<PAGE>
MERRILL LYNCH PRIME FUND, INC.
(DOING BUSINESS AS MERRILL LYNCH SENIOR FLOATING RATE FUND)
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
----------------
NOTICE OF MEETING OF STOCKHOLDERS
FEBRUARY 25, 1994
----------------
To The Stockholders Of
Merrill Lynch Prime Fund, Inc.:
Notice is hereby given that a Meeting of Stockholders (the "Meeting") of
Merrill Lynch Prime Fund, Inc. (the "Fund") will be held at the offices of
Merrill Lynch Asset Management, 800 Scudders Mill Road, Plainsboro, New Jersey,
on Friday, February 25, 1994 at 10:30 A.M. for the following purposes:
(1) To elect six Directors to serve for an indefinite term;
(2) To consider and act upon a proposal to ratify the selection of
Deloitte & Touche to serve as independent auditors of the Fund for its
fiscal year ending August 31, 1994;
(3) To consider and act upon a proposal to amend the Fund's Articles of
Incorporation to effect the change of the name of the Fund from "Merrill
Lynch Prime Fund, Inc." to "Merrill Lynch Senior Floating Rate Fund, Inc."
The Fund currently does business as "Merrill Lynch Senior Floating Rate
Fund"; and
(4) To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 20, 1993
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournment thereof.
A complete list of the stockholders of the Fund entitled to vote at the
Meeting will be available and open to the examination of any stockholder of the
Fund for any purpose germane to the Meeting during ordinary business hours from
and after February 11, 1994, at the office of the Fund, 800 Scudders Mill Road,
Plainsboro, New Jersey 08536. You are cordially invited to attend the Meeting.
Stockholders who do not expect to attend the Meeting in person are requested to
complete, date and sign the enclosed from of proxy and return it promptly in
the envelope provided for this purpose. The enclosed proxy is being solicited
on behalf of the Board of Directors of the Fund.
By Order of the Board of
Directors
Patrick D. Sweeney
Secretary
Plainsboro, New Jersey
Dated: January 10, 1994
<PAGE>
PROXY STATEMENT
----------------
MERRILL LYNCH PRIME FUND, INC.
(DOING BUSINESS AS MERRILL LYNCH SENIOR FLOATING RATE FUND)
BOX 9011
PRINCETON, NEW JERSEY 08543-9011
----------------
MEETING OF STOCKHOLDERS
FEBRUARY 25, 1994
----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Merrill Lynch Prime Fund, Inc.,
a Maryland corporation (the "Fund"), to be voted at a Meeting of Stockholders
of the Fund (the "Meeting"), to be held at the offices of Merrill Lynch Asset
Management ("MLAM"), 800 Scudders Mill Road, Plainsboro, New Jersey, on Friday,
February 25, 1994 at 10:30 A.M. The approximate mailing date of this Proxy
Statement is January 12, 1994.
All properly executed proxies received prior to the Meeting will be voted at
the Meeting in accordance with the instructions marked thereon or otherwise as
provided therein. Unless instructions to the contrary are marked, proxies will
be voted for the election of the six Directors named herein to serve for an
indefinite term; for the ratification of the selection of independent auditors
to serve for the Fund's current fiscal year; and for the proposal to amend the
articles of incorporation of the Fund to change the name of the Fund. Any proxy
may be revoked at any time prior to the exercise thereof by giving written
notice to the Secretary of the Fund.
The Board of Directors has fixed the close of business on December 20, 1993
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting and at any adjournment thereof. Stockholders on the
record date will be entitled to one vote for each share held, with no shares
having cumulative voting rights. As of December 20, 1993, the Fund had
outstanding 70,742,381 shares of common stock, par value $.10 per share. To the
knowledge of the Fund, as of December 20, 1993 no person was the beneficial
owner of more than five percent of its outstanding shares.
The Board of Directors of the Fund knows of no business other than that
mentioned in Items 1 through 3 of the Notice of Meeting which will be presented
for consideration at the Meeting. If any other matter is properly presented, it
is the intention of the persons named in the enclosed proxy to vote in
accordance with their best judgment.
<PAGE>
1. ELECTION OF DIRECTORS
At the Meeting, six Directors will be elected to serve for an indefinite term
until their successors are elected and qualified.
There normally will be no meeting of stockholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by stockholders, at which time the Directors
then in office will call a special meeting of stockholders for the election of
Directors. Stockholders may, in accordance with the terms of the By-Laws of the
Fund, cause a meeting to be held for the purpose of voting on the removal of
Directors at the request of 10% of the outstanding shares of the Fund. A
Director elected by the holders of capital stock may be removed only for cause
by a vote of the holders of at least two-thirds of the shares of the Fund
entitled to vote on the matter. See "Additional Information--Meetings of
Stockholders" below.
It is the intention of the persons named in the enclosed proxy to nominate
and vote in favor of the election of the persons listed below.
Each nominee listed below has consented to serve as a Director. The Board of
Directors of the Fund knows of no reasons why any of these nominees will be
unable to serve, but in the event of any such unavailability, the proxies
received will be voted for such substitute nominee or nominees as the Board of
Directors may recommend.
Certain information concerning the nominees is set forth as follows:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
PRINCIPAL OCCUPATIONS BENEFICIALLY
NAME AND ADDRESS OF DURING PAST FIVE YEARS DIRECTOR OWNED AT
NOMINEE AGE AND PUBLIC DIRECTORSHIPS(1) SINCE DECEMBER 20, 1993
------------------- --- --------------------------------- -------- -----------------
<S> <C> <C> <C> <C>
Ronald W. Forbes(1)(2).. 53 Professor of Finance, School of 1989 -0-
School of Business BA Business, State University of
309 New York at Albany, since 1989,
State University of New and Associate Professor prior
York at Albany thereto; Member, Task Force on
1400 Washington Avenue Municipal Securities Markets,
Albany, New York 12222 Twentieth Century Fund.
Cynthia A. Montgom- 41 Professor, Harvard Business -- -0-
ery(1)................. School since 1989; Associate
Harvard Business School Professor, J.L. Kellogg Graduate
Soldiers Field Road School of Management, Northwest-
Boston, Massachusetts ern University, 1985-1989; As-
02163 sistant Professor, Graduate
School of Business Administra-
tion, the University of Michi-
gan, 1979-1985; Director, UNUM
Corporation.
