,097 2,097
6.875% to 11/04/92 . 3,995 3,995
6.375% to 2/05/93 . . 1,873 1,873
Joy Technologies, Inc.,
Term Loan B, due
12/31/97, 1,873 1,873
7.125% to 11/27/92 .
The Pullman Co., Inc., 8,094 8,094
Term Loan, due 9/30/96:
7.25%(2) . . . . . .
7.50%(2) . . . . . . 329 329
6.1875% to 9/29/92 . 783 783
6.4375% to 9/29/92 . 2,362 2,362
5.75% to 10/14/92 . . 5,620 5,620
6.00% to 10/14/92 . . 886 886
5.6875% to 11/06/92 . 2,108 2,108
5.9375% to 11/06/92 . 886 886
6.4375% to 12/15/92 . 2,108 2,108
6.6875% to 12/15/92 . 1,476 1,476
3,513 3,513
------ ------
72,977 72,977
Packaging--4.72% Sweetheart Holdings, Inc.,
Acquisition Term Loan,
due 10/31/96, 6.50% to
9/14/92 . . . . . . . . . 23,072 23,072
Sweetheart Holdings,
Inc., Asset Bridge Loan,
due 10/31/96, 7.50%(2) 8,683 8,683
Sweetheart Holdings,
Inc., Revolving Credit
Loan,
due 10/31/96:
7.50%(2) . . . . . . 227 227
5.9375% to 9/11/92 . 5,099 5,099
5.875% to 9/16/92 . . 1,700 1,700
6.00% to 9/30/92 . . 567 567
----- ------
39,348 39,348
</TABLE>
5
<PAGE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1992 (continued) (In thousands)
<TABLE> <CAPTION>
Industry Senior Secured Floating Face Value
Rate Loan Interests*
Amount (Note 1b)
<S> <C> <C> <C>
Paper Products-- ++Fort Howard Corp.,
9.65% Senior Secured Notes, due
9/11/2000, 7.50% to
9/11/92 $ 30,000 $ 30,000
Fort Howard Corp., Term
Loan, due 12/31/96:
6.625%(2) . . . . . . 161 161
6.75%(2) . . . . . . 44 44
5.505% to 9/04/92 . . 1,829 1,829
5.63% to 9/04/92 . . 496 496
4.875% to 9/30/92 . . 775 775
5.00% to 9/30/92 . . 210 210
5.625% to 11/30/92 . 1,744 1,744
5.75% to 11/30/92 . . 473 473
++Jefferson Smurfit
Container Corp. of
America,
Senior Secured Notes,
due 12/01/98, 6.83% to
8/31/92 . . . . . . . . 9,018 9,018
Jefferson Smurfit
Container Corp. of
America,
Term Loan, due
12/31/97:
5.63% to 9/14/92 . . 12,156 12,156
6.88% to 9/14/92 . . 8,654 8,654
6.25% to 9/15/92 . . 577 577
6.50% to 10/16/92 . . 14,423 14,423
------- -------
80,560 80,560
Restaurants--4.87 TW Services, Inc.,
% Acquisition Term Loan,
due 11/01/97:
7.50%(2) . . . . . . 822 822
5.9375% to 11/17/92 . 39,815 39,815
------ ------
40,637 40,637
Retail--Apparel- Ann Taylor, Inc., Term
-2.96% Loan, due 1/15/97:
5.875% to 10/13/92 . 16,131 16,131
6.00% to 10/13/92 . . 8,540 8,540
------ -------
24,671 24,671
Retail- Maybelline, Inc., Term
Specialty-- Loan, due 6/30/99,
2.40% 6.4375% to 9/04/92 . . . . . 20,000 20,000
Steel Rod & Pipe EMJ Acquisition Corp.,
Wholesalers-- Term Loan, due 3/01/97:
4.89% 7.75%:(2) . . . . . . 2,621 2,621
6.25% to 11/30/92 . . 38,197 38,197
------- -------
40,818 40,818
Textile Burlington Industries,
Manufacturing-- Inc., Term Loan A, due
3.85% 9/26/97:
6.25% to 9/28/92 . . 5,000 5,000
6.75% to 9/28/92 . . 15,000 15,000
Burlington Industries,
Inc., Term Loan B, due
9/26/98, 7.50%:(2) . . 5,000 5,000
Burlington Industries
Receivables, Term Loan,
due
9/26/97, 6.4375% to
9/28/92 . . . . . . . . . 7,102 7,102
------- -------
32,102 32,102
Total Senior Secured
Floating Rate Loan
Interests (Cost--
$630,770)--75.29% . . . . 630,770 628,186
6
</TABLE>
<PAGE>
Merrill Lynch Prime Fund, Inc.
Schedule of Investments as of August 31, 1992 (concluded) (In thousands)
<TABLE> <CAPTION>
Industry Short-Term Securities Face Value
Amount (Note 1b)
<S> <C> <C> <C>
Commercial Allergan, Inc., 3.30% due
Paper**-- 9/25/92 . . . . . . . . . $ 10,000 $ 9,978
24.55% Business Asset
Securitization Investment
Co., 3.30%
due 10/06/92 . . . . . 10,000 9,968
Cooperative Receivables
Corp., 3.30% due 10/01/92 15,700 15,657
General Electric Capital
Corp., 3.40% due 9/01/92 36,980 36,980
Grand Metropolitan
Investment Co., 3.27%,
due 9/18/92 . . . . . . . . 25,000 24,961
Matterhorn Capital Corp.:
3.32% due 9/23/92 . . 6,458 6,445
3.32% due 10/07/92 . 5,000 4,983
PepsiCo., Inc., 3.25% due
10/08/92 . . . . . . . . 15,000 14,950
Public Service Electric &
Gas Co., 3.28% due 21,134 21,082
9/28/92 . . . . . . . . . 10,000 9,979
Sanwa Business Credit 15,000 14,948
Corp., 3.28% due 9/24/92
Sheffield Receivables
Corp., 3.30% due 10/09/92
United States Leasing
International, Inc.,
3.30% due 20,000 19,912
10/19/92 . . . . . . . 15,000 14,973
Woolworth Corp., 3.25%
due 9/21/92 . . . . . . .
