AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 19, 1995
SECURITIES ACT FILE NO. 33-56391
INVESTMENT COMPANY ACT FILE NO. 811-5870
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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:
<TABLE>
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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 19, 1995
(Date Tender Offer First Published,
Sent or Given to Security Holders)
</TABLE>
CALCULATION OF FILING FEE
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Transaction Valuation: $75,075,000(a) Amount of Filing Fee: $15,015(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 ($10.01) at
September 14, 1995.
(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, 1995 there were
approximately 215 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 19, 1995 (the "Offer to
Purchase"). A copy of each of the Offer to Purchase and the related Letter of
Transmittal is attached hereto as Exhibit (a)(1)(ii) and Exhibit (a)(2),
respectively. Reference is hereby made to the Cover Page and Section 1 "Price;
Number of Shares" of the Offer to Purchase, which are incorporated herein by
reference. The Fund has been informed that no Directors, officers or affiliates
of the Fund intend to tender Shares pursuant to the Offer.
(c) The Shares are not currently traded on an established trading market.
(d) Not Applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) Reference is hereby made to Section 9 "Source and Amount of Funds"
of the Offer to Purchase, which is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
Reference is hereby made to Section 7 "Purpose of the Offer," Section 8
"Certain Effects of the Offer" and Section 9 "Source and Amount of Funds" of the
Offer to Purchase, which are incorporated herein by reference. The Fund is
currently engaged in a public offering, from time to time, of its Shares. The
Fund otherwise has no plans or proposals which relate to or would result in (a)
the acquisition by any person of additional securities of the Fund or the
disposition of securities of the Fund; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Fund; (c) a sale or transfer of a material amount of assets of the Fund; (d) any
change in the present Board of Directors or management of the Fund, including,
but not limited to, any plans or proposals to change the number or the term of
Directors, or to fill any existing vacancy on the Board or to change any
material term of the employment contract of any executive officer; (e) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Fund; (f) any other material change in the Fund's
corporate structure or business, including any plans or proposals to make any
changes in its investment policy for which a vote would be required by Section
13 of the Investment Company Act of 1940, as amended; or (g) changes in the
Fund's articles of incorporation, bylaws or instruments corresponding thereto or
other actions which may impede the acquisition of control of the Fund by any
person. Paragraphs (h) through (j) of this Item 3 are not applicable.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its
i
<PAGE>
Shares the Fund has sold approximately 27.6 million Shares at a price equal to
the NAV of the Fund on the date of each such sale.
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.
<TABLE>
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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>
<TABLE>
<S> <C> <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)
(b)(7) Agreement for Extension of Termination Date, dated as of March 10,
1995.(f)
(b)(8) Agreement for Extension of Termination Date and Amendment No. 5 to the
Credit Agreement between the Fund and The Bank of New York, dated as of
March 20, 1995.(g)
(c)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1994.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1993.
(g)(3) Unaudited Financial Statements of the Fund for the six months ended
February 28, 1995.
</TABLE>
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<TABLE>
<C> <S>
(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.
(f) Incorporated by reference to Exhibit (b)(7) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 17, 1995.
(g) Incorporated by reference to Exhibit (b)(8) to Amendment No. 1 to the Fund's Schedule
13E-4 filed with the Securities and Exchange Commission on April 25, 1995.
</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 18, 1995
iv
<PAGE>
EXHIBIT INDEX
<TABLE><CAPTION>
EXHIBIT
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<S> <C>
(a)(1)(i) Advertisement to be printed in The Wall Street Journal.
(a)(1)(ii) Offer to Purchase.
(a)(2) Form of Letter of Transmittal.
(a)(3) Letter to Stockholders.
(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)
(b)(7) Agreement for Extension of Termination Date, dated as of March 10, 1995.(f)
(b)(8) Agreement for Extension of Termination Date and Amendment No. 5 to the Credit
Agreement between the Fund and The Bank of New York, dated as of March 20,
1995.(g)
(c)-(f) Not Applicable.
(g)(1) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1994.
(g)(2) Audited Financial Statements of the Fund for the fiscal year ended
August 31, 1993.
(g)(3) Unaudited Financial Statements of the Fund for the six months ended February 28,
1995.
</TABLE>
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<TABLE>
<C> <S>
(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.
(f) Incorporated by reference to Exhibit (b)(7) to the Fund's Schedule 13E-4 filed with the
Securities and Exchange Commission on March 17, 1995.
(g) Incorporated by reference to Exhibit (b)(8) to Amendment No. 1 to the Fund's Schedule
13E-4 filed with the Securities and Exchange Commission on April 25, 1995.
</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
19, 1995, 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 TUESDAY, OCTOBER 17, 1995, 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 17, 1995, unless extended, upon the terms and conditions set forth in the
Offer to Purchase dated September 19, 1995 (the "Offer"). The NAV on Septem-
ber 14, 1995, was $10.01 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 Tuesday, October 17, 1995, unless the
Offer is extended, and, if not yet accepted for payment by the Fund, Shares may
also be withdrawn after November 14, 1995.
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
----------------------- -------------------- -------
Merrill Lynch clients, please give the name and office address of your
Financial Consultant:
--------------------------------------------------------------------------
7198
--------------------------------------------------------------------------------
Merrill Lynch
A tradition of trust.
(C)Copyright 1995, Merrill Lynch, Pierce, September 19, 1995
Fenner & Smith Inc. Member SIPC.
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 17, 1995, 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 17, 1995, 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 14,
1995 was $10.01 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.
September 19, 1995 MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
Merrill Lynch Response Center Transfer Agent: Merrill Lynch
P.O. Box 30200 Financial Data Services, Inc.
New Brunswick, New Jersey 08989-0200
Attn: Merrill Lynch Senior Floating Attn: Merrill Lynch Senior Floating
Rate Fund, Inc. Rate Fund, Inc.
(800) 637-7455 ext. 7198 Transfer Agency Mutual Funds
Operations Department
P.O. Box 45289
Jacksonville, Florida 32232-5289
(904) 928-5510
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TABLE OF CONTENTS
<TABLE><CAPTION>
SECTIONS PAGE
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<C> <S> <C>
1. Price; Number of Shares..................................................... 3
2. Procedure for Tendering Shares.............................................. 3
3. Early Withdrawal Charge..................................................... 4
4. Withdrawal Rights........................................................... 5
5. Payment for Shares.......................................................... 5
6. Certain Conditions of the Offer............................................. 6
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.......................................... 8
12. Additional Information...................................................... 8
13. Certain Federal Income Tax Consequences..................................... 8
14. Extension of Tender Period; Termination; Amendments......................... 9
15. Miscellaneous............................................................... 10
</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 17, 1995 (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, 1995 there were approximately 215 million Shares issued and
outstanding and there were 1,802 holders of record of Shares (in addition,
Merrill Lynch maintains accounts for 76,571 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.
3
<PAGE>
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.
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%
4
<PAGE>
In determining whether an Early Withdrawal Charge is applicable to a tender
of Shares, the calculation will be determined in the manner that results in the
lowest possible amount being charged. Therefore, it will be assumed that the
tender is first of Shares acquired through dividend reinvestment and of Shares
held for over 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, 1995.
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.
5
<PAGE>
6. CERTAIN CONDITIONS OF THE OFFER. The Fund shall not be required to accept
for payment or pay for any Shares tendered, and may terminate or amend the Offer
or may postpone the acceptance for payment of or payment for Shares tendered,
if: (1) such purchases would impair the Fund's status as a regulated investment
company under the Internal Revenue Code (which would make the Fund a taxable
entity, causing the Fund's income to be taxed at the corporate level in addition
to the taxation of stockholders who receive dividends from the Fund); (2) the
Fund would not be able to liquidate portfolio securities in a manner which is
orderly and consistent with the Fund's investment objective and policies in
order to purchase Shares tendered pursuant to the Offer; or (3) there is, in the
Board's judgment, any (a) legal action or proceeding instituted or threatened
challenging the Offer or otherwise materially adversely affecting the Fund, (b)
declaration of a banking moratorium by Federal or state authorities or any
suspension of payment by banks in the United States or New York State, which is
material to the Fund, (c) limitation imposed by Federal or state authorities on
the extension of credit by lending institutions, (d) commencement of war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States which is material to the Fund, or (e) other event or
condition which 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 $75,075,000. 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, between the Fund and 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
6
<PAGE>
(i) 0.75% for the first 45 days that such borrowing is outstanding, (ii) 1.50%
for the next 15 days that such borrowing is outstanding and (iii) 2.00% 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 business day prior to the expiration of the next
tender offer by the Fund for its shares. Borrowings under the Facility, if any,
may be repaid with the proceeds of portfolio investments sold by the Fund
subsequent to the Expiration Date. The facility was renewed on March 20, 1995
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, 1993 and 1994 and for the six months ended February 28, 1995. 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,
1993 and 1994 and from the Fund's unaudited financial statements contained in
its Semi-Annual Report to Stockholders for the six months ended February 28,
1995. 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") in connection with the Offer and
may be obtained from the Transfer Agent) and the summary of selected financial
information set forth below is qualified in its entirety by reference to such
documents and the financial information, the notes thereto and related matter
contained therein.