Charles C. Reilly(1)(2). 62 President and Chief Investment 1990 -0-
9 Hampton Harbor Road Officer of Verus Capital, Inc.
Hampton Bays, New York from 1979 to 1990; Senior Vice
11946 President of Arnhold and S.
Bleichroeder, Inc. from 1973 to
1990; Adjunct Professor, Colum-
bia University Graduate School
of Business since 1990; Adjunct
Professor, Wharton School, Uni-
versity of Pennsylvania, 1990;
Director, Harvard Business
School Alumni Association, since
1991.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
OF THE FUND
PRINCIPAL OCCUPATIONS BENEFICIALLY
NAME AND ADDRESS OF DURING PAST FIVE YEARS DIRECTOR OWNED AT
NOMINEE AGE AND PUBLIC DIRECTORSHIPS(1) SINCE DECEMBER 20, 1993
------------------- --- --------------------------------- -------- -----------------
<S> <C> <C> <C> <C>
Kevin A. Ryan(1)(2)..... 61 Professor of Education at Boston 1992 -0-
127 Commonwealth Avenue University since 1982; Founder
Chestnut Hill, Massa- and current Director of The Bos-
chusetts 02167 ton University Center for the
Advancement of Ethics and Char-
acter.
Richard R. West(1)(2)... 55 Professor of Finance, and Dean 1989 -0-
482 Tepi Drive from 1984 to 1993, New York Uni-
Southbury, Connecticut versity Leonard N. Stern School
06488 of Business Administration; Pro-
fessor of Finance at the Amos
Tuck School of Business Adminis-
tration from 1976 to 1984 and
Dean from 1976 to 1983; Director
of Vornado, Inc. (real estate
holding corporation), Bowne &
Co., Inc. (printer), Smith Co-
rona Corporation (manufacturer
of typewriters and word proces-
sors) and Alexander's Inc.
Arthur Zeikel(1)(3)..... 61 President of MLAM since 1977, 1989 -0-
P.O. Box 9011 Chief Investment Officer thereof
Princeton, New Jersey since 1976 and Director thereof
08543-9011 from 1976 to 1993; President and
Chief Investment Officer of Fund
Asset Management ("FAM") since
1977 and Director thereof from
1977 to 1993; Director of
Princeton Services, Inc.
("Princeton Services") since
1993; an Executive Vice Presi-
dent of Merrill Lynch & Co.,
Inc. ("ML & Co.") since 1990; an
Executive Vice President of Mer-
rill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill
Lynch") since 1990 and a Senior
Vice President from 1985 to
1990.
</TABLE>
- --------
(1) Each of the nominees is a director or trustee of certain other investment
companies for which MLAM or FAM acts as investment adviser. See "Merrill
Lynch Investment Company Directorships" below.
(2) Member of Audit Committee of the Board of Directors.
(3) Interested person, as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), of the Fund.
3
<PAGE>
Committee's and Board of Directors' Meetings. The Board of Directors has a
standing Audit Committee, which consists of the Directors who are not
"interested persons" of the Fund within the meaning of the Investment Company
Act. The principal purpose of the Audit Committee is to review the scope of the
annual audit conducted by the Fund's independent auditors and the evaluation by
such auditors of the accounting procedures followed by the Fund. The non-
interested Directors have retained independent legal counsel to assist them in
connection with these duties. The Board of Directors does not have a nominating
committee.
During the fiscal year ended August 31, 1993, the Board of Directors held
five meetings and the Audit Committee held four meetings. Each of the Directors
then serving attended at least 75% of the total number of meetings of the Board
of Directors, and, if a member, the total number of meetings of the Audit
Committee, held during such period.
Interested Persons. The Fund considers Mr. Zeikel to be an "interested
person" of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act as a result of the position he holds with MLAM and its affiliates.
Mr. Zeikel is the President of the Fund, the President of MLAM and FAM, and a
Director of Princeton Services, the general partner of FAM and MLAM.
Compensation of Directors. MLAM, the investment adviser, pays all
compensation of all officers of the Fund and all Directors of the Fund who are
affiliated with ML&Co. or its subsidiaries. The Fund pays each Director not
affiliated with the investment adviser a fee of $4,000 per year plus $800 per
meeting attended, together with such Director's actual out-of-pocket expenses
relating to attendance at meetings. The Fund also pays each member of its Audit
Committee, which consists of all of the non-affiliated Directors, a fee of
$2,000 per year, together with such Director's out-of-pocket expenses relating
to attendance at meetings. In addition, the Chairman of the Audit Committee
receives an annual fee of $1,000. These fees and expenses aggregated $51,339
for the fiscal year ended August 31, 1993.
Merrill Lynch Investment Company Directorships. MLAM and FAM, act as the
investment adviser for over 90 other registered investment companies. Mr.
Zeikel is a trustee or director of each of these companies except for Merrill
Lynch Series Fund, Inc., Merrill Lynch Institutional Intermediate Fund, Merrill
Lynch Funds for Institutions Series and Merrill Lynch Institutional Tax-Exempt
Fund. Each of the nominees is a director or trustee of Merrill Lynch Utility
Income Fund, Inc., MuniVest Fund, Inc., MuniVest Fund II, Inc., Senior High
Income Portfolio, Inc., Senior High Income Portfolio II, Inc., Taurus
MuniCalifornia Holdings, Inc. and Taurus MuniNew York Holdings, Inc. Messrs.
Forbes, Reilly, Ryan and West are trustees or directors of and Ms. Montgomery
is nominated to be a trustee or director of CMA Money Fund, CMA Treasury Fund,
CMA Tax-Exempt Fund, CMA Government Securities Fund, CMA Multi-State Municipal
Series Trust, CBA Money Fund, Merrill Lynch Strategic Dividend Fund, Merrill
Lynch Municipal Series Trust, Merrill Lynch Corporate Bond Fund, Inc., Merrill
Lynch Municipal Bond Fund, Inc., The Corporate Fund Accumulation Program, Inc.,
The Municipal Fund Accumulation Program, Inc., Merrill Lynch Global Utility
Fund, Inc., Merrill Lynch High Income Municipal Bond Fund, Inc., and Merrill
Lynch Fund for Tomorrow, Inc. In addition, Messrs. Reilly and West are
directors of Merrill Lynch Healthcare Fund, Inc., Merrill Lynch International
Holdings, Inc., Merrill Lynch Latin America Fund, Inc., Merrill Lynch Short-
Term Global Income Fund, Inc., Merrill Lynch Technology Fund, Inc., Merrill
Lynch Global Bond Fund for Investment and Retirement, Merrill Lynch Global
Allocation Fund, Inc., Merrill Lynch Pacific Fund, Inc., Merrill Lynch
Developing Capital Markets Fund, Inc., Merrill Lynch EuroFund, Merrill Lynch
Dragon Fund, Inc., Merrill Lynch International Equity Fund, and Merrill Lynch
Americas Income Fund, Inc.