Total Short-Term
Securities (Cost--
$204,816)--
24.55% . . . . . . . . 205,272 204,816
Shares
Industry Common Stock Held
Restaurants-- ++TW Services, Inc. . . . 222 589
0.07%
Total Common Stock (Cost-
-$0)--0.07% . . . . . . . 222 589
Total Investments (Cost--
$835,586)--99.91% . . . . 833,591
Other Assets Less
Liabilities--0.09% . . . 724
------
Net Assets--100.00% . . . $ 834,315
==========
* 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 U.S. bank, LIBOR (London
Interbank Offered Rate), or in some cases, another base
lending rate. The interest rates shown are those in effect
at August 31, 1992.
** Commercial Paper is traded on a discount basis; the interest
rates shown are the discount rates paid at the time of
purchase by the Fund.
(1) Formerly Promus/Embassy Suites, Inc.
(2) Index is based on the prime rate of a U.S. bank, which is
subject to change daily.
(3) Formerly AFG Industries, Inc.
+ As of Sept. 23, Sept. 20, and Sept. 20, 1991, respectively,
these investments became non-income producing investments
due to a default on scheduled payments of interest and
principal.
++ Restricted securities as to resale. The value of the Fund's
investment in restricted securities was approximately
$39,607,000, representing 4.75% of net assets.
Cost
Senior Secured Notes (In Thousands) Acquisition Date
Fort Howard Corp. . . . . .$30,000 9/11/91
Jefferson Smurfit Container
Corp. of America . . . . 9,018 4/24/91
Cost
Common Stock (In Thousands) Acquisition Date
TW Services, Inc. . . . . . $ 0 6/03/91
See Notes to Financial Statements.
7
<PAGE>
Merrill Lynch Prime Fund, Inc.
Statement of Assets and Liabilities as of August 31, 1992
</TABLE>
<TABLE>
<S> <C> <C>
Assets:
Investments, at value
(identified cost - $835,586,155) (Note 1b) . . . . . . . . . . . . . . . . $833,591,350
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,143
Receivables:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,301,269
Capital shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 589,456
Commitment fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,154 6,939,879
Deferred organization expenses (Note 1e) . . . . . . . . . . . . . . . . . 388,856
Prepaid registration fees and other assets (Note 1e) . . . . . . . . . . . 269,832
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841,259,060
Liabilities:
Payables:
Dividends to shareholders (Note 1f) . . . . . . . . . . . . . . . . . . . 1,199,003
Investment adviser (Note 2) . . . . . . . . . . . . . . . . . . . . . . . 625,614
Administrator (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . 164,635 1,989,252
Deferred income (Note 1d) . . . . . . . . . . . . . . . . . . . . . . . . . 4,554,386
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . 400,347
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,943,985
Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $834,315,075
Net Assets Consist of:
Common Stock, par value $.10 per share; 1,000,000,000 shares authorized . . $ 8,355,133
Paid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . 827,983,556
Accumulated realized capital losses - net . . . . . . . . . . . . . . . . . (28,809)
Unrealized depreciation on investments - net (Note 3) . . . . . . . . . . . (1,994,805)
Net Assets - Equivalent to $9.99 per share based on 83,551,326 capital
shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 834,315,075
</TABLE>
See Notes to Financial Statements. 8
<PAGE>
Merrill Lynch Prime Fund, Inc.
Statement of Operations for the Year Ended August 31, 1992
<TABLE>
<S> <C> <C>
Investment Income (Note 1d):
Interest and discount earned . . . . . . . . . $87,211,407
Facility and other fees . . . . . . . . . . . . 9,749,768
Total income . . . . . . . . . . . . . . . . . 96,961,175
Expenses:
Investment advisory fees (Note 2) . . . . . . . $ 11,516,287
Administrative fees (Note 2) . . . . . . . . . 3,030,602
Transfer agent fees (Note 2) . . . . . . . . . 949,706
Tender offer costs . . . . . . . . . . . . . . 390,938
Professional fees . . . . . . . . . . . . . . . 324,907
Borrowing costs (Note 6) . . . . . . . . . . . 217,784
Amortization of organization expenses (Note 1e) 179,472
Printing and shareholder reports . . . . . . . 167,088
Registration fees (Note 1e) . . . . . . . . . . 121,512
Custodian fees . . . . . . . . . . . . . . . . 103,818
Accounting services (Note 2) . . . . . . . . . 77,741
Directors' fees and expenses . . . . . . . . . 47,706
Other . . . . . . . . . . . . . . . . . . . . . 56,459
Total expenses before reimbursement . . . . . . 17,184,020
Reimbursement of expenses (Note 2) . . . . . . (232,333)
Total expenses . . . . . . . . . . . . . . . . 16,951,687
Investment income - net . . . . . . . . . . . . 80,009,488
Realized Loss on Investments - Net (Notes 1d&3) (28,596)
Change in Unrealized Depreciation on
Investments - Net . . . . . . . . . . . . . . . 133,330
Net Increase in Net Assets Resulting from
Operations . . . . . . . . . . . . . . . . . . $80,114,222
</TABLE>
See Notes to Financial Statements. 9
<PAGE>
Merrill Lynch Prime Fund, Inc.