SUMMARY OF SELECTED FINANCIAL INFORMATION
(IN 000'S EXCEPT PER SHARE DATA AND RATIOS)
<TABLE><CAPTION>
SIX MONTHS
ENDED
YEAR ENDED YEAR ENDED FEBRUARY 28,
AUGUST 31, AUGUST 31, 1995
1993 1994 (UNAUDITED)
---------- ---------- ------------
<S> <C> <C> <C>
INCOME STATEMENT
Investment income..................................... $ 51,076 $ 53,961 $ 48,992
Expenses.............................................. 11,141 10,747 7,862
---------- ---------- ------------
Investment income--net................................ $ 39,935 $ 43,213 $ 41,130
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) on investments--net.............. 2 (14) 58
Change in unrealized appreciation on
investments--net..................................... 2,395 (124) (58)
FINANCIAL HIGHLIGHTS (AT END OF PERIOD)
Total assets.......................................... $ 721,737 $944,991 $1,380,714
Total liabilities..................................... 8,437 10,528 15,018
---------- ---------- ------------
Net assets............................................ $ 713,300 $934,463 $1,365,696
Net asset value per share............................. $ 10.02 $ 10.02 $ 10.01
Shares of common stock outstanding.................... 71,213 93,300 136,406
PER SHARE
Investment income--net................................ $ .53 $ .59 $ .30
Realized and unrealized gain on investments--net...... .03 -- --
Dividends from net investment income to common
shareholders......................................... $ (.53) $ (.59) $ (.30)
RATIOS
Total expenses to average net assets.................. 1.47% 1.43% 1.36%*
Investment income--net, to average net assets......... 5.27% 5.75% 7.13%*
</TABLE>
------------
* Annualized
7
<PAGE>
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 InterBank Offered Rate. MLAM, an affiliate of Merrill Lynch, acts as
investment adviser and administrator for the Fund.
There have not been any transactions involving the Shares of the Fund that
were effected during the past 40 business days by the Fund, any executive
officer or Director of the Fund, any person controlling the Fund, any executive
officer or director of any corporation ultimately in control of the Fund or by
any associate or subsidiary of any of the foregoing including any executive
officer or director of any such subsidiary, except that within the past 40
business days pursuant to the public offering of its Shares the Fund has sold
approximately 27.6 million Shares at a price equal to NAV on the date of each
such sale.
The principal executive offices of the Fund are located at 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
12. ADDITIONAL INFORMATION. The Fund has filed a statement on Schedule 13E-4
with the SEC which includes certain additional information relating to the
Offer. Such material may be inspected and copied at prescribed rates at the
SEC's public reference facilities at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, New York, New York 10048; and
Room 3190, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such material may also be obtained by mail at prescribed rates from the
Public Reference Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549.
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
"substantially disproportionate" distribution generally requires a reduction of
at least 20% in the stockholder's proportionate interest in the Fund after all
shares are tendered. A "complete redemption" of a stockholder's interest
generally requires that the stockholder dispose of all Shares directly owned or
attributed to such stockholder under Section 318 of the Code. 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
8
<PAGE>
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 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 on ordinary income of
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
9
<PAGE>
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 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 19, 1995
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 19, 1995
-------------------
THE EXPIRATION DATE AND THE WITHDRAWAL DEADLINE IS 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, OCTOBER 17, 1995, UNLESS EXTENDED
-------------------
TRANSFER AGENT:
MERRILL LYNCH FINANCIAL DATA SERVICES, INC.
ATTENTION: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
TRANSFER AGENCY MUTUAL FUNDS 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 19, 1995,
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>
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.
<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 (a) I am exempt from
backup withholding, (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject thereto as a result of failure to
report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject thereto. INSTRUCTION: You must strike out the language in
(2) above if you have been notified that you are subject to backup
withholding due to underreporting and you have not received a notice from
the IRS that backup withholding has been terminated.
............................................................................
............................................................................
(SIGNATURE(S) OF OWNER(S) EXACTLY AS REGISTERED)
Date ................ , 1995
Name(s) ....................................................................
Address(es) ................................................................
(PLEASE PRINT)
Telephone Number ( ) ................
Signature(s) Guaranteed ....................................................
....................................................
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 19, 1995
(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 25, 1995 through
August 21, 1995, based on the amounts actually distributed by the Fund, was
7.21%. The Fund's NAV on September 14, 1995 was $10.01 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, Merrill Lynch 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 Senior Floating Rate Fund, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Merrill Lynch Senior Floating Rate
Fund, Inc. as of August 31, 1994, 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 four-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 about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at August
31, 1994 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 Senior
Floating Rate Fund, Inc. at August 31, 1994, 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 $792,814,431
(84.84% 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 LLP
Princeton, New Jersey
October 6, 1994
<PAGE>
EXHIBIT (g)(1)
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
Schedule of Investments as of August 31, 1994
<TABLE><CAPTION>
FACE VALUE
INDUSTRY SENIOR SECURED FLOATING RATE LOAN INTERESTS* AMOUNT (NOTE 1B)
------------------ ---------------------------------------------------------------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Aerospace--7.33% Allison Engine Co., Term Loan B, due 12/31/98, 7.25% to $25,000 $25,000
9/08/94.........................................................
Aviall Inc., Term Loan B, due 11/30/00:.........................
7.75% to 9/07/94............................................... 3,640 3,640
7.69% to 10/07/94.............................................. 4,853 4,853
8.19% to 12/07/94.............................................. 12,132 12,132
Gulfstream Aerospace Corp., Revolving Credit Loan, due
3/31/98:........................................................
9.00%(1)....................................................... 308 308
7.00% to 10/21/94.............................................. 1,923 1,923
Gulfstream Aerospace Corp., Term Loan, due 3/31/97, 7.63% to 11,374 11,374
1/13/95.........................................................
Gulfstream Aerospace Corp., Term Loan, due 3/31/98, 7.57% to 9,260 9,260
9/08/94.........................................................
------- ---------
68,490 68,490
Airlines--1.49% Northwest Airlines, Inc., Term Loan, due 9/15/97:...............
7.375% to 9/12/94.............................................. 217 217
7.25% to 10/20/94.............................................. 6,603 6,603
7.3125% to 10/20/94............................................ 105 105
7.50% to 10/20/94.............................................. 2,809 2,809
7.625% to 11/10/94............................................. 1,165 1,165
7.625% to 12/21/94............................................. 3,057 3,057
------- ---------
13,956 13,956
Analytical Elsag Bailey, Term Loan, due 8/30/02, 7.0625% to 9/19/94........ 14,000 14,000
Instruments--2.86% Waters Corp., Term Loan B, due 8/31/01, 10.125%(1).............. 5,644 5,644
Waters Corp., Term Loan C, due 8/31/02, 10.50%(1)............... 3,950 3,950
Waters Corp., Term Loan D, due 2/28/03, 10.875%(1).............. 3,175 3,175
------- ---------
26,769 26,769
Broadcast/ Silver King Communications, Term Loan B, due 7/31/02, 7.8125% to 18,000 18,000
Media--1.93% 11/03/94.......................................................
Building Overhead Door Corp., Revolving Credit Loan, due 8/18/99, 205 205
9.25%(1)........................................................