4
<PAGE>
Officers of the Fund. The Board of Directors has elected seven officers of
the Fund. The following sets forth information concerning each of these
officers:
<TABLE>
<CAPTION>
OFFICER
NAME AND PRINCIPAL OCCUPATION OFFICE AGE SINCE
- ----------------------------- ------ --- -------
<S> <C> <C> <C>
Arthur Zeikel....................................... President 61 1989
President of MLAM since 1977, Chief Investment
Officer thereof since 1976 and Director thereof
from 1976 to 1993; President and Chief Investment
Officer of FAM since 1977 and Director thereof
from 1977 to 1993; Director of Princeton Services
since 1993; Executive Vice President of ML & Co.
since 1990; Executive Vice President of Merrill
Lynch since 1990 and a Senior Vice President from
1985 to 1990.
Terry K. Glenn...................................... Executive Vice 53 1989
Executive Vice President of MLAM and FAM since 1983 President
and Director thereof from 1992 to 1993; Director
of Princeton Services since 1993; President of
Merrill Lynch Funds Distributor, Inc. ("MLFD")
since 1986 and Director thereof since 1991;
President of Princeton Administrators.
N. John Hewitt...................................... Senior Vice 59 1993
Senior Vice President of MLAM and FAM since 1980 President
and Vice President from 1979 to 1980.
R. Douglas Henderson................................ Vice President 36 1990
Vice President of MLAM since 1989; Vice President,
Leveraged Finance Department, Security Pacific
Merchant Bank from 1987 to 1989; Vice President,
Corporate Finance and Banking Department, Security
Pacific Merchant Bank from 1983 to 1987.
Donald C. Burke..................................... Vice President 33 1993
Vice President of MLAM since 1990; employee of
Deloitte & Touche from 1982 to 1990.
Gerald M. Richard................................... Treasurer 44 1989
Senior Vice President and Treasurer of MLAM and FAM
since 1984; Treasurer of MLFD since 1984 and Vice
President since 1981.
Patrick D. Sweeney.................................. Secretary 39 1990
Vice President of MLAM since 1990; Vice President
and Associate Counsel of Security Pacific Merchant
Bank from 1988 to 1990; Lawyer in private practice
from 1981 to 1988.
</TABLE>
Stock Ownership. At December 20, 1993, the Directors and officers of the Fund
as a group (12 persons) owned an aggregate of less than 1/4 of 1% of the Common
Stock of the Fund outstanding at such date. At such date, Mr. Zeikel, a
Director of the Fund, and the officers of the Fund owned an aggregate of less
than 1/4 of 1% of the outstanding shares of common stock of ML & Co.
5
<PAGE>
2. SELECTION OF INDEPENDENT AUDITORS
The Board of Directors of the Fund, including a majority of the Directors who
are not interested persons of the Fund, has selected the firm of Deloitte &
Touche ("D&T"), independent auditors to examine the financial statements of the
Fund for the current fiscal year. The appointment of D&T continues a
relationship with the Fund that began in 1989. The Fund knows of no direct or
indirect financial interest of such firm in the Fund. Such appointment is
subject to ratification or rejection by the stockholders of the Fund. Unless a
contrary specification is made, the accompanying proxy will be voted in favor
of ratifying the selection of such auditors.
D&T also acts as independent auditors for ML & Co. and all of its
subsidiaries and for substantially all of the other investment companies for
which MLAM or FAM acts as investment adviser. The fees received by D&T from
these other entities are substantially greater, in the aggregate, than the
total fees received by it from the Fund. The Board of Directors of the Fund
considered the fact that D&T has been retained as the independent auditors for
ML & Co. and the other entities described above in its evaluation of the
independence of D&T with respect to the Fund.
Representatives of D&T are expected to be present at the Meeting and will
have the opportunity to make a statement if they so desire and to respond to
questions from stockholders.
3. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION OF THE FUND TO
CHANGE THE NAME OF THE FUND FROM "MERRILL LYNCH PRIME FUND, INC." TO
"MERRILL LYNCH SENIOR FLOATING RATE FUND, INC."
At a meeting held on December 8, 1993, the Directors of the Fund approved the
change of the Fund's name from "Merrill Lynch Prime Fund, Inc." to "Merrill
Lynch Senior Floating Rate Fund, Inc." for the reasons discussed below. At that
meeting the Directors also determined to recommend that the Fund solicit, at
the next meeting of shareholders, shareholder approval of an amendment to the
Fund's Articles of Incorporation to effect the name change. In the interim, the
Fund has been doing business under the name "Merrill Lynch Senior Floating Rate
Fund".
As stated in the Fund's prospectus, the Fund's investment objective is
to provide as high a level of current income and such preservation of
capital as is consistent with investment in senior collateralized
corporate loans ("Corporate Loans") primarily in the form of
Participation Interests . . . in Corporate Loans made by banks or other
financial institutions.
The prospectus further states that
[i]t is anticipated that the Corporate Loans will pay interest at rates
which float at a margin above a generally recognized base lending rate,
such as the prime rate of a designated U.S. bank, or which adjust
periodically at a margin above the Certificate of Deposit ("CD") rate
or the London InterBank Offered Rate ("LIBOR").
The terms of the types of Corporate Loans available for investment by the
Fund typically are based on the Prime Rate, LIBOR or the CD rate, plus
specified margins that vary according to each particular base rate. Both LIBOR
and the CD rate generally are lower than the established Prime Rate published
by leading U.S. banks. In the past, under normal market conditions, the margins
for the LIBOR and CD rate borrowing options were established through
negotiation, often at a level higher than the corresponding margin for the
6
<PAGE>
Prime borrowing option, which resulted in approximately equal effective
interest rates, regardless of the borrowing option selected. Since the Fund's
inception, however, the spread between the Prime Rate and LIBOR and the CD rate
has increased to the point where the higher margins for LIBOR and CD-based
pricing options do not compensate for the difference between Prime and the
other base rates.
In light of these changes in base lending rate relationships, the percentage
of the investments available to the Fund where Borrowers pay a margin large
enough to compensate for the gap between the Prime Rate and LIBOR or the CD
rate has declined significantly. Since the net return to the Fund's
shareholders reflects the interest rates paid on Corporate Loans held by the
Fund, such return will vary and, depending on the composition of the Fund's
portfolio and the current relationship among the base lending rates, may or may
not approximate the average published Prime Rate.