Statement of Cash Flows
<TABLE> <CAPTION>
For the
Year Ended
August 31, 1992
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations . . . . . $ 80,114,222
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Decrease in receivables . . . . . . . . . . . . . . . . . . . 4,297,335
Increase in other assets . . . . . . . . . . . . . . . . . . (8,282)
Decrease in other liabilities . . . . . . . . . . . . . . . . (6,771,306)
Realized and unrealized gain on investments - net . . . . . . (104,734)
---------------
Net cash provided by operating activities . . . . . . . . . . . 77,527,235
---------------
Cash Provided by Investing Activities:
Proceeds from principal payments and sales of loan interests . 1,178,221,551
Purchases of loan interests . . . . . . . . . . . . . . . . . . (471,317,548)
Proceeds from sales and maturities of short-term investments -
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165,802,170
Net cash provided by investing activities . . . . . . . . . . . 872,706,173
Cash Used in Financing Activities:
Capital share activity:
Cash receipts on capital shares sold . . . . . . . . . . . . 107,429,034
Cash payments on capital shares tendered . . . . . . . . . . (1,015,944,996)
Dividends paid to shareholders . . . . . . . . . . . . . . . (41,648,303)
Net cash used in financing activities . . . . . . . . . . . . . (950,164,265)
Cash:
Net increase in cash . . . . . . . . . . . . . . . . . . . . . 69,143
Cash at beginning of year . . . . . . . . . . . . . . . . . . . -
Cash at end of year . . . . . . . . . . . . . . . . . . . . . . $ 69,143
Cash Flow Information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . $ 41,750
Noncash Financing Activities:
Capital shares issued in reinvestment of dividends paid to
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . $ 39,541,885
</TABLE>
See Notes to Financial Statements. 10
<PAGE>
Merrill Lynch Prime Fund, Inc.
Supplementary Financial Information
<TABLE> <CAPTION>
For the Year Ended August 31, For the Period
November 3, 1989+
1992 1991 to August 31, 1990
<S> <C> <C> <C>
Selected Data for a Share of Capital Outstanding
Throughout Each Period:
Increase (Decrease) in Net Asset Value:
Operations:
Investment income . . . . . . . . . . . . . . . . . $ .78 $ .97 $ .82
Total expenses . . . . . . . . . . . . . . . . . . (.14) (.13) (.11)
Reimbursement of expenses . . . . . . . . . . . . . .00* .01 .05
------- -------- --------
Investment income - net . . . . . . . . . . . . . . .64 .85 .76
Realized and unrealized loss on investments - net . - (.01) -
------- -------- --------
Net increase in net asset value resulting from .64 .84 .76
operations . . . . . . . . . . . . . . . . . . . .
Dividends to Shareholders:
Investment income - net . . . . . . . . . . . . . . (.64) (.85) (.76)
-------- --------- ---------
Net Asset Value:
Total decrease in net asset value . . . . . . . . . - (.01) -
Beginning of period . . . . . . . . . . . . . . . . 9.99 10.00 10.00
------- -------- --------
End of period . . . . . . . . . . . . . . . . . . . $ 9.99 $ 9.99 $ 10.00
======= ======== ========
Number of shares outstanding at end of period (in
thousands) . . . . . . . . . . . . . . . . . . . . 83,551 170,753 172,772
======= ======== ========
Significant Ratios:
Total expenses to average net assets . . . . . . . 1.41% 1.33% 1.35%**
======= ======== ======
Total expenses, net of reimbursement, to average net
assets . . . . . . . . . . . . . . . . . . . . . . 1.39% 1.27% .79%**
======= ======== ======
Investment income - net, to average net assets . . 6.58% 8.44% 9.06%**
======= ======== ======
Portfolio turnover . . . . . . . . . . . . . . . . 46.48% 58.22% 29.61%
======= ======== =======
+ Commencement of Operations.
* Includes a reimbursement amount of less than $.01 per share.
**Annualized.
</TABLE>
See Notes to Financial Statements. 11
<PAGE>
<TABLE> <CAPTION>
Merrill Lynch Prime Fund, Inc. For the Year Ended August 31,
-----------------------------
Statements of Changes in Net Assets 1992 1991
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income-net . . . . . . . . . $80,009,488 $ 141,872,531
Realized loss on investments-net . . . (28,596) -
Change in unrealized depreciation on
investments-net . . . . . . . . . . . . 133,330 (2,128,135)
---------- -------------
Net increase in net assets resulting
from operations . . . . . . . . . . . . 80,114,222 139,744,396
---------- -------------
Dividends to Shareholders (Note If):
Investment income-net . . . . . . . . . (80,009,488) (141,872,531)
------------ -------------
Net decrease in net assets resulting
from dividends to Shareholders . . . . . (80,009,488) (141,872,531)
------------ -------------
Capital Share Transactions (Note 4):
Net decrease in net assets derived from
capital share transactions . . . . . . . (871,150,138) (20,235,775)
------------- ------------
Net Assets:
Total decrease in net assets . . . . . (871,045,404) (22,363,910)
Beginning of year . . . . . . . . . . . 1,705,360,479 1,727,724,389
------------- -------------
End of year . . . . . . . . . . . . . . $834,315,075 $1,705,360,479
============ ==============
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Prime Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a continuously offered, non-
diversified, closed-end management investment company.
(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 for the Fund's investment. Because
agents and intermediaries are primarily commercial banks, the Fund's
investment in corporate loans at August 31, 1992 could be considered
to be concentrated in commercial banking.
(b) Valuation of Investments - Loan interests and common
stock are valued at fair value. Fair value is determined in good
faith by or under the direction of the Board of Directors of the
Fund. Since Loan Interests are purchased and sold primarily at par
value, the Fund values the Loan Interests at par, unless Merrill
Lynch Asset Management ("MLAM") determines par does not represent
fair value. In the event such a determination is made, fair value
will be determined in accordance with guidelines approved by the
Fund's Board of Directors. Short-term securities are valued at
amortized cost which approximates market.