Materials--1.29% Overhead Door Corp., Revolving Credit Loan, due 8/18/99, 7.3125% 1,978 1,978
to 9/30/94.....................................................
Overhead Door Corp., Term Loan, due 8/18/99, 7.3125% to 9,886 9,886
9/30/94.........................................................
------- ---------
12,069 12,069
Chemicals--4.47% Freedom Chemical Company, Term Loan B, due 6/30/02, 8.1875% to 20,000 20,000
11/30/94........................................................
Inspec Technologies, Term Loan B, due 12/02/00, 7.4375% to 5,000 5,000
9/30/94.........................................................
OSI Specialties, Inc., Term Loan, due 6/30/00:..................
7.34% to 9/15/94............................................... 4,773 4,773
7.57% to 9/22/94............................................... 4,512 4,512
Thoro PCR, Inc., Term Loan A, due 12/30/99:.....................
7.57% to 9/26/94............................................... 39 39
7.57% to 10/25/94.............................................. 1,166 1,166
Thoro PCR, Inc., Term Loan B, due 12/30/01, 7.82% to 10/25/94... 2,431 2,431
Thoro Systems Products Inc., Term Loan A, due 12/30/99:.........
7.57% to 9/26/94............................................... 24 24
7.57% to 10/25/94.............................................. 733 733
Thoro Systems Products, Inc., Term Loan B, due 12/30/01, 7.82% 1,528 1,528
to 10/25/94..................................................
Thoro Worldwide Inc., Term Loan A, due 12/30/99:................
7.57% to 9/26/94............................................... 17 17
7.57% to 10/25/94.............................................. 500 500
Thoro Worldwide, Inc., Term Loan B, due 12/30/01,...............
7.82% to 10/25/94.............................................. 1,042 1,042
------- ---------
41,765 41,765
Computing Lexmark Holdings, US, Term Loan, due 3/27/98:...................
Equipment--1.44% 7.2813% to 9/30/94............................................. 7,319 7,319
7.3125% to 10/31/94............................................ 6,106 6,106
------- ---------
13,425 13,425
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Schedule of Investments as of August 31, 1994 (continued) (in Thousands)
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<C> <S> <C> <C>
Consumer Playtex Family Products Inc., Term Loan B, due 6/01/01, 7.88% to 10/11/94 $ 19,857 $ 19,857
Products -- 2.13%
Containers -- 2.90% Ivex Packaging Corp., Term Loan B, due 12/31/99:
10.00%(1) 279 279
7.75% to 9/26/94 6,000 6,000
8.19% to 9/26/94 857 857
8.82% to 2/24/95 2,714 2,714
Portola Packaging, Inc., Term Loan B, due 7/01/99, 8.25% to 9/08/94 7,250 7,250
Silgan Corp., Term Loan B, due 9/15/96:
8.188% to 12/07/94 5,000 5,000
8.125% to 12/09/94 5,000 5,000
-------- --------
27,100 27,100
Diversified American Standard, Inc., Term Loan A, due 6/01/00:
Manufacturing -- 8.00% to 12/02/94 22,222 22,222
12.05% 8.0625% to 12/02/94 2,472 2,472
Desa International Inc., Term Loan B, due 11/30/00, 7.875% to 9/27/94 10,000 10,000
InterMetro Industries, Term Loan B, due 6/30/01, 8.32% to 1/03/95 10,185 10,185
InterMetro Industries, Term Loan C, due 12/31/02, 8.82% to 1/03/95 14,815 14,815
Joy Technologies, Inc., Term Loan B, due 12/31/98:
7.8125% to 9/29/94 9,898 9,898
8.00% to 11/28/94 2,939 2,939
The Pullman Co., Inc., Term Loan, due 9/30/96:
9.00%(1) 1,139 1,139
9.25%(1) 2,709 2,709
6.8125% to 9/15/94 1,181 1,181
7.0625% to 9/15/94 2,810 2,810
7.00% to 9/29/94 1,772 1,772
7.25% to 9/29/94 4,215 4,215
7.25% to 10/14/94 603 603
7.50% to 10/14/94 1,436 1,436
TDII Company, Term Loan B, due 2/01/01:
9.00%(1) 64 64
6.9375% to 9/02/94 21,125 21,125
7.8125% to 11/03/94 3,000 3,000
-------- --------
112,585 112,585
Drug Stores -- 5.27% Duane Reade Co., Term Loan A, due 9/30/97:
7.8125% to 9/30/94 512 512
8.00% to 11/30/94 12,067 12,067
Duane Reade Co., Term Loan B, due 9/30/99, 8.50% to 11/30/94 10,000 10,000
Jack Eckerd Corp., Term Loan, Series C, due 7/31/2000, 6.00% to 9/06/94 13,383 13,383
Thrifty Payless, Term Loan B, due 9/30/01, 8.125% to 11/23/94 13,275 13,275
-------- --------
49,237 49,237
Electrical Berg Electronics Inc., Term Loan A, due 3/31/00:
Instruments -- 1.96% 7.5625% to 9/26/94 242 242
7.625% to 11/25/94 12,088 12,088
Berg Electronics Inc., Term Loan B, due 6/30/01:
9.50%(1) 25 25
7.875% to 11/25/94 5,975 5,975
-------- --------
18,330 18,330
Food & American Italian Pasta, Term Loan C, due 12/31/00, 8.25% to 9/08/94 5,000 5,000
Beverage -- 7.98% Domino's Pizza, Inc., Term Loan B, due 7/27/00, 7.50% to 9/06/94 15,000 15,000
Heileman Acquisition Company, Term Loan B, due 12/31/00, 7.5625% to 10/13/94 10,000 10,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Schedule of Investments as of August 31, 1994 (continued) (in Thousands)
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<C> <S> <C> <C>
Food & Beverage MAFCO Worldwide, Term Loan B, due 6/30/01, 7.94% to 10/07/94 $ 10,000 $ 10,000
(concluded) President Baking Co., Inc., Term Loan B, due 9/30/00, 7.5625% to 9/23/94 4,988 4,988
Specialty Foods Corp., Term Loan B, due 8/31/99, 7.69% to 10/18/94 12,400 12,400
Specialty Foods Corp., Term Loan B3, due 8/31/99:
9.75%(1) 207 207
8.19% to 10/18/94 16,936 16,936
-------- --------
74,531 74,531
Fuel Distribution -- Petrolane, Inc., Term Loan B, due 12/31/99:
3.30% 6.8125% to 9/28/94 396 396
6.9375% to 9/30/94 1,551 1,551
6.9375% to 10/28/94 28,888 28,888
-------- --------
30,835 30,835
Grocery -- Big V Supermarkets Inc., Term Loan B, due 3/15/00:
6.94% 7.625% to 10/17/94 5,200 5,200
7.75% to 11/15/94 5,200 5,200
Circle K Acquisitions Corp., Term Loan B, due 7/31/01, 6.8125% to 9/29/94 15,000 15,000
Grand Union Company, Term Loan B, due 6/30/98:
9.75%(1) 48 48
8.125% to 9/06/94 6,333 6,333
7.625% to 9/09/94 6,667 6,667
Pathmark Stores Inc., Term Loan B, due 10/31/99, 7.8125% to 9/26/94 10,000 10,000
Ralph's Grocery Company, Term Loan, due 6/30/98:
7.375% to 9/07/94 7,715 7,715
7.625% to 9/14/94 301 301
7.50% to 9/19/94 301 301
7.5625% to 9/29/94 1,959 1,959
7.4375% to 10/04/94 518 518
7.625% to 10/24/94 301 301
7.5625% to 11/09/94 5,328 5,328
-------- --------
64,871 64,871
High Technology -- Anacomp, Inc., Term Loan, due 3/31/96, 7.5625% to 10/26/94 1,238 1,238
1.25% Anacomp, Inc., Term Loan C, due 3/31/96, 7.5625% to 10/26/94 10,405 10,405
-------- --------
11,643 11,643
Medical Devices -- Deknatel Holdings Corp., Term Loan A, due 4/20/99, 7.8125% to 10/25/94 2,417 2,417
1.06% Deknatel Holdings Corp., Term Loan B, due 4/20/01, 8.3125% to 10/25/94 7,500 7,500
-------- --------
9,917 9,917
Nautical Systems -- Sperry Marine, Inc., Term Loan, due 11/15/00:
1.10% 7.4375% to 9/23/94 5,378 5,378
8.25% to 12/23/94 4,947 4,947
-------- --------
10,325 10,325
Paper -- 9.37% ++Fort Howard Corp., Senior Secured B Notes, due 9/11/98, 7.57% to 9/12/94 5,000 5,000
++Fort Howard Corp., Senior Secured D Notes, due 9/11/00, 8.00% to 9/12/94 20,000 20,000
Fort Howard Corp., Term Loan, due 12/31/96:
8.25%(1) 1 1
9.125%(1) 5 5
7.125% to 11/30/94 1,791 1,791
7.25% to 11/30/94 486 486
Jefferson Smurfit/Container Corp. of America, Term Loan B, due 4/30/02,
7.875% to 10/24/94 44,000 44,000
Stone Container, Canadian Tender Loan, due 3/01/97:
7.5625% to 9/12/94 1,160 1,160
7.75% to 9/19/94 5,905 5,905
7.8125% to 9/29/94 999 999