In connection with the most recent review of the Fund's prospectus, MLAM
determined to recommend certain changes to the Fund's prospectus disclosure to
reflect these changes in the relationships that have evolved among the base
lending rates on which the interest paid on Corporate Loans is established.
Consistent with these changes, the Investment Adviser also recommended that the
name of the Fund be changed from "Merrill Lynch Prime Fund, Inc." to "Merrill
Lynch Senior Floating Rate Fund, Inc." No changes are recommended to the Fund's
stated investment objective and policies, and the Fund will continue to invest
in Corporate Loans consistent with such objective and policies.
The Directors recommend that the Fund's shareholders vote to amend the Fund's
Articles of Incorporation to effect the name change.
THE INVESTMENT ADVISORY AGREEMENT
On October 12, 1989, the Fund entered into an investment advisory agreement
(the "Investment Advisory Agreement") and an administration agreement (the
"Administration Agreement") with MLAM. On December 5, 1990, the Board of
Directors of the Fund approved the continuance of the Investment Advisory
Agreement and the Administration Agreement for a period of one year. On
December 4, 1991, December 9, 1992, and December 8, 1993, the Board of
Directors of the Fund approved the continuance of the Investment Advisory
Agreement and the Administration Agreement for subsequent periods of one year.
INFORMATION CONCERNING MLAM
Effective January 1, 1994, MLAM was reorganized as a Delaware limited
partnership. MLAM (the general partner of which is Princeton Services, a
wholly-owned subsidiary of ML & Co.) is owned and controlled by ML & Co. and is
located at 800 Scudders Mill Road, Plainsboro, New Jersey 08536. ML & Co. is
located at 250 Vesey Street, New York, New York 10281. The reorganization did
not result in a change of management of MLAM, in any of its personnel, or in an
adverse change in its financial condition. Prior to the reorganization, MLAM
was a Delaware corporation which was a wholly-owned subsidiary of ML & Co. MLAM
or FAM acts as the investment adviser for more than 90 other registered
investment companies. In addition, MLAM offers portfolio management and
portfolio analysis services to individuals and institutions. MLAM's audited
balance sheet for its fiscal year ended December 25, 1992 is appended to this
Proxy Statement as Exhibit A. An unaudited balance sheet for MLAM as of
September 24, 1993 is appended to
7
<PAGE>
this Proxy Statement as Exhibit B. MLAM represents that, to its knowledge,
there has been no material adverse change in its financial condition since
September 24, 1993.
Securities held by the Fund may also be held by, or be appropriate
investments for, other funds or clients (collectively referred to as "clients")
for which MLAM or FAM acts as an investment adviser. Because of
different investment objectives or other factors, a particular security may be
bought for one or more clients when one or more clients are selling the
security. If purchases or sales of securities for the Fund or other clients
arise for consideration at about the same time, transactions in such securities
will be made, insofar as feasible, for the respective clients in a manner
deemed equitable to all by MLAM or FAM. To the extent that transactions on
behalf of more than one client of MLAM or FAM during the same period may
increase the demand for securities being purchased or the supply of securities
being sold, there may be an adverse effect on price.
The following table sets forth the name, title and principal occupation of
the principal executive officer of MLAM and the directors of Princeton
Services, the general partner of MLAM:
<TABLE>
<CAPTION>
NAME TITLE PRINCIPAL OCCUPATION
---- ----- --------------------
<S> <C> <C>
Arthur Zeikel*.......... President of MLAM and Director of President of MLAM and FAM
Princeton Services
Terry K. Glenn.......... Executive Vice President of MLAM
and Director of Princeton Executive Vice President of MLAM
Services and FAM
Philip L. Kirstein...... Senior Vice President and General General Counsel of MLAM and FAM
Counsel of MLAM and Director of
Princeton Services
</TABLE>
- --------
* Mr. Zeikel is presently a Director and the President of the Fund. The address
of Messrs. Zeikel, Glenn and Kirstein is P.O. Box 9011, Princeton, New Jersey
08543-9011, which is also the address of FAM and MLAM.
TERMS OF INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS
Investment Advisory Agreement. The Investment Advisory Agreement provides
that, subject to the direction of the Board of Directors of the Fund, MLAM is
responsible for the actual management of the Fund's portfolio and for the
review of the Fund's holdings in light of its own research analysis and
analyses from other relevant sources. The responsibility for making decisions
to buy, sell or hold a particular security rests with MLAM, subject to review
by the Board of Directors. MLAM provides the portfolio management for the Fund.
Such portfolio management considers analyses from various sources, makes the
necessary investment decisions and places transactions accordingly. MLAM is
also obligated to perform certain management services for the Fund.
Administration Agreement. Under the terms of the Administration Agreement
with the Fund, MLAM also performs or arranges for the performance of the
administrative services (i.e., services other than investment advice and
related portfolio activities) necessary for the operation of the Fund,
including paying all compensation of and furnishing office space for officers
and employees of the Fund connected with
8
<PAGE>
investment and economic research, trading and investment management of the
Fund, as well as the compensation of all Directors of the Fund who are
affiliated persons of MLAM or any of its affiliates.
Investment Advisory and Administration Fees. The Investment Advisory
Agreement provides that as compensation for its services to the Fund, MLAM
receives from the Fund at the end of each month a fee at an annual rate of
0.95% of the Fund's average daily net assets (i.e., the average daily value of
the total assets of the Fund, minus the sum of accrued liabilities of the Fund
and accumulated dividends on the shares of preferred stock, if any). For
purposes of this calculation, average daily net assets are determined at the
end of each month on the basis of the average net assets of the Fund for each
day during the Month.
For the administrative services rendered to the Fund and the facilities
furnished, the Fund pays MLAM a monthly fee at an annual rate of 0.25% of the
Fund's average daily net assets determined in the same manner as the fee
payable by the Fund under the Investment Advisory Agreement. The combined
advisory and administration fees are greater than the advisory fees paid by
most funds but are similar in amount to the fees paid by similar funds making
similar investments.
For the fiscal year ended August 31, 1993, the fee paid by the Fund to MLAM
pursuant to the Investment Advisory Agreement was $7,202,400 and the fee paid
by the fund to MLAM pursuant to the Administration Agreement was $1,895,368
(based on average daily net assets of approximately $760 million). At December
17, 1993, the Fund had net assets of approximately $706.2 million. At this
asset level the Fund's annual investment advisory and administration fees would
aggregate approximately $8,474,646.