(c) 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.
(d) Security transactions and investment income -
Security transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income is recognized on
the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis. Facility
fees are recognized as income over the term of the related loan.
(e) Deferred organization expenses and prepaid
registration fees - Deferred organization expenses are amortized on
a straight-line basis over a five-year period. Prepaid registration
fees are charged to expense as the related shares are issued.
12
<PAGE>
(f) 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. MLAM is the name under which Merrill Lynch Investment
Management, Inc. ("MLIM") does business. MLIM is an indirect
wholly-owned subsidiary of Merrill Lynch & Co., Inc.
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 0.95% of the Fund's average daily net assets. The Fund also
has an Administrative Services Agreement with MLAM whereby MLAM will
receive a fee equal to an annual rate of 0.25% 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. The
Investment Advisory Agreement obligates MLAM to reimburse the Fund
to the extent the Fund's expenses (excluding interest, taxes,
brokerage fees, commissions, and extraordinary items) exceed the
lesser of a) 2.0% of the Fund's average daily net assets or b) 2.5%
of the Fund's first $30 million of average daily net assets, 2.0% of
the next $70 million of average daily net assets, and 1.5% of the
average daily net assets in excess thereof. For the year ended
August 31, 1992, MLAM earned fees of $14,546,889, of which $232,333
was waived.
Financial Data Services, Inc. ("FDS"), a wholly-owned
subsidiary of Merrill Lynch & Co., Inc., 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 MLIM, MLFD, FDS, or Merrill Lynch, Pierce,
Fenner & Smith Incorporated, a wholly-owned subsidiary of Merrill
Lynch & Co., Inc.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the year ended August 31, 1992, were $471,317,548
and $1,178,017,835, respectively.
13
<PAGE>
Net realized and unrealized losses as of August 31, 1992 were
as follows:
Realized Unrealized
Losses Gains
(Losses)
Short-term investments . . $(28,596) --
Corporate loans . . . . . . -- $(2,583,770)
Common stock . . . . . . . -- 588,965
-------- -----------
Total . . . . . . . . . . . $(28,596) $(1,994,805)
======== ===========
As of August 31, 1992, net unrealized depreciation for Federal
income tax purposes aggregated $1,994,805, of which $588,965 related
to appreciated securities and $2,583,770 related to depreciated
securities. The aggregate cost of investments at August 31, 1992
for Federal income tax purposes was $835,586,155.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Year Ended Dollar
August 31, 1992 Shares Amount
Shares sold . . . . . . . . . 10,536,024 $ 105,252,973
Shares issued to shareholders
in reinvestment of
dividends . . . . . . . . . . 3,958,371 39,541,885
------------- ---------------
Total issued . . . . . . . . (14,494,395) 144,794,858
Shares tendered . . . . . . . (101,696,196) (1,015,944,996)
-------------- ---------------
Net decrease . . . . . . . . (87,201,801) $ (871,150,138)
============= ===============
For the Year Ended Dollar
August 31, 1991 Shares Amount
Shares sold . . . . . . . . . . 32,513,648 $ 325,105,033
Shares issued to shareholders
in reinvestment of
dividends . . . . . . . . . . . 7,040,811 70,397,122
------------ -------------
Total issued . . . . . . . . . 39,554,459 395,502,155
Shares tendered . . . . . . . . (41,573,793) (415,737,930)
----------- -------------
Net decrease . . . . . . . . . (2,019,334) $ (20,235,775)
============ ==============
5. Unfunded Loan Interests:
As of August 31, 1992, the Fund had unfunded loan
commitments of $21,317,720, which would be extended at the option
of the borrower, pursuant to the following loan agreements:
14
<PAGE>
Unfunded
Commitment
Borrower (in thousands)
Ann Taylor, Inc. . . . . . . . . . $3,750
Gulfstream Corp. . . . . . . . . . 9,038
Northwest Airlines, Inc. . . . . . 2,680
Supermarkets General Corp. . . . . 5,056
Sweetheart Holdings, Inc. . . . . . 794
6. Short-Term Borrowings:
On March 23, 1992, the Fund entered into a one-year loan
commitment in the amount of $150,000,000, bearing interest at the
Federal Funds Rate plus 1% - 3% on the outstanding balance. From
March 23, 1992 to April 7, 1992, the maximum amount borrowed was
$25,000,000, the average amount outstanding was $18,750,000, and
the daily weighted average interest rate was 5.025%. For the
year ended August 31, 1992, facility and commitment fees
aggregated approximately $176,000.
7. Subsequent Events:
The Fund began a quarterly tender offer on September 21,
1992, which will end on October 19, 1992.