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Schedule of Investments as of August 31, 1994 (concluded) (in Thousands)
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<C> <S> <C> <C>
Paper Stone Container, Canadian Term Loan, due 3/01/97, 7.8125% to 9/29/94 $ 786 $ 786
(concluded) Stone Container, US, Term Loan, due 3/01/97:
7.75% to 9/19/94 6,519 6,519
7.8125% to 9/29/94 936 936
-------- --------
87,588 87,588
Retail -- Specialty -- Music Acquisition Corp., Term Loan B, due 8/31/01:
5.62% 7.6875% to 9/16/94 14,062 14,062
8.375% to 2/17/95 8,297 8,297
Music Acquisition Corp., Term Loan C, due 8/31/02, 8.0625% to 9/20/94 7,500 7,500
Saks & Co., Term Loan B, due 6/30/00, 7.88% to 11/09/94 22,662 22,662
-------- --------
52,521 52,521
Transportation Petro Properties, Term Loan B, due 5/24/01, 7.875% to 9/30/94 9,000 9,000
Services -- 0.96%
Warehousing Pierce Leahy Corp., Term Loan B, due 6/30/01, 7.75% to 9/01/94 20,000 20,000
& Storage -- 2.14%
Total Senior Secured Floating Rate Loan Interests
(Cost -- $792,814) -- 84.84% 792,814 792,814
<CAPTION>
Short-Term Securities
<C> <S> <C> <C>
Commercial Paper** -- ABN AMRO North American Finance, Inc., 4.33% due 9/01/94 20,000 20,000
13.40% DuPont (E.I.) de Nemours & Co., 4.46% due 9/20/94 25,000 24,941
General Electric Capital Corp., 4.75% due 9/01/94 45,333 45,333
JC Penney Funding Corp:
4.71% due 9/02/94 15,000 14,998
4.75% due 10/03/94 20,000 19,916
Total Short-Term Securities (Cost -- $125,188) -- 13.40% 125,333 125,188
<CAPTION>
Shares
Common Stock Held
<C> <S> <C> <C>
Restaurants -- 0.03% ++TW Services, Inc. (Cost -- $0) -- 0.03% 44 276
Total Common Stock (Cost -- $0) -- 0.03% 44 276
Total Investments (Cost $918,003) -- 98.27% 918,278
Other Assets Less Liabilities -- 1.73% 16,185
--------
Net Assets -- 100.00% $934,463
========
</TABLE>
*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, 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.
(1)Index is based on the prime rate of a US bank, which is subject
to change daily.
++Restricted security as to resale. The value of the Fund's invest-
ment in restricted securities was approximately $25,276,000,
representing 2.70% of net assets.
Cost Acquisition
Senior Secured Notes (In Thousands) Date
Fort Howard Corp. $ 25,000 9/11/91
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
August 31, 1994 was $7.75 per share.
See Notes to Financial Statements.
<PAGE>
<TABLE><CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Statement of Assets and Liabilities as of August 31, 1994
<S> <C> <C>
Assets:
Investments, at value (identified cost--$918,002,800) (Note 1b) $918,278,390
Cash 210,029
Receivables:
Capital shares sold $20,081,292
Interest 6,276,867
Commitment fees 8,223 26,366,382
-----------
Deferred facility fees (Note 6) 26,677
Deferred organization expenses (Note 1e) 29,912
Prepaid registration fees and other assets (Note 1e) 79,303
------------
Total assets 944,990,693
------------
Liabilities:
Payables:
Dividends to shareholders (Note 1f) 1,419,683
Investment adviser (Note 2) 715,246
Administrator (Note 2) 188,222 2,323,151
-----------
Deferred income (Note 1d) 7,931,680
Accrued expenses and other liabilities 273,165
------------
Total liabilities 10,527,996
------------
Net assets $934,462,697
============
Net Assets Consist of:
Common Stock, par value $0.10 per share; 1,000,000,000 shares authorized $ 9,329,959
Paid-in capital in excess of par 924,897,903
Accumulated realized capital losses--net (Note 7) (40,755)
Unrealized appreciation on investments--net (Note 3) 275,590
------------
Net Assets--Equivalent to $10.02 per share based on 93,299,587 shares of beneficial
interest outstanding $934,462,697
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Statement of Operations for the Year Ended August 31, 1994
<S> <C> <C>
Investment Income (Note 1d):
Interest and discount earned $ 47,936,055
Facility and other fees 6,024,792
------------
Total income 53,960,847
Expenses:
Investment advisory fees (Note 2) $ 7,145,339
Administrative fees (Note 2) 1,880,353
Transfer agent fees (Note 2) 555,878
Borrowing costs (Note 6) 202,074
Professional fees 182,066
Amortization of organization expenses (Note 1e) 179,472
Registration fees (Note 1e) 134,054
Tender offer costs 95,134
Printing and shareholder reports 82,974
Custodian fees 72,441
Directors' fees and expenses 54,763
Accounting services (Note 2) 51,304
Other 111,583
-----------
Total expenses 10,747,435
------------
Investment income--net 43,213,412
Realized Loss on Investments--Net (Notes 1d & 3) (13,985)
Change in Unrealized Appreciation/Depreciation on Investments--Net (Note 3) (124,460)
------------
Net Increase in Net Assets Resulting from Operations $ 43,074,967
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. For the Year Ended August 31,
Statements of Changes in Net Assets 1994 1993
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations:
Investment income--net $ 43,213,412 $ 39,934,642
Realized gain (loss) on investments--net (13,985) 2,039
Change in unrealized appreciation/depreciation on investments--net (124,460) 2,394,855
------------ ------------
Net increase in net assets resulting from operations 43,074,967 42,331,536
------------ ------------
Dividends to Shareholders (Note 1f):
Investment income--net (43,213,412) (39,934,642)
------------ ------------
Net decrease in net assets resulting from dividends to shareholders (43,213,412) (39,934,642)
------------ ------------
Capital Shares Transactions (Note 4):
Net increase (decrease) in net assets derived from capital share transactions 221,301,485 (123,412,312)
------------ ------------
Net Assets:
Total increase (decrease) in net assets 221,163,040 (121,015,418)
Beginning of year 713,299,657 834,315,075
------------ ------------
End of year $934,462,697 $713,299,657
============ ============
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc. For the Year Ended
Statement of Cash Flows August 31, 1994
<S> <C>
Cash Provided by Operating Activities:
Net increase in net assets resulting from operations $ 43,074,967
Adjustments to reconcile net increase (decrease) in net assets
resulting from operations to net cash provided by operating activities:
Increase in receivables (1,948,885)
Decrease in other assets 259,876
Increase in other liabilities 1,500,087
Realized and unrealized loss on investments--net 138,445
Amortization of discount (1,636,509)
------------
Net cash provided by operating activities 41,387,981
------------
Cash Used for Investing Activities:
Proceeds from principal payments and sales of loan interests 399,035,411
Purchases of loan interests (585,914,057)
Purchases of short-term investments--net (15,661,889)
------------
Net cash used for investing activities (202,540,535)
------------
Cash Provided by Financing Activities:
Cash receipts on capital shares sold 334,644,640
Cash payments on capital shares tendered (153,795,940)
Dividends paid to shareholders (19,486,117)
------------
Net cash provided by financing activities 161,362,583
------------
Cash:
Net increase in cash 210,029
Cash at beginning of year --
------------
Cash at end of year $ 210,029
============
Non-Cash Financing Activities:
Capital shares issued in reinvestment of dividends paid to shareholders $ 23,136,748
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
Merrill Lynch Senior Floating Rate Fund, Inc.