Payment of Expenses. The Administration Agreement, as described above,
obligates MLAM to pay all compensation of and furnish office space for officers
and employees of the fund connected with investment and economic research,
trading and investment management of the Fund, as well as the fees of all
Directors of the Fund who are affiliated persons of MLAM or any of its
affiliates. The Fund pays all other expenses incurred in the operation of the
Fund, including, among other things, expenses for legal and auditing services,
taxes, costs of printing proxies, listing fees, if any, stock certificates and
shareholder reports, charges of the Custodian and Transfer Agent, Dividend
Disbursing Agent and Shareholder Servicing Agent, expenses of registering the
shares under Federal and State securities laws, fees and expenses with respect
to the issuance of preferred shares or any borrowing, Securities and Exchange
Commission fees, fees and expenses of unaffiliated directors, accounting and
pricing costs, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses, mailing and other expenses properly
payable by the Fund. Accounting services are provided to the Fund by MLAM, and
the Fund reimburses MLAM for its costs in connection with such services. For
the fiscal year ended August 31, 1993, the Fund reimbursed $98,259 to MLAM for
such accounting services.
Duration and Termination. The Investment Advisory Agreement will continue in
effect from year to year if approved annually (a) by the Board of Directors of
the Fund or by a majority of the outstanding shares of capital stock of the
Fund and (b) by a majority of the Directors who are not parties to such
agreement or interested persons (as defined in the Investment Company Act) of
any such party. Such agreement is not assignable and may be terminated without
penalty on 60 days' written notice at the option of either party thereto or by
the vote of the stockholders of the Fund. The Administration Agreement will
continue in effect for an indefinite term but is not assignable and may be
terminated without penalty on 60 days' written notice at the option of either
party thereto.
9
<PAGE>
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund, MLAM
is primarily responsible for the execution of the Fund's portfolio transactions
and the allocation of brokerage. In executing such transactions, MLAM seeks to
obtain the best results for the Fund, taking into account such factors as price
(including the applicable fee, commission or spread), size of order, difficulty
of execution and operational facilities of the firm involved and the firm's
risk in positioning a block of securities. While MLAM generally seeks
reasonable competitive commission rates, the Fund does not necessarily pay the
lowest commission or spread available. The securities in which the Fund invests
generally do not trade in a broker market. The Fund paid no brokerage
commissions in connection with portfolio transactions for the fiscal year ended
August 31, 1993.
The Fund will purchase Corporate Loans in individually negotiated
transactions with commercial banks, thrifts, insurance companies, finance
companies and other financial institutions. In selecting such financial
institutions, MLAM may consider, among other factors, the financial strength,
professional ability, level of service and research capability of the
institution. While such financial institutions generally are not required to
repurchase Participation Interests in Corporate Loans which they have sold,
they may act as principal or on an agency basis in connection with the Fund's
disposition of Corporate Loans.
The Fund has no obligation to deal with any bank, broker or dealer in
execution of transactions in portfolio securities. Subject to obtaining the
best price and execution, brokers who provided supplemental investment research
to MLAM, including Merrill Lynch, may receive orders for transactions by the
Fund. Information so received will be in addition to and not in lieu of the
services required to be performed by MLAM under the Investment Advisory
Agreement and the expenses of MLAM will not necessarily be reduced as a result
of the receipt of such supplemental information.
Other securities in which the Fund may invest are traded primarily in the
over-the-counter markets, and the Fund intends to deal directly with dealers
who make markets in the securities involved, except in those circumstances
where better prices and execution are available elsewhere. Under the Investment
Company Act, except as permitted by exemptive order, persons affiliated with
the Fund are prohibited from dealing with the Fund as principal in the purchase
and sale securities. Since transactions in the over-the-counter market usually
involve transactions with dealers acting as principal for their own account,
the Fund does not deal with affiliated persons, including Merrill Lynch and its
affiliates, in connection with such transactions. However, an affiliated person
of the Fund may serve as its broker in over-the-counter transactions conducted
on an agency basis.
The Board of Directors has considered the possibility of recapturing for the
benefit of the Fund brokerage commissions, dealer spreads and other expenses of
possible portfolio transactions, such as underwriting commissions, by
conducting portfolio transactions through affiliated entities, including
Merrill Lynch. For example, brokerage commissions received by Merrill Lynch
could be offset against the investment advisory fee paid by the Fund to MLAM.
After considering all factors deemed relevant, the Directors made a
determination not to seek such recapture. The Directors will reconsider this
matter from time to time.
10
<PAGE>
ADDITIONAL INFORMATION
The expenses of preparation, printing and mailing of the enclosed form of
proxy and accompanying Notice and Proxy Statement will be borne by the Fund.
The Fund will reimburse banks, brokers and others for their reasonable expenses
in forwarding proxy solicitation material to the beneficial owners of the
shares of the Fund. The Fund may also hire proxy solicitors at the expense of
the Fund.
In order to obtain the necessary quorum at the Meeting (i.e., a majority of
the shares of the Fund entitled to vote at the Meeting, present in person or by
proxy), supplementary solicitation may be made by mail, telephone, telegraph or
personal interview by officers of the Fund. It is anticipated that the cost of
such supplementary solicitation, if any, will be nominal.
The proposal to elect the Fund's directors (Item 1) and the proposal to
ratify the selection of the Fund's auditors (Item 2) may be approved by
majority vote of the stockholders, present in person or by proxy, at a meeting
at which a quorum is duly constituted.
The proposal to amend the articles of incorporation of the Fund to change the
name of the Fund (Item 3) requires the affirmative vote of more than 50% of the
outstanding shares of the Fund.
All shares represented by properly executed proxies, unless such proxies have
previously been revoked, will be voted at the Meeting in accordance with the
directions on the proxies; if no direction is indicated, the shares will be
voted "FOR" the six Director nominees, "FOR" the ratification of D&T as
independent auditors for the Fund and "FOR" the change of the name of the Fund
to "Merrill Lynch Senior Floating Rate Fund, Inc." Shares will not be voted for
any of the aforementioned proposals, however, unless (i) in the judgment of the
Fund's Board of Directors, there has been no material adverse change in the
financial condition of MLAM between September 24, 1993 and the date of MLAM's
most recently completed fiscal quarter and (ii) the Fund shall have received a
certificate of the President or a Senior Vice President of MLAM, dated the
Meeting date, attesting that, to the knowledge of such officer, there has been
no material adverse change in the financial condition of MLAM unless such
material adverse change has been disclosed to stockholders in additional proxy
solicitation materials.