15
EXHIBIT (g)(3)
<PAGE>
EXHIBIT (g)(3)
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Schedule of Investments as of February 28, 1994 (unaudited) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Airlines--3.35% Northwest Airlines, Inc., Term Loan, due 9/15/97:
6.1875% to 3/08/94 $ 4,776 $ 4,776
6.125% to 4/20/94 9,327 9,327
6.1875% to 6/21/94 4,403 4,403
6.1875% to 7/20/94 3,731 3,731
6.50% to 8/10/94 1,836 1,836
-------- --------
24,073 24,073
Communications Magnavox Electronic Systems Co., Term Loan,
Equipment--0.86% due 9/30/2000, 6.6875% to 5/03/94 6,189 6,189
Computer-Related Anacomp, Inc., Term Loan, due 3/31/96, 6.00% to 4/26/94 13,354 13,354
Services--1.86%
Computing Equipment Lexmark Holdings, US, Term Loan, due 3/27/98:
Manufacturing--2.56% 5.875% to 3/31/94 10,248 10,248
5.875% to 7/29/94 8,155 8,155
-------- --------
18,403 18,403
Corporate Aircraft Allison Engine Co., Term Loan, due 12/31/98, 6.31% to 6/06/94 25,000 25,000
Manufacturing--8.87% Aviall Inc., Term Loan B, due 11/30/2000:
6.57% to 4/07/94 3,529 3,529
6.76% to 6/07/94 8,824 8,824
6.80% to 8/08/94 2,647 2,647
Gulfstream Corp., Revolving Credit Loan, due 3/31/98, 5.50% to 3/31/94 3,154 3,154
Gulfstream Corp.:
Term Loan, due 3/31/97, 5.50% to 4/13/94(1) 11,373 11,373
Term Loan, due 3/31/98, 6.50% to 3/08/94 9,260 9,260
-------- --------
63,787 63,787
<PAGE>
Electrical Instruments Berg Electronics Inc., Term Loan, due 3/31/2000:
& Controls--1.78% 7.50%(1) 3 3
6.13% to 3/29/94 12,811 12,811
-------- --------
12,814 12,814
Grocery--7.86% Big V Supermarkets Inc., Term Loan B, due 3/15/2000, 6.625% to 8/15/94 10,400 10,400
Carr-Gottstein Foods Co., Term Loan B, due 12/31/2000, 5.63% to 3/14/94 10,000 10,000
Grand Union Company, Term Loan B, due 6/30/98:
8.00%(1) 48 48
6.9375% to 3/09/94 6,667 6,667
7.00% to 5/16/94 6,333 6,333
Pathmark Stores Inc., Term Loan, due 10/31/1999, 6.25% to 4/26/94 5,000 5,000
Ralph's Grocery Company, Term Loan, due 6/30/98:
5.9375% to 3/04/94 518 518
6.25% to 3/07/94 7,715 7,715
6.125% to 3/14/94 603 603
6.1875% to 3/23/94 3,616 3,616
6.25% to 4/22/94 301 301
6.1875% to 5/09/94 5,328 5,328
-------- --------
56,529 56,529
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Schedule of Investments as of February 28, 1994 (unaudited) (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Inorganic Pigments--2.08% Hilton Davis Chemical Co., Term Loan A, due 9/09/98, 6.125% to 3/15/94 $ 1,639 $ 1,639
Hilton Davis Chemical Co., Term Loan B, due 9/09/2000, 6.625% to 3/15/94 8,333 8,333
Inspec Technologies, Term Loan B, due 12/02/2000, 5.75% to 3/01/94 5,000 5,000
-------- --------
14,972 14,972
Liquid Gas Petrolane, Inc., Term Loan, due 12/31/99:
Distribution--4.42% 5.4375% to 3/28/94 1,586 1,586
5.875% to 5/31/94 1,297 1,297
5.50% to 7/28/94 28,889 28,889
-------- --------
31,772 31,772
<PAGE>
Manufacturing-- American Standard, Inc., Term Loan A, due 6/01/2000, 6.50% to 6/02/94 25,000 25,000
Diversified--7.04% Joy Technologies, Inc., Term Loan B, due 12/31/98, 6.5625% to 5/27/94 7,837 7,837
The Pullman Co., Inc., Term Loan, due 9/30/96:
7.25%(1) 240 240
7.50%(1) 571 571
5.625% to 3/15/94 1,181 1,181
5.875% to 3/15/94 2,810 2,810
5.625% to 3/29/94 2,067 2,067
5.875% to 3/29/94 4,918 4,918
5.50% to 4/14/94 886 886
5.75% to 4/14/94 2,108 2,108
5.6875% to 5/09/94 886 886
5.9375% to 5/09/94 2,108 2,108
-------- --------
50,612 50,612
Manufacturing-- Heileman Acquisition Company, Term Loan B, due 12/31/2000, 8.00%(1) 10,000 10,000
Food & Beverage--5.53% President Baking Co., Inc., Term Loan B, due 9/30/2000, 6.0625% to 3/29/94 5,000 5,000
Specialty Foods Corp., Term Loan B, due 8/31/99, 6.63% to 4/18/94 24,800 24,800
-------- --------
39,800 39,800
Packaging--1.38% IVEX Packaging Corp., Term Loan B, due 12/31/99:
8.25%(1) 43 43
6.88% to 3/24/94 7,143 7,143
7.38% to 8/24/94 2,714 2,714
-------- --------
9,900 9,900
Paper Products--12.96% ++Fort Howard Corp., Senior Secured Notes, due 9/11/98, 6.38% to 3/12/94 5,000 5,000
++Fort Howard Corp., Senior Secured Notes, due 9/11/2000, 6.88% to 3/12/94 20,000 20,000
Fort Howard Corp., Term Loan, due 12/31/96:
7.375%(1) 52 52
7.50%(1) 14 14
5.625% to 5/31/94 1,744 1,744
5.75% to 5/31/94 473 473
++Jefferson Smurfit/Container Corp. of America, Senior Secured Notes,
due 12/01/98, 6.25% to 3/01/94 23,988 23,988
Jefferson Smurfit/Container Corp. of America, Term Loan, due 12/31/97:
5.69% to 3/18/94 13,814 13,814