Financial Highlights
For the
Period
Nov. 3,
The following per share data and ratios have been derived For the Year 1989++ to
from information provided in the financial statements. Ended 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 .59 .53 .64 .85 .76
Realized and unrealized gain (loss) on investments--net -- .03 -- (.01) --
------ ------ ------ ------ ------
Total from investment operations .59 .56 .64 .84 .76
------ ------ ------ ------ ------
Less Dividends:
Investment income--net (.59) (.53) (.64) (.85) (.76)
------ ------ ------ ------ ------
Net asset value, end of period $10.02 $10.02 $ 9.99 $ 9.99 $10.00
====== ====== ====== ====== ======
Total Investment Return:*
Based on net asset value per share 5.94% 5.74% 6.58% 8.79% 7.63%+++
====== ====== ====== ====== ======
Ratios to Average Net Assets:
Expenses, net of reimbusement 1.43% 1.47% 1.39% 1.27% .79%**
====== ====== ====== ====== ======
Expenses 1.43% 1.47% 1.41% 1.33% 1.35%**
====== ====== ====== ====== ======
Investment income--net 5.75% 5.27% 6.58% 8.44% 9.06%**
====== ====== ====== ====== ======
Supplemental Data:
Net assets, end of period (in millions) $ 934 $ 713 $ 834 $1,705 $1,728
====== ====== ====== ====== ======
Portfolio turnover 61.31% 90.36% 46.48% 58.22% 29.61%
====== ====== ====== ====== ======
</TABLE>
*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.
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate 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, 1994 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, 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 with remaining maturities
of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund.
(c) lncome 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. 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. ("PSI"), 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.
<PAGE>
Notes to Financial Statements
(concluded)
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. No fee payment will be
made to the Investment Adviser during any fiscal year which will
cause such expenses to exceed the most restrictive expense
limitation applicable at the time of such payment.
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 trustees of the Fund are officers and/or
directors of MLIM, MLAM, FDS, PSI, or Merrill Lynch, Pierce, Fenner
& Smith Incorporated, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the year ended August 31, 1994 were $585,914,057 and
$399,035,411, respectively.
Net realized and unrealized gains (losses) as of August 31, 1994
were as follows:
<TABLE>
<CAPTION>
Realized Unrealized
Losses Gains
<S> <C> <C>
Short-term investments $ (13,985) --
Common stock -- $ 275,590
------------ ------------
Total $ (13,985) $ 275,590
============ ============
</TABLE>
As of August 31, 1994, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $275,590, all
of which related to appreciated securities. The aggregate cost of
investments at August 31, 1994 for Federal income tax purposes was
$918,002,800.
4. Capital Share Transaction:
Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
For the Year Ended Dollar
August 31, 1994 Shares Amount
<S> <C> <C>
Shares sold 35,126,101 $ 351,960,677
Shares issued to share-
holders in reinvestment
of dividends 2,309,056 23,136,748
------------ -------------
Total issued 37,435,157 375,097,425
Shares tendered (15,348,896) (153,795,940)
------------ -------------
Net increase 22,086,261 $ 221,301,485
============ =============
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended Dollar
August 31, 1993 Shares Amount
<S> <C> <C>
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)
============ =============
</TABLE>
<PAGE>
5. Unfunded Loan Interests:
As of August 31, 1994, the Fund had unfunded loan commitments of
$15,751,105, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Gulfstream Corp. $7,961
Northwest Airlines, Inc. 4,858
Overhead Door Corp. 2,932
6. Short-Term Borrowings:
On March 16, 1994, the Fund extended its loan commitment. The
commitment is for $100,000,000, bearing interest at the Federal
Funds Rate plus 1%--3% on the outstanding balance. The Fund had
no borrowings under this commitment during the year ended August
31, 1994. For the year ended August 31, 1994, facility and
commitment fees aggregated approximately $202,000.
7. Capital Loss Carryforward:
At August 31, 1994, 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 September 16, 1994.
EXHIBIT (g)(2)
<PAGE>
EXHIBIT (g)(2)
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 LLP
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)(3)
<PAGE>
EXHIBIT (g)(3)
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Aerospace--4.85% Allison Engine Co., Term Loan B, due 12/31/98, 8.88% to 3/17/95 $ 25,000 $ 25,000
Aviall Inc., Term Loan B, due 11/30/00:
8.57% to 3/07/95 3,640 3,640
9.38% to 3/07/95 1,698 1,698
10.00% to 6/07/95 15,287 15,287
Gulfstream Aerospace Corp., Term Loan, due 3/31/97:
10.25%(1) 612 612
9.13% to 7/13/95 10,761 10,761
Gulfstream Aerospace Corp., Term Loan, due 3/31/98, 9.88% to 6/08/95 9,260 9,260
---------- ----------
66,258 66,258
Airlines--1.12% Northwest Airlines, Inc., Term Loan, due 6/15/97, 8.5625% to 4/20/95 15,310 15,310
Analytical Elsag Bailey, Term Loan, due 8/30/02, 8.50% to 3/23/95 13,942 13,942
Instruments--1.95% Waters Corp., Term Loan B, due 8/31/01, 9.875% to 3/15/95 5,629 5,629
Waters Corp., Term Loan C, due 8/31/02, 10.25% to 3/15/95 3,940 3,940
Waters Corp., Term Loan D, due 2/28/03, 10.625% to 3/15/95 3,167 3,167
---------- ----------
26,678 26,678
Broadcast/Media Coaxial Communications, Term Loan, due 12/31/99:
--5.10% 9.38% to 3/15/95 1,298 1,298
9.44% to 4/17/95 3,768 3,768
9.57% to 5/15/95 4,433 4,433
10.19% to 6/15/95 9,500 9,500
Enquirer/Star, Term Loan B, due 9/30/02:
10.50%(1) 268 268
8.75% to 5/22/95 26,532 26,532
Silver King Communications, Term Loan B, due 7/31/02, 9.3125% to 4/28/95 17,910 17,910
US Radio Inc., Term Loan A, due 12/31/01:
9.13% to 3/30/95 1,298 1,298
9.3125% to 4/28/95 1,298 1,298
US Radio Inc., Term Loan B, due 9/23/03:
9.69% to 3/30/95 1,695 1,695
10.3125% to 4/28/95 1,709 1,709
---------- ----------
69,709 69,709
Building Overhead Door Corp., Revolving Credit Loan, due 8/18/99:
Products--2.64% 9.00%(1) 1,705 1,705
8.625% to 3/23/95 341 341
Overhead Door Corp., Term Loan, due 8/18/99, 9.99%(1) 9,214 9,214
RSI Home Products, Term Loan, due 11/30/99:
8.625% to 3/31/95 1,417 1,417
8.8125% to 5/30/95 8,333 8,333
Thompson Miniwax, Term Loan B, due 12/31/02, 11.00%(1) 15,000 15,000
---------- ----------
36,010 36,010
Carbon & Graphite UCAR International, Term Loan B, due 1/31/03, 9.3125% to 5/08/95 7,328 7,328
Products--1.10% UCAR International, Term Loan C, due 7/31/03, 9.8125% to 5/08/95 3,836 3,836
UCAR International, Term Loan D, due 1/31/04, 10.0625% to 5/08/95 3,836 3,836
---------- ----------
15,000 15,000
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Chemicals--3.13% Freedom Chemical Company, Term Loan B, due 6/30/02:
11.00%(1) $ 7,000 $ 7,000
9.625% to 4/27/95 20,000 20,000
Harris Specialty Chemicals, Term Loan A, due 12/30/99:
9.19% to 3/16/95 2 2
10.00% to 3/16/95 641 641
8.82% to 3/28/95 2,346 2,346
Harris Specialty Chemicals, Term Loan B, due 12/30/01:
9.69% to 3/16/95 5 5
10.50% to 3/16/95 2,884 2,884
9.32% to 3/28/95 4,948 4,948
Inspec Technologies, Term Loan B, due 12/02/00, 9.125% to 3/30/95 5,000 5,000
---------- ----------
42,826 42,826
Consumer Products CHF/Ebel USA, Term Loan B, due 9/30/01, 9.25% to 4/28/95 10,032 10,032
--2.18% Playtex Family Products Inc., Term Loan B, due 6/01/01, 9.38% to 3/13/95 19,762 19,762