Broker-dealer firms, including Merrill Lynch, holding Fund shares in "street
name" for the benefit of their customers and clients will request the
instructions of such customers and clients on how to vote their shares on each
Item before the Meeting. The Fund understands that, under the rules of the New
York Stock Exchange, such broker-dealer firms may, without instructions from
their customers and clients, grant authority to the proxies designated to vote
on the election of Directors (Item 1), the ratification of the selection of
independent auditors (Item 2) and the amendment of the Fund's Articles of
Incorporation to effect the change of the name of the Fund (Item 3) if no
instructions have been received prior to the date specified in the broker-
dealer firm's request for voting instructions. Merrill Lynch has advised that
it intends to exercise discretion over shares held in its name for which no
instructions are received by voting such shares in the same proportion as it
has voted shares for which it has received instructions. The Fund will include
shares held of record by broker-dealers as to which such authority has been
granted in its tabulation of the total number of votes present for purposes of
determining whether the necessary quorum of shareholders exists. The Fund also
will count towards a quorum shares as to which proxies are returned by record
shareholders but which are marked "abstain" on any Item. A failure by a broker-
dealer who returns a proxy to vote for their clients on an Item or an
abstention will have no effect with respect to the vote on Item 1 or Item 2;
however, such a failure or abstention with respect to the vote on Item 3 will
have the same effect as a vote against the proposal.
11
<PAGE>
MEETINGS OF SHAREHOLDERS
The By-Laws of the Fund do not require that the Fund hold an annual meeting
of stockholders. However, the Fund will be required to call special meetings of
stockholders in accordance with the requirements of the Investment Company Act
to seek approval of new management and advisory arrangements or of a change in
the fundamental policies, objectives or restrictions of the Fund. The Fund also
would be required to hold a special stockholders' meeting to elect new
Directors at such time as less than a majority of the Directors holding office
have been elected by stockholders. The By-Laws of the Fund provide that a
stockholders' meeting may be called for any reason at the request of 10% of the
outstanding shares of the Fund or by a majority of the Directors or the
President of the Fund.
By Order of the Board of
Directors
Patrick D. Sweeney
Secretary
Dated: January 10, 1994
12
<PAGE>
EXHIBIT A
INDEPENDENT AUDITORS' REPORT
Merrill Lynch Investment Management, Inc.:
We have audited the accompanying consolidated balance sheet of Merrill Lynch
Investment Management, Inc. and its subsidiaries (the "Company") as of December
25, 1992. This consolidated balance sheet is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
consolidated balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the financial position of the Company at December 25, 1992
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Parsippany, New Jersey
February 19, 1993
<PAGE>
MERRILL LYNCH INVESTMENT MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 25,
1992
--------------
ASSETS
<S> <C>
Cash and cash equivalents....................................... $ 3,049,854
Receivable from affiliated companies--lease transactions........ 730,849,170
Investments in affiliated Limited Partnership................... 64,587,294
Investments in leases:
Leveraged leases............................................... 121,508,161
Sales-type lease............................................... 12,831,711
Investments in affiliated investment companies--at the lower of
cost or market
(market: $40,783,430).......................................... 40,382,265
Fund management and administrative fees receivable.............. 32,720,272
Fixed assets (net of $9,140,416 accumulated depreciation)....... 6,577,818
Prepaid expenses and other assets............................... 12,372,403
--------------
Total Assets.................................................... $1,024,878,948
==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Payable to affiliates........................................... $ 747,726,743
Accrued liabilities and other payables.......................... 36,982,643
Deferred income--unearned fees.................................. 5,361,686
Deferred income taxes:
Arising from leveraged leases.................................. 111,585,182
Arising from sales-type lease.................................. 5,245,721
Other.......................................................... 43,705,466
--------------
950,607,441
--------------
Stockholder's Equity:
Common stock, par value $1.00 per share--authorized 25,000
shares,
outstanding 10,000 shares...................................... 10,000
Additional paid-in capital...................................... 23,266,792
Accumulated translation adjustment.............................. 280,287
Retained earnings............................................... 50,714,428
--------------
Total stockholder's equity...................................... 74,271,507
--------------
Total Liabilities and Stockholder's Equity...................... $1,024,878,948
==============
</TABLE>
See notes to consolidated balance sheet.
A-2
<PAGE>
MERRILL LYNCH INVESTMENT MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET, DECEMBER 25, 1992
1. Summary of significant accounting policies
Organization--Merrill Lynch Investment Management, Inc. and its subsidiaries
(the "Company"), serve as investment adviser to certain registered investment
companies, and provide investment advisory services for individuals and
institutions. Merrill Lynch Investment Management, Inc., a wholly-owned
subsidiary of Merrill Lynch Group, Inc., is an indirect wholly-owned subsidiary
of Merrill Lynch & Co., Inc. ("ML&Co").
The Company's consolidated balance sheet reflects its 100 percent ownership
of Merrill Lynch Funds Distributor, Inc., a distributor of shares of various
affiliated managed registered investment companies, Fund Asset Management,
Inc., an investment adviser to various registered investment companies and a
lessor participant in leveraged lease agreements, Merrill Lynch International
Asset Management, Ltd., a Channel Islands based investment adviser and
Princeton Administrators, Inc., an administrator to certain non-affiliated
investment companies, and its 60% ownership of Merrill Lynch International
Capital Management Co., a Japan based investment adviser.
Fixed assets--Fixed assets are recorded at cost and consist principally of
furniture and equipment. Depreciation is calculated using the straight-line
method over a period ranging from 3 to 10 years.
Deferred income--unearned fees--Investment advisory services are billed at
the beginning of the period for which services are to be rendered. The fee is
deferred and credited to income on a pro rata basis over the period of the
contract, which normally does not exceed one year.
Income taxes--The results of the operations of the Company are included in
the consolidated federal and combined state and local income tax returns filed
by ML&Co. It is the policy of ML&Co. to allocate the tax associated with such
operating results to each respective subsidiary in a manner which approximates
the separate company method. Effective in the first quarter of 1992, ML&Co.
adopted statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109") which requires an asset and liability method in
recording income taxes on all transactions that have been recognized in the
financial statements. SFAS 109 provides that deferred taxes be adjusted to
reflect tax rates at which future tax liabilities or assets are expected to be
settled or realized. Previously, the Company accounted for income taxes in
accordance with SFAS 96. The current year's impact on adopting SFAS 109 was
minimal.