5.69% to 3/25/94 8 8
6.50% to 3/28/94 10,063 10,063
Silgan Corp., Term Loan B, due 9/15/96:
6.56% to 3/07/94 5,000 5,000
6.63% to 5/09/94 5,000 5,000
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Schedule of Investments as of February 28, 1994 (unaudited) (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Paper Products Stone Container, Canadian, Tender Loan, due 3/01/97:
(concluded) 8.00%(1) $ 15 $ 15
6.50% to 3/08/94 573 573
6.375% to 3/14/94 2,854 2,854
6.50% to 3/28/94 530 530
Stone Container, Canadian, Term Loan, due 3/01/97, 6.50% to 3/28/94 387 387
Stone Container, US, Term Loan, due 3/01/97:
8.00%(1) 14 14
6.4375% to 3/18/94 3,174 3,174
6.4375% to 3/24/94 482 482
-------- --------
93,185 93,185
Restaurants--1.25% TW Services, Term Loan, Facility A2, due 8/15/95, 6.1875% to 3/28/94 5,610 5,610
TW Services, Term Loan, Facility A3, due 8/15/95, 6.1875% to 3/28/94 3,404 3,404
-------- --------
9,014 9,014
Retail--Apparel--3.16% Saks & Co., Term Loan B, due 6/30/2000, 6.69% to 8/09/94 22,750 22,750
Retail--
Convenience Stores--2.53% Circle K Acquisitions Corp., Term Loan A, due 4/30/98, 6.00% to 3/28/94 4,848 4,848
Circle K Acquisitions Corp., Term Loan B, due 4/30/2000:
6.50% to 3/28/94 3,556 3,556
6.4375% to 4/27/94 9,778 9,778
-------- --------
18,182 18,182
Retail--Drug Stores--7.16% Duane Reade, Term Loan A, due 9/30/97:
6.50% to 3/28/94 768 768
6.75% to 5/31/94 12,835 12,835
Duane Reade, Term Loan B, due 9/30/99:
7.00% to 3/28/94 333 333
7.25% to 5/31/94 9,667 9,667
Hook-SupeRx, Inc., Term Loan, Series C, due 7/31/2000, 6.195% to 3/30/94 13,697 13,697
Jack Eckerd Corp., Term Loan B, due 6/14/2000, 6.75% to 5/31/94 14,174 14,174
-------- --------
51,474 51,474
Retail--Record & Tape--4.17% Camelot Music, Inc., Term Loan B, due 8/31/2001:
6.50% to 5/17/94 8,437 8,437
6.75% to 8/17/94 14,062 14,062
Camelot Music, Inc., Term Loan C, due 8/31/2002, 6.81% to 3/17/94 7,500 7,500
-------- --------
29,999 29,999
<PAGE>
Search & Navigation Sperry Marine, Inc., Term Loan, due 11/15/2000, 6.5625% to 3/23/94 10,500 10,500
Equipment--1.46%
Specialty Chemicals--1.33% OSI Specialties, Inc., Term Loan, due 6/30/2000:
6.19% to 3/22/94 4,773 4,773
6.32% to 5/23/94 4,773 4,773
-------- --------
9,546 9,546
Timber Tracts--1.37% Crown Pacific Inland, Term Loan A, due 1/02/96, 6.125% to 3/31/94 1,515 1,515
Crown Pacific Inland, Term Loan B, due 10/31/98, 6.125% to 4/05/94 8,333 8,333
-------- --------
9,848 9,848
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Schedule of Investments as of February 28, 1994 (unaudited) (concluded) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Tools--4.40% Desa International Inc., Term Loan B, due 11/30/2000, 6.75% to 6/27/94 $ 10,000 $ 10,000
Thermadyne Company, Term Loan B, due 2/01/2001, 7.75%(1) 21,625 21,625
-------- --------
31,625 31,625
Warehousing-- Pierce Leahy Corp., Term Loan A, due 1/31/2000:
Business Records--1.70% 6.625% to 4/29/94 156 156
6.50% to 6/07/94 4,581 4,581
Pierce Leahy Corp., Term Loan B, due 7/31/2000, 6.50% to 3/07/94 7,500 7,500
-------- --------
12,237 12,237
Total Senior Secured Floating Rate Loan Interests
(Cost--$640,565)--89.08% 640,565 640,565
<CAPTION>
Short-Term Securities
<S> <S> <C> <C>
Commercial Paper**--10.34% General Electric Capital Corp., 3.40% due 3/01/94 34,459 34,459
Matterhorn Capital Corp., 3.37% due 3/18/94 20,000 19,968
PHH Corp., 3.40% due 3/21/94 20,000 19,962
Total Short-Term Securities (Cost--$74,389)--10.34% 74,459 74,389
<CAPTION>
Shares
Common Stock Held
<S> <S> <C> <C>
Restaurants--0.06% ++TW Services, Inc. (Cost--$0)--0.06% 44 409
Total Common Stock (Cost--$0)--0.06% 44 409
Total Investments (Cost--$714,954)--99.48% 715,363
Other Assets Less Liabilities--0.52% 3,740
--------
Net Assets--100.00% $719,103
========
<PAGE>
<FN>
(1)Index is based on the prime rate of a US bank, which is subject to change daily.
*The interest rates on senior secured floating rate loan interests are subject to
change periodically based on the change in the prime rate of a US Bank, LIBOR (London
Interbank Offered Rate), or, in some cases, another base lending rate. The interest rates
shown are those in effect at February 28, 1994.
**Commercial Paper is traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
++Restricted securities as to resale. The value of the Fund's investment in restricted
securities was approximately $49,397,000, representing 6.87% of net assets.