---------- ----------
29,794 29,794
Containers--2.70% Ivex Packaging Corp., Term Loan B, due 12/31/99:
11.25%(1) 60 60
9.19% to 3/27/95 4,000 4,000
9.69% to 3/30/95 571 571
10.32% to 3/30/95 857 857
9.82% to 5/30/95 1,429 1,429
10.00% to 8/24/95 2,714 2,714
Portola Packaging, Inc., Term Loan B, due 7/01/99, 9.6875% to 5/08/95 7,250 7,250
Silgan Corp., Term Loan B, due 9/15/96:
9.688% to 3/07/95 9,886 9,886
10.00% to 6/09/95 10,038 10,038
---------- ----------
36,805 36,805
Diversified Desa International Inc., Term Loan B, due 11/30/00, 10.0625% to 6/27/95 10,000 10,000
Manufacturing InterMetro Industries, Term Loan B, due 6/30/01, 10.00% to 7/03/95 9,825 9,825
--5.32% InterMetro Industries, Term Loan C, due 12/31/02, 10.50% to 7/03/95 14,295 14,295
The Pullman Co., Inc., Revolving Credit Loan, due 12/31/99 :
10.50%(1) 494 494
9.8125% to 6/23/95 3,915 3,915
The Pullman Co., Inc., Term Loan A, due 12/31/99, 9.8125% to 6/23/95 9,359 9,359
The Pullman Co., Inc., Term Loan B, due 12/31/99, 10.3125% to 6/23/95 650 650
Thermadyne Company, Term Loan B, due 2/01/01:
10.25%(1) 4 4
8.3125% to 3/02/95 21,125 21,125
9.3125% to 5/03/95 3,000 3,000
---------- ----------
72,667 72,667
Drug Stores--3.02% Duane Reade Co., Term Loan A, due 9/30/97:
9.0625% to 3/31/95 833 833
9.25% to 5/30/95 10,722 10,722
Duane Reade Co., Term Loan B, due 9/30/99, 9.75% to 5/30/95 10,000 10,000
Eckerd Corp., Term Loan, Series C, due 7/31/00, 7.625% to 3/07/95 11,462 11,462
Thrifty Payless, Term Loan B, due 9/30/01:
11.00%(1) 21 21
9.375% to 5/24/95 8,200 8,200
---------- ----------
41,238 41,238
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Electrical Berg Electronics Inc., Term Loan A, due 3/31/00:
Instruments--2.04% 8.82% to 3/30/95 $ 255 $ 255
9.125% to 5/25/95 11,591 11,591
Berg Electronics Inc., Term Loan B, due 6/30/01:
9.07% to 3/30/95 25 25
9.375% to 5/25/95 5,950 5,950
Tracor Inc., Term Loan B, due 2/28/01:
10.25%(1) 86 86
9.3125% to 5/22/95 9,889 9,889
---------- ----------
27,796 27,796
Fertilizer--1.46% Terra Industries, Term Loan B, due 10/20/01, 8.8125% to 4/20/95 20,000 20,000
Food & Beverage American Italian Pasta, Term Loan C, due 12/31/00, 10.00% to 5/17/95 5,000 5,000
--9.00% Amerifoods, Term Loan B, due 6/30/01, 8.9375% to 4/11/95 7,500 7,500
Amerifoods, Term Loan C, due 6/30/02, 9.4375% to 4/11/95 7,500 7,500
Domino's Pizza, Inc., Term Loan B, due 7/27/00:
8.3125% to 3/06/95 6,000 6,000
9.039% to 5/08/95 2,087 2,087
9.75% to 6/06/95 3,000 3,000
9.6875% to 8/07/95 3,000 3,000
Heileman Acquisition Company, Term Loan B, due 12/31/00, 9.125% to 4/13/95 10,000 10,000
Kraft Foods, Term Loan B, due 3/31/02, 9.32% to 8/21/95 30,000 30,000
MAFCO Worldwide, Term Loan B, due 6/30/01, 9.50% to 4/05/95 10,000 10,000
President Baking Co., Inc., Term Loan B, due 9/30/00, 8.9375% to 3/31/95 4,974 4,974
Specialty Foods Corp., Term Loan B, due 8/31/99:
11.00%(1) 5,000 5,000
9.13% to 4/18/95 13,673 13,673
10.00% to 7/18/95 15,150 15,150
---------- ----------
122,884 122,884
Fuel Petrolane, Inc., Term Loan B, due 12/31/99:
Distribution 8.3125% to 3/30/95 28,888 28,888
--2.20% 8.3125% to 4/03/95 1,105 1,105
---------- ----------
29,993 29,993
Grocery--4.92% Big V Supermarkets Inc., Term Loan B, due 3/15/00:
9.25% to 3/20/95 5,200 5,200
9.00% to 5/15/95 5,200 5,200
Circle K Acquisitions Corp., Term Loan B, due 7/31/01:
8.125% to 3/28/95 24,766 24,766
9.75% to 3/31/95 67 67
Pathmark Stores Inc., Term Loan B, due 10/31/99, 9.25% to 5/30/95 9,900 9,900
Ralph's Grocery Company, Term Loan, due 6/30/98:
9.00% to 3/06/95 518 518
8.9375% to 3/30/95 301 301
8.8125% to 3/31/95 301 301
8.9375% to 3/31/95 603 603
8.9375% to 4/10/95 13,043 13,043
Star Markets Co., Inc., Term Loan B, due 12/31/01, 9.125% to 3/15/95 4,211 4,211
Star Markets Co., Inc., Term Loan C, due 12/31/02, 9.625% to 3/15/95 3,158 3,158
---------- ----------
67,268 67,268
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
High Technology Anacomp, Inc., Term Loan C, due 3/31/96, 9.0625% to 4/26/95 $ 4,598 $ 4,598
--0.34%
Leasing & Rental Prime Acquisition, Term Loan, due 12/31/00:
Services--1.10% 9.25% to 3/06/95 4,800 4,800
9.50% to 4/06/95 5,400 5,400
9.375% to 5/08/95 4,800 4,800
---------- ----------
15,000 15,000
Medical Devices Deknatel Holdings Corp., Term Loan A, due 4/20/99, 9.3125% to 4/25/95 2,250 2,250
--0.71% Deknatel Holdings Corp., Term Loan B, due 4/20/01, 9.8125% to 4/25/95 7,500 7,500
---------- ----------
9,750 9,750
Nautical Systems Sperry Marine, Inc., Term Loan, due 11/15/00:
--0.65% 9.5625% to 3/23/95 3,901 3,901
10.0625% to 6/23/95 4,947 4,947
---------- ----------
8,848 8,848
Office Machines Lexmark Holdings, US, Term Loan, due 3/27/98, 8.5859% to 3/31/95 8,784 8,784
--0.64%
Paper--17.33% ++Fort Howard Corp., Senior Secured B Notes, due 9/11/98, 9.38% to 3/13/95 5,000 5,000
++Fort Howard Corp., Senior Secured D Notes, due 9/11/00, 9.88% to 3/13/95 20,000 20,000
Fort Howard Corp., Term Loan, due 12/31/96:
10.50%(1) 472 472
10.375%(1) 1,741 1,741
Jefferson Smurfit Company/Container Corp. of America, Term Loan A,
due 4/30/01:
8.5625% to 3/28/95 10,500 10,500
8.6875% to 3/30/95 7,000 7,000
8.50% to 4/28/95 770 770
8.6875% to 5/18/95 3,500 3,500
8.8125% to 5/30/95 9,730 9,730
Jefferson Smurfit Company/Container Corp. of America, Term Loan B,
due 4/30/02:
9.1875% to 3/24/95 4,733 4,733
9.3125% to 4/24/95 66,267 66,267
Mail Well, Term Loan B, due 12/31/00, 9.625% to 3/31/95 5,000 5,000
Mail Well, Term Loan C, due 12/31/01, 9.625% to 3/31/95 5,000 5,000
S.D. Warren Co., Term Loan B, due 12/19/02, 9.50% to 8/23/95 52,000 52,000
Stone Container, Term Loan B, due 4/01/00:
9.3125% to 3/14/95 22,500 22,500
9.25% to 3/17/95 22,500 22,500
---------- ----------
236,713 236,713
Printing & Print Tech International, Term Loan B, due 12/28/01, 8.94% to 3/03/95 5,000 5,000
Publishing--2.34% Ziff Davis, Term Loan B, due 12/31/01, 9.38% to 3/28/95 13,897 13,897
Ziff Davis, Term Loan C, due 12/31/02, 9.88% to 3/28/95 13,103 13,103
---------- ----------
32,000 32,000
Retail-- Federated Department Stores, Term Loan, due 3/31/00:
Specialty--7.12% 7.375% to 3/29/95 25,000 25,000
7.25% to 5/30/95 15,000 15,000
Music Acquisition Corp., Term Loan B, due 8/31/01:
8.875% to 4/19/95 14,063 14,063
9.5625% to 8/17/95 8,156 8,156
Music Acquisition Corp., Term Loan C, due 8/31/02, 10.3125% to 6/20/95 7,500 7,500
Saks & Co., Term Loan B, due 6/30/00, 9.13% to 5/09/95 27,469 27,469
---------- ----------
97,188 97,188
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
Face Value
Industry Senior Secured Floating Rate Loan Interests* Amount (Note 1b)
<S> <S> <C> <C>
Transportation Petro Properties, Term Loan B, due 5/24/01, 9.75% to 3/31/95 $ 9,000 $ 9,000
Services--0.66%
Warehousing Pierce Leahy Corp., Term Loan B, due 6/30/01:
& Storage--1.10% 9.5625% to 4/28/95 9,545 9,545
9.9375% to 7/31/95 5,455 5,455
---------- ----------
15,000 15,000
Total Senior Secured Floating Rate Loan Interests
(Cost--$1,157,117)--84.72% 1,157,117 1,157,117
Short-Term Securities
Commercial Cargill Inc., 5.95% due 3/24/95 25,000 24,905
Paper**--11.08% Du Pont (E.I.) de Nemours & Co., 5.94% due 4/11/95 25,000 24,831
General Electric Capital Corp., 6.00% due 3/01/95 4,750 4,750
Matterhorn Capital Corp.:
5.93% due 3/10/95 17,000 16,975
5.96% due 3/15/95 30,000 29,930
Xerox Corp., 5.95% due 3/20/95 50,000 49,843
---------- ----------
151,750 151,234
US Government Federal Home Loan Bank, 5.87% due 4/17/95 25,655 25,458
& Agency Federal National Mortgage Association, 5.89% due 4/13/95 14,820 14,716
Obligations**-- ---------- ----------
2.94% 40,475 40,174
Total Short-Term Securities (Cost--$191,408)--14.02% 192,225 191,408