Cash and cash equivalents--For purposes of the consolidated balance sheet,
cash and cash equivalents include marketable securities with initial maturity
dates of less than three months. The carrying amount approximates fair value
because of the short maturity of those instruments.
2. Transactions with affiliates
The Company serves as an investment adviser for certain investment companies.
In addition, the Company, through its 100% owned subsidiary Princeton
Administrators, Inc., serves as an administrator for certain non-affiliated
investment companies. Management fees earned as adviser and administrator are
based on a percentage of the net assets of each investment company. Such fees
are generally recognized in the period earned.
The Company maintains investments in certain of these investment companies.
Such investments are carried at the lower of cost or market value. Market value
is determined based upon quoted market prices.
A-3
<PAGE>
MERRILL LYNCH INVESTMENT MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
DECEMBER 25, 1992--(CONTINUED)
The Company has an arrangement with Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") which provides that the Company, which receives revenue
as investment adviser to certain investment companies (the "Funds"), reimburse
MLPF&S for certain costs incurred in processing transactions involving shares
of the Funds.
In connection with the formation of certain affiliated investment companies
(the "Investment Companies"), the Company has reimbursed MLPF&S for
subscription expenses incurred in offering the Investment Companies' shares for
sale. The unamortized balance included in prepaid expenses and other assets
totalled $5,361,686 as of December 25, 1992.
The Company has an unsecured note agreement with ML&Co. for $650,000,000. In
addition, the Company has certain other amounts payable to affiliates. These
amounts are payable on demand. During 1992, the Company's investments in
Merrill Lynch Interfunding, Inc. and Merlease Leasing Corp. were sold to an
affiliate at book value. Receivable from affiliated companies-lease
transactions represents the proceeds from this transaction.
The Company has a 98 percent limited partnership interest in ML Plainsboro
Limited Partnership ("MLP"), whose general partner is an affiliate. Profits and
losses are allocated to the Company based on its percentage interest.
The "Receivable from affiliated companies" arising from lease transactions is
summarized as follows:
<TABLE>
<S> <C>
Monies advanced to fund lease transactions................ $(117,240,047)
Tax benefits allocated to the Company by ML&Co. .......... 150,407,083
Proceeds from sale of subsidiaries........................ 684,115,048
Other..................................................... 13,567,086
-------------
Total................................................. $ 730,849,170
=============
</TABLE>
ML&Co. is the holder of the Company's excess cash, which is available on
demand to meet current liabilities. ML&Co. credits the Company for interest at
a floating rate approximating ML&Co.'s average borrowing rate based on the
Company's average daily balance due to/from ML&Co.
3. Investments in Leases
The Company is a lessor participant in leveraged lease agreements. The
Company's net investment in leveraged leases is summarized as follows:
A-4
<PAGE>
MERRILL LYNCH INVESTMENT MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
DECEMBER 25, 1992--(CONTINUED)
<TABLE>
<S> <C>
Rentals receivable (net of principal and interest on non-
recourse debt).......................................... $ 117,309,811
Estimated residual values of leased assets............... 40,329,738
Less:
Unearned and deferred income........................... (34,891,388)
Allowance for uncollectibles........................... (1,240,000)
-------------
Investment in leveraged leases........................... 121,508,161
Less deferred taxes arising from leveraged leases........ (111,585,182)
-------------
Net investment in leveraged leases....................... $ 9,922,979
=============
</TABLE>
Pertinent information relating to the Company's investments in leveraged
leases is summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
LENGTH OF RESIDUAL VALUE
LEASE EQUITY OF LEASED
TYPE OF PROPERTY (YEARS) INVESTMENT PROPERTY
---------------- --------- ---------- --------------
<S> <C> <C> <C>
Chemical tanker....................... 20 42.75% 15.0%
Generating plant...................... 24-25 34.06% 15.0%
</TABLE>
Financing beyond the Company's equity interest in the purchase price of the
properties was furnished by outside parties in the form of long-term debt that
provides for no recourse against the Company and is collateralized by a first
lien on the properties and related rentals. At the end of the respective lease
terms, ownership of the properties remains with the Company.
The Company's investment in the sales-type leases is composed of the
following elements at December 25, 1992:
<TABLE>
<S> <C>
Minimum lease payments receivable............................ $13,612,690
Less unearned income......................................... (780,979)
-----------
Investment in sales-type financing leases.................... $12,831,711
===========
</TABLE>
At December 25, 1992 minimum lease payments receivable are $9,941,000 for
1993 and $3,672,000 for 1994.
For Federal income tax purposes, the Company receives the investment tax
credit and has the benefit of tax deductions for (i) depreciation on the entire
amount of leased assets and (ii) interest on the outstanding long-term debt.
For state and local tax purposes, the Company also receives the benefits of tax
deductions from (i) and (ii) above. Since, during the early years of the
leases, those deductions exceed the Company's lease rental income, substantial
excess deductions are available to be applied against the Company's other
income and the consolidated income of ML&Co. In the later years of these
leases, rental income will exceed
A-5
<PAGE>
MERRILL LYNCH INVESTMENT MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED BALANCE SHEET
DECEMBER 25, 1992--(CONTINUED)
the related deductions and taxes will be payable (to the extent that net
deductions arising from additional leveraged lease transactions do not offset
such net lease income). Deferred taxes have been provided to reflect these
temporary differences.
4. Income Taxes
As part of the consolidated group, the Company transfers its current federal
and state tax liabilities to the Parent. At December 25, 1992, the Company had
a current Federal tax payable of $6,922,068, and current state tax payable of
$2,588,057 payable to the Parent.
5. Pension Plan
The Company participates in the ML&Co. Comprehensive Retirement Program (the
"Program"), consisting of the Retirement Accumulation Plan ("RAP") and the
Employee Stock Ownership Plan (the "ESOP"). Both plans became effective January
1, 1989. Under the Program, cash contributions made by the Company and the
ML&Co. stock held by the ESOP are allocated quarterly to participants'
accounts. Allocations are based on years of service, age and eligible
compensation. Actuarial data regarding the Company's Plan participants is not
separately available.
6. Postretirement Benefits Other Than Pensions
The Company provides certain healthcare and life insurance benefits for
retired employees. The Company reserves the right to amend or terminate this
program at any time. Substantially all of the Company's employees become
eligible for these benefits upon attainment of age 55 and completion of 10
years of service.