Cost Acquisition
Senior Secured Notes (In Thousands) Date
Fort Howard Corp. $25,000 9/11/91
Jefferson Smurfit/Container
Corp. of America 23,988 4/24/91
Cost Acquisition
Common Stock (In Thousands) Date
TW Services, Inc. $0 6/03/91
The closing bid price for TW Services, Inc. Common Stock on 2/28/94
was $11.50 per share.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Statement of Assets and Liabilities as of February 28, 1994
<CAPTION>
Assets:
<S> <C> <C>
Investments, at value (identified cost--$714,954,184) (Note 1b) $715,363,124
Cash 663,230
Receivables:
Capital shares sold $ 6,801,637
Interest 4,869,454
Commitment fees 51,370 11,722,461
------------
Deferred facility fees (Note 1d) 1,527
Deferred organization expenses (Note 1e) 209,384
Prepaid registration fees and other assets (Note 1e) 159,718
------------
Total assets 728,119,444
------------
<PAGE>
Liabilities:
Payables:
Dividends to shareholders (Note 1f) 576,845
Investment adviser (Note 2) 513,430
Administrator (Note 2) 135,113 1,225,388
------------
Deferred income (Note 1d) 7,020,705
Accrued expenses and other liabilities 770,066
------------
Total liabilities 9,016,159
------------
Net assets $719,103,285
============
Net Assets Consist of:
Common Stock, par value $.10 per share; 1,000,000,000 shares authorized $ 7,179,175
Paid-in capital in excess of par 711,542,336
Accumulated realized capital losses--net (Note 7) (27,166)
Unrealized appreciation on investments--net (Note 3) 408,940
------------
Net Assets--Equivalent to $10.02 per share based on 71,791,752 capital shares outstanding $719,103,285
============
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Statement of Operations
<CAPTION>
For the Six Months Ended
February 28, 1994
<S> <C> <C>
Investment Income (Note 1d):
Interest and discount earned $ 20,720,458
Facility and other fees 3,305,418
------------
Total income 24,025,876
Expenses:
Investment advisory fees (Note 2) $ 3,327,894
Administrative fees (Note 2) 875,761
Transfer agent fees (Note 2) 249,871
Borrowing costs (Note 6) 106,306
Professional fees 91,898
Amortization of organization expenses (Note 1e) 82,751
Tender offer costs 49,186
Printing and shareholder reports 38,561
Custodian fees 35,183
Registration fees (Note 1e) 33,283
Directors' fees and expenses 21,884
Accounting services (Note 2) 17,803
Other 83,243
------------
Total expenses 5,013,624
------------
Investment income--net 19,012,252
Realized Loss on Investments--Net (Notes 1d & 3) (396)
Change in Unrealized Appreciation on Investments--Net (Note 3) 8,890
------------
Net Increase in Net Assets Resulting from Operations $ 19,020,746
============
<PAGE>
See Notes to Financial Statements.
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Statements of Changes in Net Assets
<CAPTION>
For the Six For the Year
Months Ended Ended
Increase (Decrease) in Net Assets: February 28, 1994 August 31, 1993
<S> <C> <C>
Operations:
Investment income--net $ 19,012,252 $ 39,934,642
Realized gain (loss) on investments--net (396) 2,039
Change in unrealized appreciation on investments--net 8,890 2,394,855
------------ ------------
Net increase in net assets resulting from operations 19,020,746 42,331,536
------------ ------------
Dividends to Shareholders (Note 1f):
Investment income--net (19,012,252) (39,934,642)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (19,012,252) (39,934,642)
------------ ------------
Capital Share Transactions (Note 4):
Net increase (decrease) in net assets derived from capital share transactions 5,795,134 (123,412,312)
------------ ------------
Net Assets:
Total increase (decrease) in net assets 5,803,628 (121,015,418)
Beginning of period 713,299,657 834,315,075
------------ ------------
End of period $719,103,285 $713,299,657
============ ============
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Statement of Cash Flows
<CAPTION>
For the Six
Months Ended
February 28, 1994
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 19,020,746
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Increase in receivables (584,619)
Decrease in other assets 25,139
Increase in other liabilities 831,088
Realized and unrealized gain (loss) on investments--net (8,494)
------------
Net cash provided by operating activities 19,283,860
------------
<PAGE>
Cash Used for Investing Activities:
Proceeds from principal payments and sales of loan interests 212,849,649
Purchases of loan interests (247,478,653)
Proceeds from sales and maturities of short-term investments--net 33,514,164
------------
Net cash used for investment activities (1,114,840)
------------
Cash Used in Financing Activities:
Capital share activity:
Cash receipts on capital shares sold 90,806,074
Cash payments on capital shares tendered (99,395,818)
Dividends paid to shareholders (8,916,046)
------------
Net cash used in financing activities (17,505,790)
------------
Cash:
Net increase in cash 663,230
Cash at beginning of period --
------------
Cash at end of period $ 663,230
============
Non-cash Financing Activities:
Capital shares issued in reinvestment of dividends paid to shareholders $ 10,348,496
============
See Notes to Financial Statements.
</TABLE>
<TABLE>
Merrill Lynch Senior Floating Rate Fund
Financial Highlights
<CAPTION>
For the
For the Period
The following per share data and ratios have been derived Six Months Nov. 3,
from information provided in the financial statements. Ended For the Year Ended 1989++ to
Feb. 28, August 31, Aug. 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net asset value, beginning of period $ 10.02 $ 9.99 $ 9.99 $ 10.00 $ 10.00
------- ------- ------- ------- -------
Investment income--net .27 .53 .64 .85 .76
Realized and unrealized gain (loss) on investments--net -- .03 -- (.01) --
------- ------- ------- ------- -------
Total from investment operations .27 .56 .64 .84 .76
------- ------- ------- ------- -------
Less Dividends:
Investment income--net (.27) (.53) (.64) (.85) (.76)
------- ------- ------- ------- -------
Total dividends (.27) (.53) (.64) (.85) (.76)
------- ------- ------- ------- -------
Net asset value, end of period $ 10.02 $ 10.02 $ 9.99 $ 9.99 $ 10.00
======= ======= ======= ======= =======
<PAGE>
Total Investment Return:*
Based on net asset value per share 2.76%+++ 5.74% 6.58% 8.79% 7.63%+++
======= ======= ======= ======= =======
Ratios to Average Net Assets:
Expenses, net of reimbursement 1.43%** 1.47% 1.39% 1.27% .79%**
======= ======= ======= ======= =======
Expenses 1.43%** 1.47% 1.41% 1.33% 1.35%**
======= ======= ======= ======= =======
Investment income--net 5.43%** 5.27% 6.58% 8.44% 9.06%**
======= ======= ======= ======= =======
Supplemental Data:
Net assets, end of period (in millions) $ 719 $ 713 $ 834 $ 1,705 $ 1,728
======= ======= ======= ======= =======
Portfolio turnover 35.22% 90.36% 46.48% 58.22% 29.61%
======= ======= ======= ======= =======
<FN>
*Total investment returns exclude the effects of sales loads. The Fund is a continuously offered closed-end fund,
the shares of which are offered at net asset value. Therefore, no separate market exists.