Shares
Common Stock Held
Restaurants--0.02% TW Services, Inc. 44 218
Total Common Stock (Cost--$0)--0.02% 44 218
Total Investments (Cost--$1,348,525)--98.76% 1,348,743
Other Assets Less Liabilities--1.24% 16,953
----------
Net Assets--100.00% $1,365,696
==========
<FN>
*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, 1995.
**Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the
discount rates paid at the time of purchase by the Fund.
(1)Index is based on the prime rate of a US bank, which is subject
to change daily.
++Restricted security as to resale. The value of the Fund's
investment in restricted securities was $25,000,000, representing
1.83% of net assets.
(in Thousands)
Acquisition Value
Senior Secured Notes Date Cost (Note 1b)
Fort Howard Corp. 9/11/91 $25,000 $25,000
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
<TABLE>
Statement of Assets and Liabilities as of February 28, 1995
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$1,348,524,991)
(Note 1b) $1,348,742,797
Cash 743,614
Receivables:
Capital shares sold $ 19,435,087
Interest 10,782,416 30,217,503
------------
Deferred facility fees (Note 6) 1,398
Deferred organization expense (Note 1f) 29,912
Prepaid registration fees and other assets (Note 1f) 979,008
--------------
Total assets 1,380,714,232
--------------
Liabilities: Payables:
Dividends to shareholders (Note 1g) 1,993,281
Investment adviser (Note 2) 966,754
Administrator (Note 2) 254,409
Commitment fees 5,409
Securities purchased 767 3,220,620
------------
Deferred income (Note 1e) 11,723,797
Accrued expenses and other liabilities 73,688
--------------
Total liabilities 15,018,105
--------------
Net Assets: Net assets $1,365,696,127
==============
Net Assets Common Stock, par value $0.10 per share; 1,000,000,000 shares
Consist of: authorized $ 13,640,589
Paid-in capital in excess of par 1,352,141,480
Accumulated investment loss--net (321,494)
Undistributed realized capital gains on investments--net (Note 7) 17,746
Unrealized appreciation on investments--net (Note 3) 217,806
--------------
Net Assets--Equivalent to $10.01 per share based on 136,405,885 shares of
beneficial interest outstanding $1,365,696,127
==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months Ended
February 28, 1995
<S> <S> <C> <C>
Investment Interest and discount earned $ 47,707,014
Income Facility and other fees 1,285,310
(Note 1e): ------------
Total income 48,992,324
------------
Expenses: Investment advisory fees (Note 2) $ 5,480,559
Administrative fees (Note 2) 1,442,252
Transfer agent fees (Note 2) 376,737
Professional fees 125,153
Borrowing costs (Note 6) 100,696
Accounting services (Note 2) 68,190
Registration fees (Note 1f) 55,557
Custodian fees 49,587
Printing and shareholder reports 47,731
Tender offer costs 36,420
Amortization of organization expenses (Note 1f) 26,673
Directors' fees and expenses 20,783
Other 31,931
------------
Total expenses 7,862,269
------------
Investment income--net 41,130,055
------------
Realized & Realized gain on investments--net 58,501
Unrealized Change in unrealized appreciation on investments--net (57,784)
Gain (Loss) ------------
on Investments Net Increase in Net Assets Resulting from Operations $ 41,130,772
--Net (Notes ============
1c, 1e & 3):
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
February 28, August 31,
Increase (Decrease) in Net Assets: 1995 1994
<S> <S> <C> <C>
Operations: Investment income--net $ 41,130,055 $ 43,213,412
Realized gain (loss) on investments--net 58,501 (13,985)
Change in unrealized appreciation/depreciation on invest-
ments--net (57,784) (124,460)
-------------- ------------
Net increase in net assets resulting from operations 41,130,772 43,074,967
-------------- ------------
Dividends to Investment income--net (41,451,549) (43,213,412)
Shareholders -------------- ------------
(Note 1g): Net decrease in net assets resulting from dividends to
shareholders (41,451,549) (43,213,412)
-------------- ------------
Capital Share Net increase in net assets resulting from capital share
Transactions transactions 431,554,207 221,301,485
(Note 4): -------------- ------------
Net Assets: Total increase in net assets 431,233,430 221,163,040
Beginning of period 934,462,697 713,299,657
-------------- ------------
End of period $1,365,696,127 $934,462,697
============== ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Cash Flows
For the Six Months Ended
February 28, 1995
<S> <S> <C>
Cash Provided by Net increase in net assets resulting from operations $ 41,130,772
Operating Adjustments to reconcile net increase in net assets resulting from
Activities: operations to net cash provided by operating activities:
Increase in receivables (4,274,252)
Increase in other assets (874,426)
Increase in other liabilities 3,915,744
Realized and unrealized gain on investments--net (717)
Amortization of premium and discount (11,748,771)
---------------
Net cash provided by operating activities 28,148,350
---------------
Cash Used for Proceeds from principal payments and sales of loan interests 239,964,403
Investing Purchases of loan interests (597,748,295)
Activities: Purchases of short-term investments--net (4,659,306,580)
Proceeds from sales and maturities of short-term investments--net 4,598,153,246
---------------
Net cash used for investing activities (418,937,226)
---------------
Cash Provided by Cash receipts on capital shares sold 465,842,231
Financing Cash payments on capital shares tendered (56,250,237)
Activities: Dividends paid to shareholders (18,269,533)
---------------
Net cash provided by financing activities 391,322,461
---------------
Cash: Net increase in cash 533,585
Cash at beginning of period 210,029
---------------
Cash at end of period $ 743,614
===============
Non-Cash Capital shares issued in reinvestment of dividends paid to
Financing shareholders $ 22,608,418
Activities: ===============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
The following per share data and ratios have been derived For the Six
from information provided in the financial statements. Months Ended,
February 28, For the Year Ended August 31,
Increase (Decrease) in Net Asset Value: 1995 1994 1993 1992 1991
<S> <S> <C> <C> <C> <C> <C>
Per Share Net asset value, beginning of period $ 10.02 $ 10.02 $ 9.99 $ 9.99 $ 10.00
Operating -------- -------- -------- -------- --------
Performance: Investment income--net .36 .59 .53 .64 .85
Realized and unrealized gain (loss) on
investments--net (.01) --++++ .03 -- (.01)
-------- -------- -------- -------- --------
Total from investment operations .35 .59 .56 .64 .84
-------- -------- -------- -------- --------
Less dividends from investment income--net (.36) (.59) (.53) (.64) (.85)
-------- -------- -------- -------- --------
Net asset value, end of period $ 10.01 $ 10.02 $ 10.02 $ 9.99 $ 9.99
======== ======== ======== ======== ========
Total Investment Based on net asset value per share 3.32%++ 5.94% 5.74% 6.58% 8.79%
Return:** ======== ======== ======== ======== ========
Ratios to Expenses, net of reimbursement 1.36%* 1.43% 1.47% 1.39% 1.27%
Average ======== ======== ======== ======== ========
Net Assets: Expenses 1.36%* 1.43% 1.47% 1.41% 1.33%
======== ======== ======== ======== ========
Investment income--net 7.13%* 5.75% 5.27% 6.58% 8.44%
======== ======== ======== ======== ========
Supplemental Net assets, end of period (in millions) $ 1,366 $ 934 $ 713 $ 834 $ 1,705
Data: ======== ======== ======== ======== ========
Portfolio turnover 24.72% 61.31% 90.36% 46.48% 58.22%
======== ======== ======== ======== ========
<FN>
*Annualized.