In December 1990, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions ("SFAS 106"). SFAS 106, effective
for fiscal year 1993, will require that the Company change its method of
accounting for postretirement healthcare and life insurance benefits from
expensing these costs on a pay-as-you-go basis to an accrual basis. This change
in accounting will require the recognition of a transition obligation which
represents the actuarial present value of benefits attributed to prior employee
service. The Company has not yet determined what effect the adoption of SFAS
106 will have on its financial condition.
7. Name Change
Effective December 28, 1991, the Company, through an amendment of its
certificate of incorporation, changed its name to Merrill Lynch Investment
Management, Inc. ("MLIM"). MLIM will do business under the name "Merrill Lynch
Asset Management".
A-6
<PAGE>
EXHIBIT B
MERRILL LYNCH INVESTMENT MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 24, 1993
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS
<S> <C>
Cash and Cash Equivalents....................................... $ 1,887,182
Receivable from Affiliated Companies--Lease Transactions........ 747,641,938
Investment in Affiliated Limited Partnership.................... 62,966,260
Investment in Leases:
Leveraged leases.............................................. 118,273,550
Sales-type lease.............................................. 8,152,491
Investment in Affiliated Investment Companies--at the lower of
cost
or market (market: $24,344,191)................................ 22,981,485
Fund Management and Administrative Fees Receivable.............. 48,337,144
Fixed Assets (net of $10,807,825 accumulated depreciation)...... 8,706,455
Other Assets.................................................... 6,132,037
--------------
Total Assets.................................................. $1,025,078,542
==============
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
LIABILITIES
<S> <C>
Payables to Affiliates.......................................... $ 737,062,022
Accrued Liabilities and Other Payables.......................... 10,597,512
Deferred Income Taxes:
Arising from leveraged leases................................. 111,401,573
Arising from sales-type lease................................. 2,333,002
Other......................................................... 70,751,039
--------------
Total Liabilities............................................. 932,145,148
--------------
<CAPTION>
STOCKHOLDER'S EQUITY
<S> <C>
Common Stock, par value; $1.00 per share--authorized 25,000
shares;
outstanding 10,000 shares...................................... 10,000
Additional Paid-In Capital...................................... 23,266,792
Accumulated translation adjustment.............................. 640,374
Retained Earnings............................................... 69,016,228
--------------
Total Stockholder's Equity.................................... 92,933,394
--------------
Total Liabilities & Stockholder's Equity...................... $1,025,078,542
==============
</TABLE>
B-1
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH PRIME FUND, INC. PROXY
Box 9011, Princeton, New Jersey 08543-9011
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and Patrick D.
Sweeney as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
common stock of Merrill Lynch Prime Fund, Inc. (the "Fund") held of record by
the undersigned on December 20, 1993 at a special meeting of shareholders of
the Fund to be held on February 25, 1994 or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted for
Proposals 1, 2 and 3.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
To withheld authority to vote for any individual nominee,
FOR WITHHOLD write the name on the following line:
1. Election of Directors. [ ] [ ]
--------------------------------------------------------------------
Nominees: Ronald W. Forbes, Cynthia A. Montgomery, Charles C. Reilly, Kevin A. Ryan, Richard R. West, Arthur Zeikel
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2. Proposal to ratify the selection of 3. Proposal to amend the Fund's Articles of 4. In the discretion of
Deloitte & Touche as the independent Incorporation to effect the change of the name of such proxies, upon such
auditors of the Fund to serve for the current the Fund from "Merrill Lynch Prime Fund, Inc." to other business as may
fiscal year. "Merrill Lynch Senior Floating Rate Fund, Inc.". properly come before the
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN meeting or any adjournment
[ ] [ ] [ ] [ ] [ ] [ ] thereof.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
00000000000000000000000000000000000
Please sign exactly as name appears hereof. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
persons.
- ----------------------------------------------
Signature Date
- ----------------------------------------------
Signature, if held jointly Date
Please mark boxes in blue or black ink.
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
BY SIGNING AND PROMPTLY RETURNING THE ENCLOSED PROXY YOU MAY SAVE YOUR FUND THE
EXPENSE OF ADDITIONAL SOLICITATION COSTS.
- --------------------------------------------------------------------------------
THE ENCLOSED PROXY CARD HAS BEEN FORWARDED TO YOU BECAUSE YOU WERE A SHAREHOLDER
ON THE RECORD DATE.
IT IS IMPORTANT THAT YOU VOTE AND SIGN THIS PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE AS SOON AS POSSIBLE.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MERRILL LYNCH PRIME FUND, INC. PROXY
Box 9011, Princeton, New Jersey 08543-9011
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Arthur Zeikel, Terry K. Glenn and Patrick D.
Sweeney as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all shares of
common stock of Merrill Lynch Prime Fund, Inc. (the "Fund") held of record by
the undersigned on December 20, 1993 at a special meeting of shareholders of
the Fund to be held on February 25, 1994 or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed by the
undersigned shareholder. If no direction is made, this proxy will be voted for
Proposals 1, 2 and 3.
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Election of Directors. FOR [ ] WITHHOLD [ ] Nominees: Ronald W. Forbes, Cynthia A. Montgomery,
Charles C. Reilly, Kevin A. Ryan,
Richard R. West, Arthur Zeikel
To withhold authority to vote for any individual nominee, write the name on the following line:
----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
2. Proposal to ratify the selection of Deloitte & Touche as the independent FOR AGAINST ABSTAIN
auditors of the Fund to serve for the current fiscal year. [ ] [ ] [ ]
3. Proposal to amend the Fund's Articles of Incorporation to effect the change of the FOR AGAINST ABSTAIN
name of the Fund from "Merrill Lynch Prime Fund, Inc." to "Merrill Lynch Senior [ ] [ ] [ ]
Floating Rate Fund, Inc."
4. In the discretion of such proxies, upon such other business as may properly come before the meeting or any adjournment thereof.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney or as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
- ----------------------------------------------
Signature Date
- ----------------------------------------------
Signature, if held jointly Date
Please mark boxes in blue or black ink.
<PAGE>
- -------------------------------------------------------------------------------
BY SIGNING AND PROMPTLY RETURNING THE ENCLOSED PROXY YOU MAY SAVE
YOUR FUND THE EXPENSE OF ADDITIONAL SOLICITATION COSTS.
- -------------------------------------------------------------------------------
THE ENCLOSED PROXY CARD HAS BEEN FORWARDED TO YOU BECAUSE YOU
WERE A SHAREHOLDER ON THE RECORD DATE.
IT IS IMPORTANT THAT YOU VOTE AND SIGN THIS PROXY AND RETURN
IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
- -------------------------------------------------------------------------------