**Annualized.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered non-diversified, closed-end management
investment company.
(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 for the
Fund's investment. Because agents and intermediaries are
primarily commercial banks, the Fund's investment in corporate
loans at February 28, 1994 could be considered to be
concentrated in commercial banking.
<PAGE>
(b) Valuation of investments--Loan Interests and common stocks
are valued at fair value. Fair value is determined in good faith
by or under the direction of the Board of Directors of the Fund.
Since Loan Interests are purchased and sold primarily at par
value, the Fund values the Loan Interests at par, unless Merrill
Lynch Asset Management, L.P. ("MLAM") determines par does not
represent fair value. In the event such a determination is made,
fair value will be determined in accordance with guidelines
approved by the Fund's Board of Directors. Short-term securities
are valued at amortized cost which approximates market.
(c) 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.
(d) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are
entered into (the trade dates). Interest income is recognized on
the accrual basis. Realized gains and losses on security
transactions are determined on the identified cost basis.
Facility fees are accreted into income over the term of the
related loan.
(e) Deferred organization expenses and pre-paid registration
fees--Deferred organization expenses are amortized on a straight-
line basis over a five-year period. Prepaid registration fees are
charged to expense as the related shares are issued.
(f) 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. Effective January 1, 1994, the investment advisory business
of MLAM was reorganized from a corporation to a limited partnership.
Both prior to and after the reorganization, ultimate control of
MLAM was vested with Merrill Lynch & Co., Inc. ("ML & Co."). The
general partner of MLAM is Princeton Services, Inc., an indirect
wholly-owned subsidiary of ML & Co. The limited partners are ML &
Co. and Merrill Lynch Investment Management, Inc. ("MLIM') which
is also an indirect wholly-owned subsidiary of ML & Co. The Fund
has also entered into a Distribution Agreement and a Distribution
Plan with Merrill Lynch Funds Distributor, Inc. ("MLFD" or "Distri-
butor"), a wholly-owned subsidiary of MLIM.
<PAGE>
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 0.95% of the Fund's average daily net assets. The Fund also
has an Administrative Services Agreement with MLAM whereby MLAM
will receive a fee equal to an annual rate of 0.25% 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. The Investment Advisory Agreement
obligates MLAM to reimburse the Fund to the extent the Fund's
expenses (excluding interest, taxes, brokerage fees, commissions,
and extraordinary items) exceed the lesser of a) 2.0% of the
Fund's average daily net assets or b) 2.5% of the Fund's first
$30 million of average daily net assets, 2.0% of the next $70
million of average daily net assets, and 1.5% of the average
daily net assets in excess thereof. 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 MLIM, MLFD, FDS, or Merrill Lynch, Pierce, Fenner &
Smith Incorporated, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term
securities, for the six months ended February 28, 1994 were
$247,478,653 and $212,849,649, respectively.
Net realized and unrealized gains (losses) as of February 28,
1994 were as follows:
Realized Unrealized
Losses Gains
Short-term investments $ (396) --
Common stock -- $ 408,940
------------ ------------
Total $ (396) $ 408,940
============ ============
As of February 28, 1994, net unrealized appreciation
for financial reporting and Federal income tax
purposes aggregated $408,940, all of which related
to appreciated securities. The aggregate cost of
investments at February 28, 1994 for Federal income
tax purposes was $714,954,184.
<PAGE>
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
February 28, 1994 Shares Amount
Shares sold 9,465,384 $ 94,842,456
Shares issued to share-
holders in reinvestment
of dividends 1,032,784 10,348,496
----------- -------------
Total issued 10,498,168 105,190,952
Shares tendered (9,919,742) (99,395,818)
----------- -------------
Net increase 578,426 $ 5,795,134
=========== =============
For the Year Ended Dollar
August 31, 1993 Shares Amount
Shares sold 14,572,615 $ 145,750,963
Shares issued to share-
holders in reinvestment
of dividends 2,112,254 21,124,039
----------- -------------
Total issued 16,684,869 166,875,002
Shares tendered (29,022,869) (290,287,314)
----------- -------------
Net decrease (12,338,000) $(123,412,312)
=========== =============
5. Unfunded Loan Interests:
As of February 28, 1994, the Fund had unfunded loan commitments
of $16,722,000, which would be extended at the option of the
borrower, pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Gulfstream Corp. $7,038
Northwest Airlines, Inc. 6,308
Thermadyne Company 3,375
6. Short-Term Borrowings:
On March 17, 1993, the Fund extended the loan commitment. The
commitment was reduced from $150,000,000 to $100,000,000, bearing
interest at the Federal Funds rate plus 1%--3% on the outstanding
balance. For the six months ended February 28, 1994, facility and
commitment fees aggregated approximately $106,306.
<PAGE>
7. Capital Loss Carryforward:
At August 31, 1993, the Fund had a net capital loss carryforward
of approximately $34,000, all of which expires in 2001. These
will be available to offset like amounts of any future taxable
gains.
8. Subsequent Event:
The Fund began a quarterly tender offer on March 21, 1994, which
will end on April 15, 1994.