**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.
++Aggregate total investment return.
++++Amount is less than $.01 per share.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Merrill Lynch Senior Floating Rate Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940 as a
continuously offered non-diversified, closed-end management
investment company. These unaudited financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the results for the interim period represented.
All such adjustments are of a normal recurring nature.
(a) Loan participation interests--The Fund invests in senior secured
floating rate loan interests ("Loan Interests") with collateral
having a market value, at time of acquisition by the Fund, which
Fund management believes equals or exceeds the principal amount of
the corporate loan. The Fund may invest up to 20% of its total
assets in loans made on an unsecured basis. Depending on how the
loan was acquired, the Fund will regard the issuer as including the
corporate borrower along with an agent bank for the syndicate of
lenders and any intermediary of the Fund's investment. Because
agents and intermediaries are primarily commercial banks, the Fund's
investment in corporate loans at February 28, 1995 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, 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 with remaining maturities
of sixty days or less are valued at amortized cost, which
approximates market value. Securities and assets for which market
quotations are not readily available are valued at fair value as
determined in good faith by or under the direction of the Board of
Directors of the Fund.
(c) Derivative financial instruments--The Fund may engage in various
portfolio strategies to seek to increase its return by hedging its
portfolio against adverse movements in the debt markets. Losses may
arise due to changes in the value of the contract or if the
counterparty does not perform under the contract.
* Interest rate transactions--The Fund is authorized to enter into
interest rate swaps and purchase or sell interest rate caps and
floors. In an interest rate swap, the Fund exchanges with another
party their respective commitments to pay or receive interest on a
specified notional principal amount. The purchase of an interest
rate cap (or floor) entitles the purchaser, to the extent that a
specified index exceeds (or falls below) a predetermined interest
rate, to receive payments of interest equal to the difference
between the index and the predetermined rate on a notional principal
amount from the party selling such interest rate cap (or floor).
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required.
(e) Security transactions and investment income--Security
transactions are recorded on the dates the transactions are entered
into (the trade dates). Interest is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on
the identified cost basis. Facility fees are accreted into income
over the term of the related loan. For income tax purposes, as of
September 1, 1994, the corporate loans are treated as discount
obligations.
(f) 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.
(g) Dividends and distributions--Dividends from net investment
income is declared daily and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory and Administrative Services Agreement and
Transactions with Affiliates:
The Fund has entered into an Investment Advisory Agreement with
MLAM. The general partner of MLAM is Princeton Services, Inc.
("PSI"), an indirect wholly-owned subsidiary of Merrill Lynch and
Co., Inc. ("ML & Co."), which is the limited partner.
<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,
distribution fees, brokerage fees and 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 Fund's next $70 million of average daily net
assets, and 1.5% of the average daily net assets in excess thereof.
No fee payment will be made to the Investment Adviser during any
fiscal year which will cause such expenses to exceed the most
restrictive expense limitation at the time of such payment.
Financial Data Services, Inc. ("FDS"), a wholly-owned subsidiary of
ML & Co., is the Fund's transfer agent.
Accounting services are provided to the Fund by MLAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of MLAM, PSI, Merrill Lynch, Pierce, Fenner, & Smith Inc.,
FDS, and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term securities,
for the six months ended February 28, 1995 were $601,541,180 and
$240,187,477, respectively.
Net realized and unrealized gains (losses) as of February 28, 1995
were as follows:
Realized Unrealized
Gains (Losses) Gains
Long-term investments $ 60,765 $ 217,806
Short-term investments (2,264) --
---------- -----------
Total $ 58,501 $ 217,806
========== ===========
As of February 28, 1995, net unrealized appreciation for financial
reporting and Federal income tax purposes aggregated $217,806, all
of which related to appreciated securities. The aggregate cost of
investments at February 28, 1995 for Federal income tax purposes was
$1,348,524,991.
4. Capital Share Transactions:
Transactions in capital shares were as follows:
For the Six Months Ended Dollar
February 28,1995 Shares Amount
Shares sold 46,467,447 $465,196,026
Shares issued to shareholders
in reinvestment of dividends 2,258,255 22,608,418
----------- ------------
Total issued 48,725,702 487,804,444
Shares tendered (5,619,404) (56,250,237)
----------- ------------
Net increase 43,106,298 $431,554,207
=========== ============
For the Year Ended Dollar
August 31, 1994 Shares Amount
Shares sold 35,126,101 $351,960,677
Shares issued to shareholders
in reinvestment dividends 2,309,056 23,136,748
----------- ------------
Total issued 37,435,157 375,097,425
Shares tendered (15,348,896) (153,795,940)
----------- ------------
Net increase 22,086,261 $221,301,485
----------- ------------
<PAGE>
5. Unfunded Loan Interests:
As of February 28, 1995, the Fund had unfunded loan commitments of
$19,248,199, which would be extended at the option of the borrower,
pursuant to the following loan agreements:
Unfunded
Commitment
Borrower (in thousands)
Gulfstream Corp. $10,192
Northwest Airlines, Inc. 2,660
Overhead Door Corp. 3,068
Petrolane, Inc. 1,212
The Pullman Co., Inc. 2,116
6. Short-Term Borrowings:
On March 20, 1995, the Fund extended its loan commitment. The
commitment is for $100,000,000, bearing interest at the Federal
Funds Rate plus 0.75%--2% on the outstanding balance. The Fund had
no borrowings under this commitment during the six months ended
February 28, 1995. For the six months ended February 28, 1995,
facility and commitment fees aggregated approximately $101,000.
7. Capital Loss Carryforward:
At August 31, 1994, the Fund had a net capital loss carryforward of
approximately $34,000, all of which expires in 2001. This amount
will be available to offset like amounts of any future taxable
gains.
8. Subsequent Event:
The Fund began a quarterly tender offer on March 17, 1995.
